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California: The Reasons Gavin Newsom Will Not Regulate the Charter Industry

By dianeravitch
July 17, 2019 //
12

 

When Gavin Newsom ran for Governor in 2018, the big charter donors backed former Los Angeles Mayor Antonio Villaraigosa, who ran third in the Democratic primary. Newsom was backed in the race by the California Teachers Association. Newsom’s victory in the gubernatorial race gave public school parents and teachers hope that the scandal-ridden, money-drenched, unregulated charter industry would finally be reined in. For years, we have read about unbridled corruption in the charter sector. Surely Gavin Newsom will insist on  reform of the law.

He won. He appointed a commission to make recommendations for reform. He made sure that at least six of the 11 members of the charter commission were high-profile leaders of the charter industry.

But the commission, on split votes, recommended some strong reforms.

The Legislature seemed poised to enact those reforms. But they got watered down, and the word is that it was Gavin Newsom who watered them down.

Why? Well, for one, his chief of staff is Ann O’Leary, is a strong charter supporter. She was Hillary Clinton’s Education advisor, and she has long ties with the pro-charter Center for American Progress.

But there is more: Gavin Newsom has long been funded by pro-charter billionaires. 

Among them are the Fisher family (The Gap, Old Navy), which has been a key funder of KIPP. And there is the Pritzker family, of both San Francisco and Chicago, which has funded charters in Chicago.

As usual, follow the money.

The charter billionaires covered their bases.

Categories Accountability, California, Charter Schools, Education Industry, Privatization

Oakland Parent Jane Nylund Writes a Letter to Governor Gavin Newsom

By dianeravitch
July 17, 2019 //
10

Dear Governor Newsom:

It is with profound disappointment that I heard that your office was responsible for essentially gutting the main features of these charter reform bills. While I can only speculate on the reasoning for essentially caving to the charter industry (besides Ann O’Leary and the task force espousing all kinds of charter-friendly platitudes), I can say that as a California native, public school graduate (1983), advocate, and 16-year parent/volunteer (two sons in Oakland Unified), and now employee of Oakland Unified, I am well familiar with the education landscape in this state,  particularly the damage being done to schools in Oakland. I’m also familiar with what happens when districts don’t have local control over the schools for which they are responsible. You and I have something in common-we both attended well-resourced public high schools. You went to Redwood High School in Marin, and I attended Miramonte High School in Orinda, located in what is now one of the wealthiest suburbs in the East Bay. Lucky us. 

The irony regarding your potential alliance with privatization groups like CCSA is that, because of your severe dyslexia, you would have been rejected by the same schools that are now being touted as “high quality seats”, aggressively marketed as superior to real public schools because of test scores. According to the bio I read, you were rejected from a private prep school and enrolled in your local public high school instead. So you have first-hand experience with the idea that real public schools enroll all children, not just the easy ones. Charter schools aren’t interested in promoting their schools to children with learning disabilities such as yours, and consciously or unconsciously discourage SPED kids from applying. They don’t test well and they cost too much. Your own private-to-public school trajectory clearly illustrates how private schools select students. The same situation occurs when real public schools are allowed to be privatized into charter schools. These charters schools, because they are privately managed, are now able to choose and keep the students they want, not the other way around. Lotteries do not create equity. They only encourage more motivated families to self-select into the lottery. In many cases, SPED, ELL, and newcomer students need not apply. 
What is a good school anyway? I will bet Redwood High and Miramonte High were both good because of the usual reasons: wealthy families, well-resourced, free transportation (before Prop 13), experienced teachers, lots of enrichment like art and music, language classes, health care, and sports. Prop 13 had just been passed, so the facilities had not fallen into ruin yet. Later, when our sports and bus service were eliminated, my school (and probably yours, too) was able to rally the parents to pony up the cash for all the extras that had abruptly disappeared. Other schools weren’t so lucky.  Did that make them less “good”? No, it made them underfunded and unsupported, and it’s been that way ever since. 
I will speculate that you have no personal experience with any of the long-term damage done to school districts because of charter friendly laws in California, written by the very people who want public schools to go away. (Reed Hastings).  Because of this lack of real world experience in education, you therefore are relying on the advice of education reformers that aren’t as interested in improving outcomes for high-needs children as they are putting money in their pockets and/or heading up the next rung of the political ladder. 
Over the years, I’ve heard all kinds of excuses why charter schools deserve more protection, more appeals, and more expansion. For the uninitiated, there seems to be an underlying assumption that charters are of higher quality (“high quality seats” is a marketing term thrown around a lot for charters schools that JUST opened), that they perform better than the neighborhood schools, and therefore deserve up to three chances for authorization or renewal.

