Archives for category: Deregulation

Tim Wu is a law professor at Columbia University. He ran for Lt. Governor in New York on a progressive ticket with Zephyr Teachout.

On April 24, 2012, the Federal Trade Commission, the nation’s principal gatekeeper for health care mergers, published an innocuous-seeming notice granting a request for “early termination” of its review of a $108 million health care acquisition. Newport Medical Instruments, a small developer of cheap, portable ventilators, was being acquired by Covidien, a much larger American company headquartered in Ireland for tax purposes. Covidien makes, among other things, larger and more expensive ventilators.

The government’s review was not extensive. One of the lawyers involved, a former F.T.C. staff member, notes that he successfully steered the merger through the F.T.C. “without second request” — without extensive review.

We now know that approving that merger without conditions had severe costs. It would cripple what had been a prescient federal program, begun in 2007, to build an emergency stockpile of up to 40,000 portable ventilators with the eventual help of Newport Medical Instruments. But Covidien terminated the project, apparently in large part because it was insufficiently profitable.

That cancellation set back the federal ventilator program by at least seven years. In fact, 13 years later, in the midst of the coronavirus crisis, and despite a new contract with another company, not a single ventilator has been delivered.

It is easy to criticize the F.T.C. for missing the dangers to public health in the Newport merger. But it’s a mistake to see the episode as an isolated blown call or a case of insufficient diligence. The real problem is that United States’ approach to corporate consolidation is broken, and nowhere is this more clear than when it comes to health care. As it stands, the F.T.C.’s power to review mergers takes little account of what makes health care different from other industries. And tragically, the Newport merger is only one in a long line of disasters.

The Federal Trade Commission is staffed by skilled lawyers and economists who try their best, within their authority, to stop the worst abuses. (I’m biased: I was at the F.T.C. from 2011 to 2013.) But the agency’s own rules treat the market for ventilators as little different than the market for, say, bowling balls. The scope of review is too narrow for the concerns that arise when it comes to potentially lifesaving products like ventilators, pharmaceuticals and hospitals. In fact, in the Newport case, even if the lawyers had suspected Covidien’s motives, there was probably little under existing law that they could have done.

The problem is systemic. Consider that over the past decade, the F.T.C. has found itself largely unable to stop another abuse: the transfer, by large pharmaceutical companies, of individual drug brands to tiny companies that subsequently raise the prices of the drugs by factors of thousands. (The F.T.C. has the power to review transfers retrospectively and undo them.)

Perhaps the most notorious example was the sale of Daraprim, a drug used to treat a life-threatening parasitic infection, from Impax Laboratories to Turing Pharmaceuticals. Turing raised the price of Daraprim from $13.50 to nearly $750.

And Turing isn’t even the worst offender. For $100,000, a company named Questcor bought from Aventis the rights to a $40 treatment for infantile spasms. Questcor jacked up the price by an astonishing 69,900 percent — from $40 to an $28,000. (A company that bought Questcor in 2014, Mallinckrodt, jacked it up even more, to $39,000.)

In most markets, such exploitative tactics are difficult to sustain, because customers would revolt. But health care markets are different. For many drugs or treatments, there are no realistic substitutes. And the markets are further complicated by insurance and government involvement — and ultimately, by the fact that we care about human health in ways that are hard to quantify.

Perhaps the greatest calamity, in terms of harm done, has been the F.T.C.’s inability over the past two decades to stop hospital consolidation, despite its best efforts and growing evidence of negative effects. In theory a hospital merger might produce welcome efficiencies, but in practice too many hospital mergers tend to yield higher prices and lower quality of care (measured by morbidity), not to mention bed shortages. After a bad hospital merger, patients pay more and die more.

To its credit, the F.T.C. has tried hard in this area, litigating aggressively to stop the most outrageous hospital mergers. Yet despite notable victories in court, the agency’s case-by-case approach has not effectively stopped the waves of hospital consolidation.

