A few years ago, Michigan governor Rick Snyder decided that the best way to fix the financial problems of districts in deficit was to put them under the control of an emergency manager to straighten out their finances. Some districts, however, are so poor that they don’t have enough money to educate their children. It is the state’s duty to help them.
In 2011, an emergency manager decided to give the Muskegon Heights school district to a for-profit charter chain, called Mosaica. It has not been profitable, and the district’s deficit continues.
Mosaica just received an emergency bailout from the state because it couldn’t meet its payroll. The corporation ended its first year in deficit because of the cost of repairs.
Years of deferred maintenance required expenditures of $750,000 to bring the buildings up to code. Meanwhile revenues have shrunk as enrollment dropped from 1400 to 920.
Lingering question: why did the state allow this impoverished, largely African American school district to fall into such shabby condition? Will for-profits be more cautious in the future about taking over neglected districts? Or will they have a commitment from the state for subsidies that were not available to the school district when it had an elected board?
Diane Ravitch's blog 
Here’s some background on the fully privatized district:
“If you haven’t heard it yet, tune it to Lindsey Smiths’s series on how kids are faring in Muskegon Heights. Muskegon Heights is the first place in the state to turn all its public schools over to a charter company, Mosaica Education. Mosaica has a spotty record trying to improve student achievement in the state. Two schools under their operation have been closed.
Yesterday Smith reported on what drove the district to privatize. Today’s report focuses on high rates of teacher turnover. Tomorrow we’ll hear from some of the students.
Feedback from these stories has been coming in and one thing I’ve heard a lot is a call for coverage of the proposed expansion of the state’s Educational Achievement Authority (called the EAA). The EAA was the state authority that allowed Muskegon Heights to turn over their schools to Mosaica.”
http://stateofopportunity.michiganradio.org/post/checking-michigans-first-fully-privatized-school-district
And this is why a “non profit” restriction in many state codes doesn’t mean much of anything:
Q. Is MEI a non-profit company?
A. Each charter school is a nonprofit school as required by law, with an independent board of trustees. That board of trustees of the nonprofit charter school is permitted to contract out with any for-profit or non-profit entity for goods or services. This proposed charter school has or will soon enter into a management agreement through which it will contract for educational and administrative services with Mosaica Education, Inc., a for-profit education management organization.”
The school, the legal entity, is a nonprofit, to comply with the state code. Every single service, educational, management, all of it – is then contracted out to a for-profit.
So if your state has a requirement that charter schools be “nonprofits” and that’s offered as a response to end any debate, ask for more details.
http://mosaicaeducation.com/about-mosaica/faqs/
This is reprehensible. Speaking as a U of M grad and also a summer resident of this state for all of my pre-married life! Thanks Diane for putting a spotlight on this.
Does this chain operate in other states? Is its overall profits negative? Don’t most companies with business in multiple states start closing, not maintaining sites, etc when things get tight? I know that is what usually happens in the private sector so why are people surprised this company did it? That’s what FOR PROFITS do.
Mosaica is not only national, it is international:
http://mosaicaeducation.com/locations/
I think it’s one of the startling differences between public schools and charter schools that is never discussed. I see it as a real disadvantage for local public schools, because of course they can’t “scale up” or take advantage of “economies of scale” in the way a national operator can. Conceivably (I think inevitably, but that is of course debatable) we could end up with 3 or 4 or 5 big national charter operators and then local public schools.
It’s amusing in a way, because of course this original idea was sold as “innovative” and “individual” but that isn’t the way running schools like businesses works 🙂
Of course, can’t you just see it. They buy the politicians who let them create big blobs of charter companies that will go around eating up and taking over the smaller ones. It is only a matter of time.
It operates in other states. I’ve heard the owner owns a Learjet. It is completely disgusting what has happened in the state of Michigan. I know someone who worked in one in Ohio. They have low pay and benefits. Teachers were asked to go door to door to drum up business. The CEO was going to own the building (using tax money) in a few short years.
How did the salaries and benefits of the for-profit managers compare to the school district’s administrators before the takeover? How much profit did the for-profit company take out of the school?
I thought they were guaranteed 8 million up front.
