In Lease Agreements, Charter Management Companies Rip Off Their Students and the Public

On January 10, 2019, as one of his final actions as Ohio Auditor of State, Dave Yost released a report about how three Charter Management Companies (CMOs)—National Heritage Academies, Imagine Schools and Concept Schools—have been profiting when their own real estate subsidiaries demand outrageous leasing fees from the charter schools managed by the same National Heritage Academies, Imagine Schools and Concept Schools.

Without any competitive bidding, charter schools being managed by the three CMOs have been forced to pay above market rents for school buildings, when they could have spent the per-pupil dollars allotted to them by the state for paying teachers or otherwise serving their students.

For the Columbus Dispatch, Jim Siegel reports: “In 2015, 77 percent of charter schools leased their buildings. Yost looked at lease agreements with eight schools managed by National Heritage, 13 by Imagine Schools and 17 by Concept Schools.  His office found that the average rent paid per pupil ranged from $1,472 at Concept to $2,325 at Imagine, considerably higher than the $848 paid by a random sampling of six other Ohio charter schools not under a management agreement.”

In the new report, Community School Facility Procurement, Yost blames weak charter school regulation by the Ohio Legislature: “Shortcomings in current Ohio law, lax oversight, and support programs geared toward community schools (Ohio’s name for charter schools) have allowed private companies to enter into questionable lease agreements with community schools to their advantage at the expense of those schools and the Ohio taxpayers who fund their operation.”

In the report, Yost documents a lack of required bidding procedures: “Although traditional school districts are required to follow certain bidding procedures under ORC 3313.46, this law does not apply to community schools.”  Further, “Schools operating under the management of two of the three management companies all had lease rates that exceeded local market rates by upward of 50–150%. This condition is further amplified by lease provisions which caused the majority of schools reviewed to be responsible for property related expenses normally incurred by the landlord in traditional lease agreements… including property taxes, insurance, building maintenance, and structural maintenance.” Yost reports additional violations that produce profits for the three management companies.

While some of the practices Yost identifies are not prohibited by Ohio’s weak charter school laws, at least one practice does violate Ohio law.  Yost documents “related party lease agreements” and “conflicts of interest”: “National Heritage Academies and Imagine Schools, Inc. both had a direct financial interest in the companies their managed schools entered lease agreements with for all schools reviewed under those management companies.  Employees of and persons with interest in New Plan Learning/Breeze, Inc., the parent company that the majority of Concept managed schools entered into lease agreements with, also served on the Board of schools while the schools were leasing from subsidiaries of New Plan Learning… Board members with a vested interest in a company are prohibited from voting on any measures pertaining to that company in accordance with ethics laws.”

Siegel reports that charter school regulatory legislation passed by the Ohio Legislature in 2015 was supposed to have stopped some of these practices, but nonetheless, the practices continue: “A wide-ranging charter school law upgrade that passed in late 2015 included a provision that prohibits an operator from leasing property to its school until an independent real estate professional verifies the lease is ‘commercially reasonable.’ But Yost’s report said a number of problems still need to be addressed by lawmakers.”

One problem, Yost identifies is with the so-called “sweeps” contracts in which some charter school boards grant their CMOs virtually complete control over the schools: “Full-service management companies… will do everything for the school from establishing the school’s curriculum, hiring teachers and principals, handling human resources and marketing, and managing fiscal duties. In some cases, as much as 98 percent of a school’s public funding may be paid to a full-service management company in turn for its services in managing the school. The schools reviewed in this examination operated under management companies that handled the vast majority of the school operations and played a large role in how the schools’ facilities were acquired.”

Reporting on the conclusions of Yost’s new report, Siegel adds, “Clauses in for-profit management contracts of National Heritage and Imagine delegated to them various power in regards to choosing a facility. This can ‘blind the board’ to conflicts of interest. The similar lease terms across National Heritage schools, the report noted, ‘offer evidence that minimal negotiations were performed by the school boards’….”

The auditor’s 30-page report begins: “This study of community-school (charter school) facility leases was prompted by a complaint filed with the Ohio Auditor of State….”  In addition to the formal complaint to which Yost’s report responds, for years the press has been exposing shady lease arrangements in which charter schools pay above-market rent to real estate affiliates of for-profit CMOs.  In October of 2014, the Plain Dealer‘s Jackie Borchardt reported on above-market lease agreements with Schoolhouse Finance, the real estate subsidiary of Imagine Schools, by several Imagine Charter Schools in Cleveland and Akron.