Very few observers who are not on the industry’s payroll find it easy to defend what has happened over the past decade when it comes to health care mergers. Action is overdue. The F.T.C. might, as Commissioners Rohit Chopra and Rebecca Slaughter have urged, dig deeper into its own authority and begin writing special rules for the worst abuses. Congress, which is considering the first major antitrust overhaul since 1914, might create special scrutiny for health care transactions, sensitive to their broader effects.

What’s certain is that we can do better. In an alternative universe, the F.T.C. lawyers scrutinizing the Newport deal, equipped with greater authority and resources, might have flagged the acquisition as suspicious, consulted the Department of Health and Human Services and made the deal contingent on full performance of the federal contract for ventilators. And now, instead of squabbling for supplies, we might be facing the coronavirus crisis with a stockpile of new ventilators — grateful for the foresight of the federal government and the vigilance of the F.T.C.

Tim Wu (@superwuster) is a law professor at Columbia, a contributing opinion writer and the author, most recently, of “The Curse of Bigness: Antitrust in the New Gilded Age.”


Jersey Jazzman knows that the leaders of the Disruption Movement are always on the hunt for proof that their theories work. One model district after another has had its moment in the sun, then sinks into oblivion.

The district of the moment, he writes, is Camden, possibly the poorest in the state. Most people might look at Camden and think that what’s needed most is jobs and good wages. Disrupters have a different answer: Charter Schools.

In an earlier post, he explained how charters “cream” the students they want to get better results and wow naive editorial writers.

In this post, he wrote that Camden was supposed to prove that charters can take every child in the district and succeed. They would not select only the ones they wanted.

Because Camden was going to be the proof point that finally showed the creaming naysayers were wrong with a new hybrid model of schooling: the renaissance school. These schools would be run by the same organizations that managed charter schools in Newark and Philadelphia. The district would turn over dilapidated school properties to charter management organizations (CMOs); they would, in turn, renovate the facilities, using funds the district claimed it didn’t have and would never get.

But most importantly: these schools would be required to take all of the children within the school’s neighborhood (formally defined as its “catchment”). Creaming couldn’t occur, because everyone from the neighborhood would be admitted to the school. Charter schools would finally prove that they did, indeed, have a formula for success that could be replicated for all children.

It turned out not to be true, however. He calls Camden “the very big lie.”

In the third post about Camden, Jersey Jazzman gives his readers a lesson about the limitations of the CREDO methodology.

He starts here:

I and others have written a great deal over the years about the inherent limitations and flaws in CREDO’s methodology. A quick summary:

The CREDO reports rely on data that is too crude to do the job properly. At the heart of CREDOs methodology is their supposed ability to virtually “match” students who do and don’t attend charter schools, and compare their progress. The match is made on two factors: first, student characteristics, including whether students qualify for free lunch, whether they are classified as English language learners (in New Jersey, the designation is “LEP,” or “limited English proficient”), whether they have a special education disability, race/ethnicity, and gender.

The problem is that these classifications are not finely-grained enough to make a useful match. There is, for example, a huge difference between a student who is emotionally disturbed and one who has a speech impairment; yet both would be “matched” as having a special education need. In a city like Camden, where childhood poverty is extremely high, nearly all children qualify for free or reduced-price lunch (FRPL), which requires a family income below 185 percent of the poverty line. Yet there is a world of difference between a child just below that line and a child who is homeless. If charter schools enroll more students at the upper end of this range — and there is evidence that in at least some instances they do — the estimates of the effect of charter schools on student learning growth very likely will be overstated….

A “study” like the Camden CREDO report attempts to compare similar students in charters and public district schools by matching students based on crude variables. Again, these variables aren’t up to the job — but just as important, students can’t be matched on unmeasured characteristics like parental involvement. Which means the results of the Camden CREDO report must be taken with great caution.

And again: when outcomes suddenly shift from year-to-year, there’s even more reason to suspect the effects of charter and renaissance schools are not due to factors such as better instruction.

One more thing: any positive effects found in the CREDO study are a fraction of what is needed to close the opportunity gap with students in more affluent communities. There is simply no basis to believe that anything the charter or renaissance schools are doing will make up for the effects of chronic poverty, segregation, and institutional racism from which Camden students suffer.

