Nonprofit Charters Turn Taxes into Profits for Board Members

Yesterday the Economic Policy Institute published a stunning new report that examines Rocketship Charter Schools and the financial backers tied to the success of the Rocketship chain of schools.  The report’s author is political economist Gordon Lafer, who examines Rocketship Charter Schools in the context of Wisconsin, where corporate lobbies such as the Wisconsin Policy Research Institute, a member of the far-right State Policy Network, working together with the American Legislative Exchange Council, have supported recent legislative efforts to privatize public schools in Milwaukee.   While these advocates did not succeed in the recently concluded Wisconsin legislative session, Lafer warns, “Nevertheless, the more ambitious proposals will likely remain at the core of Wisconsin’s debates over education policy, and legislative leaders have made clear their desire to revisit them in next year’s session.”

Why should efforts to privatize schools in Wisconsin matter to you and me?  The corporate lobbies and investors working to privatize public schools are active in your state and mine just as they are in Wisconsin.  Vouchers, for example, began in Milwaukee over 20 years ago.

Lafer’s focus in the new report is the Rocketship chain of charter schools, launched originally in California by promoters who intend to expand into Wisconsin and other states.  The Rocketship charter chain uses “‘blended learning,” which substitutes computers for teachers for part of each day, thereby permitting far larger classes.  According to Lafer, “The profit margins of ‘blended learning’ schools—which split students’ days between in-person and online instruction—aren’t as high as those of entirely virtual schools, but they may be the next best thing. For this reason, investment banks, hedge funds, and venture capital firms have increasingly looked to ‘blended learning’ as a preferred model for urban school districts.”  Rocketship’s philosophy incorporates four principles: replacing teachers with computers for part of the day, relying on young and inexpensive teachers, narrowing the curriculum to math and reading, and focusing on preparing students for standardized tests.

This is a rather long, in-depth report about school privatization in Wisconsin, not only the influence of ALEC and the Wisconsin Policy Research Institute, but also the role of the business community including the Metropolitan Milwaukee Association of Commerce.  Most fascinating to me, however, is Lafer’s documentation of the power behind the development of Rocketship’s “blended learning” model and the not-for-profit’s plans for rapid expansion.  “While Rocketship has realized significant financial growth over its short lifetime—from 2010 through 2013, the company’s assets increased by over 600 percent, from $2.2 million to $15.8 million—the schools’ academic achievements, even by their own measures, have not followed the same trajectory.”  Rocketship charters’ standardized test scores “show significant declines in academic performance,” which is perhaps why Rocketship continues to adjust its approach to “blended learning” while Rocketship has never suggested eliminating the on-line curriculum altogether.  According to Lafer, Rocketship’s promotion of large classes (a ratio of fifty students per teacher at one point), whose disadvantages are supposedly offset through on-line learning, enables the company to spend far more on administration than traditional public schools.  Rocketship has been investing a sizeable part of its administrative costs into future growth and expansion.

Another prime reason for Rocketship’s commitment to on-line learning is the charter network’s business partnership with its own for-profit providers of curricula.  “Rocketship Education is a nonprofit company.  However, its operational model blurs the distinction between for-profit and nonprofit businesses.  At the heart of what makes Rocketship different from other schools is online instruction—often conducted using licensed software applications supplied by for-profit vendors.”  Reed Hastings, CEO of Netflix, and venture-capitalist John Doerr both sit on Rocketship’s Board, but they are at the same time primary investors in DreamBox Learning, a for-profit company that provides the math curriculum used by Rocketship.  “Thus, Hastings and Doerr help fund the nonprofit Rocketship chain, which contracts with a for-profit company they partially own…,”  although it is impossible to learn the size of Doerr and Hastings’ profits because DreamBox is privately held. That the DreamBox math curriculum has been rated by the U.S. Department of Education as producing “no discernible effects on mathematics achievement for elementary school students,” has not undermined Rocketship’s loyalty to DreamBox.

Rocketship also buys the services of Zeal software, a for-profit company founded by Rocketship’s (now retired) founder, John Danner.  Lafer concludes: “As with DreamBox, then, Rocketship’s relationship with Zeal features a nonprofit school serving as a testing ground and customer base for personally and financially connected for-profit companies.  Rocketship’s use of both DreamBox and Zeal software would likely be prohibited as illegal conflicts of interest if they took place in a public school system.  If a board member proposed that a school contract with a vendor with whom he or she had a personal financial relationship, this would be rejected out of hand.  But Rocketship is not bound to uphold the same standard of ethics demanded of public officials, and it does not.”

While public regulation is missing in the charter sector, it is important to remember, however, that the dollars filling the coffers of DreamBox and Zeal are from taxes.

2 thoughts on “Nonprofit Charters Turn Taxes into Profits for Board Members

  1. Pingback: Report Decries Unregulated Charters: Arne Duncan Should Crack Down | janresseger

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