Then last summer, the Columbus Dispatch‘s Catherine Candisky described an outrageous lease arrangement between Great Western Academy, a Columbus Imagine charter school, and School House Finance—the Imagine Schools’ real estate subsidiary: “From the outside, Imagine Schools’ Great Western Academy doesn’t look like much of a school. The sterile building sits at the end of a remodeled strip mall…. But inside the glass doors, the pristine, newly renovated charter school surprises visitors with brightly colored murals, walls of lockers lining freshly painted hallways, and a large gymnasium. Converting the 69,000-square-foot former appliance store into a school for more than 700 kindergarteners through eighth-graders wasn’t cheap. The facility improvements, including structural work in addition to desks, smart boards and other equipment, cost $4.4 million, or about $64 per square foot, according to information provided by school officials.  Under its finance deal, Great Western Academy had to come up with added lease payments totaling $7.7 million over the past decade to cover the renovations—$3.3 million above their actual cost—at times paying nearly $1 million a year in total rent.  According to the Franklin County auditor, the property was valued at $2.4 million in 2017. In other words, the $7.7 million the school paid for renovations was more than three times the building’s value.”

This month, now that Yost has become Ohio Attorney General, let’s hope he prosecutes the companies his own report as State Auditor identifies as having violated the law—the CMOs whose management of charter schools can be proven to have involved actual violations of Ohio law through “related party lease agreements and conflicts of interest.”

I suppose we can also hope for legislative reform.  But with the same powerful Republican officials merely exchanging positions across every one of the state’s major offices and with huge, pro-charter, Republican majorities in both houses of the Legislature, it is hard to believe that charter school regulation will be significantly toughened in Columbus.  It would be nice, however, to save the state millions of dollars for the public education budget—dollars now being scammed by the real estate subsidiaries of CMOs like Imagine Schools, National Heritage Academies, and Concept Schools.

When State Oversight of Charter School Sponsors Prevents Any Oversight Whatsoever

The Ohio Department of Education has turned down the Cleveland Transformation Alliance’s strong recommendation that a statewide charter school sponsor–Cincinnati’s St. Aloysius Orphanage—no longer be permitted to open new charter schools in Cleveland.

In 2012, when the Ohio legislature approved what was called the Cleveland Transformation Plan to overhaul Cleveland’s public schools, Mayor Frank Jackson, who controls the school district under state law, wanted to have a locally-appointed civic and education group—the Transformation Alliance—approve or turn down charter schools.  The idea was that, under the guidance of the Transformation Alliance, public and charter schools would work in partnership. But the state didn’t really give the Transformation Alliance any power; it was established only as an advisory committee.

The Plain Dealer‘s Patrick O’Donnell explains the state’s recent action: “Jackson won limited power from Gov. John Kasich and the legislature in 2012 to let his school quality panel, the Transformation Alliance, recommend to the state who can create and oversee new charter schools in the city. That hard fought power was much less than what Jackson had initially sought—an ability for city leaders to approve or deny each new school directly. But when the panel tried to use that already-reduced power this year for the first time—asking the state to block controversial charter sponsor St. Aloysius Orphanage from starting new schools here—the Ohio Department of Education did not agree.”

Here is some background about Ohio—a national exemplar of poor oversight of its charter school sector—where charter schools can be authorized by nonprofit agencies, even agencies with no experience in education. Agencies frequently sponsor schools in far away cities, as there is no requirement in state law that authorizing agencies be located near the institutions they supposedly oversee.

St. Aloysius Orphanage was founded in Cincinnati, Ohio in 1837. It has evolved from a 19th century orphanage into a 21st century mental health agency that also provides a local Cincinnati charter school for children needing special education services. St. Aloysius Orphanage has also become one of Ohio’s largest statewide charter school sponsoring agencies. It contracts with a for-profit firm, Charter School Specialists, to provide all the services required of charter school sponsors by the Ohio Department of Education. Under an agreement with the state, St. Aloysius Orphanage is paid 3 percent of the state’s reimbursement to all of the 42 charter schools it sponsors across the state, an amount it splits with its contractor Charter School Specialists.

In an August 2017 letter sent to State Superintendent Paolo DeMaria, Transformation Alliance Executive Director Piet Van Lier described the serious  problems uncovered when members of an Alliance task force spoke with representatives of St. Aloysius Orphanage: “Gaps in the type and quality of oversight are apparent. St. Aloysius staff represented on the interview team were unable to adequately answer questions about specific school improvement efforts. It was also not clear that St. Aloysius’s board had any member with an education background… The task force also expressed some concern that Charter School Specialists, which delivers all sponsorship services for St. Aloysius, also provides school treasurers and other services for sponsored schools for a separate fee. It is not clear how arms-length assurances are maintained.”

And the particular new charter school being opened by St. Aloysius in Cleveland this fall is part of a Florida-Ohio chain of charter schools—Cambridge-Newpoint—that is currently under indictment in Florida for fraud and racketeering charges.

