Monthly Archives: June 2016

Education Reformers Reflect at 25

Originally published in The American Prospect on June 29th, 2016.
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It’s been a quarter-century since the nation’s first charter school opened in Minnesota, prompting many self-proclaimed reformers to step back and reflect on their movement’s progress. Charters educated 2.5 million students this past year, in 6,700 schools across 43 states. Programs enabling students to attend private schools with vouchers are expanding. And in February, Teach for America celebrated its 25-year anniversary with a summit in Washington, D.C.—noting that of their 50,000 teachers and alumni, 40,000 are still under 40.

But challenges loom for the movement—politically and philosophically. Some tensions can be chalked up to growing pains: a nationwide bipartisan coalition is bound to disagree at times, and certainly policy implementation can be far more contentious than passing legislation. Transforming the public education system, reformers have found, turns out to be hard, messy work.

But the problems run deeper than that. Internally, two main camps of reformers—market-driven advocates and accountability hawks—have been butting heads increasingly over goals and political priorities. For a long time, these two groups seemed to be one and the same—“choice and accountability” have always been buzzwords for the movement. But over time, the divisions between Team Choice and Team Accountability have grown more apparent. Today, some veteran choice advocates, those who have been pushing market-driven reforms for the last 25 years, have expressed feelings of being hemmed in, and in some cases crowded out, by others who are demanding formal checks and balances.

Jeanne Allen, the president of the Center for Education Reform, is one such frustrated choice advocate. “Reformers have become our own worst enemy,” she declared at an event at the National Press Club earlier this month. Her group organized the event to release its new manifesto, outlining challenges Allen sees within education reform, and steps allies must take to get their movement back on track. “If we’re to be honest with ourselves, we must acknowledge that our efforts to drive change have hit a wall,” she said. In Allen’s view, reformers saw more progress during their first nine years, than over the last 16.

Her manifesto cites a declining interest in Teach for America, decreasing enthusiasm for the education technology sector, and slower overall charter school growth. She says that officials who authorize charters have grown too overbearing, stifling flexibility and innovation. And she calls on the reform movement to get back on offense—to focus on “opportunity and upward mobility”—so they can begin rebuilding momentum.

Chester E. Finn Jr., president emeritus at the right-of-center Thomas B. Fordham Institute, an education reform think tank, tells me he thinks Allen is correct to note that reformers have not looked ahead to the future enough. He worries that the current partisanship in the country threatens to splinter the reform coalition. But he says he thinks certain gains and accomplishments—like judging schools on whether students are learning, improved graduation rates, better tests, and more rigorous standards—are ones to be proud of. “She doesn’t really give them enough credit,” he says.

Greg Richmond, the president of the National Association of Charter School Authorizers, tells me that while he felt many of Allen’s observations were accurate, the overall tone of her manifesto was too cynical and pessimistic. “In the places where we have a lot of charter schools, they won’t disappear,” he says. “The fight now is how many more are there going to be, and what are the regulations around them going to look like.”

Still, fairly stark divisions have emerged within education reform over what role “the market” should play in determining what kinds of public schools should exist and expand.

Still, fairly stark divisions have emerged within education reform over what role “the market” should play in determining what kinds of public schools should exist and expand.

Some groups, like the Center for Education Reform, remain committed to the idea that parents should be able to choose the schools they think best meets the needs of their child. While all reformers still generally use this type of rhetoric, many have actually moved away from the more corporate “parents as customers” language that leaders like Allen still regularly employ. From the perspective of the Center for Education Reform, if a parent is satisfied with a school, then that is reason enough to assume it’s successful and working. If enough parents want to leave a school, and have the freedom to do so, the thinking goes, then bad schools will be inevitably shut down, just as bad businesses close if they can’t sustain demand for their products.

In her manifesto, Allen says that while charter authorizers have a role to play in terms of opening schools, it should be parental choice that determines whether or not schools close. “No accrediting agency has more of an incentive to keep kids out of bad schools than mothers and fathers,” she writes.

