Ohio Legislators Fail—So Far—to Block Investigation of Notorious Online Charter Schools

Ohio is a state with huge Republican majorities—protected by gerrymandering—in both houses of the legislature, a Republican governor and an elected Republican supreme court. Few elections in the next few years will be contested; everybody is very safe.  Hence there are virtually no checks and balances.

Despite all this, the state has been moving by millimeters toward at least the most minimal regulation of an out-of-control charter school sector.  Most notably there has come a realization that the notorious online charter school magnates—people who have been buying the legislature for years—must somehow be stopped.  This is partly due to the relentless daily e-mail blasts from Bill Phillis, the former assistant state superintendent who led the Ohio Coalition for Equity and Adequacy of School Funding to bring the school funding case, DeRolph v. Ohio, and win four times at the Ohio Supreme Court.  And it is because Ohio’s major newspapers have refused to let this issue go—Patrick O’Donnell, the Cleveland Plain Dealer‘s education reporter and Jim Siegel and Catherine Candisky at the Columbus Dispatch—along with the editorial boards at the Plain Dealer, the Dispatch, the Akron Beacon-Journal and other papers.

Brent Larkin, the Plain Dealer‘s editorial director from 1991 until he retired in 2009, writes a Sunday column in which for a year he has been eviscerating the legislature for sending hundreds of millions of dollars to unscrupulous charter school entrepreneurs and thereby robbing the state’s public schools and our children.  Larkin did it again on Sunday:

“The biggest scandal in Ohio history is knocking on the Statehouse door… It’s about pouring hundreds of millions of dollars a year down a rat hole and selling out tens of thousands of children. Every penny of this massive waste of money would come straight from your pocket.  Every child who would get kicked in the teeth might as well be your neighbor. The villains who want to perpetuate this swindle are the Republicans who run the Ohio General Assembly.”

Here is what’s been happening recently as Bill Lager, operator of the notorious Electronic Classroom of Tomorrow (ECOT) and his lobbyist Neil Clark have tried to pull every string to keep the Ohio Department of Education from auditing the 15,000-student school for what seem to be serious problems with its reporting of student attendance.  In a preliminary audit this spring, the state’s Department of Education discovered that ECOT’s students were logging on to their computers for an average of only an hour a day, even though the state has been paying the online school for 15,000 full time students.  (This blog has covered the long-running ECOT scandal here.)  The legislature passed a new law last winter that would penalize the agencies that sponsor charter schools when these authorizers neglect their oversight responsibilities, but ECOT and its attorneys have filed a lawsuit to block increased state oversight of the e-schools and their sponsors.  In late August at a legislative committee hearing, legislators friendly to ECOT—contending that the Department of Education has tried to use a new law retroactively—blocked a rule that would allow the Department’s investigation of attendance records to move forward.

Jim Siegel of the Columbus Dispatch quotes Rep. Greta Johnson, D-Akron, as she responded to the committee’s action to delay oversight of the notorious e-schools: “This is a clear case of Republican charter school industry allies doing everything in their power to derail, disrupt, and delay new reforms that would help hold charter schools to a reasonable standard of achievement.”  State Senator Bill Coley, R-West Chester (suburban Cincinnati) labeled the Department of Education’s attempt to impose its new rule to investigate the number of phantom students at the online charters “the height of arrogance.”

Siegel explains the goal of the delay tactics—to sink new oversight rules into the morass of committee obfuscation: “The rule isn’t dead, but it is going back to the Common Sense Initiative office, which determines if agency rules have an unusually detrimental impact on businesses… The CSI will spend up to 30 days reviewing the rule again.  Then the clock restarts on the JCARR process, which takes at least another 30 days.”

Larkin isn’t impressed with the maneuvering of Ohio’s legislative leaders: “(T)he legislature continues to whittle away at the reforms it enacted less than a year ago—and make no mistake, that’s the intent of House Speaker Cliff Rosenberger and Senate President Keith Faber…”  Larkin explains: “At the heart of it is the legislature’s obsession with protecting online charters, notably the Electronic Classroom of Tomorrow (ECOT), Ohio’s largest online school, with nearly 15,000 students.  William Lager, ECOT’s founder, has been a huge contributor to GOP legislators’ campaigns.  And, as I’ve written repeatedly, this is a legislature run by people who care a lot more about contributions than they do about kids. But the people at the Ohio Department of Education are old-fashioned.  Unlike many Republican legislators, they think students attending online schools should spend time on the computer, doing school work.”

Larkin describes ECOT’s response to increased state oversight of its lucrative operations: “So when the state asked a Franklin County court to order ECOT to turn over attendance records as part of an effort to determine whether students are actually receiving the 920 annual hours of education that the state requires, ECOT fought back—with a vengeance.  ECOT now accuses the state of ‘criminal misconduct’ and ‘incompetence’…. School spokesman Neil Clark argues passionately that ODE has gone ‘way overboard’ in its attempts to harm ECOT.”

Like the Beacon Journal‘s editorial board last week, Larkin begs Governor John Kasich to find a way to intervene to stop the legislature’s capitulation to William Lager’s demands—if for no other reason than to save the governor’s own reputation.