In the past, the charter-friendly state board made it nearly impossible for any local control to happen, which is wrong but also purposeful. Our own traditional district schools are not given the same opportunity to appeal their closures, and they are simply closed for any reason, without any more due process. There is this pervasive idea that maybe a “good” charter will fall through the cracks somehow, and therefore must be given another chance. But, in this case a good district school is not given the same opportunity. So, by this definition, district schools and charter schools, in order to be on equal footing, both would deserve the same appeals process. Otherwise, this charter appeals process automatically games charter expansion by rubber stamping any appeal to the county or the state board. We’ve seen this happen over and over and it needs to end. The CCSA’s agenda is unfettered charter expansion and privatization of our public schools. Do not allow them to use their power and billionaire influence to gut AB1505 and AB1507. Reed Hastings and Eli Broad have dictated their privatization agenda and charter expansion for far too long, and the local community deserves to take back control of its own schools, regardless of which type their students attend.
 I’d like to discuss a few characteristics of the current charter school landscape and debunk a few myths that your advisers, like Ann O’Leary and the charter-friendly task force appear to be selling to either curry favor with the charter industry or to curry political favor with Latino families, many of which have been sold on the promise of “quality” charter schools. 

Myth-a school is “good” because it has high test scores
Reality-test scores don’t measure anything and are essentially used in our district and others to weaponize school closure. There is no agreed upon measure for learning. Test scores correlate with wealth. Therefore, a high-testing school is often labeled “good” because it is well-resourced and well-funded with a rich curriculum and supports. What else is new? Charters can also manipulate test scores by keeping out low-testing populations, and high student attrition that concentrates better test takers at these schools.  They also favor a lot of test prep, which is not authentic learning and is a strategy that would never be tolerated or accepted at the kind of wealthy public schools we attended.
Myth-charters perform better than neighborhood schools based on test scores
Reality-the population of the neighborhood district school is often far different than the charter school. In Oakland, most district schools support far more SPED students, and other high-needs groups like ELL and newcomers.  Often, the poverty levels can be significantly different. Motivated families that are willing to even enter a lottery often attract a student population that test better. The populations between these two groups aren’t the same and therefore one can’t make any sort of statistical inference as to whether one school is better than the other based on test scores. Because population differences usually skew test scores in favor of the charter, these schools often discourage certain students to apply, or encourage certain students to leave. And don’t kid yourself if you think this doesn’t happen. 
Myth-charters do more with less
Reality-charters do less with less. As a privately managed business, they operate on revenues and expenses. Charters keep expenses low by hiring inexperienced TFA teachers and churning them constantly. They generally offer fewer supports, such as afterschool programs, transportation, or meals. They may not provide a rich curriculum that a lot of us had before Prop 13: art, music, sports, clubs, nurses, counselors, etc.  Charters don’t want to pay for these “extras”, but they are essential to a quality education. This business model can’t supply a high-quality product to all, and was never designed for that. Charters are a privately managed business that first and foremost have to offer an acceptable ROI to their investors. These investors are the real customers, not the students.
Myth-there is so much demand for charters, they must be doing something fantastic and amazing
Reality-Oakland has become a target for privatization because of its urban setting, combined with its valuable real estate. If opening charters was all about the kids, then there would be several in surrounding areas like Hayward and San Leandro, with similar student populations. Hayward, with a population of around 25K students, has 4 charters. San Francisco, with a population of 60K has 18 charters. Oakland, with a total student population of 50K has 46 charters. It is simply a business saturation model that has nothing to do with “quality” and everything to do with disruption and school closure. Twenty years ago, many parents in Oakland were thrown a lifeline called a charter school. Fast forward, and the model now isn’t much different than saturating the poor neighborhoods with cheap fast food. I heard an East Oakland resident say, in a public meeting, that charter schools were like having drug dealers on every corner. 
How to create demand? The current strategy is as follows: close your neighborhood elementary schools, which then feed into the middle schools (demand dries up there as well). Then, open a charter right near these same schools. Out of the last 18 school closures in Oakland, 14 were converted to charters. Doesn’t take a genius to see how that will turn out. Ask the students at Roots International how they feel about their neighborhood school closure. But our charter-friendly ($$$) school board fully supports this portfolio model; there are charters right around the corner that former Roots students can attend instead. Instant charter demand creation.
Myth-there are so many students on waitlists that charters must be allowed to expand
Reality-giant wait lists are created when students are allowed to apply to multiple schools. A pool of 100 students can create demand for 500 seats if each one applies to 5 different schools. Each of those schools then puts the student on a waitlist. But the student only attends one school. The rest of the seats on the waitlist are phantoms once the student enrolls. But they remain and are presented as proof of demand, when that proof is only an illusion.
Myth-It’s the charter parents vs. the teachers’ union
Reality-that language is purposeful. It is used by CCSA and its billionaire allies to pit these groups against each other, and it’s working. News flash-it’s the billionaires vs. the rest of us that want and deserve good neighborhood schools that aren’t defined by a piece of paper with test scores on it. Parents and students from all walks of life deserve the same clean, well-resourced schools that you and I attended. Any rhetoric spouted by Reed Hastings (school board hater extraordinaire) and Eli Broad, along with the Koch Brothers and the Waltons about charters being a civil rights issue would make Martin Luther King turn in his grave. There are no civil rights to be had when your school doesn’t support your child’s unique academic needs (like dyslexia), doesn’t provide programs or wraparound services, doesn’t provide food, transportation or a playground, no arts programs, no sports, doesn’t support SPED, sticks your child in front of a computer all day, and test preps them to death. And if your child is suspended or expelled, there is no due process. Nothing you can do about it. Parents are voiceless and that’s what these billionaires want. 
 Our school district loses $57M a year to unfettered charter expansion. It’s time to get back to some no-nonsense approaches to this problem such as real local control, as well as including impact to district finances. Charter schools don’t have the right to expand just because it’s what the Waltons and Reed Hastings want. This failed experiment on our most vulnerable children must end, and your office needs to reevaluate the amendments of AB1505 and AB1507 and ask yourself who really benefits from those amended bills.  It is obvious that these bills were gutted to satisfy your charter friends and allies, which an insult to all hardworking teachers and public school parents who have seen firsthand what kind of devastation this education model has caused over the years.
As these bills wind their way through the legislature, keep in mind how different your life might have been if you had attended a “good” charter school and been rejected (“You have dyslexia, so this school isn’t right for you”). Your entire life, career, and political aspirations might have been completely sabotaged if you had not had that well-resourced, authentic public school to fall back on. And remember what it was that made it a quality school. And remember that it’s a school model that all kids deserve, not just those in Orinda or Marin. Thanks for listening.
Jane Nylund
Oakland, California
Categories Accountability, California, Charter Schools, Corporate Reformers, Education Industry, Privatization