This is a richly argued and documented critique that deserves your full attention.

Underneath the search for miracles is the wish that equality can be purchased on the cheap. This satisfies the needs of politicians who want desperately believe there are easy answers to tough problems. JJ reminds us that there are not.

If politicians stopped looking for quick fixes, miracles, and secret sauce, it might be possible to have serious discussions about our problems and how to solve them.




Carol Burris is one of the best-informed observers of the charter industry. Tim Slekar interviewed her on his podcast #BustED Pencils.

New #BustEDPencils Episode 85: Charter School Scandal with @Network4pubEd and @carolburris

Feature Interview:

The Network for Public Education’s Executive Director Carol Burris talks about the lack of “accountability” at the Federal Department of Education regarding charter school funding.  After publishing Asleep at the Wheel the charter school industry felt dissed.  So they complained.  So Carol went back to check NPE’s facts and found out the Charter industry might even be more than just Asleep at the Wheel.

This was such an awesome interview so I asked Carol if she might be interested in doing a semi-regular interview to keep  #BustEDPencils listeners informed about the scandalous world of charter schools.!  Guess what she said?


Tom Ultican writes here about the biggest charter fraud in history (to this date). 

This fraud was not one of those one-day wonders that people read about and forget the next day.

This one should wake up state legislators and produce genuine reforms of the state’s super-permissive charter law.

Ultican writes about the indictment of 11 people for the theft of $50 million. Other writers, however, peg the loss to the state and its students at $80 million.

Whether it’s $50 million or $80 million, it should catch the attention of those who are devoted to ethical behavior.

Ultican explains that charter advocates designed the law so that it would NOT regulate who got the money or how it was spent. The California charter law is an open invitation to graft and corruption.

And they walked through an open door, reaping millions from the state’s lax law. Deregulation and lack of oversight was supposed to spur innovation. But it mostly spurred theft.

He writes:

The state of California puts more than $80 billion annually into k12 education. Because that money is a natural target for profiteers and scammers, extra vigilance is needed. However, California’s charter school law was developed to provide minimum vigilance.

During its early stages, several billionaires like Carry Walton Penner, Reed Hastings and Arthur Rock made sure the California charter school law was designed to limit governmental rules and oversight. For example, charter schools are not required to meet the earthquake standards prescribed in the 1933 Field Act, which hold public schools to higher building code requirements. Since its enactment no public schools have collapsed in an earthquake. The picture of the Education Collaborative School above is evidence that students in a known earthquake zone are now at increased risk of injury and death.

A few weeks ago Louis Freedberg observedthat a key weakness in California’s chartering law is that there are no standards for authorizers and a lack of expertise. He also wrote about the number of charter authorizers saying, “unlike many states, California has hundreds of them: 294 local school districts, 41 county offices of education, along with the State Board of Education.” Among these 336 authorizers, several are school districts of less than 1,000 students which have neither the capacity nor training to supervise charter schools. Some of these small districts look more like charter school grafters than public school districts.

The California law is deeply defective. It assumes that the market will produce better schools. We now know that isn’t right.

One of our readers and frequent commenters—Joe Nathan— was elected to the Charter School Hall of Fame and will be honored at the National Charter Schools Conference. Joe helped to write the first charter law in the nation in Minnesota. He and Ted Kolderie ensured that charters would be deregulated and would not confirm to Albert Shanker’s template on unionized schools approved only by local school districts. Joe continues to insist that charters are “progressive,” even though their most important funders are the Walton Family Foundation (which funds Joe) and their biggest cheerleaders are the rightwing ALEC and Betsy DeVos.

Charters are in the midst of an existential crisis right now after years of boasting about unlimited growth. That growth has stalled, as Democrats distance themselves from charters. A backlash against charters and privatization is in full swing.

Part of that backlash stems from the daily drumbeat of charter scandals, especially the recent indictment of 11 people connected to an $80 million scam in California.

Here is the program of the National Charter Schools Conference.

