Will Huntsberry of Voice of San Diego writes here about one of the biggest scams in the history of charter schools (the biggest was probably the ECOT–Electronic Classroom of Tomorrow–scandal in Ohio, which cost the state about $500 million).
The two ringleaders of an online charter school scam that raked in hundreds of millions of dollars in taxpayer money pleaded guilty to conspiracy charges on Friday.
Sean McManus and Jason Schrock, as well as nine other defendants, including a superintendent, were charged back in 2019 as part of a complicated scheme that involved enrolling fake students into their online charter schools and collecting public money for each student...
“The general activity is you and your friend got these millions of dollars from the state and you funneled them into your pocket, correct?” asked San Diego Superior Court Judge Frederick Link, while taking the pleas.
Both answered yes.
Online charter schools are allowed to collect just as much money per student as brick-and-mortar schools. But the case has pushed legislators in Sacramento to re-examine the rules surrounding online charters. Lawmakers passed a two-year moratorium on the creation of new online charters and are considering changes to the state’s enrollment and funding practices.
Over a several-year period leading up to 2019, McManus and Schrock’s schools brought in roughly $400 million in revenue, prosecutors from the San Diego District Attorney’s Office have said.
As part of McManus and Schrock’s plea deal, they have agreed to turn over all remaining cash and assets owned by A3 and its subsidiary companies. So far, that includes at least $215 million that will eventually make its way back into state coffers.
A3 may have misappropriated more than $215 million but that was all the cash and assets they had.
The next time someone insists that “charter schools are public schools,” ask them when was the last time that they heard of a public school stealing $215 million from the state.
A CREDO report in 2015 found that going to an online virtual charter was equivalent to a full year’s of lost time in mathematics, and almost half a year in reading. Yet numerous states are now considering legislating that would fund the child in any kind of school–charter, religious, for-profit, virtual, home schooling, Uncle Jed’s barn, whatever they want. We are rapidly advancing backwards to the 19th century.
As a result of strong opposition, Republicans who control the New Hampshire legislature decided to postpone consideration of their “number one priority,” school vouchers. Under consideration was the most sweeping voucher bill in the nation. Thousands of people signed up to testify against the legislation.
A bill to create a school voucher-like system in New Hampshire is poised to be kicked to 2022, after Republicans on the House Education Committee said that it needed more time.
In a 20-0 vote Thursday, the committee recommended that the bill be retained, a move that if approved by the full House next week would put off any decision-making until next year’s session.
House Bill 20, named the “Richard ‘Dick’ Hinch education freedom account program” after the late House speaker, was a top priority for House Republicans this year. The proposal would allow parents to withdraw their children from public school and take the per-pupil state money with them.
Under the bill, that state funding, which amounts to $3,700 to $8,000 per student depending on the school, could then be used by the parents for a number of alternative expenses, such as private school tuition, college preparatory courses, school supplies, or transportation.
But a deluge of opposition to the bill from public school advocates and Democrats had slowed down its progress, resulting in contentious hearings and deliberative sessions that stretched through the day. Opponents argue the bill would drain resources from public schools and prompt cutbacks and increased property taxes; proponents say that it would provide new opportunities to families whose public schools aren’t working for their children.
House insiders tell NHJournal that had a vote on the bill been held, the best-case scenario would have been a 10-10 tie vote in the committee, sending the bill to the floor with no recommendation. That would have set up a heated floor battle.
Attempts to sway Allard and other concerned Republicans included adding income-caps to the EFA eligibility formula. The cap would limit participation to those earning less than 375 percent of the federal poverty limit — roughly $99,000 for a family of four. That proposed income-cap would cut the number of eligible students in half.
Democrats on the Education Committee were pleased with the outcome.”HB 20 contains no protection for students against discrimination, little oversight, and is ripe for fraud…and would act as a tax-dollar giveaway to wealthy families. There has never been as much vocal opposition to a piece of legislation in NH,” Democrat leader on the committee Mel Myler said in a press release Thursday morning.
