This article was written by Dr. Cassandra Ulrich, who served as president of the Michigan State Board of Education, and now is a member of the board of the Network for Public Education.
Dr. Casandra Ulbrich is a former Michigan State Board of Education president (2014 – 2023). She is a member of the Network for Public Education Board of Directors Ulbrich has spent most of her career in higher education administration, currently serving as the Vice Chancellor for Institutional Advancement at the University of Michigan-Dearborn. Ulbrich began her career as a press secretary to the former U.S. House Democratic Whip David Bonior, acting as the official spokesperson for the Congressman. She has been recognized as one of Michigan’s 40 under 40 by Crain’s Detroit Business.
At the end of the 2023-2024 session, the House and Senate of Michigan took up bills to increase charter school transparency in a state where 70% of the schools are run by for-profits. Ultimately, the bills did not pass, but the problems persist. Below is the testimony given by Dr. Casandra Ulbrich, the former President of the Michigan Board of Education.
As the former President of the State Board of Education, I would like to commend the State Senate for taking the issue of financial transparency seriously. The bills before you today level the playing field by requiring charter schools, education management companies, and authorizers to demonstrate that they are responsible stewards of public dollars, just as traditional public schools are currently required to do.
Financial transparency is an essential element of accountability for all publicly funded institutions and a necessary component for an engaged citizenry. Absent timely and accurate financial data in a manner that is easily accessible and understood by the public, citizens lack the resources necessary to make informed decisions. Missing or misleading financial information removes a citizen’s ability to adequately determine the value of their public investments. Similarly, a charter school board that is denied this information cannot fulfill its oversight duty and its commitment to the citizens it serves.
This is particularly true for the K-12 public schools that educate approximately 1.3 million students in the State of Michigan, nearly 10 percent of whom attend a charter school. In 2022 – that year will be relevant during my testimony – Michigan Charter schools received roughly $1.4 billion in taxpayer funding. How this money is spent is often hidden from taxpayer view behind a wall of secrecy. One reason is that Michigan law allows charter school boards to contract out all the school’s services to a for-profit education management company that also assumes control of the school’s budget. This arrangement is known as a ‘sweeps’ contract in the charter school sector. Its name comes from the fact that nearly all of the school’s public dollars – anywhere from 95 percent to 100 percent – is ‘swept’ into a charter management company. Once that happens, that money is no longer reportable to the taxpayers who funded those dollars.
While the schools themselves must adhere to Freedom of Information Act(FOIA) laws, private, for-profit management companies themselves are not subject to FOIA. Therefore, when a management company assumes the vast majority, if not all, of the school’s budget, how that money is spent is legally hidden from public view.
For years, the charter lobby has argued that charter schools adhere to all applicable transparency laws. In most cases, they are correct. But, those laws fall far short of allowing taxpayers adequate oversight over the schools for which they fund.
In 2022, the State Board of Education used the Freedom of Information Act to identify and disclose the similarities and differences in financial reporting between traditional and charter school districts.
We sent FOIA requests to all school districts, both traditional and charter, in five Michigan counties. Of those districts, 112 were traditional school districts, representing over 551,000 full-time equivalent (FTE) student counts, and 166 were charter school districts, representing nearly 80,000 FTE student counts. For the charter districts, 117 (71%) used for-profit management companies, 19% used non-profit management companies, and 11% were self-managed. Individual district student counts ranged from a low of 71 to a high of more than 55,000 FTEs.
On January 5, 2022, each district received a FOIA from me as the President of the SBE. A second letter was sent to those who did not respond, and in some cases, a third letter was also sent. The FOIA request included five items:
- Contracts for rental or lease of facilities.
- Contracts for food service management or vended meals.
- Contracts with custodial service vendors.
- Contracts with lawn and grounds service vendors.
- Contracts with educational service providers or education management
companies.
The results demonstrated what we had assumed all along.
Following the third letter, 100% of traditional school districts responded to the FOIA request, while only 93% of charter districts responded. Seven percent of charter school districts didn’t even bother to respond to three Freedom of Information Requests from the State Board of Education.
When it came to facility contracts, Charter school districts were more likelyto submit facility rental or lease contracts. Sixty-eight percent, or 105, of charter districts submitted these contracts. Many charter districts lease their buildings from entities related to the management companies overseeing the schools.
A management company that also subleases its own facilities to the schools they manage raises obvious questions about conflicts of interest. It also allows the management company/facility owner to set lease terms that may be excessive. The State Board of Education FOIA did not address the market rates of each lease, but other states have identified this as an issue. For example, in 2012, the New York State Comptroller issued a report detailing how a Brooklyn charter school managed by National Heritage Academies approved a lease from a “related business” at a rate nearly $800,000 above market value, or $3.96 million more over the term of the five-year lease. The report also indicated that NHA refused to divulge financial records supporting expenses that it charged to the charter school. A 2019 Ohio Auditor report found similar examples in that state.