“Well, we just fundamentally disagree with that,” Richmond tells me.

Chester E. Finn Jr. says he’s also less willing to leave school accountability up to parents, and believes student outcomes have to be part of the conversation. “Jeanne is a little more willing to settle for a market test, and I want something else besides that. I’m also pretty fussy about achievement.”

Nowhere is this divide more evident than within the ongoing debates surrounding virtual charter schools, which more than 180,000 students attend full-time in 23 states and the District of Columbia. Last fall, multiple research studies found that virtual charter schools yield significantly worse academic results than traditional public schools. Building on those findings, this month, the National Alliance of Public Charter Schools, the National Association of Charter School Authorizers (Richmond’s group), and 50Can, an education reform advocacy group, jointly released a report with recommendations for states to hold virtual charters more accountable for student performance. “It is increasingly clear that full-time virtual charter schools are not a good fit for many children and that solely relying on self-selection in the enrollment process isn’t working,” their report said.

As Matt Barnum, an education policy writer for The 74 observed, that reform groups opted to say ‘self-selection’ –rather than “choice”—highlights some of the tensions of this particular moment. For so long, reform advocates argued that schools should be measured on the basis of whether parents choose them. (Or “self-select” them.) But now more groups are saying that perhaps unfettered choice is not the best policy after all.

“What most of the folks in the charter world realized after ten years was that having an unfettered market produced some great schools, but also a lot of bad ones,” Richmond says. He notes that groups like the Walton Family Foundation used to be very generous in terms of who they would fund. “There was a period of time where it was as if almost anyone who wanted to open a charter school could get a grant of $100,000 from the Waltons. It ran like that for a number of years, until eventually they looked at the results and decided this wasn’t working.”

“As supportive as I am about entrepreneurialism and private sector engagement,” says Finn, “there’s also been a lot of greedy behavior—a lot of ‘to the heck with the kids’—and we reformers didn’t really pay enough attention to that.”

The Center for Education Reform issued a statement sharply critical of the three groups’ report, saying it “exemplifies precisely why the education reform movement is at risk—its conclusions endanger the ideals of opportunity and innovation that are so desperately needed in education today.” At the National Press Club, Allen went further, saying there’s been a “death march” around research studies, with too many reports and academics critiquing various aspects of reform, which then inhibits a culture of risk and innovation.

Efforts to transform public education aren’t going away, but what shape they will take going forward remains unclear. A growing number of people, including both school choice advocates and education reform opponents, say there’s little evidence that standardized test score gains in math and reading lead to improved long-term life outcomes. This has further fueled debates over how students should be tested, and how schools should be held accountable for test scores. There are also growing disputes among reformers over the role of for-profit companies, and what type of regulation and accountability a choice-based system really needs.

“I don’t feel that charters are going to go away, but I do believe they will become so hamstrung they will become like the traditional school system,” said Donald Hense, the founder of one of D.C.’s largest charter networks, at the National Press Club earlier this month. Richmond tells me that while he whole-heartedly agrees some authorizers have gone too far in regulating charter schools, many don’t go far enough.

In late May, Robert Pondiscio of the Thomas B. Fordham Institute, penned a provocative post warning of a narrowing space for conservatives within education reform; its “increasingly aggressive” social justice rhetoric, he said, has served to marginalize Republicans and conservative ideas. A fellow conservative, Fredrick Hess, the director of Education Policy Studies at the American Enterprise Institute, followed up, lamenting what he described as growing “groupthink” within the movement. “It has undermined the healthy competition of ideas,” Hess said. “It has weakened the ability to sustain bipartisan cooperation. It has rendered the space less hospitable to young minds who may not share the current orthodoxy.” These and other critiques have sparked a flurry of internal discussion and debate about the future of the coalition—a fairly healthy conversation as reformers work to grow a more diverse movement, but one that has also left people divided over just how existential these problems really are.