There’s still an Education Freedom Account bill in the Senate, giving supporters hope the legislation can still be amended and passed this year. In 2017-2018, the Senate passed SB193 – an education savings account program. That bill died in the House, after being heavily amended. The Senate then scrapped a separate bill and reintroduced SB193, the original version. Again, the proposal failed in the House.Democrats and teachers unions argued EFAs would increase property taxes, defund local district schools, and wreak havoc on New Hampshire’s education system. They celebrated Thursday’s win.
It has been well documented that students who leave public schools for voucher schools lose ground academically. Vouchers will not only hurt the state’s poorly funded public schools, it will hurt the children who use vouchers. It is a lose-lose for everyone except the religious schools that win public funds.
William Gumbert has been reviewing the rapid expansion of charter schools in Texas with concern. In previous posts, he has demonstrated that they are likely to underperform the public schools with which they compete. And, worse, they take funding away from the districts in which they are located. Texas is now being flooded by corporate charter chains, replacing community-based public schools. His attached report explains why community-based schools and school districts deserve the support of all Texans.
If you live in Missouri, get active to stop this dangerous effort to destroy your public schools!
Dear Friend,
If you love your public schools you need to drop what you are doing and get to work.
There is only one intent of Senate Bill 55–to destroy public education in Missouri. It was pushed through the Senate Education Committee early this morning and may go to the Senate floor for a vote as early as next week.
1. Call your state senators NOW and ask them to support public schools by OPPOSING Senate Bill 55. You can find your Senator and their phone number by going here.
2. Click here and send an email in opposition to Senate Bill 55 NOW.
Below is the notice we just received from the Missouri School Boards Association information that provides background on the bill.
“The Senate Education Committee jammed through a mega bill on Thursday that will be heard on the Senate floor soon. Senate Bills 23 and 25 started out creating voucher schemes and expanding charter schools but were loaded up on SB 55 at the last minute with a long list of provisions hostile to public education that have never even had a public hearing. The bill now includes:
School Board Member Recall: Requires an election to recall a school board member if a petition is submitted signed by at least 25% of the number of voters in the last school board election.
Education Scholarship Account/Vouchers:Creates up to $100 million in tax credits for donations to an organization that gives out scholarships for students to attend a home school or private school – including for-profit virtual schools.
Charter School Expansion: Authorizes charter schools to be opened in an additional 61 school districts located in Jackson, Jefferson, St. Charles, and St. Louis counties or in cities of 30,000 or more and allows charters opened in provisionally and unaccredited districts to remain open even after the school district regains accreditation.
Turning MOCAP into Virtual Charter Schools: Allows students enrolling in MOCAP full time to apply directly to the vendor and cuts the resident school district and professional educators out of the process.
Home school students allowed to participate in MSHSAA activities. Districts are prohibited from belonging to MSHSAA unless home schooled students are allowed to participate in district athletics and activities governed by MSHSAA.
Limiting State Board of Education: Restricts members of the state board of education to serve only one full term.”
Trump lawyer Sidney Powell filed numerous lawsuits alleging massive voter fraud. Dominion Voting Systems was one of her major targets. Dominion is suing her and others for defamation.
Dominion Voting Systems on Friday filed a defamation lawsuit against lawyer Sidney Powell, demanding more than $1.3 billion in damages for havoc it says Powell has caused by spreading “wild” and “demonstrably false” allegations, including that Dominion played a central role in a fantastical scheme to steal the 2020 election from President Trump.
For weeks, Powell has claimed that Dominion was established with communist money in Venezuela to enable ballot-stuffing and other vote manipulation, and that those abilities were harnessed to rig the election for former vice president Joe Biden
. In a 124-page complaint filed in the U.S. District Court for the District of Columbia, Dominion said its reputation and resale value have been deeply damaged by a “viral disinformation campaign” that Powell mounted “to financially enrich herself, to raise her public profile, and to ingratiate herself to Donald Trump.” The defendants named in the lawsuit include Powell, her law firm and Defending the Republic, the organization she set up to solicit donations to support her election-related litigation...
As Powell’s accusations about Dominion spread after the election, the company’s employees were stalked, harassed and received death threats via email, text and phone: “we are already watching you,” read a text message to one Dominion employee, according to the complaint. “Come clean and you will live.”
The company says it has spent more than $565,000 on protection for personnel since the election.
