Jessica B. Swencki of the Brunswick County schools in North Carolina knows a scam when she sees one. With the near total deregulation of charter schools in that state, the corporate charter chains are moving in to where it’s easy to run a school and skim huge profits.
Here’s the deal. A big for-profit operation finds a local board to act as its front during the application process.
One doesn’t have to look any further than the Eastern part of the state for a case study in how savvy companies use this loosely regulated system to pocket millions of taxpayer dollars.
Here’s how it works: A for-profit educational management organization “helps” the nonprofit board write the charter application. Once the charter is granted, the nonprofit board hires the same EMO to operate the charter school. The charter school pays the EMO sizable fees to “manage” the schools – those fees added up to over $15.7 million taxpayer dollars for one EMO in Eastern North Carolina over the past five years.
Coincidentally (or not), in at least one case, the founder of the EMO also happens to be the organizer of a second company that leases facilities and equipment to the charter school (i.e., landlord).
Now, remember, the nonprofit board hired the EMO to track and report all the financial data; and it is the EMO that advises the nonprofit board as to whether the landlord’s fees are reasonable. But don’t forget, the landlord also runs the EMO.
This deal got even sweeter for the landlord this summer when the General Assembly amended a statute. Now the landlord is no longer required to pay any state tax on the land the landlord rents to the charter school. I suppose from a business perspective nothing could be finer. Why isn’t this making headlines? Isn’t this illegal? Surprisingly, no. There is little to no public accountability for the financial decisions made by charter schools, and there is no transparency mandate from the General Assembly.
In a time of shrinking financial markets, charter schools remain an excellent marketplace for savvy corporations looking for consumers.
Diane Ravitch's blog 
Thanks for posting this! Jessica does not name names in the article but here are some: https://dianeravitch.net/2014/01/09/nc-approves-26-new-charters-boon-for-founders/
And Gulan is here too: http://charterschoolscandals.blogspot.com/2012/04/gulen-charter-schools-in-north-carolina.html
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“Coincidentally (or not), in at least one case, the founder of the EMO also happens to be the organizer of a second company that leases facilities and equipment to the charter school (i.e., landlord).
Now, remember, the nonprofit board hired the EMO to track and report all the financial data; and it is the EMO that advises the nonprofit board as to whether the landlord’s fees are reasonable. But don’t forget, the landlord also runs the EMO.”
So, taking this to the next step, and speaking from what happened in Ohio when ed reformers deregulated charter schools, what NC citizens should look for are contract terms where the “non profit” authorizer negotiates a deal with the EMO where the EMO will actually OWN whatever publicly-funded assets come under the EMO’s control.
This will be really important down the road, because of course the charter will purchase any (additional) assets with public money so the question will then become “who owns whatever “the charter” (actually the EMO) purchased with public funds?”
Assume there is no one at the table protecting public assets, because there’s huge conflicts of interest on the state charter boards. The only protection the public will have will be that contract. Don’t let the three parties (charter board and charter and then charter and EOM) convert public funds or assets to private ownership, because you won’t get them back.
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The neat trick is these charters can get the building for one dollar. Yes, a buck! Think of how well a restaurant could do if it’s capital expense was a dollar.
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My post is awaiting moderation so I will try again.
Thanks for posting this! Jessica does not name names in the article but here are some that were on an earlier post on this blog (NC Approves 26 more charters . . .):
“South Brunswick Charter School will be operated by the Roger Bacon Academy and will rent property from Coastal Conservancy, LLC. Baker A. Mitchell Jr.—who happens to sit on the Charter School Advisory Board—owns both of those entities.
Mitchell, who currently operates three other public charter schools in the state, paid himself nearly $1.8 million in 2012 for what he characterized as “management fees” to the IRS for running Charter Day School. He has reportedly collected in the neighborhood of $16 million over a five-year period in management fees alone, according to Pruden’s impact statement.
All of that money, of course, is taxpayer funds. But Mitchell doesn’t have to explain how, for example, he used $630,696 of taxpayer dollars for staff development, as reported on his 2012 Form 990.
Gulan is here too: http://charterschoolscandals.blogspot.com/2012/04/gulen-charter-schools-in-north-carolina.html
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Imagine schools do the same.
Links to stories on Imagine and Florida charters here:
http://www.mathdittos2.com/ednews/archive/week362.html
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So, to clarify! 🙂
Where some unconflicted rep “for the public interest” needs to be is not between the appointed state charter board and the non-profit supposedly “running” the charter school, but between the non profit (“the charter school”) and the EMO.
Skip the state charter law, which cedes all authority to the appointed board and is useless (at least in Ohio), and look at the contract between the charter and the EMO. That’s where the public asset giveaways happen.
I think the mistake the public made in Ohio was buying the premise that there is only one transaction, state charter board and charter, but there are two and the second is the real deal. The public won’t have a rep at the table at that second negotiation, and that’s where all the controlling terms are made.
