Peter Greene writes in Forbes about the furor that erupted when House Democrats passed legislation to ban federal funding of charters managed by for-profit organizations. The charter industry and its lobbyists went bonkers, falsely claiming that the bill would prevent them from buying food from for-profit companies or hiring plumbers who work for profit.
He wrote:
The House Appropriations Committee has caused a stir with one tiny paragraph in its 198-page health, labor and education spending bill.
SEC. 314. None of the funds made available by this Act or any other Act may be awarded to a charter school that contracts with a for-profit entity to operate, oversee or manage the activities of the school.
The presence of for-profit operators in the charter school sector has long been a concern for critics, with almost all states outlawing a charter school strictly run for profit. But charter school operators have long worked a variety of loopholes, keeping the sector a highly profitable one, and most of those loopholes involve a non-profit charter school hiring a for-profit business. null
We are not talking about contracting services like school buses or cafeteria management; these kinds of side functions are frequently contracted out both in charter and public schools, but they are not the school’s primary activities.
The bill is clear and specific about targeting for-profit entities that “operate, oversee or manage the activities of the school.”
Sometimes the money comes from the real estate side of the charter business. There is such a thing as a business that specializes in charter schools and real estate. In some states, the government will help finance a real estate development if it’s a charter school, and in general developers have noted an abundance of cash. Though, as one charter real estate loan bond financier told the Wall Street Journal, “There’s a ton of capital coming into the industry. The question is: Does it know what it’s doing?” Many states have found a problem with charters that lease their buildings from their own owners as well. null
One example of a real estate operator making money from the real estate side was Carl Paladino of Buffalo. Paladino worked with charter operators via flipping properties and making “leaseback” deals, as detailed in a report from the Alliance for Quality Education. Paladino not only profited from the schools, but from investments in surrounding properties. He was not shy about any of it. On the question of making money from working with charters, the Buffalo City News quoted him: “If I didn’t, I’d be a friggin’ idiot.”
While many charters may contract out critical functions such as curriculum, the extreme cases are what are called “sweeps” contracts, in which the charter management organization (CMO) fully runs the school in exchange for as much as 95% of the revenue that comes in. A report that the Network for Public Education issued earlier this year details many of the creative ways that CMO’s turn a profit. CMO’s come in a variety of sizes, from chain operations running many schools all the way down to mom-and-pop CMOs that run a single school.
These arrangements can become convoluted. In Florida, one charter founder moved on and off the board of directors regularly to allow payments from his school to himself, and while the school was having trouble paying teachers, it was paying his company tens of thousands of dollars to license the school logo.
One could argue that outlawing for-profit charters actually made things worse, and that what would have been clear and open attempts to profit from a school are now hidden behind multiple operational layers.null
But all of this still leaves a simple question—what’s wrong with having charter schools managed, directly or indirectly, for profit?
In the rest of the article, he explains why for-profit charters are a terrrible idea.
Diane Ravitch's blog 
“That issue underlines one of the other issues of the hidden for-profit charter world; these organizations are businesses and make decisions for business reasons—not educational ones. As Carl Paladino put it, if they aren’t making a profit, they’re friggin’ idiots. Every year brings multiple stories of students and families left adrift—sometimes mid-year—because the business operating their school decided the business case for continued operation was too weak. When your favorite restaurant or department store closes, that may be upsetting, but when your child’s school closes, that’s disruptive and damaging. For-profit businesses cannot offer the kind of stability that”
That’s the individual harm to those students and families but schools are “universal” systems, so the individual harm isn’t the only issue.
When schools open and close the students who go there have to go somewhere else. They must. And a public universal system like K-12 schools has to accomodate them.
All of these decisions impact everyone in the system, but charters and private schools don’t have any duty to the system as a whole- they simply operate their own schools. Public schools are the only schools responsible for the system as a whole. Public schools are the schools who take on the downside of the risk in partly privatized systems.