Dominion has sent retraction demands or document preservation letters, often precursors to litigation, to more than 20 individuals and entities, including to Wood, White House Counsel Pat Cipollone and Trump’s personal attorney, Rudolph W. Giuliani; and to Fox News, Newsmax, One America News and the Epoch Times, media companies that have lent Powell an enormous platform in the two months since the election.
Some of the news outlets, including Fox, have since backed off the claims or issued corrective statements.
Sweden adopted the “reforms” in 1992, allowing families to choose any school, public or private, and send their child there with his/her taxpayer dollars. It is the “backpack full of cash” theory behind the demand for school choice, as advocated here by Betsy DeVos and Jeanne Allen of the Center for Education Reform. The voucher system has led to a growing industry of private, for-profit schools, called “free schools.” Two of the companies that run “free schools” are listed on the stock exchange. They are comparable to our charter schools.
Hjelm writes:
The huge private for profit school companies exist on all these levels, competing for student vouchers. Largest part is in the upper secondary where more than 30% of students today attend such a free school. By cherry-picking “easy” students through aggressive marketing to parents (we offer good behavior, academic excellence, high grades, etc.) they attract students that are more or less self going and enable a profit for shareholders or owner consortiums by keeping wages low, having large groups, substituting some teaching for on-line learning, employing teachers from abroad on short term contracts and more hours of teaching, etc.
As a result real student achievements and school climate are mediocre, about the same as in municipal schools and with a considerable grade inflation to that according to PISA and national tests. Students from municipal upper secondary schools have a slightly lower grade point average than students from free upper secondary schools, but still generally show higher performance and less dropouts during the first year of higher education.
There are also plenty of examples of parents told that their child does not really fit in, that the support needed is not available and they should seek a more suitable school. With a queue system for admission on compulsory level, where you can put your baby in line at birth, they keep all groups filled. And being private businesses they only have to share whatever follow up data they choose due to international business and stock market legislation of secrecy. If a school is not as profitable as expected it can simply close down with short notice or apply for bankruptcy when as much monetary resources as possible have been moved somewhere else in the organization. Stranded students are the municipality’s responsibility. The risk is minimal. At least for now.
She recognizes the important role of venture capital in the expansion of the publicly-subsidized “free schools,” and notes that it has led to persistent cost-cutting.
What matters most in this free-market system, she concludes, is profit, not education, not students.
Jake Jacobs is a middle school art teacher in New York. He is the co-administrator of the New York BadAss Teachers Association, an organization of militant activist teachers.
He writes:
Joe Biden’s recent nomination of Miguel Cardona as a relatively lesser-known, less controversial selection for Secretary of Education was telling. It shows the incoming administration’s reticence to take a side in the ongoing battle over school choice and standardized testing, just like most members of Congress and the major U.S. media.
On the campaign trail, Biden drew cheers from teachers for his promise to end standardized testing, but he noticeably never added any such policy to his website. As was well known by teachers in those audiences, federally mandated tests provide no educational benefit but are the fuel in the engine driving charter school expansion.
President-Elect Biden did vow to cut federal funding to for-profit charter schools, however this affects only about 12% of charters (who could easily change their model while still enriching their for-profit management arms). Biden has acknowledged charter schools siphon money away from public schools, agreeing to new language in the (non-binding) DNC platform to discourage charters from discriminating against high-need students but as we know well, Democrats for many years have bent to pressure from deep-pocketed industrialists seeking ever more charter schools. Not much has changed since the same billionaires threatened to fund other candidates if Hillary Clinton didn’t continue to signal support for charters. Remember Eli Broad’s explicit ultimatum to withhold campaign cash if Hillary sided with teachers against charter schools? We do. But Broad also donated money to then-senator Kamala Harris, and like many ultra-wealthy education reformers, Broad made good use of the “revolving door”, hiring Biden’s former chief of staff Bruce Reed (2011-2013) to run his foundation.
AS THE DOOR REVOLVES: The same day he revealed Cardona as his education nominee, it was announcedBiden rehired Reed as deputy chief of staff, despite pre-emptive protest from progressives like Alexandria Ocasio-Cortez and the Squad who objected to Reed’s past hostility to safety net programs like Social Security. A former top advisor to President Bill Clinton, Reed’s own bio touts his oversight of the 1996 welfare reform law, the 1994 crime bill, and the Clinton education agenda.
