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Colorado Charter School Market Analysis
Since the year 2000, 357 charter schools have opened in Colorado, while 95 have closed. As of August 2023, 262 charter schools remain operational across the state. In the past year, 15 schools closed, resulting in a net loss of 7. The rate of closure is accelerating and expected to increase as larger, more established charter schools absorb students from smaller schools facing enrollment declines and funding changes. At the same time, the rate of new charter school openings is decreasing due to financial challenges and market saturation. New charter schools opening that are not backed or funded by a larger charter network will most likely close within five years of opening. Colorado's charter school market is fragile and deeply dependent on Per Pupil Funding. A shift in funding could directly threaten their ability to continue educating students.
Schools that close typically experience:
- Declining student enrollment
- Declining student retention
- Declining recruitment and retention
- Non-diversified sources of revenue
KEY FINDINGS
Per Pupil Funding is the main tool charter schools use to finance their operations. Each new student brings thousands of dollars in additional funding. If schools can't recruit enough students to offset rising costs (inflation, salaries, property), revenue drops until they can no longer operate.
New school founders often overestimate their growth, entering into leases for large properties. Rising rent, combined with declining student recruitment and retention, reduces revenue, increases costs, and forces closure. Conversely, schools that underestimate growth lease small spaces, limiting their expansion potential.
Most schools fail to diversify revenue, showing weak financial planning. Fundraising, investing, and using their tax-exempt status are often overlooked, especially by smaller schools. Relying on Per Pupil Funding, combined with enrollment changes and financial gaps, creates a feedback loop that leads to closure.
Recommendations
Due to the fragile state of Colorado’s charter school market, changes in financial markets and demographics can hinder charter school growth and influence closure of charter schools. Charter schools will decline in the near term, allowing larger established charter schools to consolidate enrollment.
Existing charter schools should:
- Connect with financial analysts and strategists to determine their options for growth
- Develop robust marketing and engagement strategies to increase enrollment and retention
- Diversify sources of income to offset declining enrollment or shortfalls in enrollment
Pre-Market charter schools should:
- Interrogate the markets they intend to enter by conducting an in-depth market analysis.
- Ground their enrollment and growth estimations in demographic data, not intuition
- Build a scale-oriented enterprise plan that aligns marketing and engagement with growth