This is a great discussion, in which Amy Goodman of “Democracy Now” interviews Juan Gonzalez of the NY Daily News about the big money pushing charter schools. The discussion is based on this article.
“New York Hedge Funds Pour Millions of Dollars into Cuomo-Led Bid to Expand Charter Schools | Democracy Now!
In his latest column for the New York Daily News, Democracy Now! co-host Juan González reports on the tens of millions of dollars in hedge fund donations behind the push for charter schools in New York state. Gov. Andrew Cuomo is the single biggest recipient, hauling in $4.8 million. After winning approval for up to $2,600 more per pupil for charter school facilities, Cuomo is calling on the state Legislature to increase the state limit on charter schools.
AMY GOODMAN: Juan, before we move on with our first segment, you have a very interesting piece in the New York Daily News today, “Hedge fund executives give ’til it hurts to politicians, especially Cuomo, to get more charter schools.”
JUAN GONZÁLEZ: Yes. Well, I wrote about an interesting symposium that was held at the Harvard Club yesterday, an all-day symposium titled “Bonds & Blackboards: Investing in Charter Schools.” And it was a meeting, basically, of hedge fund types sponsored by the Gates Foundation and by the Walton Foundation, basically—
AMY GOODMAN: Of Wal-Mart.
JUAN GONZÁLEZ: Of the Wal-Mart family—basically enticing more investors to begin to see how they can make money off of charter schools. An all-day symposium with a small protest of parents outside. But it really has marked the enormous change that’s occurred in New York politics and, I think, around the country, as a new report showed that hedge fund executives over the last decade have poured nearly $40 million into political contributions just in New York state. The prime beneficiary over the last few years has been Governor Cuomo, who has received almost $5 million. We’re talking about Carl Icahn, you know, the famous “corporate raider”; we’re talking about Paul Singer of the vulture fund, hedge fund guy; we’re talking about Julian Robertson of Tiger Management—some of the richest people in New York City. And they’re also, most of them, also major backers of charter schools.
AMY GOODMAN: How do they make money from charter schools?
JUAN GONZÁLEZ: Well, that’s—I think a lot of it now is going to be coming in with the facilities financing that’s going to occur. aGovernor Cuomo pressed the Legislature, for instance, in New York state to begin providing what will be the equivalent of about $2,600 per child to build new facilities for charter schools, forcing Mayor de Blasio in New York City to share some of this cost. So there’s going to be a new revenue stream: In addition to direct funding from the state for pupil education, there’s now going to be a charter facilities fund that’s been set up. And, of course, the governor wants to lift the cap on charter schools to allow many more charter schools to be started in New York. And the amount of money is not just in the direct contributions; it’s also in money being given to new groups, the dark money that we’ve seen after the Citizens United case, where folks like Robertson and Dan Loeb have contributed as much as a million dollars apiece last year to a new group funding ads promoting Republicans for Senate seats in New York state, which would assure, again, support for charter schools. So it’s an enormous amount of money that’s being poured into these political campaigns specifically by hedge fund folks who are very close to charter schools. In fact, one charter network alone, the Success Academy, which I’ve reported on repeatedly, 19 members of the board of directors, or their family members, gave $600,000 to Governor Cuomo’s campaigns in the last—for his last two election campaigns. It’s an enormous amount of money, and it’s not getting much attention.”
Diane Ravitch's blog 
So…the governor, as enforcer for the 1% mob, is shaking down millions of school kids for their lunch money – which, considering the number of students involved, amounts to more than $5 million for his cut alone. Where is the outrage?
You can be assured the hedge fund managers are not being motivated by any type of civic largesse. They are looking to manipulate a big payoff for themselves. If they cared so much about poor, urban schools, they would have contributed struggling public schools over the years. They want to expand charter schools because they intend to exploit every loophole they can find in poorly written charter laws. They are skilled at moving and hiding money. I believe their ultimate goal is to move public assets into private equity.