Starting in 2015, Reed was a senior advisor for Emerson Collective, the “social change” LLC founded by billionaire Laurene Powell Jobs who is also close to Vice President-Elect Harris. Though it’s not clear how Reed might influence Biden’s decision-making on K-12 education, he is expected to have a “major role” as Biden’s Deputy Chief of Staff particularly shaping technology and data privacy policy. And echoing Trump, Reed calls for the elimination of Section 230 which protects internet companies from lawsuits over user postings. In 2014, while serving as CEO of the Broad Foundation, Reed made worrisome comments to Hillary’s education advisors, suggesting in private that whole cities could be mass-charterized in the wake of natural disasters, calling New Orleans an “amazing story”. Reed also voiced support for personalized digital learning using the Summit Charters model.
TAX BREAKS LINKED TO CHARTERS: It’s great to see watchdog groups expose significant waste and fraud in the charter school industry, but because U.S. media is so silent about the political influence of pro-charter billionaires, hardly any attention is paid to the generous federal tax credits enriching investors through “nonprofit” charter school construction and financing as public schools struggle for resources. One such program, the New Markets Tax Credit (NMTC), did make it onto Biden’s web page, showing he wants to expand the credit to $5 billion per year and make it permanent.
It might not be controversial to use a seven year, 39% tax refund to incentivize wealthy investors to start caring about economically disadvantaged neighborhoods in dire need of manufacturing plants and low-income housing, but why does the NMTC favor charter schools over traditional public schools which are literally crumbling on our heads?
I tried to find whose idea it was to include charter school construction, financing and leasing deals in the NMTC. The program itself traces back to 1998 when a “membership organization” called NMTC Coalition, comprised mostly of banks, investment funds, developers, LLPs and LLCs came together under the management of Rapoza Associates, a large DC lobbying and government relations firm who supplies policy briefs and “comprehensive legislative and support services to community development organizations, associations and public agencies”. Sound a lot like ALEC?
Legislation was championed by then-Speaker Denny Hastert and Texas Rep. William Archer, both Republicans. The program was signed into law by President Clinton and went live as past of the Community Renewal Tax Relief Act of 2000, but it appears charter schools weren’t included until 2004. The California charter nonprofit ExEd claims to have “pioneered” NMTC charter financing deals, boasting of dozens under their belt. By 2017, more than $2.2 billion in NMTC allocations were deployed to expand charter schools nationally.
The contention was that although charter schools receive operational funding for enrolled students, they must procure and finance their own space, thus they needed a helping hand from Uncle Sam. Today however, 27 states have enacted legislation granting some level of access to district facilities, suggesting some re-examination is in order.
Operators also contended that their charter renewal terms, usually five years, are shorter than typical mortgage terms which range from 10 to 30 years. Thus the need for charters to quickly show results introduced a perverse incentive, driving all-out obsession for good scores on standardized tests so the school can not only guarantee their charter renewal, but demonstrate to lenders they are a safe bet (or attract even more expansion capital). STAKES RAISED FOR TEST SCORES: Because the NMTC tax credit and a host of other federal programs give charters significant fundraising advantages over public schools, it provides financial impetus to target nearby public schools for closure. Anything that can be done to raise scores – or lower the competition’s scores – will help their chances. This not only gives rise to round-the-clock test prep, but the notorious practice of cherrypicking students.
The shiny new facilities help attract the best test-takers, while rigid “zero tolerance” discipline policies are employed to dump “troublesome” kids back on the public schools. Even though the deck is stacked, superior test scores create the “secret sauce” narrative used to sell politicians on charters and drum up support for more tax breaks.
Over the decades, poverty-stricken areas have been repeatedly carved up and designated as “Enterprise Communities”, “Empowerment Zones”, “Renewal Communities” or “Promise Neighborhoods”. In 2004, President Bush announced the “Opportunity Zones” program which Donald Trump renewed in his 2017 tax reform law, with support from Democrats like Cory Booker. This program could potentially dwarf the NMTC because it allows tax credits and deferments for trillions in untapped capital gains income.