Rachel M. Cohen: Democratic Candidates Wary of Charter School Issue

By dianeravitch
July 17, 2019 //
39

 

Rachel M.Cohen wrote in the American Prospect that the Democratic candidates are distancing themselves from the charter school issue, which only a few years ago was deeply embedded in the Obama administration education policy.

This is progress. In 2016, it was nearly impossible to get any candidate to discuss K-12 education. At last they notice that it is not cool for a Democrat to support charters. Most are trying to play the issue cautiously, being against “for profit” charters, but not acknowledging that large numbers of nonprofits are managed by for profits.

This far, Bernie Sanders is the candidate who has taken the strongest stand against charters, endorsing the NAACP call for a moratorium.

Other candidates are hedging their bets.

Hours after Sanders’s education plan was released, Elizabeth Warren told reporters that she agreed for-profit charters are “a real problem.” She has not yet released her own K-12 plan. While the Massachusetts senator has supported charter schools in the past, in 2016 she came out against a high-profile ballot initiative that would have allowed charters to expand much more quickly in her state. The measure ended up failing, with 62 percent of voters siding against it. 

South Bend Mayor Pete Buttigieg also came out to say he supports Sanders’s proposal to ban for-profit charter schools, though he affirmed a month earlier that charters “have a place” in the education landscape “as “a laboratory for techniques that can be replicated.”

Beto O’Rourke, who opposes a national moratorium on new charters, told the NEA presidential forum that “There is a place for public nonprofit charter schools, but private charter schools and voucher programs—not a single dime in my administration will go to them.” O’Rourke has supported charters in the past, and his wife is a former charter school leader who now sits on the board of a local education reform group that supports expanding charters in El Paso. 

A friend in California forwarded an email showing that charter zealot and billionaire Reed Hastings is hosting a gathering for Mayor Pete, which suggests that he would be a strong charter guy. His background at McKinsey points in the same direction.

The Network for Public Education Action will be following and grading the candidates on the issues that concern us. Feel free to let us know what you learn at town halls.

If you meet one of them, ask them if they will pledge to eliminate the federal Charter Schools Program, which currently funnels $440 Million each year to charters, mostly the big corporate chains like KIPP, which do not need a federal subsidy.

Categories Accountability, Charter Schools, Democrats, Education Industry, Education Reform, Networkfor Public Education Action Fund, Privatization

Jake Jacobs: Democratic Candidates Speak Double-talk about Charters

By dianeravitch
July 17, 2019 //
7

 

Jake Jacobs, a teacher in New York and BAT activist, writes in the Progressive about the pathetic evasions of Democratic Candidates when asked directly about their stance on charter schools.

Public school educators and advocates have been working for years for this to become a major campaign issue, but so far, most candidate statements have been conflicted, incomplete, clumsy, and/or vague, while media coverage has been equally as incomplete, inaccurate, and in many cases baldly biased in favor of charters. 

Read the article to see how they bob and weave to avoid taking issue with privatization of public schools.

Bernie Sanders is the only Democrat so far who has come out in support of the NAACP proposal for a moratorium on charters.

The others are trying to walk a fine line between “good” charters and “bad” charters, which ignores the fact that all charters divert money from public schools that enroll nearly 90% of US students.

Cory Booker can’t escape his long history with charters. Beto loves charters. Mayor Pete (ex-McKinsey) likes charters.

