Policy debates about the net effects of charter schools on students and on the delivery of K-12 education are ongoing and remain highly contentious. In a recent paper, we contribute to the policy discussion by drawing attention to the fiscal externalities of charter schools, a finance topic that deserves more attention in the overall discussion. Fiscal externalities are the additional burden that charter schools place on the budgets of traditional school districts, and we find evidence that they are consequential in North Carolina.
Although such burdens may manifest themselves in higher local tax burdens, the more likely outcome is reduced spending per pupil on educational services–and hence lower educational quality–for students who remain in the district's traditional public schools. The presence of charter schools typically means that some of the funding that would otherwise have been available to the local school district is diverted to the charter schools.
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