Although Opportunity Zone deals are available to public schools, they would need to first sign over their property to investors. But it’s not clear these programs even work. Besides being rife with cases of abuse like the Steven Mnuchin or Rick Scott front-page patronage scandals, a University of Iowa study of 75 enterprise zones in 13 states found little to no economic benefit and noted other harmful impacts such as displacement, gentrification, or giveaways for development in up-and-coming areas that would have happened anyway.
As chronicled by Network for Public Education and noted by Congress, the array of creative charter school flim-flams has been incalculable – from exorbitant CEO salaries, predatory leases and consulting fees to management firms charging taxpayers to buy out a school’s name and logo. Even school districts got into the act, authorizing charters schools so as to generate oversight fees that help plug budget gaps. But there’s a marked difference between sketchy charter operators and multi-billion dollar programs designed to help charters replace existing schools.
SWEETENING THE POT: The tax credits, designed by the rich for the rich, are only the first layer of the subsidy onion for charter schools though. Linked to the tax breaks are tax-exempt charter school financing bonds traded in investment markets, and then even more inducement via a secondary tranche of bonds leveraged by government subsidies to backstop the first set of bonds against default. One such program, administered through the infamous No Child Left Behind Act is the Credit Enhancement for Charter School Facilities Program, which not only assumes downside risk, it artificially buoys bond ratings and lowers interest rates for the borrower. These credit enhancements can be backed by federal or state funds, banks or private investors but again, the guarantees may be tied to academic performance benchmarks which precipitate discrimination against high-need students.
To lure developers into distressed neighborhoods, enormous bond guarantee and credit enhancement funds (starting at $100 million) were created under the Community Development Financial Institutions (CDFI) program, enacted as part of the 2010 Small Business Jobs Act. Charter school developers were among those offered access to long-term credit at below-market rates. In 2012, twelve of these CDFI fund management groups came together to form the Charter School Lenders Coalition, underwritten by usual suspects the Gates and Walton Foundations. The collaborative melded together ALL of the aforementioned programs with a stated goal of lobbying congressional reps to support more charters.
Earlier this year, high-profile Democrats including Senators Sanders, Warren and Van Hollen co-sponsored legislation that would automatically deploy CDFIs in areas impacted by natural disasters or economic crises. If all these financial instruments are starting to sound complicated, it’s no accident – I’ve spared readers most of the dizzying acronyms like CDEs, CMOs, UDAGs and QALICBs, but the less everyday people understand, the greater the chance this all flies under the radar. Even the developers – be they charter operators or wealthy financial backers – require a lot of hand-holding by intermediaries to guide them through the maze of policy intricacies and applications.
This is where yet another funding stream comes in, namely the federal Charter Schools Program, or CSP, which since 1994 has grown to into a $440 million annual slush fund for discretionary grants found to be so wasteful a third of 2006-2014 grantees never opened or quickly folded. Other recipients were found to be buying skyboxes or private jets, or unscrupulously charging themselves rent in cities and towns where local authorities are ill-equipped for oversight.
PULLING OUT THE STOPS: By the time Betsy DeVos took the helm, the U.S. Dept. of Education wasn’t just awarding start-up money to school-level charter developers but to all manner of other financial intermediaries including charter associations, nonprofits, state educational agencies, charter authorizers, and credit enhancement funds. The DeVoses know well that raining money on these entities will enrich real estate and banking interests, trickling down onto pro-charter candidates, local PACs and friendly media outlets. A week before the 2020 election, DeVos shamelessly announced the Trump Administration will start ignoring the crystal-clear prohibition on federal funds for charters affiliated with religious organizations, rupturing the separation of church and state.
The NMTC technically expires on Dec. 31, 2020 but proposals for renewal have been very popular – the 2019 bill in the Senate had 37 bipartisan co-sponsors including Minority Leader Schumer, Amy Klobuchar and center-left Senators Jeff Merkeley and Sherrod Brown. The House version had 130 co-sponsors including Karen Bass and 22 other members of the Progressive Caucus.
If there was an amendment to remove the exclusive carve-out for charter schools from the NMTC, it would allow the community investment to continue (for better or worse) but take the finger off the scale in the competition for educational resources.
