Thursday, December 10, 2015

NEPC: How Charter$ Ca$h In

Today the National Education Policy Center released a new report, "The Business of Charter Schooling: Understanding the Policies That Charter Operators Use for Financial Benefit."

In other words, what policies are helping charter operators cash in, and how?

The report, by Bruce Baker (Rutgers University) and Gary Miron (Western Michigan University) is a valuable and useful read, filled with actual scholarly research (unlike, say, a typical blog post). The findings are not surprising, but they are stark and clear. This is a resource that will be invaluable in a thousand little charter skirmishes across the country. I'm going to just hit some highlights here, but I strongly recommend you read the whole thing.

The paper opens with a good pocket history of charters and the charter movement.This leads to an examination of the structural and governance differences of charters, and that leads to a discussion of how charters finance themselves. Baker and Miron that charters can only "find" money one of two ways-- either by revenue enhancement strategies, or by cutting costs.

The paper is rich with detail, data, and illustrative examples. The four basic concerns they express are:

1) Much of the money intended for educating children never makes it to the classroom. Instead, somebody is making money.

Charters can only make more money by increasing revenue or cutting costs. Revenue enhancement techniques include private donations and in-kind "donations" from parents. Revenue can also be enhanced by paying special attention to enrollment and watching things like enrolling students who are labeled special needs, but whose needs are not that large (aka costly to take care of). Chester Upland in PA is a great example of a school that actually earned negative state support because charters were draining them with large payments for low-cost students with special needs. Baker and Miron also note that one reason not to take new students in January is that students added mid-year don't count toward the money the charter gets from the state.

Charters can cut costs by hiring low-cost inexperienced teachers and not keeping them long.

But all that money the charter "finds" doesn't end up in classrooms. Instead, charters pump the money into big administrative costs, including hiring both personnel and services. Charters also invest heavily in capital assets. And all of this expense is hugely inefficient as it duplicates work. IOW, when ten charter students leave a hundred-student public school, we end up with two principals and two buildings where one was previously enough.

2) Public assets are being transferred to private hands at public expense.

The public starts out owning a school building and facilities inside. Before anybody knows it (literally) the public's building has become property of a charter, with public tax dollars being spent to facilitate the transfer. Predatory leasing is rampant in the charter industry. The authors also refer to the infamous White Hat case in Ohio, where the school had to buy back its own equipment and facilities from the charter management company it had just fired.

The world of charter real estate is bizarre, counter-intuitive, and a real explanation of why so many investors are interested in the charter biz. This paper does an exemplary job of explaining how it all works.

3) Charters are building their own little kingdoms, self-serving and self-perpetuating and "derived from lucrative management fees and rent extraction."

4) Charters operate under such a shroud of secrecy and tangle of management levels which make it unlikely that make it unlikely that "any related legal violations, ethical concerns, or merely bad policies and practices are not realized until clever investigative reporting, whistleblowers or litigation brings them to light."

A great deal of money and property are moved around, changing hands between people who may or may not be connected in inappropriate, barely legal, or just plain illegal ways, and yet the charter industry is so opaque and charter regulations in some states (looking at you, Ohio) are so weak and ineffectual, that the public never gets to know what is happening to its tax dollars. Charter fans love to say that the money belongs to the students, and that is likely in part because students, unlike taxpayers, are unlikely to say, "What the hell did you do with my money?"

There are numerous examples of charter arrangements where the right hand leases property from the left hand, and the paper offers several. The lack of transparency is a problem.

Important Theme

There's a great deal of detail and support in this study, and it deserves to be revisited many times. But there is one theme that runs through it that is perhaps not entirely obvious, but is extremely important.

These abuses of the financial support system for school have a potentially disastrous outcome, because on the one hand, the draining of public tax dollars from the public education system is having the effect of weakening, and in some cases destroying, the institution of public schooling. At the same time, that money is being used to create a system that is chaotic, unstable, and unsustainable.

What happens if it all collapses?

What, for instance, would happen if every major charter operator decided to pull out of New Orleans, concluding that it just wasn't a viable business option any more? The public school system has already been dismantled-- what would happen next? After all-- the charter operators are just business people who don't have to run a school in New Orleans if they don't feel like it. They can't be compelled to stay. So what would happen next? With all the system needed to run a school district already erased, what would New Orleans do with its children?

That's the supreme danger of charter systems-- the destruction, disruption, and destabilization of an old system to be replaced with a system that is unsustainable and which has no commitment to serve all or any students.

This phrase appears several times in the report-- "risking the future provision of public education." There's lots to absorb in the study, and a good list of recommendations as well. But it is that phrase-- risking the future provision of public education" that will stay with me, because the current charter system is doing no less than that-- risking the future provision of public education.


  1. Thanks for this. Bookmarked for the next time some disingenuous babe-in-the-woods type starts in with the "I just don't see how charters make money...."

  2. When the small charter operators implode, they will be replaced by the giant McWalmart charter school. Automated teachers will be supplied by Microsoft.

  3. Careful readers might note that the report has been edited since the original release. On page 8 the scentence originally read "For-profit EMOs dominate the charter school sector in Michigan, Florida, Arizona, Ohio, and New York". As it turns out, at most 14% of New York State charter schools are run by a for profit EMO. The authors have apparently changed the text. It will be interesting to see if there are any further revisions.