A real journalist would ask if there is a shred of evidence that any of the hedge fund managers who support charter schools are themselves investing in municipal bonds that would be affected. So far, there seems to be absolutely nothing here except innuendo and confusion among people who know so little about finance that they think all financial investments are interchangeable.
You would have to be a forensic accountant with access to their records to see the whole game, but I am positive they have an exploitation strategy. It is the way they make money like buying vulnerable companies, loading them up with debt, and selling them off for parts while they put the workers out of work. The make millions in the process. This is how Mitt Romney got rich.
AMY GOODMAN: How do they make money from charter schools?
JUAN GONZÁLEZ: Homina, homina, homina.
LOL/spit-take
I think this is a bunch of misdirection. Were there any hedge fund managers at this meeting, or maybe more specifically were there any that have donated to charter schools?
IMO, the investors in charter schools’ buildings (which is more accurate than saying investors in charter schools) are banks and individual investors, and not hedge funds.
I guess to some people, any investor is the same as any other, but since the reporter makes no connection between anyone at the meeting and any of the donors, I still don’t see any story to this.
I don’t think that anyone has shown any return for the hedge fund managers that philanthropically support charter schools. Anyone care to point out an example?
In addition to pocketing the difference in rent charged and rent paid, hedge fund managers are poised to cash in on the Community Renewal Tax Relief Act 2000 as well as tax write offs and high hidden fees This link explains some of the advantages they seek. http://www.huffingtonpost.com/alan-singer/why-hedge-funds-love-char_b_5357486.htm
Hedge fund managers don’t own buildings and charge rent. Link is broken.
Here’s the article: http://www.huffingtonpost.com/alan-singer/why-hedge-funds-love-char_b_5357486.html. It’s as content-free as the other one.
With the New Markets Tax Credit, there’s BIG money to be made from charters: http://parentsacrossamerica.org/new-market-tax-credits-charter-schools/ (Juan Gonzalez broke that story as well.)
Hedge funds didn’t directly provide high risk mortgages but somehow they were implicated in 2008 housing crash.
Don’t talk sense to John. He won’t believe you, he will refute you, he will dismiss you. Show him the proof and he doesn’t see it. Just tell him he is right and maybe he will go away.
If it’s true, Scott Alvarez of the Fed. Reserve lacked the will to follow-through on an investigation of information leaked to the hedge funds in 2012, he should resign. It’s ironic that the alleged leaker was a company owned by Pearson.
The revolving door at the Fed. Reserve and SEC, and hedge funds on the receiving end of stolen property (information), warrants thorough investigation .
David Sirota does excellent invesitgations. Here’s one he did on the subject. The big money and profits behind the push for charter schools http://pando.com/2014/06/19/the-big-money-and-profits-behind-the-push-for-charter-schools/
It’s a retelling of the González “double their investment” piece, no dots are actually connected, tons of speculation, very little reporting, etc.
Carrie, I like a lot of what David Sirota has written, but not this piece. Again, there are no facts here. In fact, he allows someone else, Alan Singer, to even make the allegations. All he says is “we’re expected to believe?”. Not journalism by any stretch.
Maybe this a better explanation from Forbes, of all places. It’s from 9/10/2013 and the reporter quotes…. Juan Gonzalez. I copied some excerpts but readers should read the whole thing.
http://www.forbes.com/sites/greatspeculations/2013/09/10/charter-school-gravy-train-runs-express-to-fat-city/
Charter School Gravy Train Runs Express To Fat City
Addison Wiggin Addison Wiggin , Contributor
On Thursday, July 25, dozens of bankers, hedge fund types and private equity investors gathered in New York to hear about the latest and greatest opportunities to collect a cut of your property taxes. Of course, the promotional material for the Capital Roundtable’s conference on “private equity investing in for-profit education companies” didn’t put it in such crass terms, but that’s what’s going on.
Charter schools are booming. “There are now more than 6,000 in the United States, up from 2,500 a decade ago, educating a record 2.3 million children,” according to Reuters.