Such an amendment may not deter anti-union oligarchs like the Koch family bent on undermining public education. It may not deter data-mining tech billionaires seeking lucrative contracts or access to captive student audiences. It may not deter neoliberal social engineers who think their wealth ordains them to rejigger education as they see fit. It may not deter Betsy DeVos and her ilk from crusading for taxpayer-funding of religious schools.
But it could deter the garden-variety investor just looking to turn a buck, and it could bring attention to the little-understood giveaways to charter school investors. Also, it will flush out members of Congress afraid to go on record either for-or-against charters. As the battles over public education funding rage on, we hope incoming House members will infuse new energy into the fight, showing Biden, Harris and other policymakers the real-world harms and inequity built into charter school tax credits.
Trump called Georgia Secretary of State Brad Raffensperger on Saturday and spent an hour on the phone with him, pleading, cajoling, threatening, and demanding that he “find 11,780 votes” to flip the state to Trump’s column. Georgia’s state leaders are Republicans. The November vote in Georgia was counted three times.
In an exclusive report, the Washington Post quoted from a recording of the telephone call:
President Trump urged fellow Republican Brad Raffensperger, the Georgia secretary of state, to “find” enough votes to overturn his defeat in an extraordinary one-hour phone call Saturday that election experts said raised legal questions.
The Washington Post obtained a recording of the conversation in which Trump alternately berated Raffensperger, tried to flatter him, begged him to act and threatened him with vague criminal consequences if the Secretary of State refused to pursue his false claims, at one point warning that Raffensperger was taking “a big risk.”
Throughout the call, Raffensperger and his office’s general counsel rejected his assertions, explaining that Trump is relying on debunked conspiracy theories and that President-elect Joe Biden’s 11,779-vote victory in Georgia was fair and accurate.
Trump dismissed their arguments. “The people of Georgia are angry, the people in the country are angry,” he said. “And there’s nothing wrong with saying, you know, um, that you’ve recalculated.”
Raffensperger responded: “Well, Mr. President, the challenge that you have is, the data you have is wrong.”
At another point, Trump said: “So look. All I want to do is this. I just want to find 11,780 votes, which is one more than we have. Because we won the state.”
The rambling, at times incoherent conversation, offered a remarkable glimpse of how consumed and desperate the president remains about his loss, unwilling or unable to let the matter go and still believing he can reverse the results in enough battleground states to remain in office.
“There’s no way I lost Georgia,” Trump said, a phrase he repeated again and again on the call. “There’s no way. We won by hundreds of thousands of votes.”
Several of his allies were on the line as he spoke, including White House Chief of Staff Mark Meadows and conservative lawyer Cleta Mitchell, a prominent GOP lawyer whose involvement with Trump’s efforts had not been previously known.
In a statement, Mitchell said that Raffensperger’s office “has made many statements over the past two months that are simply not correct and everyone involved with the efforts on behalf of the President’s election challenge has said the same thing: show us your records on which you rely to make these statements that our numbers are wrong.”
The White House, the Trump campaign and Meadows did not immediately respond to a request for comment.
Raffensperger’s office declined to comment.
On Sunday, Trump tweeted that he had spoken to Raffensperger, saying the secretary of state was “unwilling, or unable, to answer questions such as the “ballots under table” scam, ballot destruction, out of state “voters”, dead voters, and more. He has no clue!”
Raffensperger responded with his own tweet: “Respectfully, President Trump: What you’re saying is not true.”
The article continues to quote the conversation in detail. It’s worth subscribing to the Washington Post to read this article in full.
Trump threatens the Georgia Secretary of State with legal consequences if he does not switch the vote for him and warns that the Senate elections will be jeopardized by the state leaders’ failure to change the results.
But Trump’s actions were legally dubious.
Trump’s conversation with Raffensperger put him in legally questionable territory, legal experts said. By exhorting the secretary of state to “find” votes and to deploy investigators who “want to find answers,” Trump appears to be encouraging him to doctor the election outcome in Georgia.
But experts said Trump’s clearer transgression is a moral one. Edward B. Foley, a law professor at the Ohio State University, said that the legal questions are murky and would be subject to prosecutorial discretion. But he also emphasized that the call was “inappropriate and contemptible” and should prompt moral outrage.
“He was already tripping the emergency meter,” Foley said. “So we were at 12 on a scale of 1 to 10, and now we’re at 15.”
