What’s wrong with managing a For Profit charter school?

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The House Appropriations Committee caused a stir with a small paragraph in its 198-page health, labor and education spending bill.

SECOND. 314. None of the funds made available by this or any other law may be allocated to a charter school that contracts with a for-profit entity to operate, supervise or manage the activities of the school.

The presence of for-profit operators in the charter school sector has long been a concern of critics, with nearly all states banning a strictly for-profit charter school. But charter school operators have long worked a variety of loopholes, keeping the industry highly profitable, and most of those loopholes involve a not-for-profit charter school hiring a for-profit company.

We’re not talking about outsourcing services like school buses or cafeteria management; these types of secondary functions are often contracted out in both charter schools and public schools, but they are not the primary activities of the school.

The bill is clear and precise on targeting for-profit entities that “operate, supervise or manage the activities of the school”.

Sometimes the money comes from the real estate side of the charter business. There is a company specializing in charter schools and real estate. In some states, the government will help fund a real estate development if it is a charter school, and in general, developers have noted an abundance of cash. However, as one chartered home loan bond financier told the Wall Street Journal, “There’s a ton of capital going into the industry. The question is: does he know what he is doing? Many states have found a problem with charters which also lease their buildings to their own owners.

An example of a real estate operator making money on the real estate side was Carl Paladino of Buffalo. Paladino has worked with charter operators in reversing properties and entering into “sale and leaseback” agreements, as detailed in a report from the Alliance for Quality Education. Paladino has not only benefited from schools, but investments in surrounding properties. He wasn’t shy about it all. On the subject of making money working with charters, the Buffalo City News quoted him: “If I didn’t do that, I would be a fucking idiot.”

While many charters can outsource critical functions such as curriculum, extreme cases are what are called “sweep” contracts, in which the charter management organization (CMO) fully manages. school in exchange for 95% of the income generated. in. A report the Network for Public Education released earlier this year details many creative ways in which marketing managers generate profits. CMOs come in a variety of sizes, from chain operations running many schools to mom-and-pop CMOs that run a single school.

These arrangements can become convoluted. In Florida, a charter founder regularly stepped down from the board to authorize his school’s payments to himself, and while the school struggled to pay teachers, she was paying her business tens of thousands. of dollars for the license of the school logo.

One could argue that the ban on for-profit charters has actually made matters worse and that what would have been clear and open attempts to profit from a school are now hidden behind multiple operational layers.

But all that still leaves a simple question: what is wrong with having charter schools run, directly or indirectly, for profit?

Certainly, the presence of so much money in a largely unregulated industry is an invitation to bad actors, and while most charter school operators are ethical and honest, a worrying number of fraudsters are drawn to the industry. . And it’s important to remember that the money at stake here is taxpayer money.

Yet taxpayers often find that their money has become not just a profit, but an asset to someone else. This report from the National Education Policy Center explains how the public can end up paying for a building – more than once – and that building is still privately owned.

The battle for property can be a problem for the charter school itself. As this Ohio Supreme Court decision shows, the CMO may very well own all the equipment and resources in the classroom; If the CMO terminates or terminates their contract, the school they served may become an empty shell.

This problem highlights one of the other problems in the hidden world of the for-profit charter; these organizations are businesses and make decisions for business, not educational reasons. As Carl Paladino said, if they’re not making a profit, they’re fools. Every year, many stories of students and families are left adrift, sometimes in the middle of the year, because the company operating their school decided that the business case for continuing to operate was too weak. When your favorite restaurant or department store closes it can be upsetting, but when your child’s school closes it is disruptive and damaging. For-profit businesses cannot provide the kind of stability families need and deserve.

The basic problem with for-profit charters is simple: the more money they spend to meet the needs of students, the less profit they keep. And because the income stream is mostly fixed and unchanging, the only way to “generate” more profit is to spend less of that income on students. For-profit charter management will naturally tend towards an adversarial relationship with the people it is meant to serve and will face an endless struggle over how to measure success.

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