Here is the bottom line: REAL DEMOCRATS SUPPORT REAL PUBLIC SCHOOLS.

Categories Accountability, Charter Schools, Democrats, Education Industry, Privatization

Mercedes Schneider: The Very Profitable Career of an ex-TFA-er

By dianeravitch
July 16, 2019 //
9

 

Mercedes Schneider writes here about the itinerant but very profitable career of Alison Serapin. A Texan, She went from a short stint in TFA to working as a TFA executive to somehow getting herself on the Nevada State Board of Education, where she was vice-president. She had to resign because of a potential conflict of interest when she decided to apply for a $10 million grant. Fancy that!

Schneider writes:

In April 2016, the Las Vegas Review-Journal published an article about former VP of the Nevada State board of Education, Allison Serafin, who resigned from the board in December 2015 because of a conflict of interest involving her decision to apply for state money to partially fund a charter-promoting nonprofit that Serafin started in 2014, Operation 180. In April 2016, Serafin’s nonprofit, Opportunity 180, won a state contract. From thr LV Review-Journal:

The former vice president of the State Board of Education, who resigned last year citing a potential conflict of interest, won a $10 million contract Tuesday to recruit high-quality charter school operators to Nevada.

When she stepped down from the state board in December, Allison Serafin noted her intent to submit a bid for the state’s new charter harbormaster fund, which matches grants from private philanthropic groups to attract the “best-in-class” national charter management organizations.

The contract authorizes Opportunity 180, an educational nonprofit group that Serafin founded in 2014, to drive two key components of Gov. Brian Sandoval’s education reform agenda: expanding access for low-income families to high-performing charter schools and creating a state-run Achievement School District to take over and turn around chronically underperforming campuses. …

As of Friday, Opportunity 180 already had collected more than $4.1 million in committed or cash donations from the Englestad Family Foundation and three other philanthropic groups, Serafin said.

So, Serafin arguably saw an *opportunity* to tailor her nonprofit toward creating Nevada’s newly-legislated Achievement School District and chose to pursue it.

IMG_1547
Schneider traces the remunerative path of this TFA  entrepreneur.
The good news in this story of “follow the money” is that the Nevada Legislature voted in May 2019 to abolish its failed Achievement School District. So Alison quickly adjusted to find new opportunities in the EdDeform world.

 

Categories Accountability, Charter Schools, Education Industry

Jeff Bryant: Why Won’t the Charter Industry Admit Its Failures and Clean House?

By dianeravitch
July 15, 2019 //
6

Jeff Bryant notes the escalating scandals surrounding the charter industry, creating a stench that can’t be covered up and hidden.

Yet the charter industry refuses to acknowledge its problems and act to correct them and to oust the bad actors from its big tent.

Case in point: when the Network for Public Education released a study of the federal Charter Schools Program which showed that about one-third of all federally-funded charters had never opened or had closed soon after opening, at a cost of taxpayers of $1 billion, the charter industry was at first silent. Then it responded by attacking the report and NPE, claiming that NPE was “union-funded,” which it is not. NPE has indeed received contributions from unions, but the overwhelming bulk of its funding comes as voluntary gifts from individual supporters.

The attack came from paid employees of the National Alliance for Public [sic] Charter Schools, whose job seems to be to deny any charter misdeeds and to attack all critics and criticism. They were outraged that NPE would criticize the federal Charter Schools Program, which under Betsy DeVos has directed the bulk of its $440 million a year to support of large corporate chains like KIPP, IDEA, and Success Academy. It is now a charter slush fund, controlled by DeVos and her merry band of privatizers.

Bryant, who was a co-author of the NPE report with Carol Burris, writes:

As charter reform in California takes one step forward and two steps back, charter proponents operating at the national level show no signs of being willing to consider the need for more regulatory oversight.

For instance, months after the report Burris and I published about waste in the federal government’s charter school grant program, officials from the National Alliance for Public Charter Schools, a charter school lobbyist and advocacy group, attacked our report in a national media outlet supportive of charter schools.

The critique by Christy Wolfe and Nathan Barrett is a slog through a mostly unsubstantiated defense of a program their organization does not even administer and does not seem to have any greater understanding of than Burris and I’ve demonstrated. But what Wolfe and Barrett have written can serve as a useful example of how charter industry operatives continue to respond disingenuously to criticism of their schools no matter how reasonable and well-founded the criticism is.

Now, why would the National Alliance for Public [sic] Charter Schools respond so defensively to any criticism of the federal Charter Schools Program?

Surely it can’t be because the NAPCS received a grant of $2.385 million from that same program in 2018.

The charter slush fund must be protected at all costs, regardless of where the money goes or how it is spent and misspent. Accountability be damned!

 

 

Categories Charter Schools, Corruption, Education Reform, Fraud

D.C.: Famed Philanthropist Jeffrey Epstein Endorses Charter School Dominance In D.C.