NCSC will honor not only Joe, but Ferdinand Zulueta, who runs one of the largest for-profit charter chains in Florida, called Academica. The Zulueta Family has amassed a real estate fortune of more than $100 million, thanks to their business acumen and public funds.

National Charter Schools Conference

We are bummed you couldn’t make it, but that doesn’t mean you can’t get a little taste of Vegas during the 2019 National Charter Schools Conference (NCSC19)! We will be livestreaming all general sessions and happenings on the Charter Talks stage.

Tune in on our Facebook page for these sessions:

Monday, July 1

Opening General Session (9:30-10:30 a.m. PT): We’re thrilled to welcome back Sal Khan, founder of Khan Academy, back to the main stage at NCSC19! National Alliance President & CEO Nina Rees will kick-off and lead the first plenary session of NCSC19 with her annual State of the Movement address encouraging us all to share our stories.

And, finally, don’t miss a special guest introduce one of the 2019 Charter School Hall of Fame inductees, Fernando Zulueta, president of Academica!

Charter Talks (11 a.m.-12:30 p.m. PT): Back for a third year, presenters will share a 15-minute compelling presentation that shares a big idea, is a tech demo, delves into an issue, or shares a small idea with a big impact. These Charter Talks pack a punch, so come ready to learn a lot in a small amount of time from interactive, engaging presenters!

  • 11:15 a.m. The Fight for the Best Charter Public Schools in the Nation – Cara Stillings Candal, Pioneer Institute
  • 11:30 a.m. The Life and Times of an Independent Charter School Operator – India Ford, T-Squared Honors Academy
  • 11:45 a.m. College for All: A Personal Odyssey – Robert Lane, Southland College Prep HS

Recording of The 8 Black Hands Podcast (3-4:30 p.m. PT): For the first time ever, we will have a live recording of two podcasts on-site, starting with The 8 Black Hands Podcast. The podcast from four black men (Ray Ankrum, Charles Cole, Sharif El-Mekki, and Chris Stewart) engages in passionate discussions about educating Black minds in a country that has perpetually failed them. Don’t miss the live recording of this powerful podcast!

Tuesday, July 2

Recording of Academica Media’s Charter School Superstars Podcast (10 a.m.-12 p.m. PT): The second live podcast recording at NCSC19 will feature a Q&A session with big players in the charter school movement on the Academic Media podcast.

Unleashing Opportunity and Creativity with Computer Science (12:15-1 p.m. PT): Hadi Partovi, founder of and creator of the global Hour of Code campaign, talks about the importance of teaching computer science as part of the core academic curriculum in grades K-12, introducing creativity to the classroom, approaches to diversity in computer science, and implementation challenges in schools.

Second General Session and Charter School Rally (3:15-4:30 p.m. PT): The National Alliance is pleased to have Hadi Partovi as our keynote speaker during Tuesday’s general session. Romy Drucker, deputy director of K-12 Education at the Walton Family Foundation and co-founder of The 74, will also give remarks. The General Session will close with a Charter Schools Rally encouraging us all to speak up on behalf of the nation’s 3.2 million charter school students, led by Dr. Howard Fuller, Institute for the Transformation of Learning; Keri Rodrigues, Massachusetts Parents United; and Myrna Casterjón, California Charter Schools Association.

Wednesday, July 3

Closing Session (9-10 a.m. PT): During the closing session of NCSC19, we will be recognizing two more 2019 Charter School Hall of Fame inductees: Joe Nathan, Ph.D., director of the Center for School Change, and Dr. Margaret Fortune, president and CEO of Fortune School. Clifton Taulbert, president of the Freemount Corporation and author of Once Upon a Time When We Were Colored, will be delivering our last keynote session of NCSC19 with his talk on the charter of community—a fitting end to the conference. Kendall Massett, executive director of Delaware Charter School Network and vice chair of the State Leaders Council, will lead the final session.

Don’t forget to follow the conversation throughout the conference on Twitter with #NCSC19!


While technology is great, everything is so much better in person—and you can still register onsite at Mandalay Bay. We’d love to have you!