Claiming that the Transformation Alliance missed a deadline in submitting its complaint, State Superintendent DeMaria has denied the Transformation Alliance’s recommendation to reject the school and deny St. Aloysius Orphanage the right to open additional schools in Cleveland.

O’Donnell summarizes the response of members of the Transformation Alliance to the state’s recent denial of its recommendation: “Members of the Alliance—Cleveland school district, union, charter school, higher education, business and philanthropic leaders—believe that the Cincinnati orphanage, which now oversees 12 charter schools in Cleveland, creates mediocre or poor schools across the state, just to offer school choices for the sake of choice, not quality. Alliance members also question whether the orphanage and the for-profit company that creates schools for it are mainly trying to make money.”

Extra: Plain Dealer’s Brent Larkin Summarizes Ohio’s Corrupt Charter School Catastrophe

Brent Larkin, columnist and retired editorial director of the Cleveland Plain Dealer, summarizes the corruption underneath Ohio’s charter school tragedy.  He describes the impact of money in the politics of a state without checks and balances—where all three branches of government are controlled by one party.

Larkin credits the fine reporting of Patrick O’Donnell that has broken the story of corruption in Governor John Kasich’s Department of Education. He wonders if the story will affect Kasich’s prospects as a Presidential candidate.

Ohio is a state where even members of the supreme court depend on campaign donations to get elected—and where the big charter school czars, William Lager and David Brennan, are happy to oblige.

Lots of people are suggesting that, as we can’t get rid of charter schools, we have to ensure they are regulated.  Check out this article and follow Larkin’s links to learn why I am so skeptical of the idea that a lucrative privatized sector can be effectively regulated by a state legislature.

Talk of Charter Oversight in Ohio is Likely Just Talk

Ohio’s governor and members of the legislature have begun talking about regulating charter schools in a state that was called  by an official at the National Association of Charter School Authorizers, “the wild, wild west” of charter schools.  But it’s really only just talk, and the real question is whether the legislature will make any serious effort crack down on the charter sector whose tycoons have continued to fill legislators’ political coffers.

There are serious questions, for example, about whether any of the new regulations proposed by Ohio’s governor or House of Representatives would touch the kind of fraud that was recently investigated by the state auditor, who released a report on Ohio’s so-called “dropout recovery” charters that, he discovered, have been collecting state reimbursements for phantom students who are not really attending the schools.  This blog covered the auditor’s investigation here.

Patrick O’Donnell, a reporter for the Plain Dealer, has been investigating the recent discussions about regulating Ohio’s charters. In this report O’Donnell summarizes the contents of a proposed bill in the Ohio House that would, if it ever passes, prevent some of the really serious problems with Ohio’s charter schools.  And there are some extremely serious problems right now.  For example, if a charter school is failing miserably academically or found to be misusing state funds, the school would no longer be able to, ” ‘hop’ from one sponsor to another if a sponsor, the organization responsible for making sure they do a good job, cracks down on them.”  The bill, if passed, would also require charter school board members to “disclose if they have any family members or business associates doing business with the school.”  And the sponsors would be prohibited “from selling goods or services to the schools they oversee.”  Proposed regulations would require charter schools to have their own treasurers who are independent from the sponsors as well as the management companies hired by the charter school boards.

And while the new law, if passed, would not determine whether desks and computers and other equipment purchased with tax money belong to the charter school itself or the private management company hired by a charter school board to run the school, the new law would at least require the school to have established a clear agreement with the sponsor and management company about who owns the equipment. The agreement would need to define “which entity owns… school facilities and property including, but not limited to, equipment, furniture, fixtures, instructional materials and supplies, computers, printers….”  Currently ten of Ohio’s charter schools are involved in a long running lawsuit to determine if the schools, whose boards want to change management companies, can take with them the equipment purchased with tax money.  For-profit White Hat Management Company, whose management contract all ten schools want to terminate, claims it owns all of the equipment.

Here and here, O’Donnell examines Ohio’s Governor John Kasich’s proposal that the legislature crack down on Ohio’s system of charter school sponsors: “Ohio differs sharply from other states… by allowing many different kinds of agencies to take that sponsor/authorizer role.  In some states, only local school districts, universities or a few state charter boards can sponsor schools.  But Ohio has nearly 70 sponsors and is one of the few states that allows other nonprofit agencies to be sponsors… Some people… have accused sponsors of using schools as a money grab, just to collect three percent annual fees that are supposed to cover oversight costs or to find other ways to draw money from the schools.”  O’Donnell continues, “Asked last week how Ohio can justify having sponsors as a layer of bureaucracy in the process of cracking down on poor charter schools, National Association of Charter School Authorizers’ spokesman Greg Richmond could offer no defense of Ohio’s system. ‘It’s hard to rationalize or justify Ohio’s system,’ he said.”