As education policy devolves back to the states, as it’s set to do through the Every Student Succeeds Act, which Congress passed in December, we’re likely to see much more school variation across states and communities. Teacher unions and market-driven reformers have cheered these developments, but many civil rights groupsand accountability hawks worry about what a decreased federal role will mean for struggling students. As reformers continue to mobilize, so do their critics. The discussion around school integration has grown louder over the past two years, and more community advocates are exploring models like full-service community schools as ways to boost student success.

Needless to say, the next quarter-century will require close attention.

 

Under Armour’s Slam-Dunk Deal

Originally published in Slate on June 20th, 2016.
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It’s been a lucrative couple of years for Kevin Plank, CEO of Under Armour, the country’s second-largest maker of sports apparel. His company’s revenue has grown by more than 20 percent for 24 consecutive quarters, and its savvy sponsorship deals—with NBA MVP Steph Curry, pro golfer Jordan Spieth, and ballet dancer Misty Copeland—have turned the brand into a powerhouse that now can plausibly be mentioned in the same breath as Nike and Adidas. Under Armour’s expansion into health and fitness technology has even placed it in competition with the likes of Apple and Google.

Just as ambitious are Plank’s efforts in Baltimore, where Under Armour’s headquarters have been stationed since 1998. As part of an effort to grow the company’s HQ staff—from its current headcount of about 2,000 employees to 10,000—Plank is seeking to redevelop some 260 acres of mostly empty industrial land on the south Baltimore peninsula. In addition to a new Under Armour headquarters, Plank hopes to create what would amount to an entire new waterfront neighborhood, complete with shopping, dining, office space, parks, and nearly 14,000 residential units. It’s a real estate development project that could transform the city.

The area Plank has his eyes on, known as Port Covington, has been an underused eyesore for decades. But while many in Baltimore’s political class are cheering the project’s potential to create new jobs and stimulate the local economy, there’s good reason to worry that if the plan goes forward, it could end up leaving the city’s most vulnerable residents worse off than they already are, all while saddling the city with risk it can’t afford.

The problem is that Plank, despite being a self-made billionaire, wants a lot of help to make his vision for Port Covington a reality. To that end, his real estate firm, Sagamore, has asked the city of Baltimore for a record-breaking $535 million in so-called tax increment financing. TIFs, as these types of loans are known, are used to fund infrastructure by selling municipal bonds to private investors, and then property taxes generated by the new development are used to pay them back. Though beloved by titans of commercial real estate, TIFs tend to draw scrutiny because they divert so much money away from a city’s general fund. MuniCap, a consulting firm that Sagamore hired to analyze its TIF application, projects that Plank’s development would not yield property tax revenue for Baltimore’s coffers until about 2040, even as the site would require substantial city resources in the interim.

The size of the TIF that Plank has requested is unprecedented for Baltimore. At more than half a billion dollars, it would be the third-largest TIF deal for a private company in U.S. history. And though the money it would raise would go toward funding improvements like parks, roadways, and bike paths, rather than Under Armour’s new headquarters, Sagamore’s project in Baltimore must also be understood as a tool that would help fuel Under Armour’s continued growth.

At a time when Baltimore is still reeling from the mass unrest that followed the death of Freddie Gray in police custody last year, the deal—as it’s currently structured—strikes many locals as a handout to the well-heeled. They have a point.

“[We are] outraged that, one year after the world bore witness to the decades of disinvestment in poor neighborhoods and communities of color, city leaders would respond by bending over backwards to back a $535 million playground for the rich,” Charly Carter, the executive director of Maryland Working Families, a progressive political advocacy group, says. “This is the new Jim Crow—black and brown families subsidizing wealthy developers while our own neighborhoods crumble.”

Baltimore has a long record of inequitable public investment, with political leaders financing flashy projects in mostly white areas and profits rarely trickling back into the poor, black communities that need funding most. The fear now being expressed by local progressive organizations, housing activists, and labor unions is that, for all the prosperity it will bring Kevin Plank and Under Armour, Sagamore’s TIF plan may turn out to be just another chapter in Baltimore’s history of bad development deals.

