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Indianapolis: The Resistance Is Fighting the Well-Funded Disruptors

By dianeravitch
February 4, 2020 //
8

Professor Jim Scheurich read a recent article in the rightwing, anti-public school journal “Education Next” about Indianapolis, which he thought was fundamentally flawed.

He sent the following analysis of what’s really happening in Indianapolis:

 

A RECENT ARTICLE IN EDUCATION NEXT

COMPLETELY MISREPRESENTS

THE RECENT HISTORY OF INDIANAPOLIS K12 EDUCATION

Dr. Jim Scheurich

Urban Education Studies Doctoral Program

Indiana University – Indianapolis (IUPUI) Professor

President, IPS Community Coalition

 

Unfortunately, a recent article in the pro-charter, pro-neoliberal “magazine,” called Education Next, is a thorough misrepresentation of the recent history of Indianapolis K12 education (see https://www.educationnext.org/hoosier-way-good-choices-for-all-indianapolis/).  I know because, as a university professor and a community activist, I have spent the last seven years working against the pro-charter, pro-neoliberal efforts in Indianapolis, mainly through the IPS Community Coalition, a citywide grassroots organization, and through anactivist research group of doctoral students, community members, and university faculty.  Below, I am going to point out eight ways this Education Next “story” is distorted and deceptive.  

1. The real cause of the “schooling crisis” in Indianapolis was racism and desegregation as many whites who could afford to do so moved out of the city, as did much business and capital, along with the ongoing effects of local, long-term racist policies and practices.  

In the Education Next (EN) article, there is not a single reference to race, desegregation, and racism.  Indeed, these words are never used (except as labels in one chart) even though the history of Indianapolis schooling cannot be accurately and fairly storied without these. In addition, there is no mention of the ongoing racism in law enforcement and imprisonment, housing, education, medicine, employment, banking, and the media, which exists in all cities and is well documented in social science research. These exclusions are a loud absence that is unquestionably remarkable and certainly a mark of weak and/or distorted scholarship.  Why would anyone who wanted to tell an honest “Hoosier” education story leave these out?  At a minimum, it certainly makes one wonder about the real nature and agenda of this EN story.

2. No mention of the pro-charter neoliberal movement that has “Mind Trust” and “Stand for Children” like organizations in every major city and several smaller ones in the U.S.

The Mind Trust and Stand for Children in Indianapolis like to keep their “story” local so those who work for them and the Indianapolis public remain ignorant about their true nature. The Mind Trust and Stand for Children never discuss that they are part of a national neoliberal movement largely funded by conservative and right–wing individuals, organizations, and corporations.  They never discuss the wider agenda of this movement, which includes low taxes for the wealthy, decreased funding for social supports, the privatization of and profiteering off of public services (like public education), efforts to decrease the voting power of people of color, the end of unions (esp. teachers unions) and the benefits unions have developed, among other ways that decrease the quality of life for everyone but the 1% and those who serve them.  Also, Mind Trust and Stand for Children never discuss the strongly anti-democratic nature of the neoliberal movement.  To begin to educate yourself on this national movement, read these highly respected books, in this order, MacLean’s ”Democracy in Chains,” Mayer’s “Dark Money,“ and Lipman’s “The New Political Economy of Urban Education.”  

3. No mention of the key role of ALEC (American Legislative Exchange Council) in the Mind Trust/Stand for Children story.

ALEC is a conservative-rightwing organization that creates model state-level neoliberal legislation to assist in institutionalizing the state-level neoliberal agenda discussed above in #2.  ALEC considers Indiana to be one of its favorite states, as Indiana Republicans and some Democrats have implemented so much ALEC developed legislation.  The result has been that Indiana consistently ranks high in business-friendly policies and effects and among the lowest in quality of life policies and effects.  Lengthy discussions and critiques of ALEC and its agenda are widely available, but there is no doubt ALEC is pushing a radical agenda that would not be supported if voted on by the general public.  

4. No mention of the “dark money” funding of Mind Trust/Stand for Children supported school board members.  

Since the 2012 board election in Indianapolis, the Mind Trust and Stand for Children have covertly used a Stand for Children 501c4 headquartered in Oregon to funnel national money into the Indianapolis school board race.  Before this, any everyday citizen who could put together funding of $3-5,000 had a chance to win election to the school board.  Starting in 2012, we know that the Mind Trust and Stand for Children started providing around $65,000 to each of their chosen candidates with all of them winning as no one was expecting or prepared for this infusion of such large amounts.  In the next election, 2014, they did the same and took majority control of the board, even though one of their chosen candidates, Gayle Cosby, turned against them once she realized what their real agenda was.  We call this “dark money” because a 501c4 does not have to report where the funds came from or how they were spent and not one of their candidates have publicly admitted this support.  In fact, it took the IPS Community Coalition shouting loudly about this for some time before the local news media paid any attention and still do not sufficiently attend to this, especially since in the last election, our best guess is that they spent over $500,000 on a district wide seat (more on this below).  Recently, the head of Stand for Children, who is widely praised in the EN article, said on social media that the Indianapolis Stand for Children has no relationship to the 501c4 in Oregon, leaving us puzzled as to how the Oregon folks know whom to support.  

5. Even though the “Innovation” schools (stealth charters inside the district) are widely praised, there is no discussion of constant reports to the IPS Community Coalition that the district leadership uses deception, misrepresentations (to put it politely), and threats to stop resistance and garner parent and teacher support for converting a traditional school to an “innovation” school.  

Either lots of teachers and parents are lying to the IPS Community Coalition, or the districts is using strong arm tactics to institute “innovation” schools.  Indeed, many teachers report to us that they feel afraid of the district leadership, given the district’s rough shod ways of getting what the district wants.  Also, there is no mention of the fact that for their first three years, the “innovation” schools are under easier state accountability rules.  Thus, the Mind Trust and Stand for Children often brag that the “innovation” schools are doing “better” even though traditional schools, which are under the full accountability rules, are actually doing better.  Might we call this dissembling?

6. No mention of the utter failure to successfully  educate Black children, who are the majority of IPS students, and no mention of the use of home schooling and high discipline rates to push out Black children.

Despite that we know that testing experts say we cannot use state accountability exams in the way we do, it is a harsh fact that less than 6% of Black 10th graders recently passed both the state’s language arts exam and the math exam.  If any business (the favorite neoliberal model) had this terrible outcome, that business would be shut down or all the leadership fired.  This is totally appalling—and never mentioned.  In addition, an intrepid local Chalkbeat reporter found compelling evidence that some schools have been counseling the parents of primarily Black students to choose to home school instead of facing a discipline incident result, a move that takes this student off the school’s roles and improves the school’s standing.  That this has the high potential to negatively impact the entire life of these Black students does not seem important to the decision makers, even though local Black activists, like Diane Daniels, have been pointing this out for years.  Furthermore, other schools, sometime called “no excuses” schools, use really high levels of discipline to push out primarily Black students that they see as potentially hurting their schools’ state grade, even though local education activists, like John Harris Loflin, have been making this point for years.  That all of this is totally disastrous for Black students, their families, their communities, and all of Indianapolis does not seem important enough to mention in the EN story.