O’Donnell reports that Kasich will ask the legislature to better regulate sponsors and perhaps eliminate those with low ratings. “The rating system currently has three categories: exemplary, effective and ineffective.  Kasich would add a fourth rating as the lowest: ‘poor.’  When an authorizer is rated as poor, the state would withdraw sponsorship rights and take over sponsorship of all of its schools.”  Current law puts low-rated sponsors on probation and blocks them from adding new charters to their roster until they improve.  Kasich proposes to reward the most successful charters by permitting them go to their local public school board to request that the local board of education place a local property tax levy on the ballot for the charter school in the same way public school districts in Ohio raise local millage.  Charters sponsored by “exemplary” agencies could also qualify for help from a $25 million state fund to be created to assist charter schools to purchase or renovate their school facilities.  The new rules Governor Kasich suggests the legislature pass would even apply to the “handful of authorizers that the state named as permanent sponsors in Ohio’s first charter school pilot project.”  Till now, these sponsors have been grandfathered out of regulations.

Are there reasons to be skeptical?  Yes.  Does all this sound too complicated to pass in the legislature?  Yes. Why focus on the sponsors and ignore the possibility of just regulating particular charters that are known to be wasting or stealing taxpayer dollars and failing to educate children?

One reason for skepticism is that, as O’Donnell reports, past efforts to get the Ohio legislature to regulate charter schools have failed.  In 2012, as part of a proposed Cleveland Transformation Plan, Cleveland Mayor Frank Jackson asked the legislature merely to pass enabling legislation for the formation of a local Cleveland charter school regulatory agency with representatives appointed from the city school board and civic and business leaders.  The legislature did permit the creation of what is  now called the Cleveland Transformation Alliance but denied the Transformation Alliance the right to shut down any charter schools, even if their academic or financial records are abysmal. The Cleveland Tranformation Alliance serves only in an advisory capacity.  The legislature has never even given the Ohio Department of Education the capacity to regulate charter schools or close those whose performance is poor.

Ohio is currently a one party state: Republican governor, Republicans with large majorities in both houses of the General Assembly.   Innovation Ohio recently tracked the political contributions of Ohio’s two biggest charter operators—William Lager of the Electronic Classroom of Tomorrow and David Brennan of White Hat Management:  “Between the two of them, they have contributed about $6.4 million to Ohio politicians and committees since 1998. Of that, less than 3 percent went to Democrats.”

It is clearly in the financial interest of Ohio’s legislative leaders that charter schools not be regulated.

Ohio Supreme Court Hears Oral Arguments Today in Case Involving White Hat Management

Today, September 23, 2014, the Ohio Supreme Court will hear oral arguments in a long running case that has pitted Ohio’s notorious White Hat Management Company, which manages charter schools for-profit, against ten of its schools whose boards set out to dissolve ties to the management company and bring in a new manager.  White Hat at first refused to disclose to its schools how it had spent the 96 percent of taxpayer funding for the schools that went directly to the management company without the charter boards’ oversight.  The schools had to go to court to force White Hat to disclose this information to the schools it managed.  Now the question is: Who owns the school buildings, furniture, and all equipment?

The case involves basic and important questions: whether charter school boards are in charge and can cleanly terminate contracts with poorly performing management companies they have hired to run the schools, whether management companies can create subsidiaries with taxpayer funds to amass real estate empires and then rent buildings back to the management companies with whom they are affiliated at rents well over market rates, whether buildings and other assets purchased by the management companies with tax dollars are owned by the charter school boards or the private management companies, and finally whether charter schools themselves—that draw funding from Ohio’s state education fund and the state’s over 600 public school districts—are public or private entities.

Doug Livingston, an Akron Beacon Journal reporter and Ohio’s top education writer, explains the case succinctly: “The case involves Akron-based White Hat Management and 10 charter schools.  The schools’ boards, after paying White Hat millions to run what turned out to be poorly performing schools, fired the company when they were unable to obtain answers as to how the money was spent.  But after the firing, White Hat argued that it owned most of the assets and it would be the boards that would have to move and start up new schools from scratch.  Meanwhile, the buildings that were vacated often became the home for new charter schools run by the for-profit White Hat… The case illustrates a larger issue: Ohio charter schools were created more than 15 years ago as independent public agencies.  But as so many for-profit companies now own the real estate, furniture and computers, the questions are raised: Are charter schools still public?  Are they independent? Or are they now privately run, for-proft businesses?”