Another issue is that many charter management contracts also include a provision that allows the management company to own all property in the school, even though that property was most likely funded by taxpayers.
Food Service, Custodial, and Lawn Contracts
Charter school districts, particularly those managed by for-profit companies, were far less likely to share food, custodial or lawn contracts. In fact, these charter districts indicated they were not responsible for these contracts. This reflects the fact that many charter districts engage in “sweeps contracts.” Therefore, a common response among for-profit managed companies was to deny the State Board’s FOIA request related to these three contracts. The FOIA coordinator responded, “Your request for information contained in bullets 2 through 4 is denied because the Academy does not (i) contract for food service management or vended meals, (ii) contract with custodial service vendors, or (iii) contract with lawn and grounds service vendors. Instead, the Academy contracts for the above services through a third-party management company by way of an educational management agreement and, thus, the Academy is not a party to the service contracts.” (S. Wilson, personal communication, January 14, 2022).
Financial Disclosures
One thing that became evident through the FOIA process was the vast differences in detailed financial disclosures. All districts, regardless of charter or traditional, are required by statute to submit annual comprehensive financial data (MCL 388.1618(5) and a financial audit report (MCL 388.1618(4). While the reports tend to be detailed for traditional school districts, this is not the case for charter districts. Most PSAs report most of their current operating expenditures as“purchased services” through their management company. The management companies, themselves, are not required to report detailed information. As a private vendor, there is no statutory requirement for management companies to submit financial reports to the state.
It’s important to note that, with limited exceptions, traditional school districts are not permitted by law to contract for instructional services. On the other hand, many charter school districts contract with a management company for all or most of these services. According to a state board of education resolution, in FY21, 90.4% of charter schools reported that more than 50% of the school’s current operating expenditures were spent on purchased services (totaling $1.3 billion in purchased services), resulting in those expenditures not being reported and audited with the same level of detail provided for expenditures of traditional school districts, and not subject to public disclosure under FOIA” (MI State Board of Education, 2022).
Financial Reporting
Michigan school districts provide financial information to the state via the Financial Information Database (FID). Data submitted to the FID includes financial reports, revenues, and expenditures. However, what is reported looks very different depending on the type of district and their management contracts, leading to greater disparity between traditional and charter school districts. Under current reporting requirements, the costs for services provided to charter districts under a management agreement are often aggregated under “purchased services” and therefore lack any detailed information.
As a result of this method of reporting, it is nearly impossible to make any kind of accurate comparisons of financial spending. And, since management companies are not subject to the same financial reporting and audit requirements as districts, taxpayers have no way of knowing if their investments are being spent appropriately or if those dollars are being spent in an illegal or
inappropriate manner. In my role on the State Board of Education, I have heard many anecdotal examples of this happening, but absent real transparency laws, there is no way of holding bad actors accountable for their actions. Not only is this inappropriate for a public entity, but it also serves as a stain on all charter schools, including those that are acting in good faith and are truly interested in
providing quality education for children.
The bills before you today alleviate many of the concerns that the State Board of Education has been raising over the last twenty years. Specifically, financial information will be available to the Boards that are charged with overseeing these schools, allowing them to do their jobs effectively. Financial
information will also be not only FOIA-able for the public but in many cases available on the school’s website. It will bring to light related party transactions and taxpayer overspending.
If we are truly interested in parents making choices for their children, they should have access to this information, as should taxpayers who are funding these schools.
For these reasons, the Charter School lobby should be the first in line tosupport these financial transparency laws that could demonstrate what they have been saying…that the vast majority of charter school operators are conducting themselves appropriately and to send a message to those who may not be.
Absent that, I would ask yourself, what do they have to hide?
Dr. Casandra Ulbrich is a former Michigan State Board of Education president (2014 – 2023). She is a member of the Network for Public Education Board of Directors Ulbrich has spent most of her career in higher education administration, currently serving as the Vice Chancellor for Institutional Advancement at the University of Michigan-Dearborn. Ulbrich began her career as a press secretary to the former U.S. House Democratic Whip David Bonior, acting as the official spokesperson for the Congressman. She has been recognized as one of Michigan’s 40 under 40 by Crain’s Detroit Business.
Diane Ravitch's blog 
What does any corporate service industry try to hide from its consumers?
Every damn thing it can.