7. Substantial problems with the CREDO and Indiana University (IU) research cited in the EN article are not addressed.

There is no mention of the deep critique of the CREDO report and its methodology, even though the University of Colorado’s National Education Policy Center (neps.colorado.edu) has published more than one critique of the CREDO methodology and their reports.  Also, no mention that the CREDO reports are done by a center that receives large pro-charter funding.  Furthermore, the IU research has been cited locally and nationally but never publicly released, as far as I have been able to determine.  I was able to get a copy of it, but since others have ownership, I cannot release it.  I did a thorough, indepth critique of it, showing it to be flawed in multiple ways but cannot publish since the research continues not to be public.  I mentioned that publicizing but not publishing results was against social science practice and ethics. I even asked that it be released, but they have stopped communicating with me even though I am part of the same university system.  

8. Nothing on the persistent incompetency of the Ferebee administration.  (Ferebee left last year to go to Washington, DC.  Fight hard, everyday DC folks!)

The examples of incompetency are many and large.  First, closing of high schools is almost always a fraught endeavor.  Nonetheless, there are good superintendents around the country who have figured out how to have authentic, transparent conversations with their communities and arrive at collaborative decisions.  I have met and talked to some of these folks.  It is never easy, and some community people are not happy in the end, but overall the community can feel it was done fairly and transparently.  That was not the case in Indianapolis.  Second, without consulting even with their friends and natural allies, like the Chamber of Commerce and the Board of Realtors, Ferebee went public with little time left before the vote with a nearly one billion–dollar bond proposal.  Even their friends and allies said, “NO!”  After an inappropriate Chamber study of cost cutting for the district, the district cut to around a quarter of the original amount to get Chamber and other elite support.  In addition, good superintendents know that it takes one to one and a half years of hard work to prepare for a successful bond election, and even that is no guarantee.  Ferebee seemed not to know this.  He did though get his quarter million because he committed most of it to raising teacher salaries, which even his critics supported.  Third, the district’s public budget document was opaque and confusing, even after having been critiqued by a non-political national organization that examines such documents nationwide.  After two years of pushing, we got some improvements.  Fourth, busing has consistently been a mess, which they now think they are solving by privatizing it. Fifth, teachers districtwide have become very afraid of raising any issues because they believe they will be fired.  Sixth, even though there is a large amount of research nationally as to what it takes to create successful urban schools for all children, regardless of race and ethnicity, family income, sexuality, disability status, and immigration status (some of which I have published), the Ferebee administration did not seem to know any of this.  Instead, initiating “innovation” schools and supporting charter schools that replaced district schools seemed to be his only choices.  

The neoliberal so-called education “reform” movement is weaker than they seem despite their millions of dollars and their PR machine.  

The IPS Community Coalition is a multi-race, multi-class citywide coalition of everyday Indianapolis folks and local organizations (see us on Facebook) who started a little over three years ago.  We began with less than eight people sitting in a room together, and now we have over 250 members.  We are very active on Facebook and sometimes have over 6,000 eyes on our posts.  We have no money, and many of our members have little. We do support teachers’ unions and work with the local teachers’ union.  In the 2018 school board election, we defeated two of the Mind Trust and Stand for Children incumbents.  The only race they won was due to the candidate being a non-incumbent.  In our best understanding, they spent over a half million dollars on their districtwide candidate, while the person we supported defeated their candidate on less than $10,000.  Because of their losses in the last election, now they are bringing back some of the most well-known local founders of their movement and trying to fake the community engagement that we authentically do.  They do have millions of dollars, many fulltime and part-time employees, and a large PR machine that falsely uses civil rights language, but they can be defeated.  

Study what neoliberalism is in education and other areas of your community.  

An activated people can defeat money and power.

Categories Accountability, Charter Schools, Corporate Reform, Corporate Reformers, Education Industry, Education Reform, Fraud, Funding, Indianapolis, Privatization, Resistance

Ohio GOP Grovels at Feet of Fordham and ALEC

By dianeravitch
January 28, 2020 //
20

Bill Phillis writes about the GOP’s pusillanimous capitulation to its masters and is prepared to sacrifice its public schools to satisfy DC-based Thomas B. Fordham Institute and ALEC, funded by CharlesKoch, the Waltons, and DeVos.

He writes:

School choice zealots seem to be driving the state education policy train
In spite of the harm being heaped on school districts due to corruption in the charter industry and the wild expansion of vouchers, the school choice zealots are in control. State officials seem powerless to establish rational Ohio education policy.
According to current media reports, the voucher “fix” being considered in the Ohio Senate, would lessen the harm to some school districts in the near term but would set the stage for a universal voucher system in the future. The local choice zealots and their big boy moneyed allies, such as the American Legislative Exchange Council (ALEC) and Fordham Foundation, are driving policy that undercuts the very foundation of the public common school. State officials seem to cower when confronted by the choice crowd.
 
Time to march on Columbus.
Before I saw Bill Phillis’ post, I tweeted an article about a temporary “fix” proposed by the GOP.
Jan Resseger wrote to me that the “fix” is a fraud and her own integrated, mixed-income district will be devastated.

She wrote:

I noticed you forwarded the Dispatch piece as though it will help anybody.  The Ohio Senate “solution” will simply leave in place all the damage from current year.  In CH-UH we have 478 percent growth in vouchers this year.  These kids will carry those vouchers out of our district’s budget each year until they graduate from high school. 

We’ll hope that this afternoon the House mitigates this in some way.  Leaves vouchers in place for now—but moratorium on their growth for a while.  Leaves flawed state report cards in place without a deadline to change them.  Expands income cap on the other kind of state funded vouchers.

The mess is embedded right in this so-called “solution.”

–Jan

Categories Accountability, Education Industry, Fraud, Funding, Ohio, Privatization, Vouchers

Craig Harris: How Foreign Investors Get Green Cards by Investing Millions in the Charter School Industry

By dianeravitch
January 26, 2020 //
13

Thanks to a provision in the tax law, called the EB-5 program, wealthy foreign investors can buy green cards by investing in charter schools.

Craig Harris, award-winning investigative reporter for the Arizona Republic, took a close look at this provision in the law that allows foreign citizens to buy visas in exchange for funding charter schools.

He visited schools in Arizona and other states.

This story was published in December.

CORNELIUS, N.C. – When Lakeside Charter Academy opened five years ago in this boating community outside Charlotte, it faced the same challenge that confronts many new charter schools.

