Charter Schools: Just Another Opportunity for Investors?

Last summer I attended a meeting soliciting parents to enroll their children in a second charter school in Rock Hill.  Most of the talking was done by a man from Dallas, Texas.  I asked him how he even knew about South Carolina.  He said he had been contacted by the Public Charter School District in South Carolina.  Later in the meeting he laughingly said that he had invested his own money and would not let this school fail.  I was puzzled by why someone from Texas would consider a “public” school in SC as a place to invest his money.  When I looked him up to discover his credentials I saw that he had an undergraduate degree in Pastoral Counseling from a school whose name suggested a church related college.  I saw no evidence of experience in teaching.

I contacted the head of the South Carolina Charter School District to learn more and received the reply that the man whom I met is a consultant who has “had some success with charter schools in Texas… The District invited him as well as numerous other successful operators of charter schools to consider South Carolina.”

I had not before thought of public schools or schools in general as being just another investment opportunity for capitalists.  I typed Charter Schools As Investment Opportunities into my search engine.  Google returned over 15 million links with such titles as NextGen Investments-Charter School Growth Funds, The big business of charter schools (why you should add charter schools to your investment portfolio), and from Forbes Magazine “ Charter School Gravy Train Runs Express to Fat City”. The Forbes article notes that “Charter schools are frequently a way for politicians to reward their cronies. In Ohio, two firms operate 9% of the state’s charter schools and are collecting 38% of the state’s charter school funding increase this year. The operators of both firms donate generously to elected officials.”

I knew from a blog I researched and published in January 2014 (Public Schools Outperform Public Charters) that charters do not have better results academically than traditional public schools. I have spent the last few days updating my knowledge of the monetary profit for investors in America’s charter schools.

I learned that the profit motive became attached to charter schools from a Federal bill in 2000 (Bill Clinton’s last term) which allowed banks and equity firms that invest in charter schools and other “underserved areas” to take advantage of tax credits of up to 39%.  In addition, investors are also allowed to claim “job creation credits”, etc., which can add up to more than double Federally-insured investment returns.  “There is big money being made here.” See for example the Daily Kos story So why do hedge funds so favor charter schools? and the Forbes story referenced above,  Charter School Gravy Train Runs Express to Fat City.

Another Federal law allows rich donors from throughout the world to invest money in funding charter schools in the U.S.  If these individuals invest at least $500,000 to charters under a federal program called EB-5, they’re allowed to purchase immigration visas for themselves and family members. This may be related to the plethora of Gulen Charters by a Turkish citizen named Fetullah Gulen.  “The reclusive Muslim cleric lives in the Poconos, runs a vast political network in Turkey, and is associated with the largest charter chain in the U.S.” See for example About Gulen charter schools + Gulen 101 webinar video.

A web site entitled Parents Across American claimed that “wealthy investors and major banks have been making windfall profits, nearly doubling their investment in seven years (by investing in charter schools).”  They note the names of charter school chains that have benefited, such as Imagine Schools, Green Dot, Brighter Choice, KIPP and Andre Agassi Schools. For examples of their positions see Parents OPPOSE S.2304, the “Expanding Opportunity Through Quality Charter Schools Act” and A Parents Across America Position Paper on the “Empowering Parents Through Quality Charter Schools Act”.

This parent activist group also noted the following, rather convoluted, transaction as an example.  “Imagine Schools’ finance subsidiary, Schoolhouse Finance, sold some charters to Real Estate Investment Trusts, including Entertainment Properties (EPR) and then entered into a triple net lease arrangement, quite profitable for investors, but costly for the charter schools. Schools were deprived of operating revenue due to the high cost of leases (nearly 40% of total revenue in Las Vegas) and principals were fired for questioning the terms of the leases.” See “New market tax credits” and charter schools.

A yearlong Detroit Free Press investigation of Michigan’s charter schools found wasteful spending, conflicts of interest, poor performing schools, a failure to close the worst performing charters, and examples of some charter school board members being forced out after demanding financial details from management companies.  The Free Press investigation also noted that “State law does not prevent insider dealing and self-enrichment by those who operate schools.” See State of charter schools: How Michigan spends $1 billion but fails to hold schools accountable.

A Cleveland charter operator was tried for funneling over $1 million to his church and other businesses. The charter founder was a pastor, not an educator. His attorney said “His client had good intentions when opening the school on East 55th Street but then got greedy when he saw easy opportunities to make money.” See Lion of Judah charter school operator ordered to pay $195,000 in restitution to the state.

The Florida League of Women Voters in an April 2014 report STATEWIDE STUDY ON SCHOOL CHOICE AND CONSENSUS REPORT ON CHARTER SCHOOLS found that Florida charter schools do not perform better than public schools; that charters are more segregated than public schools; that many charters funnel money to religious organizations; that a significant number of charters operate for profit; and that the charter industry has captured control of key seats in the Florida legislature.

The leader of a California celebrated charter school with outstanding test scores was found by a state audit to have diverted nearly $4 million of public money to his other businesses.  See State audit finds evidence of fraud, conflicts of interest by Oakland charter school operator.

I am glad, as I assume you are, that there have been no reported cases of such graft in the South Carolina Public Charter School District.  However, the question remains “Why Charter Schools?”  My experience at the charter school meeting suggests that SC is opening the door to those who wish to enrich themselves at our state’s and students’ expense.  Our Legislature in 2014 increased Base Student Cost for Public Schools from $2,101 to $2,120 per student.  Charter schools base funding per students increased from $3,250 to $3,600.

There is no consistent evidence that charter schools teach students more effectively than do traditional public schools. Our limited state funds are supporting a dual school system.  There is no reason to give charters to non-educators, certainly not to “successful operators”.  There is no reason to allow charter operators to pocket taxpayer dollars for their own enrichment while refusing to be fully accountable for how public money is spent.  It does not appear that public accountability has been observed in many states where charters are growing.  It certainly suggests a need for strong caution and vigilance in our state.

This entry was posted in Charter schools. Bookmark the permalink.

3 Responses to Charter Schools: Just Another Opportunity for Investors?

  1. mary keenan says:

    Yay again. Thanks for doing all this research.

  2. Jane Carroll says:

    Parents are flocking to Charter schools in part because public schools consistantly are very poor at providing appropriate services for children who learn differently. Even with all of the laws and guidelines provided by IDEA, SpEd Law, the fight to do as little as possible for these students is a drain on parents emotionally and financially. Yet, NOTHING every changes with Exceptional Education. Teachers are forbidden to write Specific, Measurable, Appropriate, Related, Time specific goals that bring kids from where they are to where they need to be. Each year is a new teacher with a new look at the IEP…no data, no consistancy, and this has been the case for the last 6 years for my child.

    • Jane Sharp says:

      Thank you for your comment. I wanted to respond personally.

      This past year the Board approved $1.3 million for additional teachers and support for special needs students. We were out of compliance in a number of areas and our action was overdue. We have already filled some of these new positions.

      I agree with and have expressed to the Administration more than once concern about the attitude that is sometimes conveyed to parents concerning any questions expressed by parents. “Oh, we know best what is right for your child! Run away and let us do our job.” I, as you, know that most parents know very well what their child needs. Certainly their opinions should be treated with respect.

      In our last Board meeting our new superintendent presented her goals for this year. I added to those she presented one that concerned special needs students. My request was that the Board receive yearly reports on percent of special needs students who had met their IEP goals during the year. We have never monitored this that I know of. It is well time we did.