National Alliance for Public Charter Schools   1425 K Street  Suite 900  Washington,  DC   20005   USA


Louis Freedberg of EdSource explains here why California charter schools are largely unsupervised, leading to a drumbeat of scandals like the recent indictment of 11 people charged with a theft of $80 million.

He writes:

As charter school conflicts intensify in California, increasing attention is being focused not only on the schools themselves but on the school boards and other entities that grant them permission to operate in the first place.

They’re called charter authorizers, and unlike many states, California has hundreds of them: 294 local school districts, 41 county offices of education, along with the State Board of Education.

In fact, California, with over 1300 charters schools, has more authorizers than any other state. That’s not only because of California’s size but also because it has an extremely decentralized approach to charter school authorization.

Someone wishing to start a charter school, or to renew a charter, must apply to a local school district to get the green light to do so. If a petition is turned down by the district, applicants can appeal to county boards of education, and if they are denied there, they can go to the State Board of Education as a last resort.

An emerging question is whether California’s authorizers have the skills, capacity and guidance to adequately oversee the charter schools under their jurisdiction.

Under the state’s extremely lax law, a tiny rural district may authorize a charter to open for business in an urban district hundreds of miles away. The rural district collects a commission, the charter has no supervision.

A win-win for the charter and the authorizer, a lose-lose for taxpayers and students.

The California problem is not that authorizers need training, but that any district can authorize charters in other districts.

The law should be changed so that districts control whether charters open inside their boundaries. The current law encourages scavengers to prey on other districts. This must stop. Give districts control and responsibility for the schools inside their geographic area. Stop the charter vandals whose only goal is profiteering without oversight.


Steven Singer doesn’t research or data to describe what is happening to his school district. He sees it. It is being gobbled up outsiders intent on turning public schools into charter schools and voucher schools. 

The state auditor of Pennsylvania said a few years ago that the Pennsylvania charter law is”the worst in the nation.”

Singer shows why.


Our middle school-high school complex is located at the top of a hill. At the bottom of the hill in our most impoverished neighborhood sits one of the Propel network of charter schools.

Our district is so poor we can’t even afford to bus our kids to school. So Propel tempts kids who don’t feel like making the long walk to our door.

Institutions like Propel are publicly funded but privately operated. That means they take our tax dollars but don’t have to be as accountable, transparent or sensible in how they spend them.

And like McDonalds, KFC or Walmart, they take in a lot of money.

Just three years ago, the Propel franchise siphoned away $3.5 million from our district annually. This year, they took $5 million, and next year they’re projected to get away with $6 million. That’s about 16% of our entire $37 million yearly budget.

Do we have a mass exodus of children from Steel Valley to the neighboring charter schools?


Enrollment at Propel has stayed constant at about 260-270 students a year since 2015-16. It’s only the amount of money that we have to pay them that has increased.

The state funding formula is a mess. It gives charter schools almost the same amount per regular education student that my district spends but doesn’t require that all of that money actually be used to educate these children.

If you’re a charter school operator and you want to increase your salary, you can do that. Just make sure to cut student services an equal amount.

Want to buy a piece of property and pay yourself to lease it? Fine. Just take another slice of student funding.

Want to grab a handful of cash and put it in your briefcase, stuff it down your pants, hide it in your shoes? Go right ahead! It’s not like anyone’s actually looking over your shoulder. It’s not like your documents are routinely audited or you have to explain yourself at monthly school board meetings – all of which authentic public schools like mine have to do or else.

Furthermore, for every student we lose to charters, we do not lose any of the costs of overhead. The costs of running our buildings, electricity, water, maintenance, etc. are the same. We just have less money with which to pay them.

Read his post in full. You will understand.


Chris Hughes co-founded Facebook with Mark Zuckerberg. He is no longer part of the company but left with a considerable fortune. For a time, he was publisher of The New Republic. In this essay, which appeared in The New York Times, he says again and again that he really likes his old friend Mark. Great guy. A good, kind person. But dear friend Mark has too much power, and no one should have that much power.

Here is an excerpt.