Livingston points out that a recent investigation by the Beacon Journal and the News Outlet at Youngstown State University uncovered a number of instances when members of charter boards explained that they had been recruited by management companies to serve on the charter boards that later hired the management companies.  White Hat Management was reported by charter board members to have been one of the management companies that recruited them to serve on a board that was, supposedly, responsible for hiring a management company—despite that federal law requires that not-for-profit boards be independent of any contractors or managers they hire.

Purchase and rental of school buildings is a significant part of this case.  Livingston reports that the “Beacon Journal-News Outlet review of hundreds of property records and business filings across Ohio found multiple connections between management companies and property owners.  The investigation found that 40 percent of Ohio public charter schools pay rent to for-profit or out-of-state landlords.  At least six companies have leased property to charter schools that also hired them to run the schools.  One real estate company charges a rental rate that equals nearly half the property’s market value…. The most active companies are Summit Academy, which owns half its school properties, and White Hat, which has created out-of-state real estate companies to acquire at least 11 of its 29 brick-and-mortar charter schools in Ohio… White Hat and others have related companies that manage real estate portfolios, and while the schools in those portfolios may change names, the education management company doesn’t.”

According to Livingston, “The Ohio Department of Education keeps no records on the private management companies hired by public charter schools… And because the state asks little, determining ownership of assets is complex.”

White Hat claims it owns all the buildings, furniture and equipment as an independent contractor.  According to M. Bettman writing for Legally Speaking Ohio, “White Hat argues that the charter schools are ultimately governed by their individual school boards—no management company takes that role.  Charter schools are allowed to contract with management companies like White Hat to administer the daily functions of the school.  As was perfectly permissible, the management agreements shifted all financial risk from the Schools to White Hat.”

Bettman also presents the schools’ argument, “The Schools argue that public funds do not lose their public function just because a private entity has received them… White Hat did not provide a discrete or remote service, but was entrusted with carrying out a government function on a daily basis, and received public funds for doing this… White Hat acted as a purchasing agent for them in the acquisition of furniture, computers, and other personal property… White Hat became an agent for the Schools, therefore establishing a fiduciary duty for White Hat to act primarily for the benefit of the Schools.”

The Court of Appeals, according to Bettman, found for White Hat: “that the Schools owned only the property that had to be titled in their own names due to the nature of the funding source, and that is the only situation in which White Hat operates as the purchasing agent for the Schools.  Otherwise, the funds received by White Hat… became its private funds, and property it bought with those funds belongs to it.”

The case is complicated by the political power of David Brennan, owner of White Hat Management, former member of  Ohio’s higher education board of regents, long time advocate for Ohio’s school voucher program, proponent of legislation to promote the unregulated growth of charter schools, and campaign-donor extraordinaire to members of the Ohio General Assembly.

Financial Corruption and Academic Failure in Charter Sector Beg for Oversight

Earlier this week, tracking an extraordinary investigative series on charter schools by the Detroit Free Press (still ongoing today) , this blog commented: “Although the federal government has been creating huge incentives for states to expand rapidly the number of charter schools—by making the removal of statutory caps on the authorization of new charters a condition for a state even to submit an application for a Race to the Top grant and by making available additional federal grants to expand charters, the federal government has left the oversight and regulation of charters up to the fifty state legislatures.”  The Free Press series is titled, “How Michigan Spends $1 Billion but Fails to Hold Schools Accountable.”

Yesterday Jeff Bryant, in his weekly column at the Education Opportunity Network, raised the same concern: Will Anyone Stop Charter School Corruption?  Bryant examines the Free Press‘s expose on Michigan’s charter schools and also looks at theft of tax money by unscrupulous charter operators in three additional states: Ohio, Pennsylvania, and Florida. He notes that, “The U.S. House of Representatives recently passed controversial legislation to expand federal funds for more charter schools without placing any substantial new regulations on those schools.” “And in Washington, DC, that House legislation that would expand federal funding to these sorts of schools has been joined by a Senate version that is now steaming toward bipartisan consideration.”

In Ohio, Bryant examines Akron Beacon-Journal coverage of David Brennan’s for-profit White Hat Management Company, whose charter schools have “enjoyed such carte blanche operation that Ohio lawmakers approved additional funding for about 77 of those schools and exempted them from ‘full accountability until at least 2017.'”

In Pennsylvania, Bryant describes a quirk in state law that pays charter schools for providing special education for students who qualify but does not require the charter schools actually to provide the special education services for which the state reimburses them.  Charter schools in Pennsylvania, according to Bryant, “collected $350,562,878 last year for special education funding and spent $156,003,034 for special education.”  Describing Philadelphia, a school district mired in a dismal financial crisis that involves local money being siphoned by charter schools, Bryant quotes the Philadelphia School Notebook: “Philadelphia charter schools received more than $175 million last year to educate special education students, but spent only about $77 million for that purpose….”