By dianeravitch
July 15, 2019 //
48

 

To understand the charter industry, you must appreciate that it is driven by extremely wealthy people and has no grassroots. It has mastered the arts of marketing and branding, but does not have a plan to improve education other than to draw students and resources away from public education, which belongs to all of us.

People often ask me, “Why do the super-rich cluster to the cause of privatization?” The Answer is not simple because many different motives are at work. Some see giving to charters as a charitable endeavor, and their friends assure them that they are “giving back,” helping poor children escape poverty. Others want to impress their friends in their social strata, their colleagues in the world of high finance. Being a supporter of charter schools is like belonging to the right clubs, going to the right parties, sharing a cause with other very rich people.

Perhaps infamous pedophile Jeffrey Epstein fits into the last category. Perhaps he fits into all those categories.  He is a man who grew up in modest circumstances in Brooklyn, attended public schools, and owed his start in life to the New York City public schools.

But once he achieved wealth and could call himself a “philanthropist,” he realized that choosing the right causes was important as a way of burnishing his image, showing that he was running with the In Crowd.

So, of course, he announced that he supported charter schools, not the public schools to which he owed a debt for launching him in life.

In 2013, his foundation issued a press release announcing that he looked forward to the dominance of charter schools in Washington, D.C. and predicted that they would succeed because they were unregulated. That, in a sense, was his own secret: he succeeded because he was unregulated, neither his appetites nor his activities were regulated. Supporting charter schools showed that he moved in the circles of the DFER elites, the hedge fund kings. No longer was he the boy from Lafayette High School in Brooklyn; he was a philanthropist encouraging the growth of school privatization, not just as competition but as a replacement for public schools.

Now that he has been indicted yet again, this time in New York, for his crimes against young girls, it is interesting to read his fulsome self-praise for investing in the charter industry.

This press release was issued by the Jeffrey Epstein VI Foundation:

NEW YORK, Feb. 8, 2013 /PRNewswire/ — For the first time, more students in Washington DCenrolled into charter schools than public schools. Last year, charters had an 11% increase in student enrollment, while public schools had a 1% increase. Mayor Vince Gray noted that the nation’s capital is only a few years away from being evenly split between the two school systems.

The shift was welcomed by financier and well-known education philanthropist, Jeffrey Epstein and his foundation, the Jeffrey Epstein VI Foundation. Jeffrey Epstein founded the Program for Evolutionary Dynamics at Harvard University with a $30 million dollar grant in 2003 and has since expanded his support into early development, Head Start and charter school programs across the nation, including Washington DC.

Some of the charter schools that the Jeffrey Epstein has supported include, Harlem Link Charter School, the Maya Angelou Schools in DC and the Bard High School Early College in New York. “Charter Schools have the freedom to self-regulate. It’s a critical component of their success. They also reduce the burden on the public school system,” Jeffrey Epstein asserted.

In fact, last year, the DC Schools Chancellor, Kaya Henderson, decided to close fifteen public schools due to the shift to charters.

Despite this growth, there is concern about the number of charter schools that close every year. According to The Center for Education Reform, 15% of charters close every year. However Jeanne Allen, President of the Center for Education Reform explained that unlike the public school system, this closure rate reflects a healthy level of accountability. Today 41 states have charter school laws and audit requirements. 52% of charter schools are also now authorized by school districts and 48% independently.

“We need to enhance state standards of excellence,” Jeffrey Epstein noted. “But it’s essential that these laws are just that, standards, and not management policies.”

Jeffrey Epstein is a trustee of the Institute for International Education, a former board member of Rockefeller University, the Council of Foreign Relations, the Trilateral Commission, New York Academy of Science and sits on the board of the Mind, Brain and Behavior committee at Harvard.

SOURCE www.jeffreyepsteineducation.com

 

Categories Accountability, Charter Schools, Corporate Reformers, Corruption, District of Columbia, Education Industry, Privatization

Law Journal: “Are Charter Schools the Second Coming of Enron?”

By dianeravitch
July 14, 2019 //
65

This law journal article about the self-dealing and corruption in the charter sector was written by Professors Preston C. Green III, Bruce D. Baker, and Joseph Oluwole.

Since it was written, there have been so many examples of scandals, conflicts of interest, and outright theft of public dollars that this prediction seems remarkably prescient.