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The campaign to remake Port Covington has been aggressive and well-funded. Sagamore has already spent hundreds of thousands of dollars on marketing the development to the public, and its forceful slogan—“#WeWill build it”—suggests that the project is a fait accompli.

Which isn’t far off the mark. The Baltimore Development Corp., a public-private agency, approved Plank’s $535 million TIF request in March, and the city’s Board of Finance backed it in April. Now all it needs is the Baltimore City Council’s final approval, which could come as early as August. Activists have urged the council to postpone its vote to give the public more time to comb through the 545-page proposal. But according to Councilman Carl Stokes, who heads the body’s economic development committee, Sagamore wants the deal approved by the end of the summer.

Tom Geddes, the CEO of Plank Industries, which serves as Plank’s private-investment vehicle, denies that Sagamore’s TIF request is anything more than a loan from outside investors to fund public infrastructure. “Some have mischaracterized the TIF as a ‘subsidy’ or a tax break. It is anything but,” he tells me. “There are no tax breaks for developers involved. There are no subsidies. There are no handouts.”

That’s semantics. There’s little question that Sagamore would benefit from the deal—MuniCap reported that Plank and his investors would earn $400 million more on the development with TIF financing than they would without. On top of the TIF money, the Port Covington project would be eligible for more than $760 million in additional tax breaks. As Barbara Samuels, a fair housing lawyer with the Maryland American Civil Liberties Union, has said, the idea that Sagamore is asking for anything but a subsidy is an insult to the public’s intelligence. “They claim it’s not a tax break, but it most assuredly is a tax break,” says Stokes.

Subsidies are meant to generate benefits for cities and are usually reserved for projects that would be too difficult to fund absent government financing. But right now, it’s not at all clear that Baltimore would benefit enough from the Port Covington deal to warrant such a massive public investment.

There’s no doubt the city needs more jobs. Nearly 7 percent of Baltimoreans are unemployed, and for young black men, that figure is 37 percent. The city certainly feels indebted to Kevin Plank and Under Armour, too—few other esteemed companies offer comparable employment opportunities for locals. Yet according to Sagamore’s own TIF application, after it’s built, Baltimore residents are expected to fill just a third of the nearly 35,000 permanent full- and part-time jobs projected for Port Covington; the rest of the new employees would live outside the city. And there’s no guarantee, under Plank’s current terms, that they would even earn a living wage. Baltimore’s minimum wage is currently $8.25 per hour and is supposed to hit $10.10 by 2018. A living wage in the city for a childless adult is $12.42 per hour.

Community activists also worry that the proposed Port Covington plan would exacerbate racial segregation and do nothing to address Baltimore’s affordable-housing crisis. While Sagamore has touted its (nonbinding) goal of making 10 percent of its residential units affordable, the company defines its market for affordable housing as families earning 80 percent of the area median income of $86,700 per year. Baltimore City’s median income, though, is $42,000. Carol Ott, the director of the Baltimore-based Housing Policy Watch, says if Sagamore is serious about making its units affordable, it needs to use numbers that actually reflect the city’s population.

There’s also the matter of how the TIF deal could impact state funding for city schools. The Baltimore Sun reported that the city’s rapid economic growth spurred by local tax breaks and smaller-scale TIFs led to an automatic $24 million cut in state aid to public schools over the past year. This happened because the state assumes Baltimore’s wealth has gone up—based on property values and resident income—but because many of these valuable buildings pay no property tax, little new revenue actually goes into the city’s coffers. Since the Port Covington TIF is far larger than any other project Baltimore has undertaken before, the risk of severe fiscal drain looms large. For now, the state has agreed to not reduce education funding for three years as the Maryland State Department of Education reviews its school funding formula.

“The problem is, in three years the state could very well say, ‘Hey local jurisdictions, this is on you. You get no break.’ Or, ‘You get only a partial break, since you decided this TIF project was in your interest,’ ” says Melissa Schober, whose daughter attends an elementary school in the city. “As a parent, I don’t know what we would do except move, the cut would be so severe and substantial.”

