Exposing PA Cyber Charter Schools for Their Fraudulent Practices and Financial Exploitation of Taxpayers

Between 2018 and 2022, the combined assets of Pennsylvania's four largest cyber charter schools skyrocketed from a mere $566,858 to a staggering $486 million. This alarming statistic shines a spotlight on the rapid financial growth of cyber charter schools, raising critical questions about their funding and financial practices.

In the last two decades, cyber charter schools have emerged as an alternative to traditional public education, promising flexibility, and personalized learning experiences. However, this rise has come at a significant cost to public education funding. These schools are funded based on the cost per pupil in public schools, leading to substantial financial surpluses. Instead of reinvesting these funds into educational resources, these schools are channeling taxpayer dollars into marketing campaigns, lobbying efforts, and an extensive real estate empire.

Cyber charter schools in Pennsylvania are siphoning off public funds, enriching themselves at the expense of public schools, and creating a questionable real estate empire.

Funding Mechanism

The funding mechanism for cyber charter schools in Pennsylvania is directly linked to the cost per pupil in traditional public schools. When a student enrolls in a cyber charter school, the school district of residence is required to transfer a portion of its per-pupil funding to the cyber charter school. This amount is calculated based on the district's average expenditure per student, excluding costs like transportation and facilities, which cyber charter schools rarely incur.

This funding model creates a scenario where cyber charter schools receive substantial amounts of money without bearing the same level of overhead costs as traditional schools. Consequently, these schools often end up with significant financial surpluses. For example, the funds meant to cover physical infrastructure and in-person services in public schools can instead be reallocated by cyber charter schools towards other expenditures, including aggressive marketing campaigns and substantial real estate investments.

These surpluses have raised concerns about the efficient use of taxpayer dollars and the true cost-benefit ratio of cyber charter education. While traditional public schools struggle with budget constraints and underfunding, cyber charter schools accumulate vast financial reserves. 

Financial Growth and Asset Accumulation

The financial growth of Pennsylvania's cyber charter schools over the past few years has been nothing short of astonishing. In 2018, the combined assets of the four largest cyber charter schools amounted to $566,858. By 2022, this figure had ballooned to an eye-popping $486 million. This dramatic increase highlights the substantial financial reserves these schools have amassed, mostly funded by taxpayer dollars.

This explosive growth in assets poses significant implications for both public schools and taxpayers. Public schools, which already face financial constraints, are losing critical funding to cyber charter schools. This diverts resources away from traditional schools, exacerbating issues like overcrowded classrooms, outdated materials, and insufficient support services. For taxpayers, the concern lies in whether their money is being used effectively and equitably. Instead of enhancing the quality of education, a large portion of these funds is accumulating in the bank accounts of cyber charter schools, raising questions about transparency and accountability in how these schools manage their finances.

Misallocation of Taxpayer Dollars

One of the most concerning aspects of the financial practices of cyber charter schools is the significant allocation of taxpayer dollars towards marketing and lobbying efforts. Commonwealth Charter Academy, the largest operator among Pennsylvania's cyber charter schools, has spent over $8 million on advertising alone. These funds are used to attract new students through aggressive marketing campaigns and to influence legislation in their favor through lobbying efforts.

Redirecting these funds could have an enormous impact on public schools. For example, the $8 million spent on advertising by CCA could be used to hire additional teachers, reduce class sizes, update educational materials, and improve school facilities. These changes could enhance the learning environment and educational outcomes for students in traditional public schools. 

Real Estate Empire of CCA

Commonwealth Charter Academy has used its substantial financial reserves to build an extensive real estate portfolio. Notable acquisitions include:

• The former Pennsylvania State Employee Credit Union headquarters in Harrisburg, purchased for $5 million.

• The former Macy’s at the Waterfront in Homestead, providing 140,000 square feet of office space.

• The former Cigna building in Moosic, acquired for $17.8 million.

These properties are used for various purposes, such as staff work locations, student testing sites, meetings, field trips, and community events. However, the use of these properties raise significant concerns. 

First, there is no legal obligation for CCA to return funds to taxpayers if these properties are sold, potentially allowing the school to profit from public funds. 

Second, many of these properties are removed from local tax rolls, reducing the income for local school districts and impacting their ability to provide essential services. This creates a situation where public resources are diverted to support a private enterprise, further adding to the financial challenges faced by traditional public schools.

Ethical and Legal Concerns

The ethical considerations surrounding the use of public funds for private gain are significant. Cyber charter schools are entrusted with taxpayer dollars to educate students. However, when these funds are diverted into real estate investments, marketing, and lobbying, the primary mission of education is compromised. The practice of accumulating and using public funds for purposes that do not directly enhance educational outcomes for students raises serious ethical questions. Are these schools fulfilling their obligation to act in the best interest of the students and the taxpayers who fund them? The apparent prioritization of financial growth over educational excellence suggests a misalignment of values and responsibilities.

Besides ethical concerns, there are potential legal ambiguities and violations in the practices of cyber charter schools. The lack of stringent regulations and oversight allows these schools to operate in ways that might skirt legal boundaries. Questions arise about whether their financial practices comply with state laws governing the use of public funds. The significant expenditure on lobbying and advertising, coupled with extensive real estate acquisitions, warrants a thorough examination of compliance with educational funding laws. Legal reforms may be necessary to close loopholes and ensure that public funds are used strictly for educational purposes, preventing misuse and promoting accountability.

The rapid financial growth and asset accumulation of Pennsylvania's cyber charter schools, particularly Commonwealth Charter Academy, reveal a troubling pattern of misallocation of taxpayer dollars. From the dramatic increase in assets from $566,858 in 2018 to $486 million in 2022, to the substantial spending on marketing and lobbying, and the extensive real estate acquisitions, these practices divert essential funds away from public schools. The lack of accountability, including no obligation to return money to taxpayers if properties are sold and the impact on local tax rolls, adds to the financial strain on public education.

Legislative reforms are needed to protect public education funds and ensure they are used for their intended purpose but our elected officials are not interested in changing the laws. Most are being funded through cyber chart lobbying efforts. So there is probably not much we can do, other than expose their obvious fraudulent practices and financial exploitation of taxpayers in Pennsylvania. 

Sources: Forbes (2024) In Pennsylvania , A Cyber Charter School Builds A Real Estate Empire; Children First (2024) PA Cyber Performance Center Report