America was built on the idea that power should not be concentrated in any one person, because we are all fallible. That’s why the founders created a system of checks and balances. They didn’t need to foresee the rise of Facebook to understand the threat that gargantuan companies would pose to democracy. Jefferson and Madison were voracious readers of Adam Smith, who believed that monopolies prevent the competition that spurs innovation and leads to economic growth.

A century later, in response to the rise of the oil, railroad and banking trusts of the Gilded Age, the Ohio Republican John Sherman said on the floor of Congress: “If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade with power to prevent competition and to fix the price of any commodity.” The Sherman Antitrust Act of 1890 outlawed monopolies. More legislation followed in the 20th century, creating legal and regulatory structures to promote competition and hold the biggest companies accountable. The Department of Justice broke up monopolies like Standard Oil and AT&T.

For many people today, it’s hard to imagine government doing much of anything right, let alone breaking up a company like Facebook. This isn’t by coincidence.

Starting in the 1970s, a small but dedicated group of economists, lawyers and policymakers sowed the seeds of our cynicism. Over the next 40 years, they financed a network of think tanks, journals, social clubs, academic centers and media outlets to teach an emerging generation that private interests should take precedence over public ones. Their gospel was simple: “Free” markets are dynamic and productive, while government is bureaucratic and ineffective. By the mid-1980s, they had largely managed to relegate energetic antitrust enforcement to the history books.

This shift, combined with business-friendly tax and regulatory policy, ushered in a period of mergers and acquisitions that created megacorporations. In the past 20 years, more than 75 percent of American industries, from airlines to pharmaceuticals, have experienced increased concentration, and the average size of public companies has tripled. The results are a decline in entrepreneurship, stalled productivity growth, and higher prices and fewer choices for consumers.

The same thing is happening in social media and digital communications. Because Facebook so dominates social networking, it faces no market-based accountability. This means that every time Facebook messes up, we repeat an exhausting pattern: first outrage, then disappointment and, finally, resignation….

Facebook has earned the prize of domination. It is worth half a trillion dollars and commands, by my estimate, more than 80 percent of the world’s social networking revenue. It is a powerful monopoly, eclipsing all of its rivals and erasing competition from the social networking category. This explains why, even during the annus horribilis of 2018, Facebook’s earnings per share increased by an astounding 40 percent compared with the year before. (I liquidated my Facebook shares in 2012, and I don’t invest directly in any social media companies.)…

The vibrant marketplace that once drove Facebook and other social media companies to compete to come up with better products has virtually disappeared. This means there’s less chance of start-ups developing healthier, less exploitative social media platforms. It also means less accountability on issues like privacy.

Just last month, Facebook seemingly tried to bury news that it had stored tens of millions of user passwords in plain text format, which thousands of Facebook employees could see. Competition alone wouldn’t necessarily spur privacy protection — regulation is required to ensure accountability — but Facebook’s lock on the market guarantees that users can’t protest by moving to alternative platforms….

Hughes is especially concerned about Zuckerberg’s “unilateral” power over the speech and expression of two billion people. A fine of $5 Billion is a slap on the wrist. When facing a threat of a fine that large, Facebook’s stock value went up by $30 billion.

Hughes has two recommendations:

First, that Facebook be broken up by compelling it to divest itself of WhatsApp and Instagram.

Second, that the federal government create a regulatory agency to oversee tech companies and assure consumer privacy.

In normal times, policymakers in D.C. might listen and consider such a bold proposal. But these days, given a federal administration dedicated to deregulating everything, Hughes’ ideas will have to wait for new leadership.


Robert Kuttner writes regularly for The American Prospect, where he is co-editor. He is brilliant.


ON TAP Today from the American Prospect
May 1, 2019

Kuttner on TAP

In Which the Superb Tom Edsall Gets One Big Thing Wrong About Unions. New York Times contributing columnist Tom Edsall is a national resource. In column after column, he provides encyclopedic research both scholarly and journalistic, extended interviews, astute insights, and hard questions for progressives on politically urgent topics.


