Q. What does it mean for Great Hearts to be a non-profit?
Great Hearts is recognized by the IRS as a 501(c)3 organization. This means that all revenue from state and philanthropic funding must go to the operations of Great Hearts and our academies. Furthermore, no part of the activities or the net earnings can unfairly benefit any director, officer, or any private individuals at Great Hearts. This also means that no individual owns and has an equity stake in the organization and that at no time can the organization’s assets be sold to the financial gain of any person.
Q. What is the difference between Great Hearts and district or private schools?
As a charter school, Great Hearts has contracted with the state of Arizona to operate schools that educate K-12 students in a way that maximizes academic achievement. This freedom allows Great Hearts to offer a classical liberal arts education, rather than the standardized curriculum of many district schools.
However, as a charter, Great Hearts does not have the same access to funding as district schools. Great Hearts must rely on state funding as the single source of public funding. Not only do district schools receive revenue from local property taxes, voter-approved overrides, and levies, they are also subsidized for transportation, construction, repairs, and debt financing. Great Hearts must absorb the cost of these expenses without any additional dollars from these sources.
Similar to district schools, Great Hearts is held accountable for academic, financial, and operational compliance by the Arizona Department of Education and the Arizona State Board for Charter Schools.
On the other hand, private schools operate independently of most state education regulations which allows them to charge tuition, set academic standards for enrollment, and even offer a religious based curriculum.
Q. What is a CMO?
Charter Management Organizations (CMOs) are nonprofit entities that manage two or more charter schools. CMOs provide a wide range of services for schools—including hiring, professional development, data analysis, public relations, curriculum development, and fundraising. Great Hearts is the CMO whereas our academies are the actual charter schools.
As the CMO, Great Hearts, is also responsible for the financial health and growth of the entire network. Whereas public district schools are established and permanently supported by the state of Arizona, CMOs and charter schools are more like entrepreneurial businesses which are held publicly accountable. Growing from a single campus in a leased space to 29 campuses, Great Hearts is financially responsible for providing facilities, servicing debt, attracting students, and expanding into new communities. Operating existing academies while also continuing to expand nationwide requires Great Hearts to be structured entirely different from public school districts.
Q. How are charter schools funded?
Charter schools, including Great Hearts, have three main sources of funding.
1. Arizona State Funding
This is the primary source of Great Hearts funding. The state equalization formula provides for the basic instructional and operational functions of schools. The amount of funding a school receives is based on the number of students, the grade levels served, special education or language needs. Charter additional assistance (CAA) is also distributed to cover additional expenses like capital needs, supplies, etc.
2. Federal Funding
These funds provide support for targeted programs such as Title I, Individuals with Disabilities Education Act, and the National School Lunch Program.
3. Donations & Tax Credits
This funding comes from the charitable donations of the Great Hearts community itself in the form of Community Investment and Tax Credits.
District schools funding has similarities and differences. The most significant difference is their access to local tax revenue. Local taxes, such as property taxes, are commonly the largest source of funding for district schools, in some cases making up more than 75% of their revenue. When local taxes are not enough to cover a district school’s projected expenses for instruction, operations, and transportation the state of Arizona provides the funding to bridge this gap.
As a charter school, Great Hearts does not collect any fund from local taxes and must solely rely on state dollars.
Q. Does Great Hearts receive less public funding than district schools?
When all tax dollars from state, federal, and local, sources are considered, neighboring district schools receive on average over $2,400 more in public per pupil funding than a Great Hearts academy. This means each Great Hearts K-12 classroom receives between $48,000 to $72,000 less than neighboring district schools.
Q. What is the average salary for Great Hearts teachers?
For the 2017-2018 school year the average Great Hearts teacher salary was $37,486. All returning Arizona teachers received a 10% raise bringing the average salary for the 2018-2019 school year to $41,224.
2018-2019 Arizona Average Teacher Salary: $ 53,209 (+10%)
Neighboring District Average Teacher Salary: $ 54,687 (+11%)
Great Hearts Average Returning Teacher Salary: $ 41,224 (+10%)
Q. What is preventing Great Hearts from paying teachers at or above the state average?
There are several prominent reasons why Great Hearts teacher salaries continue to fall below state and neighboring district averages.
1. Great Hearts does not receive additional public funding from local taxes, bond overrides, or voter approved levies. Without this revenue source Great Hearts receives about $72,000 less per classroom at the K-5 level and about $48,000 less per classroom at 6-12 level than district schools.
