Wednesday, November 10, 2010

The Big Bucks in School Privatization (f/k/a Charter Schools)

It's been interesting to me to see the intense interest that some very wealth Americans have been giving to the charter school movement. Some (e.g., Bill Gates) appear to be genuinely interested in school reform, others (e.g., Mark Zuckerberg) seem interested in improving their public image, and many may see it as a fashionable social activity. But when hedge fund managers start sniffing around the perimeter you know that there has to be big money involved... somehow.

Well, here's an example of the big money.
Wealthy investors and major banks have been making windfall profits by using a little-known federal tax break to finance new charter-school construction.

The program, the New Markets Tax Credit, is so lucrative that a lender who uses it can almost double his money in seven years.
The article explains how some charter schools have seen their rent skyrocket, but with little interest from regulators or state auditors. And the charters aren't making much noise about it, even as rent doubles or triples over a couple of years because.... at least according to the article, it appears that they're in bed with the companies that are building the properties and leasing them to the schools.
In Albany, which boasts the state's highest percentage of charter school enrollments, a nonprofit called the Brighter Choice Foundation has employed the New Markets Tax Credit to arrange private financing for five of the city's nine charter schools.

But many of those same schools are now straining to pay escalating rents, which are going toward the debt service that Brighter Choice incurred during construction.

The Henry Johnson Charter School, for example, saw the rent for its 31,000-square-foot building skyrocket from $170,000 in 2008 to $560,000 last year.

The Albany Community School's rent jumped from $195,000 to $350,000.

Green Tech High Charter School rents went from $443,000 to $487,000....

And key officers of Albany's charter school boards are themselves board members, employees or former employees of the Brighter Choice Foundation or its affiliates.

Christian Bender, for example, executive director of the foundation, is chairman or vice chairman of four of the Albany charters.
So is this catching anybody's attention?
No wonder JPMorgan Chase announced this week it was creating a new $325 million pool to invest in charter schools and take advantage of the New Markets Tax Credit.
Who else is seeing opportunity here?
The Local Initiatives Support Corporation (LISC) and The Goldman Sachs Group Inc. today announced the formation of a $25 million charter school facility that will finance the development of approximately 16 charter schools over the next two years.

The Goldman Sachs Charter School Loan Facility will be capitalized by Goldman Sachs and credit-enhanced by funds awarded by the US Department of Education to LISC, which will also manage the facility and its lending program. LISC currently supports 130 charter schools nationwide. This facility will be focused on the greater New York City and New Jersey areas. In total, the fund is expected to leverage approximately $100 million in additional capital to support high-quality charter school facilities.
How might more money be squeezed out of charter schools? How about allowing them to operate as for-profit businesses (in the model of the University of Phoenix and Kaplan)? The AEI's on the case:
The Obama administration has been particularly guilty on this count, enthusiastically championing charter-school expansion even as its Department of Education radiates hostility toward for-profits in K-12 and higher education. The result is entrenched funding arrangements, policies, and political currents that stifle for-profit operators — organizations such as National Heritage Academies, which operates 67 charter schools in eight states, or EdisonLearning, which operates schools and provides supplemental education services across the United States and overseas. If choice-based reform is to yield more than boutique solutions, for-profits are a critical piece of the puzzle.
Meanwhile, even as they admit that charter schools are effectively doing nothing to improve school performance, with the help of their mainstream media stenographers they hope to create a funding structure that shifts more money to charters and out of the public system - in a manner that appears designed to benefit large commercial ventures:
A real marketplace in education, he suggests, probably wouldn’t fund schools directly at all. It would only fund students, tying a school’s budget to the number of children seeking to enroll. If there are 150 applicants for a charter school, they should all bring their funding with them — and take it away from the failing schools they’re trying to escape.
A "real marketplace" in which you defund the public school in favor of a for-profit charter school that doesn't actually get better results, but pays a lot of rent to the property investors who sit on its board, operates a large number of schools so that it can justify CEO-sized salaries to its management, doesn't offer amenities such as music, gym, art, libraries (all a "waste of money"), avoids public oversight, and leaves special education to what's left of the public school system. And if the public becomes concerned that you're scrapping the public system in favor of something that may not be better - may in fact be worse - and that these corporations are interested not only in the inner city but in extending their reach into successful school districts? Lecture them that results don't matter - what counts is "freedom of choice". Oops, sorry Ross - I mean being "Free to Choose".

As I've indicates, my initial hope for the charter school movement was that it would bring about more choice for parents. I would like to see charters offer parents a real choice of educational model with less focus on standardized testing. But with few exceptions the charter school movement has not lived up to that promise and, sorry, exceptions do not prove the rule. The charter schools that show the most promise in the inner city receive grants and other subsidies that expand their budgets well beyond the standard level of funding per pupil, while advancing an educational model that would be quickly and firmly rejected by most middle class parents. We're to extrapolate from that limited success to believe that if those charters not only operated without that additional grant money, but were operated by corporations that were also pulling out 10-20% of the school's money to satisfy investors and shareholders on top of oversized rents, we would be happy with the results? Why stop there? Let's push the argument right over the top.
And a world where more parents and kids have access to a fraction of the educational choices available to, say, Sasha and Malia Obama seems a like a better world by definition, no matter what happens to America’s average S.A.T. score.
First, while it's nice to pretend that we're talking about average SAT scores, the larger discussion of charter schools involves bringing children up to grade level in math and reading. We're not talking about a trade-off between "history, science, foreign languages, classic literature, mathematics and English composition" and "test scores" that a typical parent would find acceptable. If you're lagging two or three years behind grade level, it's absurd to pretend you can simultaneously hold an advantage in mathematics, literature and composition. Second, the school attended by the President's children is not in any way average, nor would the public have any interest in funding a school at @$35,000 per student per year. If it were, we wouldn't be having this discussion. Third, the school is a non-profit. As are most of the private schools to which those with the money to choose presently send their children.

