By Timothy L. DeFoor, Pennsylvania Auditor General

As the Commonwealth of Pennsylvania’s chief taxpayer advocate, the Department of the Auditor General works to ensure state government operates within its means and to make sure every taxpayer dollar is spent wisely. We draw conclusions and make recommendations based on reliable data, outside political agendas or the wishes of special interest groups. We get concerned when we see revenues and fund balances significantly increase, because it opens the potential for questionable and discretionary spending of taxpayer dollars.

When our department conducted an audit of five cyber charter schools in Pennsylvania, we found that from 2020 to 2023 they increased revenues by $425 million and reserves by 144%, due in part to an outdated funding formula that does not use actual instruction costs to determine tuition, does not set guidelines for spending, nor sets limits for cyber charter school reserve funds.

We found these cyber charter schools were getting paid nearly $7,000 to $25,000 per student without special needs, and from more than $18,000 to $60,000 per special education student.

In each case, the cyber charter school was legally accruing millions of dollars in reserves; levels that many consider excessive. Reserves are meant to cover unanticipated bills so there is no interruption in a child’s education. It isn’t money meant to sit in the bank account of a cyber charter school, accumulating interest year after year.

These reserves are your tax dollars.

The current cyber charter funding formula is based on how much a school district budgets to educate each student, not the actual cost to teach them. For brick-and-mortar charter schools, this means they are funded by local school districts because their student population is determined by where the school is located.

Cyber charter schools, on the other hand, are designed for online, home-based instruction for students from each of the 500 school districts in Pennsylvania. This means cyber charter schools get paid using 1,000 different tuition rates, based on a funding formula that became law in 2002! To put that into perspective, in 2002 we were still using dial-up service to access the internet, floppy discs were the best way to store and share data, and the iPhone and iPad were not yet invented.

I am the third auditor general to look at this issue, and the third to come to the same conclusion: the cyber charter funding formula needs to change to reflect what is actually being spent to educate students. The law should also set reasonable limits on the amount of money these schools can hold in reserve.

Think about how much technology, teaching strategy, and resources have changed since the COVID-19 pandemic, let alone over the past two decades. Furthermore, think about how much school district budgets and funding have changed since 2002.

We made important recommendations in this regard to the governor and legislature.

In the next six months, we recommend that Gov. Josh Shapiro form a task force that includes the Department of Education, cyber charter schools, school districts, parents, stakeholders, and the General Assembly. This task force should be given a deadline of nine months to develop a new funding formula that is equitable, reasonable, and sustainable.

We further recommend that the General Assembly enact and pass this plan within six months of receiving it and that the governor sign it.

I understand that I have proposed a tight time frame, but we can’t afford to delay any longer.

Our recommendations call for a nonpartisan, systematic approach to making sure that there are sufficient funds available for cyber charter schools to operate while protecting your tax dollars.

The most important thing we can do is to provide our children with a quality education.

I’ve been a champion of literacy, in particular financial literacy, because I understand that our future growth and success depends on education. While recent laws and court cases have tried to make the system better, more work needs to be done.

Parents deserve choices in how to educate their children, and taxpayers also deserve accountability for how their money is spent. As leaders, we need to set our personal agendas aside and fix the laws that determine how we fund education in Pennsylvania because our children deserve nothing less.

Timothy L. DeFoor is Pennsylvania’s 50th auditor general. He was elected to his first term in 2020 and reelected in 2024. DeFoor has more than 25 years of combined experience in law enforcement and auditing, in both public service and private industries.

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