2. Great Hearts must cover the expense of facilities (construction and financing) out of pocket and without the same government backed assurances offered through the State School Facilities Board afforded to district schools. This costs Great Hearts academies an average of $1,100 per pupil for facilities.
3. It is also important to note that the Great Hearts model relies on smaller class sizes with more teacher support. Great Hearts student to teacher ratio is 12:1 which is 33% better than the neighboring districts. In addition to this we also offer core subjects beyond the traditional district model; Latin, French, Spanish, drama, poetry, PE, art, music.
4. The state average is also based on an average teacher tenure of eleven years. Due to our relative youth (Great Hearts elementary schools are less than a decade old), our average teacher tenure is currently three years. If you disaggregate our salary average by tenure, faculty members who have taught ten years or more are at or near the state average.
Q. How did Great Hearts distribute funds intended for teacher pay increases?
In line with legislative intent, our first objective is to see that all returning lead teachers receive a 9% raise to their current salary. Those who have completed two or more years with Great Hearts as a lead teacher and are still below $40,000 after the 9% increase will receive up to an additional 1% increase towards this mark.
It is, perhaps, important to point out that in the state’s eyes the 9% increase is seen as 10% because the state includes last year’s 1% COL increase. Great Hearts gave a 2% COL increase last year, meaning that in the eyes of the state, our lead teachers are receiving an 11% raise.
The state’s calculation of increased funding for teacher salaries did not include many members of our faculty who we know are essential to our schools and the moral and intellectual formation of our students. Notably, new state funds (other than a 1.8% COL increase) were not provided for ESS teachers, Apprentice or Assistant Teachers, as well as any other faculty or staff members who are not solely responsible for whole class instruction in a core course.
Nevertheless, we have worked to stretch every dollar of additional funding, even those not intended for instructional salaries, to give other raises as well. ESS teachers will receive a 3% raise and returning TAs will receive a 5% raise this year. All other employees will receive up to a 2% COL increase. No executives at the Great Hearts CMO level received pay increases for fiscal year 2019.
Q. With more tax dollars going towards public education, will Great Hearts receive enough funding to pay teachers more?
There are several reasons:
1. Great Hearts continues to receive much less in per-pupil funding than traditional district schools. In spite of this, we work hard to maintain smaller class sizes, extra teacher support, smaller student to teacher ratios, as well as more core curricular offerings than most other operators. Additionally, we offer a richer health benefits package than most public school systems. We believe our program is better for teachers and better for students. It is also worth noting that over the past seven years, Great Hearts has seen its total funding cut by over $500 per pupil. This equates to a total loss of $26,000,000 in funding over that period. The prime example of this is that the state of Arizona no longer provides Small School Adjustment funding. This funding was initially intended to incentivize smaller classroom sizes and schools. Without this adjustment, the state funding formulas dramatically favor large schools with higher student-teacher ratios.
2. What is many times forgotten is that Great Hearts must cover the financing, building, and leasing of school facilities, without additional funding from voter approved bonds or capital funding from the School Facilities Board. It costs Great Hearts an average of $1,100 per pupil to cover these additional expenses.
3. Great Hearts does not receive funding generated from local taxes, which often makes up a majority of a districts school’s budget. This is the predominant reason why Great Hearts receives on average $2,400 less in per pupil public funding than neighboring district schools.
Q. Why does Great Hearts need to fundraise?
Total state funding is not enough to provide the education these students deserve. Public funding only covers about 83% of Great Hearts expenses.
It is the generous contributions of families to the Community Investment Campaign, Arizona Tax Credit Drive, and other charitable donations that allows Great Hearts to provide a classical liberal arts education. Without this family commitment, Great Hearts could not operate.
Family giving amounts to 10% of our operating budget and allows Great Hearts to provide subjects that are often cut from district school’s curricula such as drama, fine arts, P.E., poetry, and diverse foreign languages. The staggering difference in family giving between Great Heart families and neighboring districts is evidence of the overwhelming value parents see in a Great Hearts education.
Charitable Giving Average Per Pupil Revenue
$800 per pupil
$126 per pupil
The remaining difference in funding is made up by student and family participation in extracurricular programs and schools activates such as dances, festivals, fun runs, and more.
Q. What percent of Community Investment goes to teacher pay?
Community Investment helps bridge the gap between what we receive in public funding and what it actually costs to operate our academies. Although Community Investment is used to support teacher pay, it is a general funding source for total academy operations.
