We Need a Massive National Campaign to Protest School Privatization

Fighting the privatization of public education feels like an overwhelming challenge. Partly, because all kinds of vouchers (plain old vouchers, tuition tax credits, and education savings accounts) are set up and funded by state legislatures, and charter schools are also set up and controlled (and too frequently poorly regulated) by state law,  the battle is fragmented from place to place.  Except for the money allocated every year out of the federal Charter Schools Program, begun in 1994 during the Clinton administration, school privatization is not driven by federal policy that affects all of us across the United States.  What happens in California and Arizona doesn’t have any effect on the public schools of Ohio where I live.  So why should I care about what happens in another state?

Then there is the question of why the problem of school privatization matters so much. While much of the research and advocacy materials about the impact of school privatization inspects the quality of the privatized school alternatives, I  believe that what ought to concern us most is the amount of money being driven out of the public schools that serve the mass of our children. The evidence shows that school funding in many states has fallen very significantly since the Great Recession in 2008 and that school privatization has contributed to that problem.

In his new book, Schoolhouse Burning, Derek Black,traces, for example, how funding charter schools depleted public school funding in Ohio during and after the Great Recession in 2008: “While states were reducing their financial commitment to public schools, they were pumping enormous new resources into charters and vouchers—and making the policy environment for these alternatives more favorable. Charter schools, unlike traditional public schools, did not struggle during the recession. Their state and federal funding skyrocketed. Too often, financial shortfalls in public school districts were the direct result of pro-charter school policies… Ohio charter schools received substantial funding increases every year between 2008 and 2015. While public schools received increases in a few of those years, they were modest at best—in one instance just one-tenth the size of the charter school increase. In 2013-14, Ohio school districts, on average, went $256 in the hole for every student who went to a charter.  Some went deeper in the red.  Nine districts sent charters between 20 percent and 65 percent more money than they received from the state… All told, charter schools received $7,189 per pupil in state funding.  Public school districts received less than half that amount.” (Schoolhouse Burning, pp. 35-36)

Once voucher and charter programs are well established, their proponents across the state legislatures ensure that they grow and expand.  Earlier this month, Steve Dyer showed how Ohio’s charter school program has continued to grow since Derek Black researched his book: “According to the latest Charter School funding report form the Ohio Department of Education, we are set to spend $999.7 million” on charter schools this year. And it isn’t because more students are attending charter schools: “It’s because Ohio politicians have continued bumping up the per pupil amounts flowing to charters. So now kids in Ohio charters, on average, get nearly $8,500  per pupil in state aid—about double what that same kid would receive in a local public school. As I’ve recounted for more than a decade, because of the way we fund charters (through the local school district deduction), that means that local property taxes have to subsidize charter school kids. It doesn’t take a Ph.D in Rocket Science to understand that, if you’re removing $8,500 in state aid from a district for a kid the district was only getting about half of that from the state to educate, the difference has to come from somewhere. This year, that subsidy is slated to be $148 million.  And in some districts, it’s really high. Like in Columbus where $62 million in local revenue has to subsidize the state funding deduction for charters.”

Three major reports published in the past two months confirm that when states set up private school tuition voucher programs and charter school programs, these privatized alternatives compete with public schools for dollars from state budgets.

  • In a February report for In the Public Interest, political economist Gordon Lafer documents that, “California is overpaying for online charter schools that are failing students.”  Online charters are a rapidly growing education sector in California: “In 2018-19, nearly 175,000 California students were enrolled in nonclassroom-based charter schools, representing 27 percent of all charter school students in the state… In 2014, just 18 percent of newly approved charter schools were nonclassroom-based; by 2019 that figure had reached 43 percent.  But this sector has also been plagued with repeated scandals and poor educational performance.”  Despite the passage of new regulation to prevent abuses: “Following a new stet of scandals that saw one of the largest charter school chains charged with defrauding the state of nearly $50 million, legislators imposed a two-year moratorium on authorizing new nonclassroom-based charter schools…. The moratorium expires at the end of 2021.”  Here is the primary problem identified in Lafer’s report: “It is common sense that the cost of operating an online charter school must be less than that of running a brick-and-mortar school. Yet California’s online charter schools, with very few exceptions, receive the same dollars per pupil as a physically existing school with classrooms, buses, a cafeteria, and maintenance and security staff. To the extent that funding for online charter schools exceeds the actual cost of operation, the government is wasting many millions of tax dollars that are desperately needed in school districts across the state.”
  • This week, the League of Women Voters of Florida released a shocking report on StepUpforStudents.org, a 20-year-old nonprofit, which has taken over administering all of that state’s voucher programs: “Step Up began with a mission to award vouchers to low-income students to attend private schools. It has grown to include vouchers… for students with special needs, students who have been bullied, students who are homeschooled, and students with reading difficulties… Step up for Students was created by venture capitalist John Kirtley in 2002, one year after Governor Jeb Bush’s administration established the first Florida Tax Credit voucher program…. By 2020, Step Up had total net assets of over a half billion dollars… Step Up is one of two Scholarship Funding Organizations authorized to administer five school choice scholarship programs in Florida. Step Up administers 99% of the contributions, while AAA Scholarship Foundation handles the remaining 1%.