In Florida, Bryant  reports on unscrupulous operators collecting funds for charters that are opened and then quickly closed. “Examples… include a man who received $450,000 in tax dollars to open two new charter schools just months after his first collapsed.  The schools closed in seven weeks.” Bryant quotes an Orlando Sun Sentinel report:  “With such wild growth, district officials say, many new charters no longer fill a niche or offer innovation. Yet Florida lawmakers repeatedly have declined to tighten charter school regulations.”

In Michigan, Bryant directs readers to the ongoing investigation by the Detroit Free Press, in which Thursday morning’s installment examines not the financial fraud but instead the academic performance of Michigan’s charters, an education sector that, in Michigan, now has an academic record spanning two decades.  “And, reflecting Michigan’s loose oversight of charter schools, a majority of the lowest-performing charters have been around for 10 years or more—despite research that shows the success of a charter school can be determined in the first three years of existence.”  The Free Press calls attention to two for-profit chains that not only run individual schools but have also been hired in Michigan to manage whole school districts. In 2012, the Highland Park School District was turned over to the national Leona Group, “often criticized for poor-performing schools.  The company runs 14 charters in Michigan and 43 in four other states.  Leona’s Michigan schools have an average percentile ranking of 19 (on the state’s school rating formula).”  “That same year, the emergency manager for the Muskegon Heights School District turned its schools over to Mosaica Education, a for-profit company with an average ranking of 16.”  The Muskegon Heights-Mosaica contract was dissolved mutually by the state and the corporation in April 2014, however, when Mosaica was not only unable to manage the district without a deficit: as a for-profit company, it was also unable to turn a profit.

Advocates for charter schools have railed against traditional public schools because, they allege, school district bureaucracy stifles innovation.  Others would value the kind of regulation built into traditional public school districts: public oversight of the tax dollars invested and the protection of the educational rights and the safety of the children enrolled.  I agree with Jeff Bryant who concludes his column this week with a plea for increased regulation of what has become a colossal charter school rip-off across many states: “Certainly, faced with such a growing calamity, it’s not being ‘negative’ or ‘oppositional’ or a ‘status-quo defender’ to stand in the pathway and yell ‘Stop!'”

Inviting the Fox Right Into the Henhouse

Ohio sends $1 billion every year out of its public education budget to charter schools and vouchers.  According to Doug Livingston at the Akron Beacon-Journal, Ohio’s charter schools and their sponsors are so poorly regulated by the state legislature that the private companies hired by nonprofits to manage their charter schools have been known to recruit (and fire) members of the boards whose responsibility it is to oversee and regulate the management companies.  “In Ohio, charter schools are required to satisfy strict federal guidelines as nonprofit organizations under Section 501(c)3 of the Internal Revenue code, including board autonomy.  If the board is not independent of the company, the IRS is supposed to throw up a red flag.  But state law allows private companies to throw out non-profit boards that challenge them.”  White Hat Management is known for such practices.

Leaders in the state legislature that brought Ohio this lucrative arrangement for wealthy White Hat charter czar David Brennan and cyber-charter parasite William Lager, the owner of two privately-held companies that siphon $100 million annually from Ohio’s school budget for the services provided to the Electronic Classroom of Tomorrow, now want to remove the constitutional checks and balances that protect the allocation and distribution of the state’s public school budget.

The legislature has created a Constitutional Modernization Commission that seeks to remove the state’s public education clause from the 160-year-old Ohio Constitution.  Writing for the Akron Beacon-Journal, Carol Biliczky reports that the Commission’s education committee chair, Chad Readler, a Columbus attorney who has prominently represented the interests of charter schools in recent years, “suggested removing the ‘thorough and efficient’ clause because it is hard to define and interpret and has produced a series of closely decided court decisions.”

The clause to which Readler refers is the very constitutional language that protects adequate and equitably distributed funding across the over 600 school districts in Ohio.  Biliczky quotes Nick Pittner, the attorney who argued the DeRolph school funding litigation for 500 plaintiff school districts who brought the case to demand that Ohio school funding be increased and distributed fairly.  According to Pittner, Readler’s proposal now before the Constitutional Modernization Commission would “remove the courts from any role in determining the appropriateness of public education provided by the Ohio General Assembly.  It’s not in the interest of Ohio in general or school children to remove the courts from oversight.”

