Protect school tax dollars from for-profit malfeasance
Today, more than 1,100 charter schools are run by for-profit corporations. Whether those corporations are large national chains or small local companies running one or two schools, they invest in slick marketing campaigns to get children and tax dollars through the door.
The public is often shocked to find out that for-profit-run charters use federal dollars to skim funds at taxpayers’ expense. According to the most stringent interpretation of federal law, for-profit charters cannot be federally subsidized. Title 20 of the Elementary and Secondary Education Act requires K-12 schools to be nonprofit organizations to receive federal funding. However, clever forprofit operators create workarounds using nonprofit facades to evade the law.
Last year, the Network for Public Education dug deep into the for-profit operations of charter schools. The schemes we discovered ranged from elaborate to unsophisticated, depending on the operator’s creativity. Worst of all, we saw how for-profits shortchange kids to line their pockets.
We uncovered scandalous examples of self-dealing, such as Reginald Barr, who, with his wife and daughter, own the management, personnel and real estate companies contracting with their Arizona-based AmeriSchools. They also sit on the nonprofit board that governs the charters, ensuring whatever rent or fees they want are approved and passed right into their accounts.
In North Carolina, Donnie McQueen is executive manager of the for-profit that runs Torchlight Academy, where he’s the executive director and his wife is principal. He’s also president of the real estate company that owns the building leased to the school. Nearly every penny that comes in is turned over by the nonprofit to the for-profit he owns.
Marcus May’s for-profit Newpoint Education Partners managed 15 charter schools. May persuaded parents and community members, mostly naive to school governance, to create charter schools dependent on Newpoint. His vendor businesses overcharged the schools for furniture, computers and other items. He took kickbacks and broker fees for leases, and inflated enrollment figures for more revenue. May is now an inmate in Florida, appealing his 20-year sentence for racketeering and organized fraud.
These operators often use “sweeps” contracts to extract every penny from their taxpayer-funded charter schools. Examples of sweeps include the contracts between the Ohio Distance Electronic Learning Academy and Accel Online Ohio, LLC; the Northeast Raleigh Charter Academy and Torchlight Academy Schools; and Ohio Virtual Academy and K12 Virtual Schools.
Sweep contracts are used by one of the largest for-profit chains, National Heritage Academies (NHA), which uses its control to make money through real estate — either as a broker or landlord. For example, NHA leased a building from the Diocese of New York for $264,000 and then sublet it to its Brooklyn Dreams Charter School for $2.76 million. NHA’s owner, J.C. Huizenga, is selling off 69 charter buildings to a new nonprofit run by his personal attorney. The deal is financed by nearly $1 billion in municipal bonds. Even after he cashes in on the school sale, his for-profit will control them, sweeping in profits from day-to-day operations and the maintenance of the buildings.
Of greatest concern, however, are the cost-cutting, servicediminishing strategies used by for-profits to maximize their bottom line, such as these:
■ Circumventing state rules for qualified educators by designating their uncertified and inexperienced teachers “permanent substitutes.”
■ Limiting the number of special needs students permitted to attend, violating laws about open enrollment.
■ Overcrowding classroom settings, especially online. One online charter operator had a student-teacher ratio of 275-to-1.11.
■ Instituting policies and practices intended to discriminate against, or exclude, students who are expensive to teach.
Of course, charter schools should be free to use for-profit companies to provide books, transportation and the like. But, when for-profits are managing the school, inside deals, secrecy and real estate empires quickly take precedence over the well-being of children. Fortunately, Congress is on the verge of closing a major loophole exploited by these for-profit charter operators. It is hoped the Senate will pass Section 314 of the 2022 House Labor-HHSEducation Appropriations Bill and help ensure our tax dollars stay in the classroom with students, where they belong.
Clearly, some parents are happy with the services these schools provide. I am not arguing that they should be shut down. But, if our federal dollars are being used to support them, then the spirit of the law, not just the letter, should be followed.