Here is how the tax credit program administered by Step UP works: “Step Up receives donations from corporations who receive a dollar-for-dollar tax credit on corporate and certain sales taxes owed to the state of Florida. Billions of dollars have been diverted to Step Up instead of having been deposited into the General Revenue to operate state government, including public schools.  These tax diversions have been cleverly labeled as ‘donations.'”  Step Up not only administers the state’s voucher programs, but it also oversees the programs it administers: “The Florida Department of Education’s Office of School Choice cannot supervise a program of this magnitude. The task of supervising over 1,800 private schools and tracking individual vouchers given to parents is huge and varied. Where students enroll must be verified. Some schools report vouchers for students who are not enrolled. Some vouchers are awarded to students who do not meet the family income requirement for their voucher. In addition, some vouchers allow parents to purchase supplies and services for students. These individual purchases must be tracked. This is where Step Up has stepped in. The Department of Education has outsourced oversight functions to the same private agency that also awards the scholarships.”  The rest of the report lists questionable practices in Step Up’s program compliance monitoring, and explains further how so-called charitable donations in Florida are in this case merely a means of avoiding paying taxes.

  • Finally there is Chartered for Profit: The Hidden World of Charter Schools Operated for Financial Gain, the mammoth report from the Network for Public Education.  While only Arizona law permits the operation of for-profit charter schools, all the other states with charter school enabling legislation require the schools to be nonprofits. “However, those who wish to profit from charter schools have developed creative workarounds to evade state and federal laws. The for-profit management organization, commonly referred to as an EMO, finds individuals to create a nonprofit board. That board, which is appointed, not elected, enters into a contract with the for-profit to run the school. Some EMOs manage only one or two schools.  Others manage over ninety… Many operate using a ‘sweeps contract’ in which virtually all revenue, public and private, raised by the charter, is passed to the for-profit management corporation to run the school.  In other cases, the EMO contracts various services out to other for-profit provides, sometimes owned by the owners of the EMO… Whatever money is left over after the bills are paid can accumulate as profit.”

“In total we identified 1,237 charter schools that have contracts with for-profit organizations which control critical or complete operations of the schools, including management, personnel, and/or curriculum… While our research suggests that over 15 percent of all charter schools are operated for profit, the percentage of schools, however, belies the impact.  Based on our match of school names to federal 2018-2019 school year data, over 600,000 students are educated in charters run for profit…. Twenty-six states and the District of Columbia presently have charter schools operated by for-profit corporations… Most of the schools are located in four states—Michigan, Florida, Ohio and Arizona… Together, the seven largest national chains (Academica, National Heritage Academies, The Leona Group, K12Inc., Charter Schools USA, Pansophic Learning/ACCEL, and Pearson/Connections Academy manage 555 schools.  At least one of the big chains operates in twenty-five states and the District of Columbia.”

In a 2016 report published by the Economic Policy Institute, Rutgers University school finance expert, Bruce Baker showed how the expansion of charter schools destabilizes big city school districts: “(C)harters established within districts operate primarily in competition, not cooperation with their host, to serve a finite set of students and draw from a finite pool of resources. One might characterize this as a parasitic model… one in which the condition of the host is of little concern to any single charter operator. Such a model emerges because under most state charter laws, locally elected officials—boards of education—have limited control over charter school expansion within their boundaries, or over resources that must be dedicated to charter schools.”

Baker continues: “If we consider a specific geographic space, like a major urban center, operating under the reality of finite available resources (local, state, and federal revenues), the goal is to provide the best possible system for all children citywide….  Chartering, school choice, or market competition are not policy objectives in-and-of-themselves. They are merely policy alternatives—courses of policy action—toward achieving these broader goals and must be evaluated in this light. To the extent that charter expansion or any policy alternative increases inequity, introduces inefficiencies and redundancies, compromises financial stability, or introduces other objectionable distortions to the system, those costs must be weighed against expected benefits.”

