This article about charter real estate dealings was written by Professors Preston Green III, Bruce Baker, and Derek W. Black.
They argue that lax state laws allow charter operators to reap profits while maintaining an ostensibly “nonprofit” status.
While critics charge that charter schools are siphoning money away from public schools, a more fundamental issue frequently flies under the radar: the questionable business practices that allow people who own and run charter schools to make large profits.
Charter school supporters are reluctant to acknowledge, much less stop, these practices.
Given that charter schools are growing rapidly – from 1 million students in 2006 to more than 3.1 million students attending approximately 7,000 charter schoolsnow – shining a light on these practices can’t come too soon. The first challenge, however, is simply understanding the complex space in which charters operate – somewhere between public and private.
Unregulated competition
Charters were founded on the theory that market forces and competition would benefit public education. But policy reports and local government studiesincreasingly reveal that the charter school industry is engaging in the type of business practices that have led to the downfall of other huge industries and companies.
Charter schools regularly sign contracts with little oversight, shuffle money between subsidiaries and cut corners that would never fly in the real world of business or traditional public schools – at least not if the business wanted to stay out of bankruptcy and school officials out of jail. The problem has gotten so bad that a nationwide assessment by the U.S. Department of Education warned in a 2016 audit report that the charter school operations pose a serious “risk of waste, fraud and abuse” and lack “accountability.”
Self-dealing
The biggest problem in charter school operations involves facility leases and land purchases. Like any other business, charters need to pay for space. But unlike other businesses, charters too often pay unreasonably high rates – rates that no one else in the community would pay.
One of the latest examples can be found in a January 2019 report from the Ohio auditor-general, which revealed that in 2016 a Cincinnati charter school paid $867,000 to lease its facilities. This was far more than the going rate for comparable facilities in the area. The year before, a Cleveland charter was paying half a million above market rate, according to the same report.
Why would a charter school do this? Most states require charter schools to be nonprofit. To make money, some of them have simply entered into contracts with separate for-profit companies that they also own. These companies do make money off students.
In other words, some “nonprofit” charter schools take public money and pay their owners with it. When this happens, it creates an enormous incentive to overpay for facilities and supplies and underpay for things like teachers and student services.
Many millions of dollars of public funds that were intended to educate children are squandered, they say.
It is called “legal graft.”
Diane Ravitch's blog 
Yes, indeed … “legal graft.”
Seems this is where this country is headed after years and years of DEFORMS.
We need “critical literacies” like never before.
Is charter schools the next ENRON? I say, “YES.”
https://theconversation.com/is-charter-school-fraud-the-next-enron-74020
This post says as much about the “legal graft” in privatization as it does about the political system that enables it. Privatization is backed by so many billionaires and corporations that can afford to keep the public money flowing to private entities. Elected representatives have been the enablers of this corruption at every level of government. They have refused to regulate this run away train of profiteering, and they have been instrumental in enabling theft of public assets and the crooked self dealing all to the detriment of public education, which has been both ignored and denigrated at every level of government. We need to free our schools, students and teachers from these corrupt weasels.
It is also the politicians that manipulate behind the scenes so that privatization is a top down decision. and the public rarely gets a say on charters and/or vouchers. Politicians in many states engage in this purposeful avoidance of democratic input in order to transfer public money into private pockets which reflects the wishes of the corporations and 1%, not the people. We need to show them the door.
“which revealed that in 2016 a Cincinnati charter school paid $867,000 to lease its facilities. This was far more than the going rate for comparable facilities in the area. The year before, a Cleveland charter was paying half a million above market rate, according to the same report”
It’s especially mystifying in Ohio because Ohio has so many laws designed to promote charters- written specifically for and on behalf of the charter lobby.
One of them directs school systems to offer publicly-owned and funded school buildings to charters first before they can be used for any other purpose. I have no idea what happens to the title to the property after that transfer- I assume it is just given to the charter operator. If you can’t find a building to put your charter in in Ohio for less then 867k you’re not looking real hard.
Agree 100% that there need to be strict laws against self-dealing as the few examples are a black eye for charters. In addition, I favor laws that require that charters be not-for-profit and prohibit them from contracting for operations with for-profit operators. This also requires that any property belonging to a closing charter school be transferred to a not-for-profit (in my state, a judge decides, but property goes to district or charter schools).
In addition, real estate has become an issue for charters in part because many of them have to pay for buildings out of operating expenses since they have been shut out of state capital funding. Throw in the fact that a charter may be revoked leaving a lender holding the bag and the borrowing can get pretty expensive. That unfortunately can contribute to real estate arrangements that are not in the best interests of students or communities.
How about a limit on charter exec compensation, no more than district superintendent?