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Will the real agenda for charter schools, please stand up? I’ve written an article recently published about this agenda that explains the impetus behind the explosion of charter schools. It may fill in some gaps that people are searching for. Interestingly enough, no one is talking about the Re-authorization of ESEA, Title I, which will fuel the destruction of public education through federal “choice” money that will “follow the child.” Definitions are changing to students who do not meet Common Core. It’s very long, but tells the real story.
http://www.newswithviews.com/Hoge/anita104.htm
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“Why isn’t this making headlines? Isn’t this illegal?”
I hear this in Ohio a lot, and I suspect it’s because there’s some confusion between “regulation” and “authorization”.
What charter laws do in this state and others is not “regulate” charter schools, but “authorize” charter schools.
That’s an essentially DE-regulatory mechanism, because it transfers power from the public actor to the private actor.
“Authorize” doesn’t mean “regulate” at all, in law or anywhere else. The state actors are simply “authorizing” and then stepping back. Their role is over.
This is a legal opinion from an Ohio charter case where the question is “who owns the assets”? What you’ll see if you read it is the judge (rightly, in my view) makes quick work of the state statute (because the state charter law is an authorization, a ceding of state power to the charter, not a regulation) and goes almost immediately to the “real deal”, the private contract between the legal entity “the charter” and the EMO.
https://archive.org/details/618427-white-hat-case-court-of-appeals-decision-116
What’s interesting to me in the Ohio cases is how the “non profit authorizer” (university, whatever) completely disappears. I think that’s a reflection of the almost “straw man” status of the charter authorizer. They’re not mentioned in the lawsuits because they don’t matter.
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NC is interesting politically, because I’m not sure how “liberal” or Democratic reformers back the NC agenda on privatizing ed (which they agree with) WHILE opposing the rest of the agenda (voter suppression laws, anti-worker laws, civil rights for gay people).
It’s complicated by the fact that there’s a real liberal movement in NC (Moral Mondays) and those advocates support public ed.
It’s a real political dilemma for them! Do they ignore what they’re supporting in NC or distance themselves from what is their identical ed agenda? Stay tuned! I’m curious what the campaign people do with it 🙂
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I’m thinking that perhaps I should start a charter school myself. I would staff it with people who really know what they are doing, not teach to the test but give them a full education and *gasp* pay those NC teachers a living wage. Wouldn’t that be the best way to beat them, and by them I mean the politicians and those who pay them to do this, at their own game? Create charter schools that do what we in public ed would really like to be doing. Offer classes in art, music, drama, science, world languages, technologies, manufacturing, spark the true interest a child might have. Have a full time nurse, counselor and psychologist, along with smaller class sizes since we don’t have to pay for all the bureaucrats! What a wonderful dream.
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It’s exactly what true public educators have always done, long, long before charters attempted to co-opted “public ed” for fun and profit.
“people who know what they’re doing?”
How about actual, certified teachers with experience – charters hire who they want regardless.
“We” in public ed would really like to be doing?” Public educators usually don’t commodify students and families, which you as theoretical CEO of this I guess, 501c3? would have to do.
Offer classes in etc. doesn’t include “clubs” run sporadically by whoever is there that day, as many charters think they can get away with, by unpaid volunteers. Presumably their living wage is their problem.
The smaller classes are taken care of when charters harrass and push out any student they want, so that’s a given.
In short, the dream turns to reality when the bottom line asserts itself, and charters can, and are, getting away with things that traditional truly public schools wouldn’t even think about, while making a nice profit, forever taking public property out of the public’s hands, and aggrandizing themselves through a relentless campaign of self-promotion.
I notice your “dream” makes you one of the fortunate few “owners” of the corporation.
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Ummm…I think you missed my point completely. I was being sarcastic for one thing, I’m not quite sure how you missed that. As a NC (Arts) educator, I have seen my schools once vibrant arts program shrink, we went from 4 counselors to two, lost one of our technology teachers and 2 teachers per grade level, (I teach middle school.) The DREAM is what we, as in educators, all believe should be happening everywhere but aren’t able to do because of the mandates that are currently in place. Your anger is more then misplaced.
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Reading this makes my head spin. I can barely organize my thoughts of disgust to get a comment out. Is this wild array of illegality which causes this dizziness yet another “corporate ed reform raider” strategy????
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Maybe the “South” plans to secede again – secede from common sense at least. Or maybe common sense has just become an uncommon virtue.
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Bernadette –
Believe it not, the bunkum rhetoric (well done, by the way!) in your post was very close to the promises made and then happily broken by the charter starters I’ve seen. Hundreds of millions of dollars later – no one has yet bothered as far as I know to tally it up in here – the charters are laughing all the way to the bank while our public schools are hollowed out.
To me that is a terrible tragedy.
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The tragedy is that people aren’t outraged by this. I worry that we have become so complacent. We are so civilized we have forgotten how to fight.
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