Wednesday, April 8, 2020

PA: PNC A Charter School Player

We may think of the financial arm of the charter movement coming from specialized groups like the NewSchools Venture Fund or from hedge fund groups, but I've been reminded that sometimes it's regular old everyday banks in their helping to prop up the privatization of public education.

PNC Financial Services is a big fat financial holding company with a long history. It's the 9th largest bank in the US by assets, 5th by number of branches. They own 22% of Blackrock, the biggest asset management company in the world. They operate in nineteen states, but they're headquartered jst up the road from me in Pittsburgh. They trace their history back to the Pittsburgh Trust and Savings Company, founded in 1845. After years of various mergers and acquisitions, the current PNC version appeared in 1982 when Pittsburgh National Corporation and Provident National Corporation (a Philly bank originally founded by Quakers) merged into a new entity named PNC Financial Corporation. It was the largest bank merger ever at that time. They've continued to gobble since then.

While most folks in these parts recognize them as a consumer bank, PNC is a busy little conglomerate. That includes sponsorships; PNC is a sponsor of Sesame Street, NASCAR, and six different sports teams.

They are also proud sponsors of the Pennsylvania Coalition of Public [sic] Charter Schools.

That makes sense, because they have a whole financing group dedicated to charter school finance. The PNC Charter School Team includes both Investment Bankers from PNC Capital Markets LLC and Corporate Banking Relationship Managers from PNC Bank, N.A., and they have handed out a collective $500 million in charter school financing-- and they just scraped together another cool $250 mill for charter school finance.

They know the rhetoric. Their charter schools page defines charter schools as "new, innovative public schools that have been freed from some of the rules, regulations, and statutes that apply to other public schools," and they repeat the talking point that charter schools are public schools, also calling charters "a way to increase educational choice and innovation within the public school system." Their specialty appears to be helping charters own a facility; they are fans of the tax-exempt bond.

The bankers in charge of this operation are, well, bankers. Here's Nicholas Tripician, managing director and co-lead of the Charter School Sector Group. He's worked for JP Morgan and Morgan Stanley doing income and pricing analysis--oh, and he was a big time rower. Or  Greg McKenna, who works with the execution of the bonds and other financial services for charters.

It's not that I think having an education background is essential for being an investment banker. But if someone comes to you to get a loan to start a bagel factory, wouldn't you taste the bagels. And if you, for some reason, were incapable of tasting bagels, would you not get ahold of someone who knows bagels and can give you a real opinion?

The PNC division has underwritten charter schools in PA, in Florida, in Delaware. They've financed a school for Montessori Works, the Delaware group intent on mass-producing Montessori education. In all of their materials, they talk about charter school excellence and high quality and it's not particularly clear how these guys would know a high-quality school when they saw one. I can believe that they would know a good investment when they saw one, and there are plenty of rules in place to insure that charters are good real estate investments. Most particularly, we can point to the Clinton-era Community Tax Relief Act of 2000 (now in place until 2021) which guarantees a buttload of benefits, including the chance to double your investment in seven years. It's worth noting that when you read about the Waltons pumping tons of money into charters, they're not investing in curriculum development or teacher salaries-- they are mostly investing in real estate.

PNC is just following in the steps of many financial institutions who have figured out that the quality of charter education is largely irrelevant to the advisability of investing in them. We're living with huge financial incentives to build a lot of bad charter schools that have negative impacts on public education. And when an 800-pound financial gorilla like PNC feels that charter school growth is a win for them, how do you suppose that effects the messages that legislators get about charter regulation.

Follow the money. Always follow the money. And in the case of charter schools, following the money will often lead you to someone who doesn't care all that much about actual education.

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