Back in the olden times, advocates claimed that charters would provide healthy competition and beneficial innovation. This would benefit the public schools and urban districts as well.
But it turned out to be a false promise.
By skimming off the best students in poor neighborhoods, charter schools leave the public schools in worse condition, overburdened with the neediest students that the charters don’t want and lacking the resources to educate them appropriately. Where the public school system is struggling to improve, charter schools may actually hasten their collapse.
Now Moody’s Investors’ Service has issued a bulletin warning that the proliferation of charters in economically weak cities damages those cities’ economic viability.
The report summary says:
The dramatic rise in charter school enrollments over the past decade is likely to create negative credit pressure on school districts in economically weak urban areas, says Moody’s Investors Service in a new report. Charter schools tend to proliferate in areas where school districts already show a degree of underlying economic and demographic stress, says Moody’s in the report “Charter Schools Pose Growing Risks for Urban Public Schools.”
“While the vast majority of traditional public districts are managing through the rise of charter schools without a negative credit impact, a small but growing number face financial stress due to the movement of students to charters,” says Michael D’Arcy, one of two authors of the report.
Charter schools can pull students and revenues away from districts faster than the districts can reduce their costs, says Moody’s. As some of these districts trim costs to balance out declining revenues, cuts in programs and services will further drive students to seek alternative institutions including charter schools.
Many older, urban areas that have experienced population and tax base losses, creating stress for their local school districts, have also been areas where charter schools have proliferated, says Moody’s. Among the cities where over a fifth of the students are enrolled in charter schools are Cleveland, Detroit, Kansas City, St. Louis, and Washington, D.C. Nationwide about one in 20 students is in a charter school.
One of the four risk factors Moody’s identifies as making a school district vulnerable to charter school growth is that the school district is already financially pressured and grappling with weak demographics.
A second factor is having a limited ability to adjust operations in response to a loss of enrolment to charter schools.
“Shifts in student enrollment from district schools to charters, while resulting in a transfer of a portion of district revenues to charter schools, do not typically result in a full shift of operating costs away from district public schools,” says Moody’s Tiphany Lee-Allen, the Moody’s Associate Analyst who co-authored the report. “Districts may face institutional barriers to cutting staff levels, capital footprints and benefit costs over the short term given the intricacies of collective bargaining contracts – leaving them with underutilized buildings and ongoing growth in personnel costs.”
A third risk factor for a school district is being in a state with a statutory framework promoting a high degree of educational choice and has a relatively liberal approval process for new charters and few limits on their growth, as well as generous funding.
For example in Michigan, the statutory framework emphasizes educational choice, and there are multiple charter authorizers to help promote charter school growth. In Michigan, Detroit Public Schools (B2 negative), Clintondale Community Schools (Ba3 negative), Mount Clemens Community School District (Ba3 negative) and Ypsilanti School District (Ba3) have all experienced significant fiscal strain related to charter enrollment growth, which has also been a contributing factor to their speculative grade status.
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Interesting, but considering how deep Moody’s was in the problems that cause the economic meltdown of 2008, I’m not terribly confident about their motives at this point and I don’t know what to believe about anything they say.
It’s the same as with that Whitney Tilson guy turning against K12. I wouldn’t have trusted him as far as I could through him before, so I’m certainly not about to start trusting him just because he’s now saying something I happen agree with. Same with Moody’s.
This is very interesting. If Fiscally Conservative Republicans can be convinced that the reform movement is bad for the economy, this could be a great opportunity to build a broad coalition.
Libertarian and Socially Conservative Republicans have embraced school choice. But they are inclined to oppose Common Core, that is another great area of opportunity.
While we can argue over whether charters began with good intentions or were in fact “born in sin,” It’s been two decades since they’ve been anything other than a Trojan Horse for privatization, union busting and looting the public sector.
Yes, there are decent (though painfully and often willfully naive) people working in charter schools who want to do the right thing for students, but that is virtually immaterial: the funding and institutional weight behind them is overwhelmingly destructive, and should be exposed as such at every opportunity.
As Concerned Citizen points out, supporters of public education should make every effort to highlight and use the contradictions among so-called reformers to prevent the public wealth extraction and social vandalism that so-called education reform represents.