Thank you for sharing this issue. You reach a lot of people. Hope you are doing well! 🙂
Thanks to Diane for consolidating the info., for posts, and her succinct cogent calls for action. Thanks to Chiara for the research and analysis, that highlights and draws significant conclusions. Chiara, do you regularly forward the info. to Ohio’s State Board of Education? A few months ago, in response to my complaints and references to the Akron Beacon Journal articles, the Ohio State Board of Education Chair suggested that she and I meet for a discussion. Have you asked for a meeting with her to share your information? I sensed she valued discussions, as a format, instead of reading. She sent me an e-mail that said something like, Tis best, not to believe what you read in the newspaper.
“Dee Dee
April 10, 2014 at 10:26 am
Of course, can’t you just see it. They buy the politicians who let them create big blobs of charter companies that will go around eating up and taking over the smaller ones. It is only a matter of time.”
Right, but even without capture or corruption it’s not a real “free” market because it’s publicly-funded, so in order to ensure “quality” (whatever that means, right?) there will be attempts by lawmakers to pick “winners and losers” which in my opinion will inevitably lead to standardization and larger trumping smaller because that makes BUSINESS sense. That’s what “replicate” means, in practice. Standardize and repeat.
This is the US House bill which subsides charter schools. The bill is much more than that, they also did a statutory redefinition that allows entry into a pre-K market, but
“The big difference in this new piece of legislation: The bill would create a grant program to help Charter Management Organizations (think KIPP or Aspire) open new charter schools. That’s something U.S. Secretary of Education Arne Duncan supports.”
So they know they can’t regulate hundreds or thousands of schools all over the country (that’s why we regulate schools locally) so instead they hope to pick CMO’s.
It’s really pretty radical. It’s akin to my saying “our school board and superintendent do a pretty good job with a lower income rural population of students (they do) so we should open a school in West Virginia”. If a public school did that it would be unheard of (and also have no support in any law I’m aware of) but that’s the general idea here.
I’m amazed it doesn’t get more discussion, if not from ed people then at least from academics in legal fields. I think it’s a huge departure from what people understand public schools to BE, their inherently local nature.
And, here’s the link I forgot!
http://blogs.edweek.org/edweek/campaign-k-12/2014/04/kline_miller_team_up_on_charte.html
Somehow, I think management is still getting paid.
Nothing is more ironic than this story. Just sounds like phony for-profit tiertiary English language schools(so called NO VALUE Eikaiwa) that try to make themselves larger-than-life but end up going bankrupt with CEO absconding with $$$ coming from student tuitions.
It could be argued that Mosaica is trying to do the right thing.
Snyder bashing is so knee jerk anti Republican. The automatic anti charter bias, nay bigotry is amazing to me. Even a charter doing good work would be condemned just because it’s a charter. Maybe we should judge charters by the content of their character rather than the color of their authorizing law.
Funny, I just looked again and none of the previous comments even mentioned MI Gov. Rick Snyder. Michigan has hundreds of charters – this is a still-unusual case of an entire district handed over to a for-profit CMO. So who’s bashing?
As a for-profit business, Mosaica is doing what is in the best interests of its shareholders – as is its legal duty. I’m astounded at how often people forget that when we start to talk about for-profits in education.
Moreover, Mosaica sought out this opportunity, because they were being handed the entire district lock, stock and barrel. Leona Group got a similar deal in Highland Park, MI schools.
Both these districts were and still are under the control of emergency managers appointed by the Governor. This whole scheme works because 100% of the funding for a charter school is provided by the state in Michigan. This allows the local taxes that used to comprise the mandatory local contribution for a public district (18 mills on non-homestead property) to be used to pay down the accumulated operating deficits of the district – money borrowed from the state.
In other words, this entire experiment is focused on one thing only – how to ‘solve’ the financial problems of a local district that has run persistent deficits. Academic results were window-dressing – and in fact, first year state test results (MEAP) are disappointing, with between half and two-thirds of all returning students performing worse this year than last. In fact, results were worse for students who had tested proficient last year.
No one expects miracles, but the only argument for replacing locally governed schools (though under state control for several years now) with a charter chain was a financial one – except for those who simply choose to believe that charters are better, no matter what. This was all about punishing an impoverished community for not cutting their school budget fast enough to keep it balanced in the face of continued dis-investment in K-12 education by our state.