It had governmental approval to operate and the tax dollars that come with it to pay for teacher salaries, supplies and other expenses. But it had no money to build a school or lease classrooms.

Like most of the 45 states with charter schools — taxpayer-funded campuses operated largely by private businesses — North Carolina provides no money to new operators for start-up or capital costs.

So Lakeside struck a devil’s bargain of sorts. It entered an agreement with an Arizona company to renovate a former church building, funded, in part, by a federal program that allows private companies to raise money by essentially selling green cards to wealthy foreign nationals.

Arizona-based Education Fund of America secured the foreign financing and its business partner, American Charter Development, of Utah, would raise the rest of the cash, build the campus and then lease the space back to Lakeside. Lakeside put no money down.

Peter Mojica, a North Carolina businessman and founding school board member, said Lakeside had few options as parents worked to get the school built around 2012. 

“A charter school has no credit and can’t get the money unless they have a crazy endowment from a rich benefactor,” said Mojica, who still has a son at Lakeside. “So you have Chinese investors buying visas.”

Twenty-seven other campuses in eight states, mostly small charter schools, have struck similar deals with Education Fund of America since 2013, according to its website.

Those deals have put some of the schools in financial jeopardy, according an Arizona Republic investigation.

Two Florida schools closed after one year. Four others, including three Arizona charter schools, are in imminent danger of shutting their doors, records obtained by The Arizona Republic show. More than half of the schools who entered the deals are running budget deficits. And at least 10 have turned to high-interest loans to stay afloat. The majority have average to failing academic scores.

The Republic visited seven states to investigate charter schools and what ongoing shifts in the industry might mean for Arizona, the state with the largest share of charter school students in the nation.

Almost three decades after the first U.S. charter schools opened their doors promising to innovate and compete with traditional public schools, funding remains a daunting barrier for all but the biggest operators. The result, experts say, is small, entrepreneurial operators who were the backbone of the early charter movement are increasingly squeezed out or forced to take big financial risks.

The number of mom-and-pop charter operators is declining. Between 2014 and 2018, 61% of charter schools approved to operate nationwide were affiliated with a nonprofit or for-profit chain, according to the National Association of Charter School Authorizers.

The officials who grant charters to would-be school operators are more inclined to favor big chains with proven track records than independent startups, said Greg Richmond, who until recently was chief executive of the National Association of Charter School Authorizers. 

“The charter school field has become a little more risk-adverse,” he said.

‘MAKING A PROFIT OFF OF OUR CHILDREN’

Lakeside Charter Academy turned to Education Fund of America only after parents struck out trying to get private investors, including hedge funds, Mojica said.

The school has paid escalating rent to American Charter Development for a campus that is far from luxurious, according to interviews and records obtained by The Republic.

Lakeside has no gymnasium or lunch room and only a small playground. At the end of last school year, a parking lot that doubles as a basketball court was rendered unusable by a large sinkhole. Its roughly 300-square-foot library is mostly filled with donated books.

As of July, the school was more than $1.7 million in debt — most of it for unpaid rent — and enrollment had plummeted to 100 students, from a high of 400. The state gave it a “C” academic rating.

“All I wanted was a good school for my sons,” said Alyson Ford, whose boys attended Lakeside until she moved them over disgust with Lakeside’s finances and governing board.

“As taxpayers, we are not happy about this situation,” she said, citing companies “making a profit off of our children.”

She questions Education Fund’s claim that the school was built for $5.1 million, using $3 million in Chinese investment through the federal Employment-Based Fifth Preference Immigrant Investor Program — or EB-5 visa program. County assessor records value the property at $3.3 million….

The nation’s 7,000 charter schools educate more than 3 million children, according to the U.S. Department of Education. The share of public school students attending charter schools nationwide has risen from 1% in 2000 to 6% today.

Despite that growth, starting a charter school remains daunting.

Just seven states and the District of Columbia offer charter school facility grants, and nine have loan programs, according to the Charter School Facilities Center.

The Charter School Facilities Center, a Washington, D.C., group tied to the National Alliance for Public Charter Schools, found in a June research paper that one of the biggest challenges to the expansion of charter schools is state laws that place the burden of funding facilities on school operators who struggle to find affordable facilities.

Arizona Gov. Doug Ducey created a charter school construction lending program in 2016 that was billed as a way to help the “best public schools” expand by providing lower-cost financing with help from the state. It mostly assisted Basis Charter Schools Inc. and Great Hearts Academies — large, successful charter chains with close ties to the governor. After only one charter school received financing through the program in 2018, three Arizona charter schools used it this fall.

The federal government since 1994 has helped fund startup costs for charter schools through competitive grants and credit programs. But only a fraction of the projected $500 million this year is set aside for smaller charter schools, with most going to the large nonprofit companies that dominate the charter school industry.

The U.S. Department of Education last year distributed 32 multi-year grants to individual charter schools. The largest was for $1.25 million, far less than what is needed to build a comprehensive campus. Meanwhile, a single chain, Texas-based IDEA Public Schools, received nearly $117 million.

Operators who succeed in opening a school have a high failure rate, suggesting additional difficulty in finding long-term financing. Since 2000, at least 2,927 U.S. charter schools, or nearly 30%, have closed, federal records show.

The failure rate in Arizona, 41%, is even higher despite the Legislature providing charters with additional per-pupil funding to help with capital costs.

In 2018, The Republic found 1 in 4 Arizona charter schools had significant financial red flags, and that when compared to district schools, charters spend about twice as much or more on administrative costs than in the classroom.

In January 2018, Discovery Creemos, a Goodyear charter school, made headlines when it closed because of financial troubles. The ex-chief executive later admitted to defrauding the state and federal government of at least $2.2 million by inflating enrollment by hundreds of students. 

The Grand Canyon Institute, a private, nonpartisan think tank, found Arizona charter schools primarily fund buildings and classrooms using high-interest “junk bonds” guaranteed by schools’ projected enrollment growth. If the growth doesn’t materialize, mortgage payments will consume a greater share of the schools’ shrinking revenue, leaving less for the classroom.

Bill Honig, a researcher and California educator who runs the Building Better Schools website, found through his research that charter school closures have disrupted the instruction of at least 288,000 school kids since 2000.

Those closures take a largely overlooked toll on students.

Stanford University’s Center for Research on Education Outcomes examined school closures in 26 states over eight years, and found that fewer than 50% of students displaced by a closure ended up at a better school.

A UC Santa Barbara study, considered the definitive look at the subject, found students who changed schools between the eighth and 12th grades for any reason other than being promoted to a higher grade, were twice as likely to drop out…

Wing launched Education Fund eight years ago to help address the lack of charter school start-up funding. 

“Charter schools have a massive financial disadvantage,” he said.