There’s another reason to be skeptical. Port Covington would be Sagamore’s first major undertaking in the world of commercial real estate. Besides the ongoing construction of a new hotel and the transformation of an old garage into office space, Plank’s real estate firm lacks a track record in development. “This is a brand new developer, we don’t know what they’re capable of,” says Lawrence Brown, an assistant professor at Morgan State University. “I don’t know why the city would feel comfortable giving so much of its development future to one entity like this.”

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If Sagamore gets its way, its nearly 600-page TIF application would be approved in just a few weeks—well before the next round of political leadership takes office in January. But local activists and labor unions want to see the plan slowed down, to ensure their concerns about quality jobs, affordable housing, and public education are properly addressed.

If local officials insist on moving forward, says Maryland Working Families director Charly Carter, advocates will demand a transparent process; a plan to help struggling neighborhoods near the development; and a “good jobs guarantee” with local hiring, full benefits, and living wages. “Most importantly,” she adds, advocates want a “clawback provision”—a contractual agreement with Sagamore—ensuring that “if the development falls through, our poorest residents aren’t left holding the bag.” (For example, if the expected jobs don’t pan out, or the property tax generated is lower than anticipated, or the developer walks away—local governments would still have to ensure that they don’t default on their bond payments and that Sagamore retains some responsibility.)

City leaders are discussing clawback provisions and other safeguards to protect Baltimore taxpayers if Port Covington goes belly up or underperforms, but at this point it’s not really clear what teeth these protections would have. In other municipalities, TIFs have left taxpayers with unanticipated shortfalls or have been used fraudulently by politicians with little oversight. In Chicago, nearly half of the $1.3 billion in TIF funds spent by the Rahm Emanuel administration between 2011 and 2014 went toward downtown gentrifying neighborhoods while blighted communities received little to no investment and saw decreased tax revenue for schools and public services. While those specific TIF funds may never have gone toward needy neighborhoods, these acts of financial engineering, which can place extra burdens on cities and on strained budgets, tend to only benefit the kinds of projects that make developers very rich.

“I think it’s being fast-tracked, it’s unfair to the taxpayer, and proper due diligence cannot be made so quickly on such a complex piece of legislation,” says Councilman Stokes. “It’s quite frankly unethical and doesn’t allow us to do any independent market analysis. We’re not facing a legal deadline, but we’re under a lot of pressure from the developer.”

Sagamore, which recently started a Change.org petition in support of its project, obviously doesn’t see it that way. “We have received tremendous and enthusiastic support from stakeholders across the city,” says Geddes, the Plank Industries CEO.“We’re excited to be a part of building something great in this city and proud that Baltimore is home to one of the largest urban renewal projects in America right now, a redevelopment that will bring tens of thousands of jobs at a time when the city needs a major economic boost.”

When I ask why the project is barreling forward so quickly, Sagamore’s president, Marc Weller, says that if Sagamore’s TIF is not approved as soon as possible, the city “may miss out on hundreds of millions of federal dollars that require TIF approval.” Specifically, he cites federal grant programs, like the Department of Transportation’s FASTLANE grant, which require cities to make local matching contributions in order to access funds.

But Weller made clear that government subsidies aren’t the only reason for the rush and that Under Armour’s growth is of pressing concern. The company, he says, “has simply outgrown its space” and therefore needs to “aggressively move forward with the construction of a new campus.”

Asked if the company will leave the city if the TIF deal falls though, Geddes answered, “the primary purpose of the Port Covington redevelopment is to allow Under Armour to grow in Baltimore City, and to keep the many direct and related jobs in Baltimore.” #WeWill see.

 

 

Teacher Unions Are ‘Bargaining for the Common Good’

Originally published in The American Prospect on June 16, 2016.
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This week, the Los Angeles school board voted to approve a new bargaining agreement with UTLA, the city’s teachers union. Local community organizations—like Los Angeles Alliance for a New Economy, Alliance of Californians for Community Empowerment, InnerCity Struggle, and the Advancement Project—hailed the “groundbreaking” agreement for directing more resources towards students in high-needs schools. Some specific items UTLA bargained for included hiring a Pupil Services and Attendance counselor for high-poverty high schools, and hiring a new teacher for the 55 most needy elementary schools in order to reduce class size. Union members voted overwhelmingly in support of this new contract a week earlier.