Wouldn’t have an effect on my school, but I think there are other factors. Creating schools from nothing or expanding is a very different job.from managing. It also seems that challenging districts have trouble attracting superintendents or keeping them for very long, so I’m not sure that’s the ideal model. Finally, as an issue in public education, I think it’s pretty far down the list of importance.
I wonder how many charters would exist if salaries of the top execs were capped to align with that of the local superintendent.
How much people who run charters are allowed to profit from it is “pretty far down the list of importance”?
May I suggest to you, John, that if you didn’t support a system that incentivizes all of the worst behavior by charters (kicking out expensive students, forcing parents to volunteer to save money, not serving children with special needs, blatantly lying in testimony to cut funding for small class sizes by saying that they have proved it was unnecessary), then most of those problems wouldn’t exist.
The fact that you seem to believe that charter CEOs would still treat kids with special needs in horrific ways and would still be blatantly dishonest about how so many African-American kindergarten children are naturally violent and thus deserved multiple out of school suspensions if there was NOT a financial incentive speaks volumes.
John, you are frankly convincing me that the only reason that charter CEOs publicly smear young students and put them on got to go lists and punish and humiliate them as we saw their MODEL teachers do (the one whose behavior was held up as perfect until it was captured on video) is because charter CEOs derive pleasure from watching children suffer and not because there is a financial motive.
Remember, that happened in a state that charter supporters has one of the BEST oversight processes that should be copied everywhere!
John– In justification of charter CEO salaries in excess [usually in multiples] of dist supt salaries: “Creating schools from nothing or expanding is a very different job.from managing.”
Two things wrong w/that suggestion.
1.The concept that CEO’s of start-ups command outsize salaries doesn’t fit with public schools; that’s about investing a big chunk in someone expected to bring in big profits.
2.In any scenario, the size of the charter enterprise is dwarfed by the size of the district managed. Take Moskowitz $782k salary for starting-up/managing 47 schools with a total of 17k students, vs. Carvalho’s $343k for managing 1700 schools with a total of 1.1million students. Surely the two jobs are at minimum equivalent [in fact, Carvalho’s job should command considerably more].
“real estate has become an issue for charters in part because many of them have to pay for buildings out of operating expenses since they have been shut out of state capital funding”
Charters are “extra” schools for a district that does not have “extra” students; their enrollment is a division of existing students. Citizens tax themselves enough to house the district’s student population as efficiently as possible. The town does not have “extra” funds to hang onto excess capacity. Does the state have “extra” capital funding for charters? As a state taxpayer I would say no thanks to extra assessment for extra schools for students already accommodated by existing pubsch bldgs.
You are right that charters have this feasibility problem from the get-go: the RE angle is emblematic of the basic problem with the charter concept. Charters must turn to private sources for housing; private bldg costs will inevitably be higher than public-owned; per-pupil costs will not cover it: enter financial shenanigans which public will pay for one way or another.
Many charter schools own their own buildings. Also, it would be simple for governmental entities to make it easier and cheaper for charters to borrow money, which would help to get rid of excess costs. Anti-charter folks lobby against such things, which perpetuates the problem
Any thoughts about how to get the grifters and entrepreneurs out of the charter industry?
Quick list
– insist on strong charter laws and charter authorizers. Support legislation that accomplishes this without simultaneously including measures designed to hurt charters.
– vote out elected officials that believe that grift is acceptable
– eliminate for-profit charters.
– make it easier for charters to get or finance facilities.
– support unified enrollment to enhance the transparency of the process
– talk about individual charter schools’ behavior instead of simply denigrating all charters uniformly. That would allow some cooperation between charter supporters and opponents that would be in the best interests of everyone.
Add to your list:
—Put charter authorization in the hands of elected school boards with responsibility to oversee charter schools
—Ban for-profit Charter management organizations
—Cap the salaries of charter leaders to no more than local district superintendent
—Require independent financial audits of all charters annually
—Require charters to hire only certified teachers
—Hold charters to same laws governing nepotism, self-dealing and conflicts of interest as public schools
Readers are invited to add their own ideas about preventing fraud, graft, and unethical profiteering by charter schools.
I agree with your even numbered ones ;-).
#1 is a poison pill because elected school boards won’t open charters despite parental demand
#3 I’m equivocal on. I think it should be the same as other not-for-profits
#5 I think this is best determined locally. I probably don’t have as high an opinion of our teacher prep programs as you do.
John,
We don’t have to agree.
The original vision for charter schools (see Raymond Budde and Albert Shanker) was that they would be authorized by local districts, not by competing entities.
The purpose of charter schools was not to open competition for public schools, but to collaborate, to act as R&D entities, and to meet needs that the district wanted met.