As a U.S. Citizenship and Immigration Services regional center for EB-5 visas, Wing’s Education Fund essentially sells green cards to wealthy foreign nationals in exchange for an investment in U.S. charter schools.

Among its first projects was to provide $2 million in foreign investment for the Learning Foundation and Performing Arts charter school, which opened in Gilbert in 2013.

Education Fund’s website shows smiling students, 28 “EB-5 financed charter schools,” and a breakdown of foreign capital and other investments.

There are about 880 regional centers. But Education Fund, which is approved to operate in 11 states, claims to be the first to raise foreign investment for charter schools.

Its work has gone largely unnoticed, even within the charter school industry. Assistant U.S. Secretary of Education Jim Blew, one of the country’s top charter school advocates, told The Republic he was unaware charter schools have been funded through the EB-5 program.

The foreign investments must create or maintain at least 10 U.S. jobs within two years. When Lakeside Academy signed on with Education Fund, investors could get a visa with a $500,000 investment provided it was for a project in a rural or high-unemployment area.

Wing declined to say how many visas Education Fund’s investors have obtained. Nationwide, about 10,000 such visas are issued annually, but not without controversy and allegations of fraud.

Reports to Congress by U.S. Government Accountability Office in 2015 and 2016 found a lack of federal oversight of the program resulted in fraud.

Sen. Chuck Grassley, R-Iowa and then-chairman of the Senate Judiciary Committee, in 2017 raised questions about an EB-5 scheme that created no jobs while allowing operators to pocket $50 million from Chinese investors.

EB-5-funded projects also have been widely criticized for gerrymandering poorer neighborhoods into regional centers to fund projects in wealthier areas. For example, New York City’s $25 billion Hudson Yards mega project, which has raised luxury towers across a swath of Manhattan, drew on more than $1 billion in EB-5 investment.

USCIS acknowledged it does not keep a “database of specific EB-5 investments” and said each regional center is responsible to “provide adequate and proper oversight, monitoring and management of its projects.”

Former Arizona Sen. Jeff Flake, who as a member of the Senate Judiciary Committee supported Grassley’s efforts to provide more oversight of the EB-5 program, said there have been numerous calls in Congress to fix it because of situations similar to the Hudson Yards project, but “we simply extend the program year after year.”

“Reforms are needed and there is pretty broad agreement on those integrity measures,” Flake said. 

David North, a researcher with Washington, D.C-based Center for Immigration Studies, a think tank that favors reducing immigration, said the “stunning” lack of federal oversight allows the EB-5 program to fester while middlemen and developers enrich themselves.

“It’s a terrific business to be in, but it’s a hell of a waste of public-school monies,” he said. “The EB-5 program is a mess. Charter schools are a mess. When you put them together, it’s a messier mess.”

One of Education Fund’s investors was Erica Zhu, who said she works in foreign-funded enterprises in China.

She learned of the program when her husband saw an article about Education Fund, and invested $500,000 in one of the company’s Florida schools, St. Cloud Preparatory Academy.

Four years passed before the U.S. government approved visas for her and three family members. They plan to relocate to North Carolina. (EB-5 investors do not have to live in the same community as their investment.)

“The EB-5 program is a great program that gives foreigners a chance to immigrate to the United States,” Zhu saidin an email to The Republic.

North disagrees, saying it unfairly rewards wealthy “aliens with a handful of green cards.”…

Education Fund’s cheap foreign money only covered a third of the charter schools’ facility costs. Wing’s business partner, American Charter Development, provided high-interest, U.S. hard money loans. The combined charter school fund totaled $234 million. 

Lakeside Charter Academy’s loans with American Charter Development carry interest rates up to 9.5%. The school began missing rent payments in 2017, records show.

Wing said some Education Fund schools’ financial hardships may be unrelated to their lease arrangement — for example, board infighting or declining enrollment, both of which have occurred at Lakeside.

Wing said Morley has been generous in allowing charter operators to delay rent payments.

Still, a Republic review of Education Fund’s financing of charter schools — including a review of more than 1,000 records and dozens of interviews — found widespread financial problems at the schools:

  • Half of Education Fund’s schools have budget deficits, with one Arizona operator, the Learning Foundation and Performing Arts charter school in Gilbert, nearly $2.8 million in the red. 
  • Education Fund charter operators of at least 10 schools in Arizona, Florida, Georgia and North Carolina have borrowed money from other lenders at interest rates of up to 23%.
  • Independent auditors for three Education Fund charter operators in metro Phoenix have raised doubts to state regulators about whether the schools will remain open. All three, Learning Foundation and Performing Arts, Champion Schools and Painted Desert Montessori Academy, have experienced high and escalating rent payments.
  • Two Florida schools that raised money through Education Fund closed within a year of opening.
  • More than half of Education Fund’s charter schools have average to failing letter grades, with just three receiving an “A….”

Frank Yanez, who has worked in the charter school industry for two decades, wanted to open a Montessori-style school in Buckeye for his grandkids and other children.

He turned to Education Fund, which raised $2.5 million from Chinese investors for the $5.6 million Painted Desert Montessori Academy. Yanez, who has worked as a consultant to Education Fund, put no money down.

Yanez sipped a latte as he greeted students and parents with hugs on the first day of classes in early August.

He wore a smile for the students, but he’s worried about the school’s finances.

The school, which is beginning its fourth school year, has paid nearly $2 million in rent to one of Morley’s companies, he said. That’s about what he receives annually from the state of Arizona to teach 370 kids in the K-8 charter school.

Yanez is $1.4 million in debt, and deferred $436,633 in rent during the 2018-19 school year. Some of the borrowed money was used last year for teacher pay raises.

Things were so dire this past year he leveraged future payments from the state as collateral to borrow operating cash. The loan had interest rates up to 23%. 

This year, he said, he can’t afford to give raises even though the Arizona Legislature and Ducey approved a budget to provide all teachers with a 5% boost in pay.

“With the money on the rent, they are making money,” Yanez said of Wing and Morley. And when he buys the school, instead of paying them rent, “they will make a few million dollars, and that’s a good return on their investment,” he said.

Yanez also is on the board of Champion Charter Schools, a charter chain that financed two campuses through Education Fund in Chandler and San Tan Valley.

Carolyn Sawyer, who runs Champion, said the schools’ rent is so high she had to defer $800,000 in lease payments last year.

The nonprofit company that runs the schools, including a south Phoenix campus built without EB-5 investment, had a $1.9 million deficit last year.

She said using the EB-5 program was her only option. 

Sawyer recalled a woman from Shanghai showing up several years ago when the campus on McQueen Road in Chandler was still under construction. The two put on hard hats and took a tour.

The woman returned several times to check on the school’s progress.

“She decided to invest in American school children,” Sawyer said. “These people have helped us build beautiful schools.”