The proposal now before the Commission would render school funding in Ohio not subject to judicial review by removing the language that establishes judicial oversight.  Columbus Dispatch reporter Darrel Roland reminds us that in the past those who sought to reduce the state’s investment in public education have made the case that school funding be left solely up to the legislature and be rendered non-justiciable:

“In a March 1997 ruling that later became known as DeRolph I after its lead plaintiff, Ohio Supreme Court Justice Francis Sweeney determined that ‘the facts documented in the record lead to one inescapable conclusion—Ohio’s elementary and secondary public schools are neither thorough nor efficient.’ ‘In reaching this conclusion, we dismiss as unfounded any suggestion that the problems presented by this case should be left for the General Assembly to resolve.'”  Sweeney’s words were prophetic. In 2002, after the elected Ohio Supreme Court changed parties and subsequently released jurisdiction in the DeRolph case, the legislature of Ohio has never felt obliged to design a remedy that would address voluntarily “the problems presented by this case.”

There is no reason to imagine that the Constitutional Modernization Commission’s proposal to remove the court’s protection of school funding equity and adequacy—by removing the court’s check and balance on the legislature—would serve Ohio’s children as well as leaving the state constitution alone.  The Education Law Center points out that in a recent school funding decision in Kansas, the supreme court of Kansas described the importance of the language that is in our state constitutions.  “Matters intended for permanence are placed in constitutions for a reason—to protect them from the vagaries of politics….”

Scandal of Ohio Charter School Governance Finally Gets Some Attention

Nearly a billion dollars flowing out of the state’s public education budget every year.  Scandals brought to light years after a charter school closes, money not recoverable because it’s been so long, no news coverage in time to make a difference.  Blog postings here and there about outrageous profits for Electronic Classroom of Tomorrow czar, William Lager.  Charter czars and management companies buying the legislature.

Will it ever be possible to get the money back where it belongs in public schools in a state where—even in the richer suburbs—families now have to pay added fees for their sons to play on the football team?  This is Ohio today.

With the coming of spring this year, however, there are some sprouts of hope.

Ohio’s state auditor, William Yost, has begun looking into big and small scandals alike.  Yesterday the Plain Dealer reported that Yost fined two officials of the Elite Academy of the Arts, $45,000 they had misspent on lavish meals and airfare before the school was closed in 2012 for academic failure.  Elite Academy of the Arts was located on East 93rd street in a very poor neighborhood, but according to Yost, “It turns out the ‘Elite’ in their name refers to their personal tastes when spending public money intended for education.”  Yost has taken to naming bluntly the corruption in Ohio’s unregulated charter sector: “theft from children.”

State auditor Yost is to be commended for using the power of his office to investigate the operation and supposed regulation of Ohio’s charter schools.  In February, the Columbus Dispatch reported that Yost is undertaking the investigation of three not-for-profit long-distance sponsors of Ohio charters: the St. Aloysius Orphanage of Cincinnati, the North Central Ohio Educational Service Center in Marion and Tiffin, and the Warren County Educational Service Center.  Yost began looking into these statewide charter sponsors when, 9 of the 17 new charters opened in 2013 in Columbus closed within  months, “costing taxpayers at least $1.6 million and leaving hundreds of students without schools.”  The Dispatch continues: “The auditor has said he has the authority to investigate sponsors because they receive state money.  Sponsors can keep up to 3 percent of the $780 million in state education aid that flows to charter schools annually.”

Then earlier this week, as this blog reported here, the Akron Beacon Journal launched a creative multi-city journalism project to expose the lack of transparency in the operation and regulation of Ohio’s charter schools.  The Beacon Journal has created, a collaboration of the journalism programs of the University of Akron, Youngstown State University, and Cuyahoga Community College, along with two newspapers, the Beacon Journal and the Youngstown Vindicator and several public radio stations.  Already reporters have exposed the secrecy and conflicts of interest built in to charter school governance in Ohio along with the extraordinary expense that Ohio law imposes on public school districts for busing children to charter schools.

Finally, the Ohio Coalition for Equity and Adequacy of School Funding published a five part series (here posted as Governance Part 1,2,3,4,5) by an insider,  a long time school administrator who consulted toward the end of his career with the Ohio Department of Education to implement Ohio’s charter school laws.  “Dennis Smith is a retired school administrator who worked both as a sponsor representative for charter schools as well as a consultant in the state charter school office.”

According to Smith (Part 4), “It’s all about governance.”  “In Ohio, the Revised Code treats a charter school as a school district, with its own treasurer, chief administrative officer, and governing board.  But state law also allows great latitude regarding the operation and governance of the school….  In such loose legal construction, charter schools become the creatures of those who ‘own’ them, rather than the public who pays for them….  This flaw in charter school genetic code will, over time, be its undoing for the American public is showing signs of increasing impatience with institutions….  If they believe the companies ‘own’ these ‘public’ schools, then surely the public will understand that the companies also ‘own’ the boards…  An owned or bought board is not characteristic of our democratic system.”

