The subcommittee of the House Appropriations Committee in charge of education has paid attention to the scandals and closures that mar the charter industry. It issued the following legislative changes for the federal Charter Schools Program for fiscal 2023:

1. A cut in appropriations from $440 million to $400 million for new charters.

2. Eliminate federal funding to for-profit EMOs (education management organizations).

3. Support the U.S. Department of Education’s proposed regulations to provide accountability and oversight for the charter schools it funds.

4. Endorse ED proposal that new charters seeking federal funding analyze need and community impact.

5. Endorse ED proposal that new charters seeking federal funds demonstrate that they will be integrated, not segregated.

6. Note that 15% of federally funded charters either never opened or closed down before the grant ended, which shows why applicants must demonstrate need for their services.

Charter Schools Grants

The Committee recommends $400,000,000 for Charter School Program (CSP) Grants, which is $40,000,000 below the fiscal year 2022 enacted level and the fiscal year 2022 budget request.

CSP awards grants to SEAs or, if a State’s SEA chooses not to participate, to charter school developers to support the development and initial implementation of public charter schools. State Facilities Incentive Grants and Credit Enhancement for Charter School Facilities awards help charter schools obtain adequate school facilities. These programs work in tandem to support the development and operation of charter schools.

For-profit Entities.—The Department has long recognized the particular risks posed by for-profit education management organi- zations (EMOs). In response to a 2016 audit, the Department con- ceded to the Inspector General, ‘‘ED is well aware of the challenges and risks posed by CMOs and, in particular, EMOs, that enter into contracts to manage the day-to-day operations of charter schools that receive Federal funds. We recognize that the proliferation of charter schools with these relationships has introduced potential risks with respect to conflicts of interest, related-party trans-actions, and fiscal accountability, particularly in regard to the use of federal funds.’’ Since that initial acknowledgement by the Department regarding for-profit EMOs, the Committee has been made aware of concerning instances of criminal fraud, conflicts of interest, and inadequate transparency.

In addition, the Committee is deeply concerned that for-profit charter schools, including those run by for-profit EMOs, deliver concerning outcomes for students. A 2017 report from Stanford University’s Center for Research on Education Outcomes compared student performance at non-profit charters, for-profit charters, and traditional public schools and found that for-profit charters perform worse in reading, and significantly worse in math, than non-profit charters. In addition, the report found that for-profit charters per- form worse in math than traditional public schools.

That is why the Committee is strongly supportive of the Department’s proposal to prohibit Federal CSP funding from supporting for-profit EMOs through its notice published in the Federal Reg- ister on March 14, 2022 (87 Fed. Reg. 14197). The Committee in- cludes bill language codifying the prohibition to establish this precedent for fiscal year 2023 and for future years. Moving for- ward, the Committee urges the Secretary to work with Congress on efforts to fully phase out the concerning for-profit EMO sector. Such efforts could include reasonable transition periods that allow schools run by for-profit EMOs to shift to independent or nonprofit management. In the interim, the Committee is committed to con- tinuing its oversight of the for-profit EMO sector and ensuring fewer taxpayer dollars enrich for-profit EMO shareholders.

Defunct CSP Grantees.—The Committee is deeply concerned by the Department’s analysis that fifteen percent ofthe charter schools receiving CSP funding since 2001 have never opened or closed before their three-year grant period is complete, rep- resenting an unacceptable waste of at least $174,000,000 in tax- payer funds. Accordingly, the Committee is strongly supportive of the Department’s fiscal year 2022 CSP notice (87 Fed. Reg. 14197) that requires applicants to demonstrate local demand for new schools. The Committee rejects the premise that grant failure and school closure is the cost of doing business in CSP and welcomes reforms that will improve its performance.

GAO Mandate from House Report 116–450.—The Committee con- tinues to be supportive of GAO’s work on the mandate included in House Report 116–450 regarding the Department’s oversight over CSP and whether the program is being implemented effectively among grantees and subgrantees. The Committee is particularly in- terested in theissue of CSP-funded schools that eventually closed or received funds but never opened; the relationships between charter schools supported by CSP grants and charter management or- ganizations; and enrollment patterns at these schools, especially for students with disabilities. Inaddition, the Committee is interested in recommendations on potential legislative changes to the program that would reduce the potential for mismanagement and inef- fective operations.

Oversight from the Office of Inspector General.—The Committee continues to support efforts by the Department’s Office of Inspector General (OIG) to examine grantee administration of Replication and Expansion Grants, including charter management organization grantees. The Committee also supports the OIG’s efforts to evalu- ate whether the Department adequately monitored grantees’ per- formance and uses of funds for CSP competitions.

Students with Disabilities and English Learners.—The Com- mittee encourages the Department to continue including in their evaluation of State CSP grants the extent to which State entities are utilizing the seven percent of funding received under the pro- gram to ensure that charter schools receiving CSP grants are equipped to appropriately serve students with disabilities and, by extension, prepared to become high-quality charter schools. In ad- dition, the Committee urges the Department to ensure subgrantees are equipped to meet the needs of English learners. The Committee directs the Department to provide an update on these efforts in the fiscal year 2024 Congressional Budget Justification.

Charter School Effects on School Segregation.—The Committee is concerned by findings from a 2019 Urban Institute report which concluded that growth in charter school enrollment increases the segregation of Black, Latino, and white students. To address this concern, the Committee urges the Department to give priority to applicants thatplan to use CSP funds to operate or manage char- ter schools intentionally designed to be racially and socioeconomically diverse.

The Committee is strongly supportive of proposed requirements in the Department’s fiscal year 2022 CSP notice (87 Fed. Reg. 14197) that grantees show that they will not exacerbate school seg- regation. Accordingly, the Committee urges the Department to ex- amine the merits of diversity reporting that compares demographic data ofgrantees to that of local districts. The Committee directs the Department to share its assessment of CSP diversity reporting, along with any prospective plans for implementation, in the fiscal year 2024 Congressional Budget Justification.