 

Categories Accountability, Arizona, Education Reform, Funding, North Carolina

Maryland: Court Allows Lawsuit to Proceed for Baltimore City Funding

By dianeravitch
January 25, 2020 //
8

The Education Law Center announces good news for equity for children in Baltimore City:
January 24, 2020
MARYLAND COURT ALLOWS BALTIMORE CITY PARENTS TO RE-OPEN BRADFORD SCHOOL FUNDING CASE
By Wendy Lecker
On January 21, Baltimore City Circuit Court Judge Audrey Carrion paved the way for Maryland’s long-running school funding litigation, Bradford v. Maryland, to proceed. Judge Carrion denied the State of Maryland’s motion to dismiss and ordered the case be prepared for a trial on the merits.
The Bradford case was first filed in 1994 by Baltimore City public school parents, alleging that the State’s underfunding of City schools violated students’ constitutional right to an adequate education. After granting partial summary judgment in favor of the parents in 1996, the parties entered into a consent decree requiring increased funding. Despite enactment of a new school funding formula in 2002, the State consistently failed to fully fund it.
In recent reports on the school funding system, the State itself has found the Baltimore City schools remain severely underfunded. The funding shortfalls have, in turn, resulted in glaring deficits in essential resources in Baltimore schools, which serve a very high percentage of low-income, at-risk students. Schools are lacking in teachers, guidance counselors, librarians and basic curricular offerings. Many buildings are in disrepair. Student outcomes are inadequate, graduation rates are low, and dropout rates are double the state average.
Faced with consistent State failure to remedy these intolerable conditions, the Bradford parents petitioned to reopen the case in March 2019. The plaintiffs are represented by the NAACP Legal Defense and Educational Fund, the ACLU of Maryland, and the firm Baker Hostetler.
The State moved to dismiss the case, claiming the petition was untimely, the 2002 consent decree was terminated, and the case presents a purely political question not suitable for judicial review.
In denying the State’s motion, Judge Carrion ruled that the Bradford court intended to retain jurisdiction until the State fully complied with the consent decree, and the consent decree remains viable. The Court also rejected the State’s argument that the case involved a purely political question, ruling that Maryland courts retain an inherent authority to review State compliance with the constitutional guarantee of education.
Judge Carrion’s ruling paves the way for the vindication of the constitutional rights of children in the Baltimore City Schools after a nearly two-decade struggle to secure adequate resources for their public schools.
Wendy Lecker is a Senior Attorney at Education Law Center
Press Contact:
Sharon Krengel
Policy and Outreach Director
Education Law Center
RELATED STORY
Baltimore Parents Move to Re-Open School Funding Lawsuit

 

Categories Accountability, Baltimore, Education Reform, Equity, Funding, Maryland

Jan Resseger: Ohio Voucher Plunges Public Districts into Fiscal Crisis

By dianeravitch
January 25, 2020 //
4

Jan Resegger summarizes the disastrous Ohio plan to expand vouchers and how grossly unfair it is to public schools, which enroll nearly 90% of the children in the state. As she points out, most of the children drawing money away from her district never attended public schools, yet now their tuition will be extracted from the budget of the public schools. Read her post in its entirety.

She writes:

On Tuesday afternoon, I went to a meeting of my monthly book discussion group—all of us retired and over 70.  But as we sat down with our coffee and before we discussed the book we had all been reading for the month, we found ourselves distracted by the topic that is tearing our community apart: the changes the Ohio Legislature made last summer in the fine print of the FY 20-21 state budget—changes that exploded the size of the state’s EdChoice school voucher program.

I wonder whether legislators have any real understanding of the collateral damage for particular communities from policies enacted without debate. Maybe, because our community has worked for fifty years to be a stable, racially and economically diverse community with emphasis on fair housing enforcement and integrated schools, legislators just write us off as another failed urban school district. After all, Ohio’s education policy emphasizes state takeover and privatization instead of equitable school funding. The state punishes instead of helping all but its most affluent, outer ring, exurban, “A”-rated school districts, where property values are high enough that state funding is not a worry.

What this year’s EdChoice voucher expansion means for the Cleveland Heights-University Heights school district where the members of my book discussion group all live is that—just to pay for the new vouchers—our school district has been forced to put a property tax levy on the March 17 primary election ballot. Ohio’s school finance expert, Howard Fleeter explains that in our school district, EdChoice voucher use has grown by 478 percent in a single year.  Fleeter continues: “Cleveland Heights isn’t losing any students…. They are just losing money.’” “If this doesn’t get unwound, I think it is significant enough in terms of the impact on the money schools get to undermine any new funding formula.”

Ohio deducts the price of the vouchers students carry to private and religious schools from the local school district budget even though, in the case of Cleveland Heights-University Heights this year, 94 percent of those students have never attended the public schools in our district. The state counts the voucher students who live in our community as though they are enrolled in our school district and then deducts the voucher from the local school budget, but the cost of each voucher is more than the state allocates per pupil.  In fact, in the current Ohio biennial FY20-21 state budget, state public education basic aid funding is frozen, which means our district actually gets no new state funding for each voucher student, but one hundred percent the cost of each voucher is deducted anyway.

Why are the people in my book group so upset about the voucher explosion and another levy on the ballot in March?  We are not a bunch of old ladies grousing about the burden of our taxes.  Two of us co-chaired a successful school levy campaign back in 1993; one person served on the board of education; and the rest were teachers in our school district. As we read the conversation threads on Next Door, where people are accusing our district of mismanaging funds, or paying teachers too much, or hiring too many school psychologists, we worry about all the undocumented misinformation floating around. Members of our group are anxious about our grandchildren and our neighbors’ children who depend on the public schools we have spent our lives supporting and protecting.  But it is difficult to explain what happened in the budget, our plight this winter set in motion last June and July in the budget conference committee, when amendments were added to the state budget without debate. It was done so quietly at the time that people across the state only began to grasp the impact later in August when the Ohio Association of School Business Officials alerted school treasurers about the potential impact.

Fortunately the Cleveland Heights-University Heights City School District sponsored a special public meeting on January 9, 2020, to explain the changes in the EdChoice Voucher Program and begin quelling the anxiety that is tearing our community apart. The school district has posted the powerpoint presentation from the meeting, and at the meeting,  the school district distributed a clear, factual brochure about the legislature’s changes in the EdChoice Vouchers.  The brochure explains: “(T)he program was expanded to the point of unsustainability. Ohio had fewer than 300 buildings deemed eligible for vouchers in 2018-2019; that number has exploded to 1,200 for 2020-2021. When the Ohio General Assembly passed its biennial budget in July 2019, it froze receipts at 2018-2019 levels. This means that for every new voucher used, none of the cost would be offset by state aid. Legislators also removed the provision that required students to attend a public school prior to using the voucher. Unable to prepare financially for the change, the District was forced the following month to negotiate one-year contracts with the teachers union, as opposed to multi-year contracts. In CH-UH, approximately 1,400 students, 94% of whom have never attended our K-12 public schools, are taking scholarships to attend private schools. This has amounted to an actual loss of $4.2 million for us last fiscal year and an estimated loss of $6.8 million this fiscal year.” Each time a student secures an EdChoice Voucher, that student can keep the voucher, paid for by the school district deduction, every year until the student graduates from high school.

