Charter schools given loans won’t have state funding cut
Arizona charter schools that received up to $100 million in federal Paycheck Protection Program forgivable loans can keep the money and not have any of their state funding cut, the Arizona Auditor General’s Office has determined.
At issue is a rarely enforced state charter school law that prohibits taxpayers from paying “twice to educate the same pupils.”
The law requires a school that has been twice compensated to have their base-level funding reduced by an equal amount if additional federal or state monies received by the school were “intended for the basic maintenance and operations of the school.”
But Auditor General Lindsey Perry concluded the state law “does not apply to loan proceeds charter schools” obtained through the federal PPP program.
Her office ruled the loans — despite being 100% forgivable with minimal justification to show that the money was needed — were not “monies received from a federal or state agency” as described in state law.
The agency concluded the money instead came from lenders, such as banks which received processing fees of up to 5% of the value of the loans, to distribute the federal dollars.
About 100 Arizona charter schools, charter management firms and related companies jumped in line when Congress and the Trump Administration created the program offering 1% interest loans intended for small businesses to shore up an economy reeling from the pandemic. The loans can be entirely forgiven.
The purpose was to keep companies hard hit from an economic downturn caused by the coronavirus from closing and laying off employees.
In Arizona, not a single charter or district school lost a penny of state funding through June 30, during the COVID-19 outbreak, according to the state Department of Education.
Data compiled by The Arizona Republic show the state’ charter schools received, on average, the equivalent of about $1,149 more in per-student funding through the federal loan program.
Arizona ranks near the bottom nationwide in per-pupil funding, despite efforts by state leaders to raise teacher pay by 20%.
The Republic also found that nearly one-third of Arizona charter operators who received the forgivable loans were in financial trouble prior to the COVID-19 outbreak, and could face state Charter Board sanctions, including possible closure.
Meanwhile, four out of 10 had “D” or “F” letter grades from the state Department of Education. A small group was both financially and academically deficient, records show.
Some charter organizations, like Legacy Traditional Schools, used multiple campuses to get several forgivable loans.
U.S. Education Secretary Betsy DeVos has supported charter schools getting the loans, and nationwide the schools obtained up to $2.2 billion, according to the Network for Public Education, a watchdog group critical of charter schools.
The Auditor General’s decision was welcome news to the Arizona Charter Schools Association, which lobbies on behalf of the state’s more than 500 charter schools.
“The finding by the Arizona Auditor General regarding PPP federal relief is consistent with ours, and our attorneys’ reading of the Arizona statute,” said Jake Logan, Arizona Charter Schools Association chief executive.
But John Todd, a certified public accountant who does audits for several charter schools, takes a different approach.
Todd said it’s not the loan that triggers the law. Instead, “it is the forgiveness of the loan that makes it revenue. We believe the revenue is from the federal government that originated the PPP loan program.”