Q. How does Great Hearts ensure the success of students and teachers with limited public funding?
In spite of receiving $2,400 less in public funding and paying $1,100 per pupil to occupy our facilities, Great Hearts still manages to spend an average of $80 more per pupil on instruction than neighboring districts. In fact, an average of 57% of our budget goes directly to instruction.
Outside of instructional spending, Great Hearts provides several programs that support our teacher’s professional development such as the Headmaster College, Great Hearts Symposium, regular in-services, Special Education certifications through Rio Salado Community College and masters programs through such universities as the University of Dallas.
By investing in the classroom and in our teachers Great Hearts students regularly achieve greater academic success than both district and private schools in Arizona. Our K-12 students continue to outperform state averages on AzMERIT testing and our high schoolers score an average of 200 points higher on the SAT.
Q. Where do the dollars representing my students in the classroom go? What percentage of that goes towards a teacher's salary? Where else does it go?
Out to the money directed to total classroom operations, over 70% of state funding for a Great Hearts classroom goes to instructional and support personnel salaries and benefits as well as instructional supplies, textbooks, and paper. An additional 40% of funding covers an academy’s operational overhead, which includes things such as the facility lease, management service fee (MSF), academy administration, utilities, and landscaping. Great Hearts spends about 10% more in each classroom than what we receive in state funding. This is why the Community Investment Campaign and Arizona Public Tax Credits are critical to the operations of our schools.
Q. What does the Management Service Fee (MSF) provide to the schools?
Great Hearts Arizona academies pay on average 8.4% of their budget to Great Hearts as a central management service fee. This fee covers services that academies would otherwise have to provide at a higher cost than they can get through the shared services of the network. Such services provided by Great Hearts include:
State Compliance and Reporting
Finance and Accounting
Exceptional Student Services Support
Teacher, Staff, and Leadership Professional Development
Q. What is the average MSF at Great Hearts?
The MSF constitutes about 8.4% of academy budgets for the 18/19 school year.
Q. What are Great Hearts administrators and executives making? Is this above or below district schools?
Great Hearts Arizona manages its limited resources carefully. While executive and other leadership roles within the organization garner the highest wages, we are mindful to ensure that these wages are both reasonable and in line the organization’s size and measured against the wider market.
Great Hearts Arizona has a total of over 1,800 employees (full and part-time) and manages $114,000,000 in revenue for fiscal year 2019. Below you will find the base-pay compensation ranges for the top five Great Hearts Arizona employees. No other Great Hearts Arizona employees make above six figures.
Asst. Superintendent Lower Schools: $124,000
Executive Director of Title I Support: $120,000
Sr. Director of AZ Development: $115,000
Asst. Superintendent Upper Schools: $110,000
All Great Hearts employees receive the same health benefits package and 401k matching. We do not provide, for any employee, housing, car allowances, per diems, or petty cash allocations.
For districts in Arizona operating between 18 to 25 schools the average base pay for superintendents in $185,000. Great Hearts Arizona operates 22 schools at its highest paid position is $183,855.
Q. Does Great Hearts receive public funding, specifically, to build and operate new schools?
Great Hearts does not receive state funding for the construction and/or leasing of school facilities. Great Hearts must cover all the real estate costs of construction, leasing, financing, and maintenance of our schools without public money. Furthermore, Great Hearts must service the debt on our facilities amounting to around $1,100 per student without additional public revenues from the Arizona School Facilities Board, property taxes, bonds, or other voter-approved levies.
If we make a direct comparison to district plant operation and maintenance Great Hearts facilities are far more efficient, spending on average $390 per pupil on facility operations vs. $977 at district schools.
Q. How does Great Hearts afford to build schools?
We utilize the tax exempt bond market to finance our facilities and by the creation of obligated groups. We bundle debt in order to secure the lowest interest rates possible. In addition to using the capital markets we partner with families, foundations, and businesses through charitable gifts to reduce the capital we need to finance.
Q. How does Great Hearts reach new communities and expand existing schools?
It does not. Our growth has come through expansion grants and other charitable investments that have subsidized our year zero budgets and capital projects. The mortgage expenses incurred are already assumed into our operating budgets. Charter schools have never received facility funding, as they are expected to pay for space out of operating/per-pupil revenue. Therefore, expansion has actually helped Great Hearts keep more money in the classroom by bundling facilities within obligated groups in order to receive lower interest rates. Additionally, expansion has continued to mean that shared services across the network become more efficient as we continue to better leverage economies of scale.