Charter schools and voucher programs have been among the most contested policy developments in American public education over the past three decades. That controversy has generated substantial research on their effects — fiscal and academic — and substantial disagreement about how to interpret it. This article does not advocate for or against either mechanism. Instead, it explains how the funding mechanics work and documents what research has found, including findings from researchers and organizations across the political spectrum.
How Charter School Funding Works
Charter schools are publicly funded, tuition-free schools that operate under a charter — a performance contract with an authorizing entity (typically a state agency, school district, or university). They are generally exempt from some regulations that apply to traditional public schools but are subject to their authorizing agreements and applicable state law.
The fundamental funding mechanism is per-pupil allocation: when a student enrolls in a charter school, the per-pupil state and local funding that would have accompanied that student to a traditional public school follows them to the charter instead. In most states, the charter school receives an amount equal to the per-pupil state and local funds of the district in which the charter is located.
This mechanism creates a specific fiscal dynamic. The district loses revenue for each student who enrolls in a charter school. But not all district costs decline proportionally with enrollment. Certain costs — building maintenance, debt service, utilities, administrative overhead, transportation infrastructure, and some staffing arrangements — are relatively fixed in the short term regardless of how many students occupy a building. As the Charter Fiscal Impact analysis explains, “fewer students may reduce some of a school district’s operating costs, many district costs will remain exactly or nearly the same for several years — if not indefinitely — when students enroll in a charter school.”
The consequence is that the district transfers funds equal to the full per-pupil allocation for each departing student while the actual cost reduction to the district is less than that amount. The difference between what the district transfers and what it saves represents a net fiscal loss — a “stranded cost” that must be absorbed by the remaining student population or through service reductions.
Documented Fiscal Effects in Pennsylvania, Michigan, and Ohio
The fiscal effects of charter school expansion have been most extensively studied in states with large charter sectors: Pennsylvania, Michigan, and Ohio.
Research for Action’s study of six Pennsylvania school districts found that as charter enrollment expanded, the fiscal impact was “consistently negative in both the short- and long-term,” regardless of the district’s size, existing charter penetration rate, or budget situation. The study found that even as students departed for charter schools, school districts experienced significant long-term fiscal impacts because of the fixed-cost structure.
The Fordham Institute’s analysis, drawing on multiple studies, found that research on charters’ effect on districts’ instructional spending per pupil is mixed: studies of Ohio, Pennsylvania, and California found declines in districts’ instructional spending when charters expanded, both in absolute terms and as a share of total spending, while in Massachusetts and New York City, instructional spending appears to have increased. Fordham also noted that in 37 of the 46 states where charters exist, they are partially or entirely excluded from local funding sources such as bond levies — meaning districts may retain some local revenue even as charter transfers occur.
The Moody’s Investors Service analysis of charter fiscal impacts found that a growing number of districts faced credit concerns related to charter school growth, particularly in Rust Belt states where declining enrollment and industrial property devaluation were compounding the fiscal pressure from charter transfers.
Nashville, Tennessee provides a detailed case. A 2014 study examining charter school costs there projected that the district would transfer $65 million to charter schools annually, rising to $98 million by 2019-20. By 2022-23, actual charter enrollment had grown to 15,726 students and the district’s annual transfers to charters exceeded $231 million. A self-examination by Metro Nashville Public Schools found that 35 percent of the district’s per-pupil costs were inelastic — they could not be reduced based on charter school enrollments.
It is worth noting that some researchers and policy analysts dispute the framing of this dynamic as inherently negative. The Fordham Institute argues that if districts are pushed to reduce inefficient spending by competitive pressure, the fiscal effect may ultimately be beneficial — requiring districts to allocate resources more efficiently. Whether a given district’s response to enrollment loss constitutes efficiency improvement or service reduction depends substantially on the specific circumstances and one’s definition of terms.
Academic Outcomes: The Evidence
The research on charter school academic outcomes has evolved significantly over time. The Center for Research on Education Outcomes (CREDO) at Stanford University has produced the most comprehensive longitudinal analyses.
Early CREDO studies found that charter school performance was, on average, similar to or slightly worse than that of traditional public schools. The most recent CREDO study, examining 6,200 charter schools from 2014 to 2019 across 29 states, found improvement: charter school students gained, on average, the equivalent of 16 days of additional learning in reading and six days in math over their peers in traditional public schools. 83 percent of charter school students performed the same as or better than peers in reading; 75 percent performed the same as or better in math. New York City showed particularly strong results, with charter students gaining 75 days of additional reading and 73 days of additional math learning.