And after Larkin’s commentary was published online earlier in the week, he revised it for the Sunday newspaper to give the governor and State School Superintendent Paolo DeMario credit for moving forward with the oversight of the online schools: “On Thursday, State Education Superintendent Paolo DeMaria brushed aside legislative attempts to prevent his department from continuing charter school sponsor evaluations, saying existing rules allow the department to proceed as planned. DeMaria’s decision to prevent legislators from undermining the charter evaluation process was endorsed by the governor… Good for him.”

Ohio Supreme Court Rules Private Charter School Management Firm Owns Public Assets

Yesterday Ohio’s elected, Republican-dominated supreme court ruled that a privately held, for-profit charter management company, White Hat Management, owns the equipment and assets of several White Hat Hope Academies and Life Skills Academies that had sought to sever ties with White Hat and hire a new management company to run the schools. White Hat is owned by Akron entrepreneur and Republican mega-donor David Brennan.  The boards of ten Hope and Life Skills Academies had filed a lawsuit to recover assets purchased with public dollars that White Hat said its contract awarded to the management company.

The Columbus Dispatch describes Justice Judith Ann Lanzinger’s decision for the majority: “that charter school operators perform a governmental function and establish a fiduciary relationship with the schools they manage in purchasing school equipment, contrary to the position taken by White Hat.”  The Dispatch continues: “Current law largely does not address the duties of school operators and does not restrict the provisions of contracts between operators and charter schools, Lanzinger wrote.”

Over ten years, the Dispatch reports, the state paid approximately $100 million to the ten schools in Cleveland and Akron.  All the schools contracted with White Hat in 2005, agreeing to turn over 95 percent of each school’s state funding to pay teacher salaries, building rentals, utilities, and other expenses, an agreement known as a “sweeps contract” in which the management company receives virtually all of the school’s revenue and handles all of its operations with little day-to-day oversight by the school’s board.  The Akron Beacon Journal explains: “The dispute arose when the school boards and White Hat parted ways.  The school boards wanted to change management companies, but White Hat said that by virtue of its contract, it owned the assets of the schools, and the boards would need to move to a new location and acquire their own equipment and supplies, or buy the assets of the schools from White Hat.  The schools argued that the assets, purchased with public money, did not belong to White Hat.”

It is not surprising that the boards of the schools failed to negotiate a careful, tough contract with the management company to protect the schools’ assets for the schools.  It has been known for years that White Hat played an active role in helping recruit members of the boards of its schools—board members whose job was supposedly to oversee the performance of the management company.  In March of 2014, Doug Livingston reported for the Akron Beacon Journal that several board members of White Hat schools admitted openly that they had been recruited by White Hat Management to sit on charter school boards, despite that the IRS expects “a bright line between the charter-school governing board and the management company hired to run the school.  The company should not create the board or recruit its members, and any evidence of boilerplate contracts from one school to the next suggests the company many be in control.”  One board member told the Beacon Journal that White Hat had asked her to serve on the boards of four of its schools.

Stephen Dyer of Innovation Ohio explains that Justice Lanzinger received a $5,000 campaign donation from David Brennan in 2004.  Chief Justice Maureen O’Connor received campaign donations from Brennan in 2002, 2008, and 2010, totaling $11,900.  Justice Judith French received a donation last year from Brennan of $7,200.  Dyer notes that Justice Terrence O’Donnell, who has received $15,000 from Brennan over the years, recused himself.  Justice Paul Pfeiffer has not accepted a campaign donation from Brennan since the early 1990s.

Pfeiffer was the lone Republican dissenter from yesterday’s majority opinion, and he made his independence explicit: “The contracts in this case are plainly and obviously unconscionable.  The contracts require that after the public pays to buy those materials for a public use, the public must then pay the companies if it wants to retain ownership of the materials.  This contract term is not merely unwise as the opinion would have us believe; it is extremely unfair, so unfair, in fact, as to be unconscionable.  The contract term is so one-sided that we should refuse to enforce it.”  Justice William O’Neill, the court’s only Democrat, calls White Hat’s contracts with its charter schools, “a fraudulent conversion of public funds into personal profit.”

Two weeks ago, Brent Larkin, the Plain Dealer‘s editorial director from 1991 until his retirement in 2009, commented on the pending decision of the state supreme court in the White Hat Case: “White Hat is owned by Akron’s David Brennan.  He and William Lager, owner of the Columbus-based Electronic Classroom of Tomorrow, who have made millions by taking our money and not educating kids, have funneled more than $6 million into Republican candidates and causes.” “Operators of Ohio’s growing number of lousy charter schools are one win away from hitting a trifecta.  They’ve got the legislature in their hip pocket and a governor who is an inexplicable and inexcusable no-show on the issue.  Two down, one to go: The payoff for controlling the judiciary won’t be millions.  It’ll be tens, maybe hundreds, of millions. And every single penny of it will come from your pocket.  Only in Ohio could charter school operators come this close to essentially having their way with all three branches of government.”

Yesterday the Ohio Supreme Court confirmed Larkin’s fears.