Bruce Baker and Derek Black summarize long trends and the recent reports bring the discussion into the immediate present.  The enormous and obvious question is: what can be done to stop the theft of public tax dollars from the public schools that serve the mass of our children and adolescents in the United States?  According to the most recent, September 2019 School Choice in the United States Report from the National Center for Education Statistics, in 2016, 47.3 million students were enrolled in public schools, and 3 million students were enrolled in charter schools.  The same report concludes: “In fall 2015, some 5.8 million students (10.2 percent of all elementary and secondary students) were enrolled in private elementary and secondary schools.” Obviously not all of those private school students are paying for their private education with public tax vouchers of various kinds or with tuition tax credits, but clearly the number of students using vouchers pales compared to public school enrollment. Another National Assessment of Education Statistics report updates public school enrollment in 2020: “Total enrollment in public elementary and secondary schools increased from 47.2 million students to 50.7 million students between fall 2000 and fall 2017.”

Clearly the information is voluminous about the expense of school privatization and about widespread corruption.  I wonder why we who support our nation’s strong and historically significant system of public education are too shy to mount a massive campaign to oppose school privatization. It is understandable that we are reluctant to pit ourselves against our friends and neighbors who use privatized alternatives. But the cost has grown too high. We don’t need to personalize the attack.  Can we not stand against the consumerist marketplace and stand up for the social contract—for the public good—for the public schools that protect our children’s rights by law and ensure that schooling is available in every community across this nation? These programs operate state-by-state, but this is a national problem.

New Report Exposes Rip-Off of Tax Dollars by For-Profit Charter Management Companies

On Wednesday, the Network for Public Education released Chartered for Profit: The Hidden World of Charter Schools Operated for Financial Gain, a ground-breaking new report on what has become an old, old problem.

Charter schools have now been around since the early 1990s, and here in Ohio, at least, soon after David Brennan, Ohio’s school choice guy, helped Governor George Voinovich get the Cleveland Voucher Program going, Brennan switched his own business over to launching charter schools. He immediately realized that running for-profit charter schools would be far more lucrative. In 1998, Brennan launched White Hat Management, his for-profit charter management company.  He and his company helped launch charter schools and even choose board members to oversee them—to ensure that his company profited at public expense.  His network included the Hope Academy elementary schools and Life Skills Academy high schools, all of which White Hat managed under sweeps contracts, by which the schools turned over to White Hat more than 95 percent of their state funding, without any transparent reporting about spending for staff and equipment or the profits Brennan was raking off the top.

David Brennan died in 2018, but his for-profit empire did not die. The Network for Public Education’s new report shows how another entrepreneur acquired Brennan’s charter empire and expanded it. The new report also examines the operation of for-profit education management organizations across many states and explains why they are a serious threat: “We are in a time when our public schools are struggling to provide all children with the services they deserve during a national pandemic… Now more than ever, it is imperative that every tax dollar be directed to delivering those services. It is time to end chartering for profit and to ensure that children, not corporations, profit from our tax dollars.”

The new report locates where the for-profit charter school management companies are operating: “Based on our match of school names to federal 2018-2019 school year data, over 600,000 students are educated in charters run for profit that we identified, approximately eighteen percent of all students enrolled in charter schools. Twenty-six states and the District of Columbia presently have charter schools operated by for-profit corporations… Most of the schools are located in four states—Michigan, Florida, Ohio, and Arizona…. Together the seven largest national chains (Academica, National Heritage Academies, The Leona Group, K12Inc., Charter Schools USA, Pansophic Learning/ACCEL, and Pearson/Connections Academy) manage 555 schools.  At least one of the big chains operates in twenty-five states and the District of Columbia.”

The Network for Public Education explains that virtually all of the charter schools operating for profit are technically nonprofits whose boards hire for-profit management companies to run the schools. Frequently the management companies, as in the case of David Brennan’s old White Hat company, work with nonprofits to set up the charter schools, or help set up the nonprofits and then help suggest people connected to the management company to be members of the schools’ boards of directors: “The term ‘for-profit charter school,’ while commonly used, does not accurately describe the vast majority of charters designed to create private profit. Only the state of Arizona allows for-profit entities to be licensed as a charter school. In addition, the for-profit charters cannot receive any federal funds. However, those who wish to profit from charter schools have developed creative workarounds to evade state and federal laws. The for-profit management organization, commonly referred to as an EMO, finds individuals to create a non-profit board. That board, which is appointed, not elected, enters into a contract with the for-profit to run the school.”