Charter schools are frequently a way for politicians to reward their cronies. In Ohio, two firms operate 9% of the state’s charter schools and are collecting 38% of the state’s charter school funding increase this year. The operators of both firms donate generously to elected Republicans.
Lest you get the idea charter schools are a “Republican” thing, they’re also favored by big-city Democrats. This summer, 23 public schools closed for good in Philadelphia — about 10% of the total — to be replaced by charters.
About the only thing charters do well is limit the influence of teachers’ unions. And fatten their investors’ portfolios.
In part, it’s the tax code that makes charter schools so lucrative: Under the federal “New Markets Tax Credit” program that became law toward the end of the Clinton presidency, firms that invest in charters and other projects located in “underserved” areas can collect a generous tax credit — up to 39% — to offset their costs.
So attractive is the math, according to a 2010 article by Juan Gonzalez in the New York Daily News, “that a lender who uses it can almost double his money in seven years.”
I stopped reading this piece the instant I encountered this sentence: “Charters have a limited admissions policy, and the applications can be as complex as those at private schools.”
Charters don’t have to accept anyone they don’t want and they don’t “backfill,” meaning accepting new students after their entry class. They shed low performers. Attrition is the name of the game.
That’s unfortunate for you. You might have learned something.
Most charters in my state have an open lottery.
However, I was surprised that one charter has a requirement:
http://questcharter.org/admissions/
OMG! What a charter school entrance requirement!
For those too busy to click on the link, this charter school in Raleigh NC says they have the following requirement for “admission and continued attendance”:
“Student applicants for grades K-8 need to be participating in an outside activity at time of application.
Outside activity is defined by Quest Academy as athletic participation or performances in fine arts and is required for admission and continued attendance at Quest Academy. This activity does not equate with religious or youth activities and should include professional instruction outside of the home. The applicant should be able to demonstrate proficiency in their outside activity through performances and competitions throughout the year round calendar.
Requirement hours for outside participation are as follows:
Kindergarten a minimum of 1 hour per week.
Grades 1 – 2 a minimum of 2 hours per week.
Grades 3 – 8 a minimum of 5 hours per week.”
What about kids from families who can’t afford the ongoing cost of “professional instruction outside of the home”? It looks like they are filtering out students from low income families (and children of color).
When test scores were reported for this school, the there are no results reported for economically disadvantaged students which mean the total number of students in this subgroup is less than five (there are also no results reported for English language learners and students with disabilities). Also, the only ethnic group with test results reported is white. I would be shocked if any other public school in Raleigh has similar demographics.
Again, he likes to thrown the words “hedge fund managers” in there, but then can’t give any examples. New Market Tax Credits are not a hedge fund vehicle.
I realize nobody on here can believe that this is philanthropy, but it is. Some of these folks no doubt support charters because they are anti-union, but many believe in charter schools and choice because they see innovation happening vs. doing the same thing, getting the same results, yet costing more and more.
John,
In most school districts, charters underperform as compared to public schools. Many are founded by non-educators–sports stars and hucksters. The frauds are numerous. At what point do hedge fund managers pay attention to results, not promises?
You’re kidding, right?
Paul Tudor Jones, Daniel Loeb, Bill Ackman, Carl Icahn are just some of the names of prominent hedge fund/ Finance types (hedge funder is a catch-all term) that come to mind as investors in charter schools, which, no matter what your talking points say, are not public schools.
Additionally, it’s disingenuous to say that New Market Tax Credits are not a hedge fund vehicle; in combination with other forms of financial engineering, and the real estate plays that are inseparable from charter metastasis, they most certainly are.
If “hedge fund” has become a catch-all term for “finance types,” and includes portfolio managers for huge retirement funds and wealthy private clients and middle-income workers alike, then yes, New Market Tax Credits are a hedge fund vehicle. I think John’s objection, which I share, is that using “hedge fund” as a catch-all term tends to obscure rather than illuminate the question of who is actually investing in these bonds. This is a question that involves “following the money,” a favorite phrase of many commenters here.