Stop and think about that for a minute. If you're wealthy, your kids don't go to the University of Phoenix, and your kids certainly won't be attending the "charter school" equivalent of the University of Phoenix. It's quaint to pretend that if only corporations are permitted to pull profits out of the per-student fees allocated to charters we'll suddenly have thousands of schools across the country offering rich curricula and pedagogical choices. But if you look at the for-profit college industry you can see what you actually get - bottom feeders. No kidding, the advocates of that system are encouraging people to ignore test scores.

As for the conceit that "costs of educating kids who took vouchers were lower than for kids who stayed in the existing public schools", well, no kidding. Because public schools offer libraries (and librarians), sports programs, gymnasiums, school cafeterias, and other amenities, the cost of providing "alternative schools" for students with behavioral problems, as well as bearing the cost of medical support and special education services for special needs students even if those students are in charter schools and private schools. The money paid to charters reflects the fact that they don't offer that full set of services - not even close.

Yes, by all means, come up with systems that create true choice for parents, and let them pick a program that suits their child. But let's not pretend that the monied interests who are hungrily eyeing public school dollars are any more interested in education than private prisons are in reducing recidivism. Those who truly want to help charters offer a wider set of choices can follow the model of Clonlara, and develop curricula and teaching methods that can be employed by interested charter schools. If they do a good job, they should even be able to sell such a curriculum at a profit. And those who truly want to help kids can do so through smaller nonprofits that remain answerable to parents and the community.

Let's not offer up the elementary school equivalent of the University of Phoenix, and defend it by claiming that we're giving its students "a fraction of the educational choices available to" parents who can afford the elementary school equivalent of Yale.


  1. There are literally hundreds of entities that make money selling goods and services to schools across the country. In addition, teachers unions syphon off hundreds of millions of dollars in public funds that end up in the hands of Democratic candidates in statehouse and at the federal level. These statements are fact and yet you are focusing on the big bad corporation, the left wing boogie man.

    This line of argumentation is the very essence of the the left wing hypocrisy when it comes to school choice. Why isn't it a good thing f a for-profit company can educate a child better than the failing school they have the misfortune of living in the attendance area of? Liberals want to keep kids in failing, union dominated schools, no matter what. Even if the kid suffers. That is insane.

  2. You appear to be affiliated with an organization that runs about 60 charter schools - so why did you post anonymously? Didn't you think that would be relevant information?

    Your comment is entirely misplaced.

    First, you are flat-out wrong that "teachers unions syphon off hundreds of millions of dollars in public funds". In those states that allow teachers unions, they are funded by dues out of teachers' paychecks. In many of those states union membership is voluntary ("right to work" states), so if a teacher doesn't want to pay dues to the union the teacher doesn't have to do so. And some of the worst schools in the nation are in states that don't allow teachers unions, or operate as non-union private and charter schools. You may impress your friends at parties with horror stories of the union bugbear, but it doesn't work very well when people know the facts.

    Second, had you taken the time to read my post you would already know that I have nothing against for-profit corporations. My objection was to those who admit that, on the whole, charter schools have brought next to nothing to the table, that they have been overhyped and oversold, but then turn around and argue that we should stop looking at whether charters improve student performance, stop looking at whether they offer any innovation or increase in quality, and divert more public funds to charters - and allow them to become private, despite the extraordinarily poor performance of for-profits in the field of higher education.

    I have absolutely no problem with for-profit schools - provided they perform. Unlike you, though, I won't drink the Kool-aid and take a facts-be-damned approach to the issue. I am looking at what is presently going on, and the track record of for-profit education in this country, and commenting on the facts. If you're comfortable with the documented instances in which board members of charter schools are in bed with board members of builders, such that the latter can siphon out of a school budget what in an arm's-lenght transaction would be extortionate rent, that's between you and your conscience. But again, that's fact.

    So pray tell, why am I to believe that if charters in their present form - even larger, corporate charters like the one you appear to work for - have brought little to the table beyond hype, that the charters that perform well as compared to matched public schools (ignoring issues of selectivity) are both non-profit and the recipients of substantial grants in addition to the public money they receive, and "for profit" colleges have succeeded in the marketplace by offering an inferior product and exploiting public subsidies, allowing corporations to siphon funds out of charter schools as "profits" will do anything to improve schools?

    And if I am to believe that, pray tell, why are the advocates of for-profit charters arguing that we need to stop talking about student performance and accountability measures for charter schools, even as they advocate their continued use in public schools?

  3. I should add, I made my original post under the impression that you work for a nonprofit charter school outfit. On deeper review the organization you appear to work for is in fact a for-profit outfit.

    If that's the case, though, why didn't you sing the praises of your outfit, rather than launching into an angry, knee-jerk tirade against accountability? Do you offer art, music, gymnasiums, support for special education students, cafeterias, etc.? Do you have a highly qualified teacher, or at least a certified teacher, in every classroom? If you're not cutting corners to turn a profit, why so defensive?

  4. In privatizer-speak, pay earned by teachers = public money; unions supported by that money shouldn't be spent on lobbying; but public money received by for-profit charters can be used to pay big salaries, to give dividends to shareholders, and to pay lobbyists. And you're a "hypocrite" if you say otherwise.


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