Charter Schools in Washington State: A Financial Drain or Gain?

October 2004

The pending Referendum 55 (R-55), allowing for the emergence of charter schools in Washington State, raises questions about the overall fiscal impact of these new public schools at the state and local levels. Specifically, what potential benefits or losses might the State of Washington and local school districts expect if Referendum 55 passes?

Utilizing examples from the research and other states where charter schools exist, this paper discusses fiscal implications for the State and finds that: 1) Charter schools will lead to modest increases in state spending; 2) The impact on individual district budgets is likely to be small given the legislation's limit of 45 new charter schools in the state over the next six years; 3) The impact of students transferring to charter schools will likely have a small effect on district budgets compared to the normal enrollment shifts districts face presently as students transfer to new schools outside of their boundaries; and 4) School districts are allowed to keep up to 3% of a charter school's state and local funds to compensate for any additional oversight responsibilities.

The three sections of this paper provide an overview of how charter schools in Washington would be funded, followed by discussions of the fiscal implications at the state and local level if the charter law passed by the Washington Legislature in 2004 is implemented as planned.