No, nothing is being obscured: using the term “hedge fund” is shorthand for the financialization and monetization of the public schools and their students.
Given that macro fact, raising nit-picking questions about whether hedge funds are per se investing in New Market Tax Credit-related deals is beside the point, which is that schools and students are “in play,” and Finance wants its skim.
We’ll have to agree to disagree. The term “hedge fund” has a specific meaning that is important. People can be forgiven if they don’t know what a hedge fund is, but when people who do know use the term “hedge fund” in as a term of art that is variously or simultaneously highly specific (as in specific to a handful of people named Loeb, Icahn, etc.) and highly abstract (as in “the financialization and monetization of the public schools”), confusion will result. If the point is just to call attention to the fact that there are financial forces that influence policy in undemocratic ways, that’s fine, I get that. But if we want to quantify and analyze that influence, we should be interested in questions like, how big is the “skim” (compared to, say, the skim from muni bonds in general), and who’s getting the skim?
I do have a tendency to focus on details, and maybe these details are frivolous in the context of the great struggle. But I can’t help it, I get annoyed by factually incorrect statements. And frankly, “hedge funds” is starting to approach “union fat cats” as cliche term in political discussion.
FLERP, the term “hedge fund manager” is not lightly used. Daniel Loeb, Paul Tudor Jones, Joel Greenblatt, David Tepper, and Alan Founier manage hedge funds.
Yes, we do know that much.
Yes, we all agree that they are hedge fund managers and that they support charters. What hasn’t been shown is any shred of information that they get anything in return for their philanthropy, yet that’s the whole topic of this post and the articles mentioned. Lots of aspersions, misinformation, obfuscation, changing the subject, etc., but no “there” there.
It’s actually a bit unseemly to denigrate philanthropy to schools because one disagrees with the particular public schools they choose to support. I support anyone who supports public education, whether traditional or charter.
John, whether they make money themselves is not the issue. Plenty of charter founders are making money. The hedge funders are destroying public education by funding an alternative publicly-funded but privatized system. Let the free market rule. You are twisting the discussion.
I disagree 100%. These posts imply that these people are donating to charters because they make money on them. To do that, it relies on ignorance of the audience regarding the fact that these aren’t the same people. So, “whether they make money themselves” is *exactly* the issue. it’s the difference between truth or fiction.
This isn’t “nit picking”. If someone wants to say that the hedge fund managers who donate to charters get some return on their investment, they should show that in some way, which nobody has done.
Equating New Market Tax Credits with these guys is like saying financial people donate and financial people gain, with no obligation to show that they are the same people or types of people.
The point is that nobody here is that if you believe that these philanthropists get some kind of financial “return” for their donations, you can discount the fact that they are supporting charters and don’t have to think about why they are. It’s like saying that parents who send their kids to charters are being duped, teachers only teach at them if they have to, etc.
If you can discount all of your critics by assuming they are either in it for the money or naive, you don’t have to think about why they are your critics. It’s a “luxury” that people with open minds don’t have.
Their “return” is multi fold, long term and Big Picture, based as much on their interests in free market fundamentalism, anti-unionism and social engineering as on quarterly financial returns.
They’re willing to defer their hyper profits, since their photo ops, where Black children are cynically used as props, provides incalculable PR benefits to them personally and to their long term project. They get to maintain the Big Lie and cliche of “doing well while doing good.”
The former, they may achieve; the latter, never.
Michael,
You say “Black children are cynically used as props”, but their parents have chosen those schools over district schools. I think those who want to shut down charters and take away choices are the ones treating these children cynically and using them as pawns to advance a political agenda.
The political agenda is supported by the Walton family, ALEC, the Koch brothers, and a host of billionaires. Why don’t they fight for desegregation and poverty reduction if they truly care about poor black and brown kids?
John, having worked in three conservative think tanks that promoted charters and vouchers, I can say with certainty that they used minority children as political props for their agenda. Do you think that Dr. King would have trusted the rightwing to do the right thing for children of color?
