Charter Schools’ Property Acquisition, Management Lack Accountability, Asserts Report

Editorial Intern

Too many of the laws governing charter schools’ management and land acquisition lack transparency and fail to prevent deals that heap costs on taxpayers and enrich private companies, a new paper contends.

The report, authored by Bruce Baker and Gary Miron of the National Education Policy Center, argues that potential conflicts of interest and wasteful uses of public funds riddle the process through which charters obtain physical space.

The National Education Policy Center, housed at the University of Colorado at Boulder, has published numerous reports casting a critical eye on the oversight and management of charter schools. The center also regularly critiques policy recommendations put out by education advocacy groups.

Charter schools are public schools that typically run with varying degrees of independence from local school districts.

Many charters, for instance, operate free of many of the policies found in traditional public schools, such as collective-bargaining agreements with teachers’ unions, as well as in staffing and academic practices.

Charter schools are governed by boards responsible for overseeing their operations. The schools are, more broadly, allowed to exist and are regulated by charter school “authorizers.” The vast majority of authorizers are school districts, though they can also include states, nonprofit organizers, and others.

The charter school’s board can hire an education management organization, which can be a nonprofit or for-profit entity depending on state law. In many cases, this management organization oversees everything in the school from the curriculum to staffing decisions to procurement, to day-to day administration, the authors explain.

The report argues that in too many cases, both for-profit and nonprofit charter management organizations have undue influence over who gets selected to serve on public charter school boards. The result is that the board itself becomes a proxy for the educational management organization, which is free to pursue questionable financial and managerial policies.

Evading Scrutiny?

In some cases, charter managers have leveraged their power over the boards to win favorable deals to acquire public resources (such as land, school buildings, and equipment) from those boards and then charge the schools exorbitant rent or management fees, the authors say.

In other instances, charter school governing boards establish large, single, bulk contracts with private management companies, then break the payments into other subcontracts for food service, transportation and other expenses. Under those arrangements, “only the single lump sum payment to the management company may be subject to public scrutiny, since all other contractual agreements are between private entities,” Miron and Baker say.

The fundamental problem, said Miron, a professor in the Department of Educational Leadership, Research and Technology at Western Michigan University, in an interview, is “collusion between charter boards and management companies.”

This is especially evident in the mechanisms through which public assets—school buildings and the land they sit upon—have been sold to charter management organizations, he contends.

For example, if a district chooses to convert a struggling traditional public school to a charter, it’s usually in the K-12 system’s interests to sell the underlying property to the charter management organization or a closely affiliated organization, to raise money, free the system of property-management costs, and incentivize potential charter operators to take a greater stake in the success of the school, the report says.

However, those sales often carry negative financial consequences for the district, the NEPC says. The charter school is receiving per-pupil funding, and it is paying rent to its charter management organization. That means the district is effectively subsidizing the sale of its own asset to a private organization, the authors say.

Additionally, Miron and Baker say, the higher cost of debt for charters and lax oversight of these complex deals often result in deeply inefficient transactions.

In some instances, charter management organizations are able to purchase a property at below-market value from a district, and then rent the property back to the charter school at a profit.

“In the process,” the report states, “the district does receive payment for the facility, which is a benefit accrued back to the taxpayers who financed it.  But in the end what results is a series of unnecessary financial transactions and associated costs—and a public asset transferred to private hands.”

Todd Ziebarth, a senior vice president of the National Alliance for Public Charter Schools, said in an interview that he agrees that many states need to pass stronger regulations mandating more detailed financial disclosure obligations by charters. They also need tougher laws that ensure the independence between charter school boards and their managers, he said.

However, the National Education Policy Center’s report “swings and misses” on the issue of facilities, Ziebarth argued.  There have been some documented cases of charters unethically profiting from public resources, Ziebarth said, but those lapses are uncommon. He argues that the larger problem is ensuring that charter schools have appropriate facilities to work out of at all.

Noting that charters cannot levy taxes or access municipal bond markets, Ziebarth and some other charter proponents say they support efforts, such as the one backed by former Indiana Gov. Mitch Daniel, to simply give the deeds directly to the charters for free rather than bothering to sell the properties at all.

To Ziebarth, the focus should be on ensuring that school buildings be used to educate kids, regardless of who controls the property, and that should a charter discontinue its operations, the facility “revert back to public ownership.”

The purpose of charters is to allow schools to operate with flexibility in the hope of unlocking new academic variety and opportunity for students, Ziebarth argued. If the National Education Policy Center’s recommendations “are followed to their logical conclusion, you have effectively recreated a traditional public school,” he said.

In addition to the issues surrounding public assets, the report also argues that state lawmakers should hold charter boards and charter managers accountable to the same obligations for public disclosure of their budgets and operations, and the same enrollment standards, that traditional public schools follow. For instance, Miron cited instances in which charter managers refused to disclose administrator salaries.

The report also urges policy changes that give districts and local governments control of public lands and assets, and that authorizers be required to review any and all contracts between charter boards and charter management organizations.

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