The school district’s information handout continues: “The CH-UH City School District will ask the community for a new 7.9 mill operating levy in March. The current funding issues with EdChoice are the major reason for this millage. In fact, the District would not need to ask for a levy until 2023 if it weren’t for the way EdChoice was funded, and the millage would be significantly less.”

School districts across Ohio are demanding that the Legislature do something about what has become a crisis for many school districts. It is important that the Legislature act quickly, before the February EdChoice Voucher enrollment period for next school year. The Heights Coalition for Public Education, a community organization, has prepared a list of short-term voucher fixes which the Legislature should consider:

  1. “Remove budget language from House Bill 166 (the current state budget) expanding vouchers in grades 7-8 and for high schools.  Restore voucher language to pre-budget language.”
  2. Limit state report card ratings on which EdChoice schools are designated to 2017-18 and 2018-19.  Currently districts are held accountable all the way back to 2013-14, and considerable changes in school programming have occurred in the seven ensuing years.
  3. “Restore funding for school districts that have lost funds to voucher students who were not part of their 2019 Average Daily Enrollment.”
  4. “Cut the loss of funds for high poverty (50% economically disadvantage) districts at 5% and other school districts at 10%.”
  5. Adopt the funding methodology for EdChoice Expansion (another Ohio voucher program) which awards vouchers to needy students and pays for the vouchers fully with state funds (not the school district deduction).

State Senator Matt Huffman has long been among the Ohio Legislature’s strongest proponents of school vouchers.  Earlier this week, the Plain Dealer‘s Patrick O’Donnell reported that Senator Huffman himself supports the fifth voucher fix listed above: “State Sen. Matt Huffman, a Lima Republican, wants a bigger change. He is resurrecting his 2017 proposal to offer vouchers to any family in Ohio whose income falls under certain limits… His proposal would have the state, not districts, pay for the vouchers of $4,650 for grades K-8 and the $6,000 a year for high school. That would eliminate many district complaints that voucher costs are killing their budgets.  He said the state can control costs by limiting how many students can use vouchers in a given year. Some extra money is already available in the budget, he said. ‘That seems to be the only way, really, to do this in a fair way,’ he added.”

There is reason for caution here, even though Huffman’s assessment is correct that eliminating the school district deduction method for funding vouchers is the only fair way to address what has become an urgent crisis for the Cleveland Heights-University Heights City Schools and for many other Ohio school districts. We all remember Naomi Klein’s 2007 warningabout the danger of adopting “shock doctrine,” privatization policies in a hurry in the midst of a crisis. We need to be sure that any so-called fix isn’t just an opportunity for the Legislature to grow the state’s voucher programs in some other way.  After all, in the case of Ohio’s current voucher mess, the Ohio Legislature itself created the crisis by expanding school privatization with explosive growth in the EdChoice school district deduction.

This blog has emphatically and consistently opposed private school tuition vouchers paid for with public funds, because vouchers undermine public funding for public education. Education privatization is never in the public interest.

However, currently in Ohio, an existential crisis for local school districts demands an immediate solution. The Legislature has saddled school districts with a school privatization program whose size the Legislature has no incentive to control because the money quietly washes out of local school district budgets. Neither can school districts control what is happening to their local budgets when the Legislature has set up an uncontrollable flow of dollars into the vouchers.

Huffman’s proposed solution would not solve the bigger problem of Ohio school vouchers. On the other hand, Huffman’s plan would pay for the vouchers out of the state budget, and as he points out, if it were to be so inclined, the Legislature could control costs by limiting how many students can use vouchers in a given year. Huffman’s idea would address the immediate school district financial crisis. It would then be up to all of us to pressure the Legislature to control the size and number of Ohio school vouchers awarded each year. Perhaps we can motivate a future legislature to eliminate vouchers entirely and return to a system where public dollars serve the mass of our children in the public schools.

Categories Accountability, Budget Cuts, Funding, Inequity, Injustice, Ohio, Vouchers

Bethlehem, Pennsylvania: A Superintendent Talks Candidly About Charter Schools and Race

By dianeravitch
January 23, 2020 //
19

Bethlehem School Superintendent Joseph Roy spoke candidly about charters and race and expected he had struck a hornets’ nest. 

He said in a public forum, not for the first time, “that some parents send their kids to charters so they won’t have to go to school with “kids coming from poverty or kids with skin that doesn’t look like theirs.”

Roy is among many superintendents, including Allentown’s Thomas Parker, who are calling for state officials to overhaul the charter school system because of the cost to school districts, which pay tuition for students who enroll in charters.

The Bethlehem Area School District expects to spend more than $30 million this year. Allentown spends about twice as much. Statewide, districts sent $1.8 billion to charters in 2018.

I met with Roy to discuss charter school funding, public accountability and other topics that I may write more about later. He also opened up about the controversy.

It started with his comments at the news conference about why students attend charters. He offered several reasons, including bus transportation, longer school days, specific academic programs and uniform requirements. He also mentioned race.

“The honest fact is, not all, but some parents send their kids from urban districts to charters to avoid having their kids be with kids coming from poverty or kids with skin that doesn’t look like theirs,” Roy said.

Five days later, Saucon Valley School Board President Shamim Pakzad, who enrolls one of his sons in a charter school, called for Roy to resign, though he didn’t mention him by name.

“What they said was ugly, divisive and outside of the boundaries of human decency,” Pakzad said at a school board meeting.

Roy also got backlash from the Pennsylvania Coalition of Public Charter Schools. Parents from several charters demanded an apology.

Others defended Roy, including Bethlehem’s school board and Bethlehem NAACP President Esther Lee. He said he received emails of support from district parents.

I asked Roy why he believes some people don’t want to talk about issues involving race.

“No one wants to be called or viewed as a racist,” he said. “That’s one of the worst things you can say. But then that is used as a defense mechanism to shut down any honest conversation about it.”

Charter schools have varying levels of diversity. Some are made up primarily of minority students, while others are overwhelmingly white. Income levels vary, too.

I was reminded of the time I spoke to the Florida School Boards Association a few years ago. I asked its executive director why students left public schools to attend charter schools. He bluntly said, “They don’t want to go to schools with kids who don’t look like them.”

School choice encourages segregation by race, social class, income, and religion. It takes determination and willpower to overcome segregation.