That’s the goal I support.
And where states want to implement that, it makes sense to have the charter law require district approvals. I doubt there would be many since few districts have opened or embraced charters.
Most states are not trying to implement charter schools in that way, so a national platform that requires it is going to make a lot of charter families unhappy. IMO, it was a step too far in trying to court teachers’ unions. If Warren had left that and ending CSP grants out (it would have been fine to say she would review them), I think most charter folks would support the platform. I think it was unnecessarily polarizing and insensitive to the largely minority population of charter families.
John, I’m not sure where you get that locally-run districts wouldn’t [and don’t] open charters even if parents want them. Can you make that generalization? We did exactly that in our distr in the ‘90’s. It meet a need then, reflecting a distr SpEd pgm that was ramping up, but still underserving midsch/ hisch kids w/moderate devptl delay. It proved very difficult to staff effectively as a separate bldg & only lasted that way for a few yrs, but distr learned from the experience & was able to modify/ expand the SpEd units in the main bldgs & bring it inhouse. Perhaps what you observe is a result of top-down state admin/ funding [/underfunding], where the districts never had the option and/ or the means to fund it.
As for uncertified teachers, it’s part and parcel of what I perceive as anti-govt ideology. Just like economic volatility/ great recession thanks to deregulation of financial sector. What replaces the state stds for teacher qualification? Nothing – nada – is where that leads: already, we’ve got a couple that “solve” teacher shortages by no longer requiring a BA. Standards of quality are required. You have to work on improving the system; you have to regulate capitalism to preserve public goods.
That’s great that your district tried the charter, but that’s way more the exception than the rule.
I agree re certification. Not requiring it for any is definitely worse than requiring it for all, but I come down on the side of a bit more flexibility for principals for exceptional cases. I also think some alternative certification programs are fine.
In support of bethree5, when I started teaching in 1975, the district where I taught for thirt
years had an alternative high school (a charter school by another name) that was managed by the teachers and the students had to volunteer and then be accepted by those teachers to attend that alternative high school with its flexible scheduling and classes that could not be found in the other two high schools in that district.
That charter school that is called an alternative high school is still there doing the same job … offering an alternative for students that qualify and are accepted.
Thanks, Lloyd. They definitely exist, but are more the exception than the rule. I love it when teachers start schools.
How do you know alternative public high schools are the exception. DO you have access to a list?
Instead of using public funds to support private sector (always for profit even when they claim to be nonprofit) corporate charters, that same money could go toward starting more alternative public schools that have already been around for a long time and proven themselves..
Do you feel the same way about all not-for-profits, or just schools?
There is nothing for profit about any of the schools I’ve been associated with.
Which charters have you been associated with?
Do not change the topic. Leave that up to the likes of liars and haters like Jones, Hannity, and Limbaugh.
Public money intended to fund the public sector like the public schools should not end up in the hands of greedy frauds running private sector businesses that are faux corporate charter schools.
We agree 100% on that. What we disagree on is that you seem to think that all charter schools are that.
All charter schools would benefit by transparency, accountability and compliance with same laws and oversight as public schools.
Plus outlawing for-profit MANAGEMENT and excessive administrative overhead
“you seem to think that all charter schools are that.”
Of course not, there are actually charter schools managed by unionized teachers (the original charter school concept) that exist in public school districts with elected school boards. Instead of high paid private sector CEOs and stockholders demanding profits, these “REAL” public charter schools are managed by the teachers and the principals are basically an office manager.
No private-sector charter school, profit or nonprofit, religious or sectarian, should receive public funds.
And I googled “How many alternative public high schools are in the United States?”
“Nearly 2,000 school districts in the United States had alternative schools during 2013-14 school year. This data set provides details on the number of students enrolled in alternative schools within each district, as well as comparative metrics on alternative and non-alternative schools within each district, including student-to-teacher ratios, school funding, teacher experience level, access to counseling, graduation rates, and more.”
https://www.propublica.org/datastore/dataset/alternative-schools-in-u-s-school-districts
Charter Schools VS. Alternative Schools
https://education.seattlepi.com/charter-schools-vs-alternative-schools-2102.html
I didn’t say there weren’t a lot of alternative schools, I said there weren’t a lot of district-operated charter schools.
The very fact that about 2,000 public school districts with locally elected school boards have alternative schools shows us that given a chance, many publicly funded public school districts with democratically elected local school boards that are held accountable by parents/local voters are more than willing to offer alternatives beyond the regular public schools and those public schools are transparent and held accountable by education legislation at the state level.
The U.S. has a Constitution; America is a Constitutional Republic – not the olgiracy Trump and his supports want, and not the kleptocracy that the Walton and Koch families want, and not a theocracy like the Koch and DeVos families want.