Smith is particularly concerned about large charter chains under Ohio law that considers charter schools “their own school districts.”  Smith declares: “Public policy should not be so deranged as to allow private, for-profit national charter school chains to ‘own’ school districts.” (Part 5)



Akron Beacon Journal Launches Investigation of Ohio’s Charter Schools

On Sunday, a long article appeared in the print edition of Cleveland Plain Dealer, the launch of an investigation of Ohio’s 393 charter schools.  The reporters phoned or faxed each of the state’s charter schools to begin to create a data base.  Reporters asked: Who runs the building? Who is that person’s supervisor? Is there a management company and what company is it? Who serves on the school’s school board? How can we contact the school board?  When does the board meet?   (The full story appears in Sunday’s Akron Beacon Journal, though its printing cannot be traced to the Plain Dealer, because, the newspaper’s on-line edition, does not post all articles that have appeared in print.)

The reporters identified themselves as representing, a journalism collaborative of the University of Akron, Youngstown State University, and Cuyahoga Community College with the Akron Beacon Journal, the Youngstown Vindicator, WYSU-FM Radio (Youngstown State), and Rubber City Radio (Akron).  Why did the print-edition of Cleveland’s Plain Dealer pick up the story?  Some of the journalists at are studying journalism here in Cleveland at Cuyahoga Community College.  And not only did Rubber City Radio and WYSU carry it, but so did WKSU (Kent) and public radio’s State Impact Ohio news service.

The new investigation is clearly a creative strategy of  Ohio’s most progressive newspaper on matters that affect public schools.  Doug Oplinger and his partner Dennis Willard were the top investigative reporters on Ohio school vouchers and on the DeRolph school funding case all through the 1990s.  Oplinger is now the Beacon Journal‘s managing editor.  In an interview Monday with WKSU (Kent State), Oplinger said that the data base being created by will be “used by parents, researchers, policy makers and reporters to track the performance of the publicly financed, but privately run, schools statewide.”

Oplinger predicts will be looking at conflicts of interest when the members of school boards supposedly overseeing charter schools are being recruited by officials at the management companies—a violation of federal law.  According to WKSU,  “Oplinger says the next step in the series will include examining who owns the property in which many charter schools operate.”

The Beacon Journal followed up on Monday with an in-depth report from its excellent education reporter, Doug Livingston, on the recruiting and functioning of school board members at David Brennan’s charter schools, managed by his private White Hat Management Company, a for-profit with 32 Ohio schools.  Privately held White Hat collects over 95.5 percent of the funding, leaving a very small percentage of the state’s money under the oversight of the board.  Livingston points out that under federal law schools managed by not-for-profits are supposed to be run independently of any management company the board sees fit to hire: “If the board is not independent of the company, the IRS is supposed to throw up a red flag.  But (Ohio) state law allows private companies to throw out nonprofit boards that challenge them.”  One White Hat school board member reported to Livingston that Nancy Brennan, daughter of David Brennan had “asked him and his wife to serve.”  When ten members of the board of one White Hat school tried to change management companies: “Because White Hat had trademarked school names and bought up real estate through affiliate companies, the renegade boards couldn’t force White Hat out of the building.”

Again in this morning’s Beacon Journal, Livingston takes up another problem with the laws that govern Ohio charter schools: transportation. Public school districts are required to transport children to charter schools.  Because children in charters are picked up from their homes and delivered  to schools all around the city (without the possibility for normal neighborhood bus routes): “State officials have forced traditional public schools to crisscross their cities to pick up and deliver children to privately run charter schools, often while cutting transportation to their own kids…  A child attending a traditional pubic school and transported on a district bus cost on average $4.30 per day in 2012. The average cost for a charter-school student: $6.18, or $1.88 more per day.”  Livingston continues: “A private contractor on average charged districts $5.45 per child to go to a traditional school and $12 to go to a charter school.”

The investigation itself remains at a very early stage.  Student reporters have been making calls and sending faxed requests to the state’s nearly 400 charter schools.  While they report that Governor Kasich told the Ohio Newspaper Association, “We’ll work with you any way we can.  I’m not going to hide from you,” the student reporters did not encounter a spirit of cooperation from many of the charter schools they contacted.  Sixty-nine, 25 percent, provided the information requested by reporters.  At other schools students were treated rudely, messages on answering machines never answered, promised materials forgotten. Reporters were frequently referred to websites where the requested information was not posted.  At Imagine Akron Academy, “office manager Jeanette Twitty wanted to know, ‘What do you do with this information?’  She put the reporter on hold, and upon returning, said school superintendent Wendy Hubbard ‘would not like to give out any information because that’s something she hasn’t heard of.’  When the reporter asked if he could send a fax with the list of questions, Twitty responded: ‘OK, you can fax it over.  If she’s interested, she’ll give you a call back or fax it back.  If she’s not interested, you won’t hear anything from her.'”