Charters and private schools CAN open and close because there is a public system behind them backstopping them. They take the risk, the public system absorbs the failure. There’s no incentive for ed reformers to mitigate risk because they know they have the much-maligned public system to pick up the students they drop.
They cannot run “systems” and also operate as islands with no responsibility for the thing as a whole. That just isn’t how systems work.
Greene nails it. The more money charters and their CMOs spend on educating students, the smaller the profit. That’s the bottom line.
the entire “open a charter, make money” story, in fact
I also think we should be clear about this- these people opposing the charter regulation are lobbyists. They are full time, paid lobbyists for charter schools. It’s all they do.
If public school lobbyists and/or teachers unions are discredited in ed reform as to policy because they’re “self interested” then charter school lobbyists should be too.
Ed reformers have to decide. If school lobbyists are self interested so therefore discredited that applies not just to the lobbyists for the public schools they disfavor but also to the lobbyists for charters and vouchers.
Either all the lobbyists are self interested or none of them are and if you’re going to complain about Weingarten’s pay you need to reveal what charter lobbyists are paid. Am I supposed to believe all these charter cheerleaders are volunteers? Of course they’re not. They’re all paid and they’re paid to lobby for charter school funding. Not “public education funding”, but CHARTER funding.
How much do all these people get paid? I have read the salaries of the teachers unions over and over but I never hear a word from the teacher union critics on how much charter/voucher lobbyists are paid. Why is that? Wouldn’t consistency demand we know what both sectors pay advocates?
Public schools are accountable to the public. Public school budgets hold hearings on school budgets with printed copies available to any member of the public. With ever expanding charter schools, public schools have a hard time determining how much money they will have for operating expenses each year. The result is that districts have a hard time determining how much money they will have each year.
Public money flowing to private charter schools becomes private, unaccountable money. All these pass through schemes are conducted behind closed doors. While the charters themselves may remain “non-profit,” the management companies hide the profit. Taxpayer funds are also used for real estate self leasing deals. The result is that public money is used to make privatization extremely profitable. In many cases the gains are not just profit, but assets in the form of real estate. Taxpayers have no idea their taxes are being used to enrich others while simultaneously disinvesting in their own public asset of public schools.
” with almost all states outlawing a charter school strictly run for profit.”
With “official wording”
“The bill is clear and specific about targeting for-profit entities…”
The gap between “official wording” and the end result
remains, as does the “eye poking” of D vs R, the woke
vs the sleepers, the professionals vs the rookies,
blurring a sad reality.
It’s the SYSTEM not the THRONE…
The “work around” schemes are the same type of game plan used by Wall St to create more wealth for the ultra wealthy. They know how to circumvent the intent of the law. Taxpayers and the government are being snookered by the Wall St suits.
There are lots and lots of diatribes like this churned out of the ed reform echo chamber:
“American Federation of Teachers president Randi Weingarten recently pilloried President Trump’s health plan in the Huffington Post: “GOP Rewards The Rich, Rips Off The Rest Of Us,” she declared. Is Weingarten among “the rest of us?” The union leader hauled in $472,197 last year.
Weingarten is hardly the only fat-cat teachers’ union leader.”
Now go try to find out what any of the charter or voucher lobbysists make, or what the heads of the tens of ed reform orgs make. How much do the people who run “50 CAN” make, or the Walton people, or the Gates people, or the rest of the top tier privatization advocates? Jeb Bush has a charter/voucher think tank. They pay the CEO of that less than 500k a year? I doubt it.
You won’t find a word about ed reform pay anywhere in the echo chamber. No, for some mysterious reason we only know Weingartens salary. The compensation of the ed reform lobby leaders is never revealed.
Private prisons and charter schools go hand in hand.
A cheap service maximizes profit. Privatizers socialize the risk of the venture, and privatize the profit. The community pays to enrich private companies while the public schools are forced to absorb loss after loss.
Here at Bob n Darlene’s Real Good Flor-uh-duh School, we are nonprofit. Every penny we get from the state, we spend on Bob and Darlene’s salaries. So they ain’t nothin’ left over, see? No profit.