At a time when the Republican super majorities in the Kentucky Legislature would seem to have more pressing issues to face – Covid-shuttered schools and businesses, unemployment supplements, eviction waivers, universal Covid testing and tracing – they nonetheless carry on with a new drive-by attempt at teacher pension “reform” which, once again, is a thinly veiled attempt to dismantle (let us be honest and use the proper term – gut) the Kentucky teacher defined benefit pension plan; kill it once and for all.
The idea of properly funding the plan, according to relevant GASB accounting standards, and repairing the damage inflicted over several decades of underfunding – is one legislators choose to duck. Better to chisel Kentucky’s way out of the debt it has run up through using funds that should have gone to the teacher pension (known as the actuarially required contribution), and which were instead used for other purposes. Perhaps they are following the lead of Kentucky Senator Mitch McConnell who refuses to allow federal aid to states beset with heavy, unforeseen expenses during a worldwide pandemic.
Rather than supply much-needed and adequate funding to TRS, (some $2 Billion per year for the foreseeable future) legislators instead prefer to “reform” the plan, placing new-hires into the old “beating-a-dead-horse” hybrid pension system.
Why not simply begin to pay back the missing funding and repair the damage inflicted by the legislature, and not by teachers who have dependably paid one of the highest pension contribution rates in the country (13%)?
The federal CARES Act included the Paycheck Protection Program to help struggling small businesses and nonprofits survive the pandemic. Lobbyists for the charter industry slipped in a provision enabling charter schools to apply for PPP funding, even though they experienced no financial losses. Charter schools got a share of the $13.2 billion allotted to the nation’s early 100,000 public schools. The average public school received about $135,000 to meet the expenses of the pandemic. On the advice of their lobbyists, some 1200 charters also sought and won PPP funding. Thus charters drew funding from two sources; public schools were not eligible for PPP funding. Charters that applied for PPP funding won six times as much federal money as public schools.
Primavera online charter school, like many businesses this spring, sought help from the federal Paycheck Protection Program to weather the economic disruption of the COVID-19 pandemic.
The Chandler-based school received a PPP loan of nearly $2.2 million, the largest forgivable loan among the 132 Arizona charter schools that obtained them.
But Primavera’s loan appears to have been more of a bonus than a lifeline.
The school, which like all Arizona public schools didn’t lose state funding because of the pandemic, ended its fiscal year on June 30 with $8.8 million in the bank — almost double the annual payroll costs for its 85 teachers, records show.
The school also shipped $10 million to its lone shareholder: StrongMind, an affiliated company owned by Primavera’s founder and former CEO Damian Creamer.
The school’s annual audit indicates Creamer controls both Primavera and StrongMind, noting he has “the ability to influence the school’s operations for the benefit of StrongMind.” Primavera paid StrongMind nearly $23 million this past fiscal year for software and curriculum services, records show.
Creamer declined to comment.
An Arizona Republic review of more than 100 charter school financial records, audits and federal Small Business Administration documents found the overwhelming majority of the Arizona charter schools that obtained PPP loans didn’t need the money.
John Todd, a longtime auditor of Arizona charter schools, said there are numerous problems with fully funded charter schools getting PPP loans intended to help struggling businesses.
“The PPP loans are taxpayer dollars intended to help the needy, not the greedy,” Todd said.
A few charters, including Legacy Traditional Schools, repaid several million dollars worth of PPP loans after The Republic reported in August that Legacy and other operators had millions of dollars in the bank when they received loans.
Most charters that got loans didn’t need them
The Republic found that most of the charter schools getting PPP funds padded their cash balances (savings accounts), and a few for-profit charter operations, like Primavera, gave money away to shareholders that matched or exceeded their PPP loan amounts.
Further, The Republic found that PPP loans didn’t significantly enhance teacher pay at schools that received them. The 132 Arizona charter school loan recipients, on average, paid their teachers several thousands dollars less than the statewide average.The 132 charter schools receiving PPP loans increased teacher pay by an average of 5% — an amount similar to all 555 charter operations and 263 school districts.
Arizona public schools saw no major job losses or layoffs this year because the state Legislature fully funded schools and gave them additional money to raise teacher pay.
