Profit Trumps Public Interest?

The National Council of State Legislatures should be commended for bringing together two people with very different views of charter school for-profit management.  On the surface, the webinar: Charter School Networks: Does Profit Status Matter?  seemed to be a reasonable, thoughtful discussion about management issues.

payoffThe discussion was polite.  Responses to questions were forthcoming.   The rationale for-profit status was discussed and management issues were raised.  The fact that both for-profit and non-profit management companies have fiscal management problems was acknowledged.   Yet, the meat of the topic was only alluded to.

If you want to really understand the issues, read on.   Don Cooper, Director of Government Relations, National Heritage Academies (NHA), summarized the Michigan based for-profit charter management organization’s approach to expansion. He said NHA follows a slow managed growth policy to ensure that needs of existing schools are met rather than placing expansion over the interests of existing charter schools. In response to a question, he explained that the primary advantage for having for-profit management companies is their ability to provide start up costs and to access capital without risk to the taxpayers. He mentioned that authorizers were now more sophisticated. They were more likely to require that independent charter boards whose members were properly vetted to avoid conflict of interest.

Donald Cohen, Executive Director of In the Public Interest raised concerns about private for-profit management of charters including: lack of transparency of records, conflict of interest, governance practices, instructional methods, and salaries. Charter schools are called ‘public schools’ but when they turn over management to a private firm, the public loses access to that firm’s data on how the money is spent. Money is diverted from classrooms  for lease and bond payments to real estate companies associated with the management firm. The inability to provide proper oversight and hold the private sector to the same standards as the public sector are critical issues.

What was said during the webinar was informative. What was not said related directly to Mr. Cohen’s remarks about the dual loyalty of charter employees to students and the management firm.  In June 2014 the Detroit Free Press released its year-long investigation of charter management in Michigan: Michigan Spends $1 billion on Charter Schools but Fails to Hold Them Accountable.  Lax oversight and accountability are problems in Michigan.  The Huffington Post reported that NHA has faced lawsuits and investigations for violating separation of church and state, conflict of interest, possible misuse of funds, and excessive lease payments. See: Why is this charter management company still in business?

Some of these problems are directly related to the for-profit management companies’ real estate strategies for making money.  They justify their profit by claiming charters are a high risk investment.  Yet, in Michigan, where concerns are raised that charters continue to operate even though they do less well than public schools, have no statewide standards for authorization or for revoking charters, the risk may be to the students, not the companies.  The need to take a hard look at protecting the public interest remains.

Posted in Audits, Authorization, Charter School Management, Funding, Michigan.

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