OUCH! the business sector smacks down one of the market driven reform model’s main products as a bad choice. Couldn’t have seen that coming, right?
This report is actually good news for charters, as in: “Charter schools can pull students and revenues away from districts faster than the districts can reduce their costs, says Moody’s. As some of these districts trim costs to balance out declining revenues, cuts in programs and services will further drive students to seek alternative institutions including charter schools.” Read the report. It shows is that charters are functioning EXACTLY as they were designed to, to weaken public education.
Here is a statement in the Moody article:
“Districts may face institutional barriers to cutting staff levels, capital footprints and benefit costs over the short term given the intricacies of collective bargaining contracts – leaving them with underutilized buildings and ongoing growth in personnel costs.”
I could see the corporate “reformers” trying to use this to change collective bargaining contracts!!!
This the bond market “canary in the coalmine” moment. The lessons for an urban system like Seattle or a politically purple suburban district is how to cage or avoid the charter expansion.
The charter school “experiment” – always meant to create the parallel system – is in the aggregate fulfilling the Tipping Point strategy that right wingers like John Walton, the Bradley Foundation, the Fordham Foundation and market fundamentalists like Whitney Tilson, Paul Tudor Jones and the other Deformers envisioned.
However at the individual charter school level, the bond investors are equally skeptical about individual deals and the viability of the business model of each charter operator that doesn’t skew its admissions, have impeccable political patrons and prodigious fundraising records.
In the end the Market Deformers get the “winners” and “losers” that fit into their philosophical straight jackets.
The “winning” boot camp survivor children earn their way through the “winning” No Excuses schools who secure more private financing and bond proceeds to boot.
The opposing downward loop of starve the system, close the undernourished schools and sift out the losing students has always been their strategy but those children are not their concern.
Have to ask reformers the question: how has ed reform benefitted existing public schools and the 90% of students who attend them?
Better yet, ask parents. Has the last decade of ed reform improved PUBLIC schools in your district, community, city, state?
No? Then stop voting for ed reformers. They’re not working on behalf of your kid.
The same concerns exist among charters and their operators. The broad brush of “Charters” paints all of them as for- profit vultures threatening the public school system. There are small, successful charters that are non-profit agencies. Dismissing the efforts of prospering schools because of a perceived inequality in demographics is erroneous in the context of school choice. Corporate charters are a threat to more than just the district schools. It seems this blog favors eliminating all charters, regardless of mission, record, or ideology. In states where charters are thriving this type of advocacy is detrimental to all involved.
This is my teaching reality. My Brooklyn school opened last year to replace another public deemed a failing school, which was phasing out over two years. A charter also opened in our building. The upper grades do not have enough students to make more than one class. The demographics of the students in the 3rd and 4th grades are unlike any I have seen in all my years of teaching special and general education, even in self-contained classes in other high needs neighborhoods. Of 22 students, maybe 2, did not have — and I say this with love in my heart– a significant academic or emotional/behavioral problem. Teaching high needs kids is my passion but it is a crime to have them all in one large class where their needs cannot adequately be met. If it were not for the charter out school could have created balanced classrooms. This year is worse: I have the same population but more new students — who have all been pushed out of charters or private schools.
Attention must be paid to this. Thanks Diane for sharing. Teachers many not groove on this Moody’s report but financial impact of Charters is where economic rubber meets the road. Remember another Diane post about Charter companies being as much in the Charter movement for real estate reasons as often financial aid can be obtained to cover land and building costs. Years down the road, Charter school “house” no longer needed can be sold off or retained as an “asset.” Follow the money folks.
The charters have massive problems and are doing nothing to improve urban education. In Detroit DPS has been gaining student population and years of decline. People around the city know the charters really aren’t doing anything special and often have high staff turnover and a lack of supplies.
Reblogged this on Middletown Voice and commented:
Muncie Community Schools, leaders in Muncie, parents and teachers need to heed this warning from Moody’s. While charters aren’t the only culprit in our town, we need to pay attention to how parents choices to remove kids from urban schools are creating difficulties for the remaining parents, teachers, and students.