“We commend UTLA’s innovative leadership in leveraging its bargaining power to deliver real and impactful investments for low income communities of color,” said John Kim, the Advancement Project’s executive director, in a statement.

UTLA’s president, Alex Caputo-Pearl, said in an interview that his union sees collective bargaining as an important tool available to fight for equity and justice. “A lot of people consider teacher union contract negotiations to be about narrower issues like salaries, benefits, and work rules—and all of those are important and we deal with those—but we’re using these agreements to expand what the union goes to the table for.” Caputo-Pearl says UTLA can ultimately be a vehicle to push for collaborative policy alongside community organizations. “We’re bargaining for the common good,” he declared.

This idea of “bargaining for the common good”—and working in partnership with local allies—is not a new idea for labor unions, but its potential has never been fully realized, and past efforts have not gone deep enough. One major obstacle has been that labor law tries to limit unions to bargaining just over issues of wages and benefits.

“Unions have been significantly hobbled by the legal regime, and a lack of imagination to challenge it,” says Stephen Lerner, a longtime labor organizer.

But now, partly because of the historic action the Chicago Teachers Union took in 2012, when its members went on strike not just for themselves, but also for increased public services for the broader community, more and more unions have started to reconsider their fundamental roles and responsibilities. By expanding their bargaining demands beyond wages and benefits, unions are recognizing that they can more fully support, and engage their community partners—and get those community groups to support them in return.

“I think there’s a growing feeling that if you operate within the confines of the law, you restrict the things that potentially give you power,” says Lerner. “We have to be willing to go beyond what the law allows.”

In 2014, leaders from public sector unions and community organizations gathered at Georgetown University for a national conference, entitled “Bargaining for the Common Good,” aimed at charting this new path forward. Writing in Dissent, Joseph A. McCartin, the director of the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown, said that three distinct priorities emerged from the proceedings: using the bargaining process as a way to challenge the relationships between government and the private-sector; working with community allies to create new, shared goals that help advance both worker and citizen power; and recognizing militancy and collective action will likely be necessary if workers and citizens are to reduce inequality and strengthen democracy.

The time had come, in sum, to politicize bargaining.

A burst of activity followed the Georgetown conference. “It’s been amazing to see how many unions, community groups, and people have adopted the ‘bargaining for common good’ frame and language,” says Lerner.

This past December in Minneapolis, a coalition of unions and community groups brought 2,000 people together to craft a collective agenda for social justice. “Participants highlighted the immense control wielded by a dozen huge corporations, including U.S. Bank, Target, and Wells Fargo, over Minnesota’s economy,” wrote McCartin, and “agreed to collaborate on an array of interlocking campaigns and direct actions in 2016.” Since then, the groups have already successfully pushed for paid sick leave in Minneapolis, and similar ordinances are on the horizon in Saint Paul and Duluth. Groups that can endorse candidates are also working together “with an eye toward building independent political power and wielding greater influence in state elections,” says Dan McGrath of TakeAction Minnesota.

Last summer in Seattle, teachers went on strike for five days—their first strike against the district in 30 years—winning not only cost-of-living increases, but also a guarantee for daily recess for all elementary school students, and the creation of “equity committees” to address the disproportionate discipline of black and brown students.

In Saint Paul, the teachers union began to rethink collective bargaining as far back as 2013, convening regular meetings with parents and community members to formulate a shared vision. When the school district refused to negotiate with the union over their community-driven proposals, insisting that teachers could only bargain on matters related to wages and benefits, the union stood its ground.