The report documents all sorts of unsavory business practices being underwritten with our tax dollars: “The first responsibility of any for-profit company is to maximize profit for its owners, and in the case of a public corporation, its shareholders. The typical way to enhance profits is to cut costs… This is often achieved by reducing personnel costs…. either paying teachers less or paying fewer by increasing class size… Savings can also accrue from hiring uncertified teachers or discouraging students who need the most services from enrolling.”  Then there are the big real estate deals when education management companies have subsidiaries that acquire school facilities and charge the schools managed by the EMO outrageous leasing costs. And it goes on and on.

The Network for Public Education’s new report covers the nefarious operations of several of the enormous for-profit education management organizations, but I would like to follow up with the report’s coverage one of those companies now operating in Ohio.  When Ohio’s charter czar David Brennan became ill and eventually died, the story of his charter school empire lived on.

The story actually links to another charter school empire, beginning in 2000, with the launch of K12Inc.,  the huge for-profit, online charter school founded by Ron Packard, “with a $10 million investment from Michael Milken and $30 million from other Wall Street investors.  Previously, Packard had worked for Milken… K12 became a publicly-traded company in 2007.” There was considerable controversy about K12’s practices. Packard left the company, and, “In 2016, after an extensive investigation of the for-profit’s dealings in California, (that state’s) then-Attorney General Kamala Harris announced a $168.5 million settlement with K12 due to its misleading advertising to prospective students and the reporting of inflated attendance numbers.”

In 2014, K12 formed a new company, Pansophic Learning, led by Ron Packard and financed by an investment company located in Dubai. “Pansophic Learning’s name and address were used to register a new Ohio for-profit, ACCEL Schools, LLC. Seven months later, Pansophic took over the contracts of 12 charter schools managed by the controversial White Hat Management. In July 2015, another large for-profit education management organization operating schools in Ohio, Mosaica, ran into financial trouble and sold its assets to Pansophic Learning… Packard continued to build a ‘critical operating mass’ for his new venture. He took over the contracts for 12 I Can charter schools, and also the Ohio Distance Learning Academy (OhDELA), the last of the White Hat Schools. The OhDELA contract is a sweeps contract that funnels 97 percent of the school’s revenue to ACCEL. We looked at several other contracts for ACCEL charters in Ohio and found that schools pay ACCEL either a 12.5 percent or an 18 percent management fee.” And by providing other management services for the ACCEL schools, Packard’s EMO profits from additional fees-per-service.

Why should Packard’s quiet expansion of the ACCEL for-profit charter school venture in Ohio be of concern to Ohio’s citizens and legislators?  Because charter schools are publicly funded and eat up funds the state should be spending on the more than 1.8 million students enrolled in Ohio’s public schools.

In his new book, Schoolhouse Burning, Derek Black traces how funding charter schools depleted public school funding in Ohio during and after the Great Recession in 2008: “While states were reducing their financial commitment to public schools, they were pumping enormous new resources into charters and vouchers—and making the policy environment for these alternatives more favorable. Charter schools, unlike traditional public schools, did not struggle during the recession. Their state and federal funding skyrocketed. Too often, financial shortfalls in public school districts were the direct result of pro-charter school policies… Ohio charter schools received substantial funding increases every year between 2008 and 2015. While public schools received increases in a few of those years, they were modest at best—in one instance just one-tenth the size of the charter school increase.  In 2013-14, Ohio school districts, on average, went $256 in the hole for every student who went to a charter.  Some went deeper in the red.  Nine districts sent charters between 20 percent and 65 percent more money than they received from the state… All told, charter schools received $7,189 per pupil in state funding.  Public school districts received less than half that amount.” (Schoolhouse Burning, pp. 35-36)

The Network for Public Education ends its new report with a constructive list of recommendations for reigning in the for-profit charter school management sector.  An important recommendation is that President Joe Biden’s Department of Education should investigate the extent to which federal Charter Schools Program dollars are being surreptitiously funneled into the for-profit EMOs despite that federal rules prohibit the investment of federal program dollars into charter schools that are, in fact, not independent of for-profit management companies.