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It is simply an axiom of the business mentality that anything management does to make money is a Trade Secret and none of anybody else’s business. Ownership will strive toward that end and get away with it to the extent it can deceive the public and corrupt the government to do so.
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Once a state allows sweeps contracts with few strings attached, the companies will lobby politicians to keep the status quo that allows them to hide behind the opaque wall of private ownership and keep unaccountable funds flowing into private pockets. The people of Michigan are being exploited. If they want change, they must pressure state leadership to require more fiscal accountability or change the laws regarding charter schools. Otherwise, the people and the public schools will continue to be exploited.
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Please re-read the article. I inserted the author’s name. My oversight.
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FINANCIAL FRAUD COMMITTED BY CHARTER SCHOOLS IS STEALING TAXPAYER MONEY FROM GENUINE PUBLIC SCHOOLS: The impartial, non-political watchdog Office of Inspector General of the U.S. Department of Education issued a report warning that so much taxpayer money is being skimmed away from America’s genuine public schools and pocketed by private corporate “school choice” charter school operators that the IG investigation declared: “Charter schools and their management organizations pose a potential risk to federal funds even as they threaten to fall short of meeting goals.”
In the 1990’s, Wall Street hedge fund billionaires discovered that they could profit from the “school choice” movement and so they took over by founding corporate chains of charter schools that have reaped billions of dollars since then through various mechanisms, such as REITs that collect exorbitant lease and rental profits from charter schools…as the expense of public schools.
Charter schools claim to be non-profit. And yet, There are numerous schemes for running a non-profit for profit. For example, in two reports — “Chartered for Profit” and “Chartered for Profit II” — The Network for Public Education explains the most common schemes: Some charters lease their buildings back from related businesses. In one New York case, a chartering organization leased a space from the diocese, then leased that space to its own charter school for over TEN TIMES the amount it was actually paying.
Then there are “sweeps” contracts, where a non-profit charter hires a for-profit management organization to handle everything, in return for nearly every dollar the charter takes in. As one contract cited in the report states, the management organization receives “as remuneration for its services an amount equal to the total revenue received” by the school “from all revenue sources.”
In many cases, a non-profit charter school simply serves as a pass through for money headed to a for-profit business.
THE MOST EFFECTIVE STRATEGY FOR DISMANTLING THE CHARTER SCHOOL MOVEMENT is to simply require that charter schools file THE SAME, EXACT PUBLIC DOMAIN QUARTERLY AND ANNUAL BUDGET REPORTS THAT PUBLIC SCHOOLS ARE REQUIRED TO FILE.
Every state in our nation should have that same common sense accountability requirement for charter schools.
THERE’S NO SUCH THING as a “public charter school”. Charter school operators spend a lot of taxpayer money telling taxpayers that charter schools are “public” schools — but they are not. As the Supreme Courts of Washington State and New York State have ruled, charter schools are actually private schools because THEY FAIL TO PASS THE MINIMUM TEST for being genuine public schools; that is — They aren’t run by school boards who are elected by, and therefore under the control of and accountable to voting taxpayers, that is, THE PUBLIC. All — ALL — charter schools are corporations run by private parties or are religious organizations. Taxpayers have no say in how their tax dollars are spent in charter schools.
CHARTER STUDENTS LOSE GROUND: The Stanford University Center for Research on Education Outcomes (CREDO) — which is funded by pro-charter organizations — has reported that in the case of popular online charter schools, students actually lose ground in both reading and math — but online charter schools are the fastest-growing type of charter school because they make it easiest to skim away public tax dollars. CREDO has been conducting years-long research into the educational quality of charter schools and yet even this charter-school-funded research center’s findings are that in general charter schools don’t do any better academically than genuine public schools.
“SCHOOL CHOICE”: The catch-phrase “school choice” was concocted by racists following the U.S. Supreme Court’s 1954 Brown v. Board of Education ruling that required racial integration in public schools. After that, racist organizations used racist politicians to conduct a decades-long attack that underfunded public schools and crippled their ability to provide the full measure of education and to “prove” that public schools were “failing”. That public school “failure” is an issue manufactured by racists organizations and politicians is well-documented in the book “The Manufactured Crisis”.
RACIAL RESEGREGATION of America’s school systems by the private charter school industry is so blatant and illegal that both the NAACP and ACLU have called for a stop to the formation of any more charter schools. The Civil Rights Project at UCLA summed it up, stating that charter schools are “a civil rights failure.”
https://www.forbes.com/sites/petergreene/2019/03/29/report-the-department-of-education-has-spent-1-billion-on-charter-school-waste-and-fraud/#ab1fbdb27b64
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