Teachers held “walk-ins,” launched social media campaigns, and threatened to go on strike. In the end, teachers won expanded preschool programming, reduced class sizes, reduced testing, and established more equitable access to nurses, librarians, counselors, and social workers. “I had negotiated almost a dozen previous contracts for the [union],” said Mary Cathryn Ricker, the former Saint Paul teachers union president. “But, for the first time, I felt that signing a contract was just one step in building a larger movement.”

Ricker now serves as executive vice-president for the American Federation of Teachers, but the work she started in Saint Paul continues. This year the union negotiated a new contract, filled with more community-oriented provisions, such as increased funding for alternatives to punitive discipline policies.

“For too many years we just dealt with the problems we saw from within the walls of our classroom, but now we understand that our contract is the most powerful document we have to improve the learning conditions for our students,” says Denise Rodriguez, the current Saint Paul local president, in an interview.

Caputo-Pearl cites the Alliance to Reclaim Our Schools, a network that formed in 2014 comprising ten national organizations, including the American Federation of Teachers and the National Education Association, as a key factor helping to drive this labor shift. “They’ve helped us reframe the conversation around bargaining and move this process forward,” he says.

Indeed, the effort is growing.

Last month, the NEA and the Center for Innovation in Worker Organization at Rutgers organized a two-day conference for teacher union locals across the Northeast region, focused on bargaining for the common good. It was the first geographic gathering of its kind. Participants explored how to bargain for issues like adequate nutrition for children, strong public libraries, longer recess, and smaller class sizes. A host of community organizations came, as well as representatives from the Seattle and Chicago teachers locals, who spoke about their own “common good” organizing.

“The members loved hearing about unions being on the offense, rather than the defense,” says Lerner.

“We offered locals a chance to think more deeply about their upcoming contract negotiations,” says Secky Fascione, NEA’s director of organizing. “We’re really watching these ‘a ha’ light bulb moments happen for members when they realize that bargaining can once again be a powerful tool for the issues most prevalent in our lives.”

Charter and Traditional Public Schools Fight Over Money

Originally published in The American Prospect on June 6, 2016.
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Last month, a teachers union-funded study in Los Angeles sparked a furor when it reported that the city’s charter sector—which educates 16 percent of L.A.’s public school students—drains upwards of $500 million a year from the district’s school budget.

In a brief accompanying the report, the teachers union and its allies charged that L.A.’s charter school explosion “limits educational opportunities” for more than 500,000 public school students, and “imperils the financial stability” of the district. Education reform advocate Peter Cunningham shot back in a blog post that the study’s premise that charters siphon money from traditional public schools “is like arguing that a younger child deprives an older child of parental attention.”

Such school budget fights are not just happening in Los Angeles. In cities all over the country—from Massachusetts, to Missouri, from Florida to Pennsylvania, from Washington state to Maryland—charters and local school districts are clashing fiercely over who gets what funding. Districts say charters steal their money, leaving them unable to properly educate the students who remain at their schools—very often those who are the most expensive to educate, like children with disabilities.

Charter advocates counter that districts’ financial woes began long before charters came on the scene, and students who seek alternatives shouldn’t have to suffer just because districts and unions face budget and organizational crises. Money should “follow the child” school choice supporters say, meaning per-pupil tax dollars should be directed towards whichever school system a student wishes to attend.

Charter school policy discussions often devolve into political battles that pit advocates armed with competing research studies against one another in arguments over academic impact. In some cities, like Boston and New Orleans, students attending charter schools have demonstrated significant test score gains. In others, the academic results have been no better than those in traditional public schools. And in some cases, charters have yielded worse results than the district schools.

The research examining charter schools’ academic effectiveness will continue indefinitely, but it is concerns about their fiscal impact that are becoming increasingly charged. As the pressure to expand charter schools continues to mount, and the budgetary health of local districts continues to decline, teachers, administrators, parents, and activists on both sides of the charter school divide are facing off over a dwindling resource: money.

Intensifying the heated political clash between charter schools and traditional school districts is that overall spending on public education, for all schools, has fallen. In 2015, the Center on Budget and Policy Priorities, a progressive think tank, found most states provide less financial support for public schools than they did before the Great Recession, and in some cases, much less.