Are DFER members “right wing”? Hardly.
A direct link between Wall Street and profits, exacted from the misery of the homeless and disadvantaged preschoolers, are Frankensteinish Goldman Sachs social impact bonds.
“You’d be surprised, there are 10,000 hedge funds.” (Peter Mallouk)
Their failure rate is legion.
For those interested in Wall Street distinctions, how much do hedge funds, specifically, drag down GDP, which is the single most important thing to know about them?
John Arnold, in attacks against pensions, claims no profit motive. Pete
Peterson, in attacks against Social Security, claims no profit motive.
Bill Gates in corporatizing education, claims no profit motive.
Their schemes are those of oligarchs, concentrating wealth.
Distractions focused on terminology, are desperate acts of diversion,
that won’t work.
I stopped reading…innuendo and confusion…a bunch of misdirection…innovation happening…
“A day without laughter is a day wasted.” [Charlie Chaplin]
This day was not wasted. Thank you.
😎
Diane,
Most of these folks are in New York, where frauds are no more prevalent in charter schools than they are in district schools. The vast majority of charter school founders in NY are very dedicated to public education.
As for results, there is a preponderance of data now that shows that charter schools get better results with black students and students from low-SES families that traditional public schools. This includes studies that count any student who attended the charter school (even if they left) as part of the charter part of the comparison.
I know you choose to discount the studies that show this. Charter school supporters in New York:
a. Support the ones that are getting the best results, not merely the average
b. Recognize that, even on average, charter schools are doing very well and are getting better every single year.
John, charters are not public schools. The hedge fund managers love the charters because they are non-union, and they especially love the ones that get high test scores, even though they are NOT educating the same kids as the district schools. They have small proportions of ELLs and no students with serious disabilities. As Eva admitted in a recent interview, they do not “backfill.” When students leave (or are counseled out), they are not replaced. (https://soundcloud.com/janewilliams/eva-moskowitz-discusses-success-academy-charter-schools; listen at the 12:00 mark). Even so, the first 32 kids to graduate from Success Academy took the elite high school exam in NYC, and none passed it.
I think an appropriate analogy for charter schools are all of the private preschools that are subcontractors for school districts which provide Universal PreK and Head Start for young children, such as in my city. Those schools are both non-profits and for-profits. They have multiple funding streams and receive public funds from the city, state and federal government.
The main differences between them and charters are that my district provides guidance and trainings for them, and they also have standards that private preschools must meet, in addition to state and federal standards. Publicly funded private preschools are regulated much more than charter schools and they remain private.
When charter schools like Success Academy claim to have waiting lists and then spend big time on advertising, but won’t take new kids each time a space opens up, those are HUGE red flags. Some charters, like KIPP, also have entrance exams, ostensibly to determine grade placement, but that filters out kids who are told they will be put back a grade and don’t want to be left behind.
Entrance exams, putting kids behind in grades and not backfilling when kids leave are all strategies that charters use in order to shape their student body, so they can increase their chances of having compliant students and higher test scores. It’s totally bogus to then compare them to neighborhood schools that have no entrance exams, take anyone at anytime and place students in grades corresponding with their ages.
All of the current “debate” about charters could be avoided by simply denying them all access to public funds (in any shape or form).
If hedge funds want to invest in charter schools, fine. They can invest private funds in them just like they invest in other junk.
If charters are as great as supporters claim they are, they will have no problem finding private investors and parents willing to take a risk on them.
Let the market decide, as the charter supporters (disingenuously) say.
If they want to defraud those investors and parents, let them do it and face the consequences just like any other private company.
Just don’t spend tax dollars on them in any way shape or form.
It’s a RIP-OFF!
Reblogged this on Exceptional Delaware and commented:
This could never happen in Delaware, right? We don’t know of any companies in Delaware that contribute to hedge funds, right? Right On Delaware Education Love. That is a clue…