His most recent column, on the political consequences of the decline of unions, is no exception. As Edsall demonstrates, the Republican right’s strategic war on unions has been devastating to Democrats, since union members and union families, with their sense of solidarity and better understanding of how capitalism works, are more likely to vote for Democrats than demographically similar nonunion families.


Edsall was not exaggerating when he wrote that the right has a better appreciation of unions than the left. Thus, the systematic union bashing. In Wisconsin, as Edsall shows, courtesy of Scott Walker’s anti-union crusade, the union share of Wisconsin employees was cut from just over 15 percent as recently as 2008 to just 8.1 percent by 2018.


Edsall ends his piece by wondering why “many liberals and Democrats” don’t get the importance of unions.


The problem in building support for a resurgent labor movement is that many liberals and Democrats do not appear to recognize the crucial role that unions continue to play not only in diminishing the effects of inequality, but in voter mobilization and campaign finance.


And here is where Edsall misses a key part of the story. The problem is not that “Democrats” fail to appreciate unions. It’s that the corporate and Wall Street Democrats who have dominated the presidential wing of the party since Jimmy Carter and Bill Clinton actively loathe unions.


Carter, Clinton, and Barack Obama all had the opportunity and the votes to put serious teeth back in the Wagner Act, in the face of vicious corporate union busting. All decided not to lift a finger on behalf of labor law reform.


All three presidents had progressive labor secretaries. But the real power players were elsewhere.


Most Democrats in Congress get unions. The problem has been the corporate influence on the presidential party and its domination of key positions at Treasury, OMB, and Legislative Affairs. Some of this is about campaign finance, but not all of it.


Edsall brilliantly depicts the class warfare that leads Republicans and their business allies to bash unions. He misses the fact that the same class warfare has infected the Democratic Party. ~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

A Conversation with Sherrod Brown
The senator from Ohio on the Green New Deal, trade, and how to beat Trump in 2020 By ROBERT KUTTNER
The Millennialization of American Labor
A generation of young workers is rebuilding a battered union movement. By KATIE BARROWS, ETHAN MILLER & KAYLA BLADO


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Legislation introduced by an influential Republican state senator would require charter schools to disclose more about their finances. But the bill contains a large loophole that would allow the state’s biggest chains like Basis Charter Schools and Great Hearts Academies to avoid revealing how they spend their money.

State Sen. Kate Brophy McGee, R-Phoenix, said Senate Bill 1394 would accomplish the biggest reform to charter schools since they were created by the Arizona Legislature in 1994.

“It’s an enormous amount of progress, and this is not my last stop,” she said.

She said there’s bipartisan support for the measure, which follows a yearlong investigation by The Arizona Republic that revealed how charter operators have exploited the state’s lax charter regulations to become wealthy from the taxpayer-funded schools.

Brophy McGee acknowledged, however, that her bill would not prevent charter chains from giving large, no-bid management or construction contracts to their founders. Nor would it prevent charter CEOs from paying themselves exorbitant amounts, as Primavera online charter Chief Executive Damian Creamer did by receiving $10.1 million from the school over the past two years.

Democrats, whose past efforts to more tightly regulate charter schools have failed, and Republican Attorney General Mark Brnovich’s Office both said the bill is a step in the right direction. But they said it needs additional work.

Arizona’s 500-plus charter schools are largely privately owned and the choice of more than 200,000 students, or 17 percent of public school students. The state spends $1.2 billion a year funding them.

State law doesn’t prohibit conflicts of interest in charter-school contracts or impose the strict reporting of expenses as it does for district schools. Charter school boards can also be staffed with the friends and relatives of school executives. And there’s no limit on how much money charter schools can spend outside the classroom.

Brophy McGee’s bill, which has not been scheduled for a hearing, could change some of that. It would:

  • Require every charter school to have at least a three-member governing board, with no more than two immediate family members serving. Family members cannot constitute a majority of the board.
  • Prohibit in, certain instances, buying goods or services from a charter owner or family member, governing board member or a related business.
  • Require that any purchase of more than $50,000 be in the “best interest” of the charter school and follow generally accepted accounting principles.
  • Prohibit charter schools from retaliating against an employee who reports violations. Currently, nearly all charter employees can be fired at any time for any reason.