Here is the table of contents:

INTRODUCTION

OVERVIEW OF ENRON

A. ENRON AND DEREGULATION

B. THE LJM SPES

C. ENRON’S COLLAPSE

II: ENRON’S GATEKEEPER PROBLEMS

A. ARTHUR ANDERSEN

B. INDEPENDENT ANALYSTS

C. CREDIT RATING AGENCIES

D. ENRON’S BOARD OF DIRECTORS

E. SECURITIES AND EXCHANGE COMMISSION (SEC)

III: CHARTER SCHOOLS AND RELATED-PARTY TRANSACTIONS

A. CHARTER SCHOOL DEREGULATION AND PRIVATE INVESTORS

B. EXAMPLES OF ENRON-LIKE RELATED-PARTY TRANSACTIONS

1. IMAGINE SCHOOLS

2. IVY ACADEMIA CHARTER SCHOOL

3. AMERICAN INDIAN MODEL CHARTER SCHOOLS

4. GRAND TRAVERSE ACADEMY

5. PENNSYLVANIA CYBER CHARTER SCHOOL

C. THE FEDERAL GOVERNMENT, RELATED-PARTY TRANSACTIONS, AND THE NEED FOR STRONG GATEKEEPING

IV: CHARTER SCHOOL GATEKEEPERS

A. AUDITORS

B. CHARTER SCHOOL GOVERNING BOARDS

C. CHARTER SCHOOL AUTHORIZERS

D. STATE EDUCATION AGENCIES (SEAS)

E. U.S. DEPARTMENT OF EDUCATION

CONCLUSION

Here is the Introduction to the article:

INTRODUCTION

In December 2001, Enron rocked the financial world by declaring bankruptcy due to the effects of an accounting scandal. Earlier in the year, Enron had been the sev- enth largest corporation in the country.1 This energy trading and utilities giant had become a dominant player by aggressively benefitting from the federal deregulation of the energy markets.2 Enron’s collapse erased more than $60 billion in shareholdervalue and caused thousands of employees to lose their jobs and pensions.3

Enron proved not to be an anomaly. Soon after the corporation’s collapse, thefinancial markets were further roiled when WorldCom, Adelphia, and Tyco, among others, declared bankruptcy because of accounting fraud.4 Congress responded to this wave of scandals by passing the Sarbanes-Oxley Act of 2002, which imposed greater accountability on publicly traded companies and their auditors.5

Andrew Fastow, Enron’s CFO, was a pivotal figure in Enron’s collapse. He cre- ated two special purpose entities (SPEs)—LJM1 Cayman LP (LJM1) and LJM2 Co- Investment LP (LJM2)—to serve as a hedge against potential downturns in Enron stock.6 Fastow and his associates served as the managers of these SPEs.7 Because ofFastow’s dual management roles, Enron should have disclosed to its shareholdersthat the partnerships were related-party transactions, defined as deals between enti- ties with special, preexisting relationships,8 which Enron failed to do.9 Although re- lated-party transactions are legal, they can create conflicts of interest that have the potential of harming their shareholders.10 Specifically, these transactions “can createthe impression that an insider is using company assets for personal benefit, and that the company is getting the short end of the stick.”11 Indeed, Fastow did take ad- vantage of this conflict of interest by making millions of dollars from the SPEs and using the illegal proceeds to invest in other interests.12

Enron’s collapse was significant because it exposed the deficiencies of gatekeep- ers that had the responsibility of protecting the integrity of the markets.13 These gate-keepers included Enron’s auditor Arthur Andersen, independent analysts, credit rat- ing agencies, corporate boards, and the Securities and Exchange Commission (SEC).14 In the case of the Enron debacle, all of these watchdogs failed to detect thedangers caused by Fastow’s conflict of interest.

Related-party transactions are now posing a threat to the charter school sector. Charter schools are a deregulated departure from traditional public schools because they are exempted from laws governing budgets and financial transparency.15 Similar to Fastow, unscrupulous individuals and corporations are using their control over charter schools and their affiliates to obtain unreasonable management fees for their services and funnel money intended for charter schools into other business ventures.16

In spite of this evidence, the federal government has consistently attempted to increase the number of charter schools without pushing for oversight.17 This policy approach is alarming because it will create more opportunities for illegal related- party transactions.18 Also, this approach runs the risk of harming students in low- income and minority communities—the very children whom charter schools are sup- posed to serve.19 Therefore, charter school gatekeepers must learn from the Enron debacle by becoming more prepared to guard against the dangers posed by related- party transactions.20 These gatekeepers include auditors, governing boards, authoriz- ers, state education agencies (SEAs), and the U.S. Department of Education.

In this Article, we discuss how some charter school officials have engaged in Enron-like related-party transactions to defraud charter schools. We also identify several measures that can be taken to strengthen the ability of charter school gate- keepers to protect against this danger. This Article is divided into four Parts. Part I describes how Fastow used his management of Enron and the SPEs to obtain illegal profits contrary to the interests of the former company. Part II discusses why the gatekeepers in the financial sector failed to stop the related-party transactions be- tween Enron and the LJM entities. Part III provides examples of how individuals in the charter school sector are benefitting from their control over charter schools and their affiliates in a manner similar to Fastow. Part IV analyzes, inter alia, pertinent statutory and regulatory provisions that apply to state and federal gatekeepers. We perform this task to identify the steps that legislators and policymakers can take to increase the gatekeepers’ ability to protect against harmful related-party transactions.

If you want to understand the deep potential for financial corruption at the heart of deregulated private charter schools, you must read this article.