Categories Accountability, Charter Schools, Education Industry, Education Reform, Funding, Pennsylvania, Privatization, School Choice, Segregation

Mercedes Schneider Compares the Money Behind EdPost and NPE

By dianeravitch
January 23, 2020 //
20

Apparently, Ed Deformers—themselves richly endowed with millions and millions from billionaires such as the Waltons, the Gates, Broad, Bloomberg, Koch, etc.—have descended to claiming that the Network for Public Education is funded by “Dark Money” and the big, bad teachers’ unions. Evidently they are troubled to have any dissent to their self-serving narrative that only privatization can “save” America’s children from the terrible public schools and teachers who have educated 90% of all Americans.

Mercedes Schneider performs a compare and contrast here, reviewing the tax filings of billionaire-funded “Education Post” with that of NPE. Of course, a fair comparison would have pitted NPE funding vs. not only “Education Post”, but also billionaire-funded The 74, The Center for Education Reform, Democrats for Education Reform, The City Fund, and the dozens of other front groups that have oodles of money but no members. (NPE has nearly 400,000 followers who pay no dues).

On one side is EdPost:

Started in 2014, Education Post is an ed-reform blog and the brainchild of California billionaire, Eli Broad. Right out of the starting gate, EdPost (actual nonprofit name, Results in Education Foundation) had $5.5M to play with in its first year.

EdPost’s first CEO, Peter Cunningham, was paid $1M for 2 1/2 years of blogging. Moreover, in his position as a founding member of EdPost’s board, Stewart was compensated a total of $422,925 for 40 hrs/wk across 30 months as “outreach and external affairs director.” (To dig into that EdPost history, click here and follow the links.)

Deutsch reviews NPE’s revenues and reports a cumulative total from 2016-2018 of: $659,300.

What a haul!

But oh, those salaries!

In 2016,

Diane Ravitch was president and was not compensated.

Carol Burris was executive director and is the only compensated person listed on the tax form; her total 2016 compensation was $41,108 (40 hrs/wk), most of which was spent working for NPE (33 hrs/wk), and the remainder, for NPE Action (7 hrs/wk).

(Point of fact: Burris actually works at least 60 hours per week.)

But wait! In 2018, Burris’s salary for her full-time job was $55,000 a year. What a scandal!

No one is in NPE for the money.

The most amazing fact about NPE is how much it has accomplished with one full-time staff member and minimal resources. See:

A state-by-state report on support for public schools;

Online learning: What Every Parent Should Know;

Charters and Consequences;

Billionaires hijacking public schools;

The real story in New Orleans;

Student privacy,

School privatization toolkit,

The waste, fraud, and abuse in the federal Charter Schools Program (here and here).

Whoa! That’s a lot of bang for the buck. One full-time employee, two part-time employees (Darcie Cimarusti and Marla Kilfoyle) and all that productivity!

Is ”EdPost,” with all their millions, jealous of NPE?

Or just sore because they have lost the war of ideas, now that their boasts have flopped and Betsy DeVos is the face of their billionaire-funded “movement”?

 

 

Categories Billionaires, Charter Schools, Common Core, Corporate Reformers, Education Industry, Funding, Network for Public Education, Networkfor Public Education Action Fund, Privatization

The Future of Public Education Hinges on This Supreme Court Case

By dianeravitch
January 21, 2020 //
41

Tomorrow, the United States Supreme Court will hear arguments in a crucial case called Espinoza v. Montana.

The goal of the Espinoza plaintiffs is to strike down state laws that prohibit public funding for religious schools.

This is a case that could not only erase the line between church and state but could actually compel states to fund religious schools. It would require states to fund religious schools of every kind, and no one knows who will determine what is a legitimate religious school. It would divert funding from public schools to support students enrolled in religious schools, now and in the future.

The plaintiffs are represented by the libertarian Institute for Justice. Its efforts on behalf of school choice have been funded over the years by anti-public school activists like the Walton Family Foundation (which has launched one of every four charter schools in the U.S.), the Bradley Foundation of Milwaukee (which fought in court to establish vouchers in that city), the DeVos family, and the Koch Foundation.

Twenty or thirty or forty years ago, the Supreme Court would have dismissed this case out of hand. In the past, the Court ruled that states should pay for ancillary matters like transportation and textbooks in religious schools, but not tuition.

But the Supreme Court today has a 5-4 conservative majority. Many conservative justices in the past were moderates compared to those now on the court. The two justices appointed by Trump are religious extremists who can be counted on to rule in favor of access to public funding for religious groups as well as their “freedom” to discriminate against those groups who offend their religious beliefs.

For more about this case and its ties to the evangelical right and anti-union funders, read this article that appeared in In These Times. 

The Washington Post described the case:

KALISPELL, Mont. — It is a blessed time at Stillwater Christian School, where Scripture adorns the gymnasium wall, enrollment is climbing and Head of School Jeremy Marsh awaits the four new classrooms that will be built in the spring.

It is a place that embraces the beliefs that sinners avoid eternal condemnation only through Jesus Christ, that a marriage consists of one man and one woman and that “human life is of inestimable worth in all its dimensions . . . from conception through natural death.”

“The religious instruction isn’t just in little pockets of Bible class,” Marsh said. “It really comes out as we are learning in all classes.”
If a family craves Stillwater’s academic rigor but not its evangelism, Marsh said he will gently advise that “this might not be the place for them.”

Parents who believe religious schools such as Stillwater absolutely are the places for their children are at the center of what could be a landmark Supreme Court case testing the constitutionality of state laws that exclude religious organizations from government funding available to others. In this case, the issue rests on whether a scholarship fund supported by tax-deductible donations can help children attending the state’s private schools, most of which are religious.

Arguments are scheduled for Wednesday.

A decision in their favor would “remove a major barrier to educational opportunity for children nationwide,” plaintiffs said in their brief to the Supreme Court. It is part of a movement by school choice advocates such as Education Secretary Betsy DeVos to allow government support of students seeking what she recently called “faith-based education.”


Said Erica Smith, a lawyer representing the parents: “If we win this case, it will be the U.S. Supreme Court once again saying that school choice is fully constitutional and it’s a good thing and it’s something parents should have. And that will provide momentum to the entire country.”


Randi Weingarten, president of the American Federation of Teachers, said such a ruling would be a “virtual earthquake,” devastating to the way states fund public education.

And Montana told the court that, as in 37 other states, it is reasonable for its constitution to prohibit direct or indirect aid to religious organizations.
“

The No-Aid Clause does not prohibit any religious practice,” Montana said in its brief. “Nor does it authorize any discriminatory benefits program. It simply says that Montana will not financially aid religious schools.”


But Montana is being called before a Supreme Court increasingly skeptical of such stark lines between church and state. A majority of justices in 2017 said Missouri could not ban a church school from requesting a grant from a state program that rehabilitated playgrounds. They have since been joined by Justice Brett M. Kavanaugh, who has signaled other such restrictions deserve the court’s attention.