The new procurement regulations, however, would not apply to management contracts between a charter holder and a management company. Charter management companies, popular with major charter chains like Basis and Great Hearts, also would be exempt from the procurement regulations.

Loopholes in the bill

That loophole for charter management companies gives Democrats heartburn, said Rep. Reginald Bolding, D-Phoenix.

Charter operators could avoid the new requirements by simply transferring all or nearly all of their state funding to a management company that runs their schools, he said.

Ryan Anderson, a spokesman for Brnovich, said the attorney general also has concerns about the exemption, as well as language that would require prosecutors to get permission from a charter sponsor in order to investigate wrongdoing.

“We still have a lot of questions,” Anderson said, adding that this is a work in progress.

Brophy McGee said it was not her intent to allow charter operators to avoid procurement restrictions, and she would consider fixing the language. She declined to say whether the Charter Schools Association, which has blocked past reform efforts, or major charter operators with powerful allies in the Republican establishment had inserted the exemption language in her bill.

She said the legislation is a work in progress that ultimately won’t make everyone happy. But, she said, the charter school industry needs more oversight.

Matt Benson, a spokesman for the Charter Schools Association, said the intent of the exemption was “to protect the school brand so that the founder of a charter school doesn’t risk losing control of his/her creation.”

Benson acknowledged the bill may be too broadly worded and that the association will work with Brophy McGee to refine the language. He said the association would oppose any law that requires charter operators to accept open bids for management contracts, as school districts are required to do.

Bolding said the loopholes will allow charter operators to continue self-dealing and enriching themselves. The bill also won’t stop charter operators from using Arizona tax dollars to expand outside the state, he said.

Basis, which has some of the top-ranked high schools in the country, transfers nearly all of its state funds to a management company owned by its founders, Michael and Olga Block.

Basis officials have stated because a closely tied private company, Basis.ed, runs the schools it isn’t required to disclose how much the Blocks or other executives are paid.

Basis has used its Arizona schools as collateral to fund operation of its schools in Texas and Washington, D.C.

The Attorney General’s Office also has expressed concerns that the legislation does not give its office enough additional power to investigate charter schools.

Brnovich wants subpoena power over charters and broader authority for the auditor general to investigate charter finances. Further, Brnovich wants charter schools to segregate public funding from private dollars in businesses related to the charter school.

“The big question is what happens with the public’s money,” said Anderson, the AG spokesman. “The bill does not appear to deal with that issue…We now have difficulty on the civil (enforcement) side on investigating misuse of public money when all money is commingled together.”

Benson said the legislation allows the Attorney General’s Office to investigate procurement related complaints. However, that would not occur for private management companies.

More disclosure?

Bolding said he likes that Brophy McGee’s bill requires charter schools to disclose more information about their finances and governance.

The bill would require charter operators to post on a public website the names of voting members of the governing body, the number of independent voting members, total annual state revenue, as well as expenses, assets and liabilities.

Charter schools already are required by state law to disclose much of that information to the Arizona State Board for Charter Schools. That information is available on the Charter Board’s website.

The bill also would require charter operators to adopt a conflict-of-interest policy and to provide a written statement that describes the services provided by a management company and the cost.

The bill, however, does not require a charter operator to release the actual contract or precise financial expenditures of its private management company. Further, the bill does not require the private management company to disclose how much its executives are paid with public tax dollars.

School districts, which receive less in per-pupil state funding than charter schools, have to abide by much stricter procurement and disclosure laws.

Brophy McGee said she will not seek to have charter management companies disclose financial information, stating that they are private companies and should not be subject to that level of transparency. Republicans in past years have blocked Democrats’ efforts to force charter management companies to comply with state public records law.

The bill also requires the state Charter Board to provide training courses on the state open meetings law, public records requirements, enrollment laws and regulations, applicable procurement rules and discipline.

Charter schools already are required by law to follow the open meeting law and public records requirements. The Republic has found some schools refuse to comply with those laws.

Reach the reporter at or 602-444-8478 or on Twitter @charrisazrep.