Full name: Bob n Darlene’s Real Good Flor-uh-duh School and Bait Shop
Sounds great! I love school, and bait. Schools of fish fall dorsal over pectoral for privatization bait. They go belly up. I might recommend a new name, Bob n Darlene’s School, Bait, and Switch. If Florida gives you 10 million dollars, and you hand over $9.5 mil to Hook, Line, and Sinker Charter Management Inc., that money has been laundered. Regulators are jellyfish. And when Sinker takes the money and runs, well, there are plenty of other marks — fish in the sea. Sorry, Charlie!
LMAO!
Not to carp about this or sound all crabby, or skate around the facts, I think your narrative flounders in the middle and gets a little crappie, as though you had fallen off your perch a bit and were trying to snook(er) us. I might say that you don’t know jack, but I won’t have your head on a pike for this if you’ll only clam up. Then we’ll be all hunky dory. Now, back to my guitar practice. I try to learn a tuna day.
fall dorsal over pectoral
LeftCoast, as far as I am concerned, you win the Internet today. That’s just freaking beautiful.
He said, just for the halibut.
Privatization is a rough sport, not a peaceful day on the lake. It’s a contact sport like football, bait and tackle. If you have a permit, you can clear the water of all life. Don’t bother throwing the little ones back. Just take. It’s called scaling up. And, did you know, you can use any kind of cheese as the bait.
beautifully said, LCT!
Duane won the internet today, Bob, not I. He below got the correct answer to the question Diane in the title of the post asked. 100% correct is an ‘A’ in my book.
Great piece, Mr. Greene!
How to Run a Non(lol)profit Charter School, or Charter School Profiteering Made E-Z
Create a charter management organization.
Buy a building in your name–an ex K-mart will work–and lease it to the school at some multiple of the rate of your mortgage. Build that equity at no cost to yourself, baby! Tell investors that you are not really in the school business but in the real-estate business, which will be the truth.
Follow the Golden Rule: ANYTHING YOU DON’T SPEND ON TEACHERS AND STUDENTS, YOU GET TO KEEP!
Gut the building and put dumb computer terminals around the walls. Lease a cheapo “personalized learning curriculum” from a virtual school. Bill yourself as a 21st-century “School of the Future.”
Hire “teachers” right out of school and pay them dirt wages to be basically monitors as the students work at the computers. Don’t pay any benefits, of course. Churn those teachers every year so that they don’t ask for better wages or start having ideas. Ofc, operate your “nonprofit” (LMAO) in a “right-to-work” state.
Do not waste any money on a theatre, a gymnasium, a library, a school nurse, science labs, art supplies, band instruments and sheet music and music stands, textbooks (that’s why you have the online curriculum!), classroom supplies, white board projectors, etc. Teachers can purchase their own markers and erasers, classroom decorations, staplers, and so on.
Have the parents pay for all art supplies, musical instruments, sheet music, sports equipment, and so on. Drill them constantly on ‘giving back to the school community.”
Pay yourself, your wife or husband, your mistress, your pool boy, and your ne’er-do-well children and cousins and golfing buddies exorbitant salaries to work for your management organization, and contract all school services out to them, and don’t forget those perks like the company cars or even a jet!
Collect that sweet per-student coin from the state. Make sure that your CMO salaries are such that there isn’t a dime left over at the end of the year.
Everything!
While on the topic of for-profit, let’s delve a bit into the NYC municipal medicare eligible retiree health insurance bait and switch disaster happening as I write this. I believe that both Diane and Randi Weingarten are both in the affected pool of over 65s. Yet neither will be hurt in the way retired school aides, paras, cleaning staff, or other low wage earners now retired from the city of NY’s municipal labor force. Read this excellent opinion piece by another retiree who stands to be affected, Len Rodberg, Professor Emeritus of Urban Studies at Queens College: https://www.nydailynews.com/opinion/ny-oped-stop-the-medicare-bait-and-switch-nyc-retirees-20210813-tjvtnjf3vbaermqb4x32cbw63e-story.html