The fifty states each have a state constitution, making them also Constitutional Republics.
Any private sector business and the public sector supported with public funds must be transparent and held accountable according to all those Constitutions or they are no longer Constitutional Republics.
Conclusion: public money cannot be given to private sector businesses or alleged non-profits if they are not totally transparent and held accountable by the federal Constitution and the state constitutions just like the real public schools are.
For instance, in Finland, public funds may be used to support private schools BUT those private schools are held accountable by the same legislation and/or laws that apply to Finland’s real public schools. That is why less than 1-percent of Finland’s schools are private.
That is not what is happening in the United States when it comes to publicly funded, private sector for-profit or alleged non-profit corporate charter schools. They are allowed to ignore the same legislation and laws that apply to the real public schools — the same public schools that are still outperforming the private sector charter school industry after a couple of decades.
Real public schools are not and never have been a monopoly or an industry.
Spin it any way you want Charter John, I will never agree with the current double standards: one for real public schools and another one for corporate charter schools.
Who do you work for, Charter John? Who pays you, Charter John? Where does your money come from, Charter John?
We live in the Trump era where white-collar crime is not a crime (according to Giuliani), but he didn’t get elected without help. Nixon showed the way. Reagan and three Bushes built the Highway of Fraud, starting in the early 1980s.
“Trump Lawyer Rudy Giuliani Says White-Collar Crime Isn’t Really Crime as He Defends Paul Manafort”
https://www.newsweek.com/trump-lawyer-rudy-giuliani-manafort-crime-1089109
A lot of people that were hurt by the 2008 economy meltdown would disagree with Giuliani. A lot of people lost homes due to fraudulent business practices.
Good for you for calling a spade a spade. I tend to blame a politically-manipulated loosely regulated system for creating the great recession– in other words, “legal” because unethical practice enshrined in law. But perhaps what we really have is a system that incentivizes unethical behavior by winking at existing laws, i.e. robbers going free while their victims get thrown into debtors’ court a la Dickens.
Nixon showed the way and Reagan tried to open the doors. Bush 1 was a good and decent human being…..probably the last decent President IMHO (and I’m a Bernie fan). Bush 1 knew of the dangers of letting big business and corporations have too much power to sway elections and politicians. Bill Clinton (DINO) was the open door for businesses to start making tons of money and there wasn’t a back door deal or loophole he wouldn’t sign into law. 1995 was the year that big business profits started to soar because of “legal graft” ( sorry, but I can’t find that article with the graphs). Curious that Bill was Gov in Arkansas, home of the Charter loving Walton family of WalMart fame and how there soon became a WalMart on every corner under a Bill Clinton presidency.
To win his election, Reagan opened the door to the racist South and the South switched from the Democratic Party to the GOP, and/or he also recruited the evangelical (so-called), Christian fundamentalists into the GOP giving them a seat at the table even though he managed to keep them from being decision-makers for the GOP.
Ronald Reagan also introduced trickle-down economics and added $1.86 trillion, a 186% increase from the $998 billion debt at the end of Carter’s last budget, FY 1981.
George H.W. Bush: Added $1.554 trillion, a 54% increase from the $2.857 trillion debt at the end of Reagan’s last budget, FY 1989. This Bush also kept the racists and/or religious right from being decision-makers for the GOP.
Bill Clinton, a neo-liberal, added $1.396 trillion, a 32% increase from the $4.4 trillion debt at the end of George H.W. Bush’s last budget, FY 1993. Under Clinton, the neo-liberals took over the leadership of the Democratic Party.
George W. Bush: Added $5.849 trillion, a 101% increase from the $5.8 trillion debt at the end of Clinton’s last budget, FY 2001, and this Bush let the neo-conservatives and racist religious right take over the leadership of the GOP.
Barack Obama, another neo-liberal, added $8.588 trillion, a 74% increase from the $11.657 trillion debt at the end of Bush’s last budget, FY 2009.
Donald Trump isn’t done yet with his wrecking ball.
The shift in the white South from Democrat to Republican began under Nixon.
He appealed to their racism.
Others call it standard practice in the era of a Trumpist Republicans (with a big bit of help from market-loving Democrats before Trump was (elected?)
The real scam is real estate. In Florida, these charter schools are bought and built with government money. They open the “non-profit” charter then they hire their own for-profit “consultant agency”. They operate for a few years, milking the charter dollars out of the school, then they close the school and sell the free building paid for by the government. I’ve seen these private charters walk away with millions of millions of dollars. Between a few local charters in South Florida, they topped over $100,000,000 in real estate sales. These people are crooks!