Here is a small excerpt:

Major philanthropic organizations have invested heavily in the charter school sec- tor.112 For example, the Walton Family Foundation, which was established by the founder of the Walmart retail chain, has pledged $1 billion to support charter schools.113 Reed Hastings, the founder of Netflix and a long-time supporter of charter schools, has created a $100 million education foundation.114 Hedge funds and other private investors have also become interested in investing in charter schools.115

The attention of philanthropic groups and private investors has dramatically im- pacted the charter school sector. For example, the education management organiza- tions (EMOs) that these groups operate have become the dominant players in the charter school sector.116 EMOs are for-profit or nonprofit entities that provide edu- cational and management services to charter schools.117 EMOs manage between thirty-five to forty percent of all charter schools, accounting for about forty-five per- cent of charter school enrollments.118

Charter schools attract investors because of the potential for new revenue streams.119 For instance, the New Market Tax Credits (NMTC) program provides investors the opportunity to make profits from charter-school real estate transac- tions.120 Enacted as a component of the Community Relief Tax Credit Act of 2000,121the NMTC was designed to encourage investment in low-income communities.122The NMTC accomplishes this goal by providing investors in a community develop- ment entity (CDE) a thirty-nine percent tax credit over a seven-year period.123 A CDE is a corporation or partnership that provides capital for investment in low-income communities.124 An educational organization such as a charter school foundation can use NMTC funding to build a charter school.125

For-profit entities can double their investment in charter-school real estate pro- jects by taking advantage of the NMTC as well as other federal tax credits.126 For- profit entities can also obtain revenue from charter schools through lease payments for the use of the facilities. For instance, the Robert Bacon Academy (RBA), a for- profit EMO operating in North Carolina, received $1.5 million in rent, as well as almost $549,000 for maintenance during the 2013–14 school year—from one char- ter school alone.127

Investors can also obtain profits through the management fees that EMOs charge for their services.128 Management fees can be very generous. In the 2013–14 school year, RBA received a management fee of sixteen percent of its school’sexpense as well as “additional incentive payments based on student achieve-ment.”129 Two charter schools paid RBA nearly “$2.4 million in fees and incentivesout of just $13 million in total revenue.”130

Please send copies of this law review article to the Center for American Progress, the Brookings Institution, the New York Times editorial board, the Washington Post editorial board, your Senators and members of Congress, and to the campaigns of every Democrat running for President.

Categories Accountability, Charter Schools, Corruption, Education Industry, Fraud, Privatization

Charter Schools and Enrollment Decline in San Antonio

By dianeravitch
July 14, 2019 //
14

 

Texas Public Radio reported on the devastating effect that charter expansion is having on the public schools of San Antonio. The city leaders, in their ignorance, decided not to improve the public schools, but to create a parallel private system to compete with them. Both sectors are funded by the public, but the charters choose their students and some do not offer transportation.

The city’s population is growing but enrollment in its public schools is shrinking.

The main reason for the apparent contradiction is an exponential growth in publicly-funded, privately-run charter schools. Charter school enrollment in the San Antonio metro area has grown by more than 200% since 2009, according to a Texas Public Radio analysis of a decade of enrollment records obtained through public information requests. 

In the past two years alone, charter networks in the San Antonio metro area gained nearly 11,000 students. For traditional school districts, that meant a corresponding loss in funding. State funding is based on attendance.

The big charter networks, like IDEA and Great Hearts, have selective enrollment practices. IDEA has received more than $200 million from Betsy DeVos and the federal Charter Schools Program.

Some local parent groups are fighting back, but they are vastly outspent by the charter networks and undercut by state policy, which favors privatization.

Charter favoritism guarantees that the local public schools, which enroll most children, will be underfunded and will serve a disproportionate number of students with the highest needs.

Some parents have organized to fight back:

Standing in the neighborhood next to Oak Meadow Elementary in the North East school district, Cameron Vickrey said her daughters’ school “experienced a kind of mass exodus” a few years ago to go to Great Hearts. Great Hearts is a charter network that uses a classical curriculum similar to private schools.

“When all of those people left there was a volunteer vacuum,” Vickrey said. “That was when I came to the school, and as a new kindergarten mom I was put on the PTA board… because they pretty much had to create a PTA board from scratch.”

Vickrey’s neighborhood is mostly one-story, ranch-style houses a short walk or drive from the elementary school.

Trimmed yards are sprinkled with white signs that say “Proudly RootEd in NEISD.”

Vickrey and a few other Oak Meadow parents started making the yard signs after hearing other parents say that nobody in the neighborhood goes to the traditional public school.

RootEd yard sign in the Oak Meadow neighborhood of North East ISD.
CREDIT CAMILLE PHILLIPS | TEXAS PUBLIC RADIO

“And we stopped and thought about it, and we were like, ‘That’s not true! Of course people go to that school.’ They just don’t know those neighbors, right, because maybe they’re not in their clique or whatever.”

From there, RootEd grew into a nonprofit with a mission of spreading positive stories about district schools — both by word of mouth and on social media using the hashtag RootEd.