The Montana case is prompted by a 2015 decision by the state’s legislature to create a tax-credit program for those who wanted to donate to a scholarship fund. The program allowed dollar-for-dollar tax credits to those who donated up to $150 to an organization that provides aid to parents who want to send their children to private school.


About 70 percent of qualifying private schools in Montana are affiliated with a religion, so that meant at least some of the money would go there.
And that conflicts with a section of the state constitution that prohibits public funds for “any sectarian purpose or to aid any church, school, academy, seminary, college, university, or other literary or scientific institution, controlled in whole or in part by any church, sect, or denomination.”


Litigation followed, and the Montana Supreme Court ultimately struck down the program — for religious and nonreligious private schools — and said Montana’s provision did not violate religious protections in the U.S. Constitution.

The Montana Constitution that is now being challenged was adopted in 1972.

The amicus briefs supporting Montana and opposing public support for religious schools are attached here.

 

Categories Education Reform, Funding, Religion, Separation of church and state

Jennifer Hall Lee: In Pasadena, the Fund-Raising for Schools Reflects the Income Inequality in Society

By dianeravitch
January 16, 2020 //
8

Jennifer Hall Lee is a parent activist in Pasadena, California. She wrote this article about the different amounts of money available to different types of schools in Pasadena. Remember that one of the goals of American public education is “equality of educational opportunity.” How is this possible when children in public schools do not have access to the resources as children in other kinds of schools in the same community?

Here is an excerpt:

Let’s look at a few of the current annual fund goals for schools in the Pasadena area.

  • $75,000 is the annual fund goal for Eliot Arts Magnet Academy (a PUSD school).
  • $500,000 is the annual fund goal for an Altadena charter school.
  • $4.3 million is the annual fund goal for a Pasadena private school.

These annual fund numbers reflect the income levels of parents because when you set a goal for an annual fund you must reasonably expect that the goal can be reached. Annual funds in public schools derive monies primarily through parents and alumni.

 

Categories California, Funding, Inequality

North Carolina: A Cash Cow for Investors, a Headache for Taxpayers

By dianeravitch
January 7, 2020 //
12

During the Clinton administration, Congress enacted a program called EB-5, which promised green cards to foreign investors who put their money into job-creating projects. One of those designated projects for foreign investors was charter schools. Give a lot of money, invest in charter school construction, get a green card.

The middle-men quickly figured out how to make this exchange pay off in profits.

Example: a charter school in North Carolina that won $3 million from foreign investors (six green cards), but has accumulated staggering debt.

The Center for Immigration Studies tells this sordid tale:

We have suggested in the past that the combination of the loosely run charter school movement with the loosely managed EB-5 immigrant investor program shows every sign of being a disaster for everyone involved(students, teachers, and taxpayers) — except for the middlemen.

They usually do just fine, thank you.

We have been following, among others, the case of one specific charter school in the suburbs of Charlotte, N.C., where until recently the state government has been, at the very least, more lax than most states in its supervision of charter schools.

This is a school in which six (probably Chinese) aliens have invested $500,000 each in the hopes of getting a family-sized set of green cards through the Homeland Security-managed EB-5 program. It is the Lakeside Preparatory Academy in Cornelius, N.C., sometimes known as the Lakeside Charter Academy, and as Thunderbird Preparatory Academy, Inc.

Financial Background. The struggling school opened a few years ago with four financial handicaps:

  • As we recorded in some detail, the campus had been sold, and resold and resold, apparently never at arms’ length, among Utah-based firms, some with the same postal address, so that several middlemen made major profits as its paper value moved up from $1.3 million to $9.5 million — despite a real estate assessment, for tax purposes, of $3.3 million (there was also a couple of million dollars worth of remodeling done during this time);
  • Somewhere along the way, the campus’ landlords collected $3 million from the alien investors which helped underwrite the aforementioned profits;
  • There was a falling-out among the middlemen that resulted in the school accepting a $450,000 judgment against it, a sum it had to borrow; and
  • Much of this debt remains, and is subject to a 20 percent interest rate (public school debt rarely exceeds 2 percent or 3 percent).

Bear in mind that the campus is owned by a for-profit entity in Utah, which had the advantage of the EB-5 funding; the school itself, though apparently controlled by the landlord, is a non-profit entity, and receives tax moneys for the education it provides.

In this dismal setting, a recent audit found that the school lost $103,875 in the 2017-2018 school year, and then a loss of $292,463 in the more recent 2018-2019 school year. The most recent loss occurred while the school reported a gross income of $983,091, down from a gross of $1,252,807 the prior year. So the gross was falling and the loss rising. At the end of the last school year, the cumulative loss was $363,471.

The Prospect of Bankruptcy. If one reads the audit carefully — what follows is not stressed anywhere — one finds that during the most recent school year the school paid the Utah landlords only some $23,000 in rent, and that in its current year it is obligated to pay 25 percent of its gross or, if the experience of the most recent year is to continue, $246,522, or about $223,000 more in rent than the previous year, which, if income and expenses remain the same, would suggest a loss in the current year of well over $500,000.

This would mean that the school went from about $100,000 in losses, to about $300,000 in losses the most recent school year, to more than $500,000 in losses for the current year.

Given those prospects, how in the world will the EB-5 investors get their money back?

The True Numbers. What we have reported above reflects the most recent audit by Rives & Associates, a North Carolina CPA firm. Local critics of the audit say that even these grim numbers do not reflect the dire state of the school.

We have a copy of an invoice, for example, that shows that the non-profit school owed the for-profit landlord (Lakeside Charter Holdings LLC) $1,720,503 at the end of the 2018-2019 school year; the date that debt is due is not shown, this debt is about double the school’s entire income for that year, and it apparently is not recorded in this audit. What we do see, on p. 14 of the audit is this, perhaps Delphic, statement: “Some liabilities, including bonds payable and accrued interest, are not due and payable in the current period and therefore are not reported in the funds.”

So, discounting a bit of auditing sleight of hand, the true debt of the school — with about 100 pupils — is well over $2 million!

It may well be in the interest of the landlord, and of the EB-5 middlemen, to seek to hide the true level of the school’s debt.

With all this in mind, EB-5 investors should look carefully at the proposed investments, and they should look at least twice if a charter school is involved.

The EB-5 program calls for 10 new jobs to be created by each $500,000 investment; since charter schools do not create jobs (they just take them away from the public schools), it is hard to agree with the underlying DHS decision to accept any charter school investment as appropriate in the EB-5 program.

One can only hope that the taxpayers will not be forced to bail out this little school.

Categories Accountability, Charter Schools, Education Industry, Funding, Hoax, North Carolina, Privatization
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