Creamer is among the prominent figures who’ve made millions of dollars operating Arizona charter schools. His online alternative school boasts more than 20,000 full- and part-time students. Primavera paid Creamer $10.1 million in 2017 and 2018.
A spokesman for StrongMind declined to say how much the company paid Creamer.
Ian Kidd, superintendent of Pima Prevention Partnership, said financially strong charter schools that took PPP loans open themselves to criticism and scrutiny.
“I don’t subscribe to making money off of students. It’s not appropriate,” Kidd said.
Kidd said he obtained PPP loans for his three charter schools, but the money was used to cover social and behavioral services for low-income, at-risk kids. His three charters had a combined negative $7,031 in cash balances, even after getting PPP loans.
The SBA, under pressure from news outlets, recently released specific figures for all PPP loan recipients. Previously, it released only the names of the borrowers and loan ranges above $150,000.
The earlier SBA records had indicated about 100 Arizona charter schools had received up to $100 million in PPP loans. The new data shows about 30 more charter schools got loans.
Several watchdog groups, including Accountable.Us, have panned the loan program for enriching companies that didn’t need the money while shutting out many minority- and women-owned businesses.
Kyle Herrig, president of Accountable.Us, which compiled a database of all PPP recipients, said there has been widespread fraud and abuse of the program, including celebrities and wealthy companies getting loans.
“The Trump administration’s faulty design and mismanagement of the Paycheck Protection Program let thousands of mom-and-pop businesses slip through the cracks without adequate aid while charter schools cashed in,” Herrig said…
Arizona Schools Superintendent Kathy Hoffman, who also is a member of the Charter Board, said she was astonished by The Republic’s findings.
“It saddens me those dollars are not going to students,” she said. “It’s very excessive. These dollars should be going where they are needed most, and that’s the students and instructional needs.”
Hoffman, a Democrat, said Republican Gov. Doug Ducey and the GOP-controlled Legislature should consider reducing state funding for full-time virtual charter schools like Primavera, which receives nearly the same per-student funding as brick-and-mortar schools that have more costs.
Ducey, at a news conference Wednesday, declined to answer questions regarding Hoffman’s proposal. He also declined to answer whether charter schools that received the PPP loans should return the money or have their state funding reduced by an amount equal to the loans.
Ducey said the PPP loans were a federal issue, but added: “I want to make sure all public schools have available funding.”
Creamer has been a major political donor to Ducey, records show.
Creamer spent at least $137,650 during the past two elections to mostly help conservative Republicans retain control of the Legislature. Among his political giving was $50,000 in December 2019 to the Republican Legislative Victory Fund, state campaign finance records show.
There has been no significant effort by Republicans in the Legislature to change the funding formula for online charter schools. A few of those lawmakers have financial interests in charter schools…
Paying shareholders, boosting reserves
In addition to Primavera, at least three other charter school operators that received PPP loans paid distributions to shareholders. Most of the rest put large sums in savings.
• The year-end cash balance for the 132 Arizona charter schools that received $51.8 million in PPP loans in April and May, increased by $62.6 million. Individually, cash balances increased for 87% of the loan recipients.
• Twenty-one charter schools that received PPP loans increased their cash reserves by at least $1 million, with Primavera seeing a $3.3 million increase.
Educational Options Foundation of Peoria, which got a $278,292 loan, saw its cash balance increase by $2 million to $13.7 million. The school has enough money to operate for four years without additional money. The state Charter Board only requires schools to have one month of cash liquidity. A call to the school was not returned.
• For-profit charters Humanities and Sciences Academy in Tempe and Accelerated Learning Center in Phoenix made shareholder distributions of $388,770 and $230,000 this past fiscal year, respectively. Both amounts exceed the charters’ PPP loans.
The Montessori Schoolhouse of Tucson gave a shareholder distribution of $92,372, equal to about 72% of its PPP loan.
Calls to the three schools were not returned.
Jim Hall, a former public school administrator who runs Arizonans for Charter School Accountability, compiled financial records from charter schools that received PPP loans and said he concluded that they didn’t need the money.
Hall said those loans should have gone to small businesses that have struggled to make payroll or mortgage payments. He said several of the charter operators engaged in “unmitigated greed.”