“RootEd just wants to say, ‘Wait, hang on a second. Remember that these schools are here. And there are awesome things happening in them still,’” Vickrey said. “Make that your first stop, the first thing that you look into and if it doesn’t work for you for whatever reason, nobody’s going to fault you for that. You have a right to do that but we just want to make sure that people don’t discount their public schools.”

Vickrey said she also wants parents to consider the “unintended side effects” of choosing charter schools: less money and volunteers for the traditional public school, and a tendency to choose a school where people look like you.

“Our middle school that we’re zoned for here is a Title I (low-income) school, Jackson Middle School,” Vickrey said. “And it’s fabulous, but so many start choosing their school path for elementary school based on trying to avoid Jackson Middle School.”

Jackson Middle School is 80% Hispanic and 72% economically disadvantaged. San Antonio’s Great Hearts schools are less than 20% low-income and almost 50% white.

Categories Accountability, Budget Cuts, Charter Schools, Education Industry, Funding, Privatization, San Antonio

Beware! Powerful Koch Network Starts New Group to Fight Public Schools

By dianeravitch
July 14, 2019 //
14

Charles Koch and his network of wealthy donors have created a new Astroturf organization called “Yes Every Kid” to promote school choice and take public money away from public schools.

Yes, they are targeting “every kid” as a prime prospect for a charter school or a voucher.

Yes, they want to shrink public schools so that they are no longer the “choice” of 90% of American families.

Koch in June announced the Yes Every Kid initiative as the latest addition to his sprawling network of wealthy donors, political groups and tax-exempt advocacy organizations best known for pushing anti-regulation, small-government policies. Its political arm, Americans for Prosperity, has made waves supporting the tea party and fighting former President Barack Obama’s health care law.

The Yes Every Kid group is tasked with monitoring statehouses where it can be influential on school choice, said Stacy Hock, a Texas philanthropist who is among hundreds of donors each contributing at least $100,000 annually to the Koch network’s wide-ranging agenda.

Hock and officials with the Koch network said it’s too early to provide specifics about what policies the group is pushing.

“The priority is to go where there is a political appetite to be open to policy change and lean in there,” said Hock, who also leads the Texans for Education Opportunity advocacy group that supports charters and other education alternatives.

She cited Texas, West Virginia, Tennessee and Florida as priority states where school choice proposals have flourished.

It is hard to say that West Virginia is a place where school choice proposals have “flourished” since the legislature approved them just weeks ago for the first time, and they have not yet been implemented. So translate: Koch money has successfully bought enough legislators in rural West Virginia to foist “choice” on local communities, although it has not happened as yet.

In Tennessee, Koch money bought the new governor and the legislature to impose charters and vouchers on districts that don’t want them.

Florida is a wholly owned subsidiary of the DeVos-Jeb-Koch combine.

There is no evidence that students benefit by having school choice, although there is plenty of evidence that vouchers underwrite racism and ignorance and there is plenty of evidence that school choice promotes segregation.

This is what the billionaires actually want: ignorance, racism, and segregation. And it is worth paying for. For them. Not for us, and not for our society.

Peter Greene defined this new group of Astroturfers far better than I. 

He calls it the “Astroturducken,” with one deform idea wrapped around another, all of them guaranteed to destroy public schools, trick parents, and generate jobs for the faithful hangers-on from Reformy world.

Greene writes:

Yes, don’t wait for things to come down from above, says this website that has come down from a billionaire who wants to drive the education bus despite his complete lack of educational expertise. But this astroturfery is insistent. “Real change has to start from the ground up. We’re here as your resource to facilitate conversation.” That might be really moving if the very next sentence weren’t “We’re here to foster a culture of disruptive innovation,” which suggests that these facilitaty listeners already have some answers in mind. Also missing– an acknowledgement of where all that negativity came from. Here is yet another reformy outfit talking about negatives from the past as if they simply fell from space, instead of saying, “Yeah, that was us. Sorry.” And here comes the tell:

We want to hear new ideas, new solutions, and new voices. And it can only happen when we listen to the real stakeholders in education: you.

But who is this “we” and why should stakeholders feel any need or obligation to talk to “we” in the first place? This is the same old rich fauxlanthropist baloney– we’re not only going to vote ourselves a seat at the table, but we’re also going to go ahead and give ourselves the seat at the head because, yeah, this is our table now. It’s so big and generous of you to agree to listen to us, Sir, but I still haven’t heard a reason that we should be talking to you. This is the overarching narrative of decades of modern ed reform– actual teachers and educators were working long and hard on the problems of education, and a bunch of rich amateurs strolled up and announced, “Good news! We’re going to take over this whole conversation now!” Thirty years later we’re still all waiting to hear why these guys should be running any part of the show beyond reasons like “I’m rich” and “I want to.”

 

 

Categories Accountability, Billionaires, Charter Schools, Corporate Reformers, Education Industry, Koch Brothers, Privatization, School Choice, Vouchers
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