This aggregate result masks significant heterogeneity. Earlier CREDO analyses found that results were more positive for students who stayed in charters for multiple years, for students with lower initial scores, and in urban areas — with some consistent underperformance at the high school level. A 2024 study of high-quality Los Angeles charter high schools using a lottery design found that enrollment in oversubscribed charters significantly increased standardized test scores and four-year college enrollment and persistence, while a review from the Center for Reinventing Public Education noted “great variety in charter school performance” across the broader literature, with “the only evidence of consistent underperformance” in charter high school reading and math.
The consensus that emerges from the literature is that charter school performance is genuinely variable — some produce strong academic gains, particularly in urban settings serving lower-income students, while others perform at or below the level of comparable traditional public schools. Average national effects have improved over time. The variation in oversight and authorization quality across states means that the charter sector in one state can function quite differently from that in another.
Voucher and Education Savings Account Programs
Voucher programs — and the related but distinct education savings account (ESA) model — differ from charter schools in a fundamental way: they direct public funds to private schools, including religious institutions. A student who participates in a voucher or ESA program receives a publicly funded benefit — typically a fixed dollar amount — that can be used toward private school tuition, curriculum materials, tutoring, or other qualified educational expenses.
The fiscal mechanism follows the same basic logic as charter funding: per-pupil revenue that would have accompanied the student in the public system is partially or fully redirected to fund the private alternative. States vary significantly in how they structure these transfers, how much money the voucher or ESA provides relative to the public per-pupil allocation, and what expenses qualify.
Voucher and ESA programs have expanded significantly in recent years. Arizona’s ESA program grew by 409 percent in enrollment between the 2021-22 and 2022-23 school years after the state made it universally available to all students, not only students with disabilities or those in failing schools. More than 70 percent of new voucher recipients in Arizona had never attended public school — meaning the fiscal transfer was not offset by any reduction in students the district was no longer serving.
West Virginia’s Center on Budget and Policy analysis found that the state’s ESA program would cost $21.6 million in lost public education funding in 2024-25, with the program’s automatic eligibility expansion projected to quintuple costs.
Proponents of voucher programs argue that fiscal effects are often overstated or temporary, and that in the long run, districts serving fewer students should have lower costs, making the fiscal impact neutral or positive. The California Policy Center analysis, for instance, projects that in the long run, districts can adjust their cost structures to match reduced enrollment, producing net fiscal benefits. Critics note that this adjustment process can take many years and requires service reductions in the interim.
Academic Outcomes for Voucher Participants
The research on academic outcomes for voucher program participants is more mixed than for charter schools. A 2019 study of Louisiana’s voucher program by University of Arkansas researchers found that after four years, students using vouchers to attend private schools “performed noticeably worse on state assessments than their control group counterparts,” with “large negative effects” particularly in math. Studies of Milwaukee’s program and Florida’s program found more positive effects on graduation rates and college enrollment, though test score effects were more modest.
One consistent finding in the literature is that voucher programs appear to induce competitive responses from traditional public schools. Several studies have found that the presence of a voucher threat — the possibility that students might leave — has led traditional public schools to improve performance metrics. Whether this competitive dynamic represents a net benefit or creates other costs (such as selective admissions practices that concentrate higher-need students in traditional public schools) is a matter of ongoing research.
The Arizona ESA competitive effects study found improvements in math proficiency rates in public schools exposed to competition from the targeted ESA program, with stronger effects in 2019, suggesting cumulative positive effects. The researchers characterized this as evidence that “small, targeted, and accountability-driven voucher initiatives can produce sustained, positive competitive effects.”
State-Level Variation in Oversight and Accountability
Perhaps no feature of the charter and voucher landscape matters more than state-level variation in oversight. States with strong authorizing standards for charter schools — including academic performance requirements, transparent financial reporting, and clear closure processes for underperforming schools — have tended to show stronger academic results in their charter sectors than states with loose oversight.
For voucher and ESA programs, accountability structures vary even more widely. Private schools receiving public funds through voucher programs are typically not required to administer the same standardized assessments as public schools, limiting comparability of outcome data. Some states require participating private schools to report enrollment, graduation rates, and test results; others do not. The West Virginia analysis specifically noted that the state’s ESA program lacked adequate accountability and reporting requirements.
The pattern of fiscal and academic effects from both charter schools and voucher programs is thus not uniform across states. It reflects the specific design choices — funding formulas, authorization standards, accountability requirements, and eligibility criteria — that each state has made. Research findings from one state’s charter sector or voucher program may not generalize to another with different structural features.
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