Charter schools that aim to help high school dropouts earn diplomas would be back in Indiana’s K-12 school funding formula and a cap on their expansion lifted under a bill that passed a House committee Monday.

But obstacles remain, especially in the Senate.

The schools, known as dropout recovery charter schools, serve mostly adults and a handful of traditional high school students. They serve a students in their teens and some old enough to have multiple children and regular jobs. Some of the schools even have on-site child care.

Concerns about rising costs of the fast-growing schools raised alarm in the Senate last year, which decided to temporarily block any new dropout recovery schools from opening to buy time to reconsider how best to fund them. That question appears to be unresolved, as separate bills in the House and Senate propose two different ways to pay for dropout recovery charter schools.

House Bill 1028 would remove last year’s cap on new dropout recovery high schools an fund them through the K-12 school funding formula. It passed the House Education Committee Monday by a 11-0 vote.

However a similar bill, Senate Bill 159, aims to keep some additional state controls over the expansion of dropout recovery charter schools, including funding them in a separate line item instead of in the funding formula and requiring more approvals to open than for other charter schools. It is scheduled to be heard in the Senate Education Committee Wednesday.

Claire Fiddian-Green, education adviser to Gov. Mike Pence, said said dropout recovery schools ultimately have a positive impact on the state budget when adults who were underemployed get better paying jobs thanks to their diplomas, paying more taxes to the state.

“The return on investment to the state budget will be positive,” she said.

But Sen. Luke Kenley, R-Nobleville, who is chairman of the powerful Senate Appropriations Committee, was adamant that dropout recovery charter schools should be funded separately, monitored to gauge their effectiveness over time and tracked as they grow to assess the financial impact to the state.

“This needs to be outside of the K-12 funding formula,” Kenley insisted.

Dropout schools are expanding

The nine Indiana dropout recovery charter schools currently are operated by two organizations. The Excel centers, run by Goodwill Industries, have nine schools in five cities and the Christel House Academies charter school group operates the DORS Academy in Indianapolis. Five of the nine schools are in Indianapolis, but both Excel and Christel House have plans for more locations.

Last year the Senate Finance Committee balked at their growth plans, worried about the escalating costs of the schools. Some senators wondered if it was even legal to spend K-12 funds for adults who return to school. They capped growth of drop out recovery schools and set aside a separate $25 million fund to cover the costs of the existing schools with the goal of reexamining how the schools are funded and whether they belong in the K-12 funding formula going forward.

Senate Bill 159 requires any new dropout recovery charter school to win the additional approval of the Indiana State Board of Education and a state budget office. Most charter schools need only win approval to open from a sponsor, such as a university or Indianapolis Mayor Greg Ballard’s office, without any state sign off.

Kenley’s bill also continues to fund dropout recovery charter schools separately from the K-12 funding formula. Dropout recovery charter schools prefer to be funded through the k-12 formula because it’s seen as a more reliable funding stream.

Kenley said he understands why, but argued the schools need to also understand the state’s financial situation. K-12 funding, he said, is not for adults and the state needs to monitor the success of dropout recovery charter schools before allowing wide expansion of them. All of the dropout schools have opened since 2010.

Funding issues would be more sensibly addressed in 2015, the legislature’s next budget session, he said.

“These schools are not for regular schoolchildren and they’re still new,” Kenley said. “This is not even an appropriate conversation for this year. This is a budget matter.”

The schools make their case

At Monday’s House Education Committee hearing, Goodwill Education Initiatives’s Chief Operating Officer Scott Bess said the success of the schools in getting students to earn diplomas and better jobs has demonstrated their value. Goodwill, he said, now serves 2,900 students and has waiting lists at all of its sites. Christel House DORS has about 200 students.

“Our students take and successfully pass required end of course assessments just as every other graduate in the state is required to do,” Bess said. “We have 424 graduates to date and that number will double by the end of the school year.”

Democrats on the panel said they did not object to the schools but worried about their rising costs, asking that they be funded separately or that K-12 funding be increased to account for the extra costs of the schools as they grow.

“What impact does this have on the dwindling dollars for public education?” asked Rep. Vernon Smith, D-Gary. “You’re reducing money for K to 12 if you’re not increasing aid to education. That concerns me greatly.”

State Superintendent Glenda Ritz’s lobbyist, John Barnes, echoed those concerns, offering to support the bill only if the schools are funded separately.

“We believe the intentions are good,” Barnes said. “Our only concern, as we move forward to the budget next year, is we want to make sure it is understood this program is not funded through K-12 dollars.”

A to F grading changes

The House bill also would direct the Indiana State Board of Education to create an alternative accountability system for “adult high schools,” that could include both dropout recovery charter schools and possibly other programs that serve adults seeking diplomas, separate from the A to F rules that apply to other public schools.

That raised additional questions about why the schools should be judged differently than traditional high schools. Fiddian-Green said the alternative accountability was needed because oddities in adult high schools create problems judging them under the current system.

For example, the current system judges graduation rate by cohort, or a grouping of students of the same age with the same projected graduation year. But adult students don’t fit in a cohort, she said. As a result, those students are left out of some A to F calculations, meaning the school is judged on a smaller number of students than are actually enrolled, which can skew the results.

“We believe accountability will ensure all existing and new high schools will provide high quality programs,” she said.

But others wanted to see specifics in the bill.

“What exactly would this look like?” asked John O’Neil, a lobbyist for the Indiana State Teachers Association. “What will the state board use as criteria for standards and benchmarks? We’d like some clarity about how the state board will undertake that process.”

Excel Centers estimate about 400,000 Hoosiers ages 22 to 45 have never finished high school, with 15,000 new dropouts accompanying each graduating class since 2007 statewide.