“Even as we’ve come out of the recession, heels are dug in, and nobody is really considering putting in additional funds,” says Bruce Baker, an expert on school finance.

Funds are not only shrinking, but districts are hard pressed to manage costs that are “fixed” or “stranded” when students leave to attend charter schools, experts warn. Charter advocates say that as money follows the child, districts should figure out how to adjust to new fiscal realities. But it’s not always so easy to reduce certain expenses, at least right away, say researchers who have studied education funding. The cost of heating a building, for example, is the same for a classroom of 15 students as it would be for one of 18 students.

Similarly, a district that has lost only a few students from each grade can find it difficult to reduce the number of school employees. In 2013, Moody’s Investor Service, a bond credit rating agency, released a report which concluded that a small but growing number of school districts face severe financial stress as charter schools proliferate, specifically because these districts can’t reduce their costs as quickly as they lose revenue. This has forced already struggling districts to make further cuts to programs and services, and in some cases, to shut down schools entirely.

In 2014, education policy experts Robert Bifulco and Randall Reback co-authored a paper on the fiscal impact of charter schools, noting a dearth in existing research on the topic. They looked at Buffalo and Albany, two cities with relatively large concentrations of charter schools, and with public school districts facing stagnant, and shrinking student enrollments. The two concluded that charter school expansion produces negative fiscal impacts for school districts, yet that such harm can be somewhat mitigated by better coordination between charters, districts, and states. Bifulco and Reback found that, in general, closing schools can be the most effective way to manage some of the fiscal strain produced by charter growth, but that such closures are “politically contentious undertakings.”

Still, given that research shows money matters a great deal in education, many charter critics believe it is neither wise nor ethical to gamble that cost cuts will wind up improving student learning.

Still other academics suggest tight budgets may actually help boost student achievement. Ron Zimmer, an education researcher at Vanderbilt University, has said it’s possible that fiscal strain on district budgets could spur competition, potentially helping all students. Still, given that research shows money matters a great deal in education, many charter critics believe it is neither wise nor ethical to gamble that cost cuts will wind up improving student learning.

When the charter school expansion first started to take off, some states freed up transitional funds to help school districts cope with declining enrollments and fiscal fallout as students left for charters. Such transitional aid began “as a sort of compromise” between charters and district schools says Reback. Yet many of these compromise measures were reduced or eliminated once the recession hit.

For example, in Illinois, state law once provided a three-year, declining payment to districts to help them manage their budgets as charter enrollment grew. According to Kasia Kalata, the external affairs manager at the Illinois Network of Charter Schools, the state offered impact aid to support school districts with declining enrollments, but phased out the policy in 2009.

Similarly, in 2007, Michigan began to provide some categorical funding to districts with declining enrollments. But these allocations were never fully funded, and by 2012, the state eliminated them altogether. Michigan also lifted its charter school cap in 2011, leading to rapid charter growth.

“Right now you could open a charter school, for almost any reason, in any location, regardless of what that will do to district schools,” says Peter Joseph Hammer, a law professor at Wayne State University in Detroit. He says Michigan’s charter law, and the elimination of the state’s charter cap, has just been “devastating” to traditional public school finances. While the categorical grants that Michigan once offered provided some help, Hammer says even those measures were always “very small relative to the need” and mostly enacted to quiet critics.

Pennsylvania used to reimburse local districts up to 30 percent of their charter school costs, but in 2011, the state’s Republican governor eliminated these partial reimbursements. This was a loss of more than $240 million across the state, including over $110 million for Philadelphia alone.

Laws governing pension participation for charter school employees vary from state to state. Charters, though, have generally not been around long enough to accumulate their own unfunded pension liabilities. The question now is: do charters share responsibility to help pay down the pension legacy costs of area school districts?

Monique Morrissey, a pension expert at the Economic Policy Institute, a progressive think tank, says there is no reason to exempt charter schools from paying unfunded liabilities that are no more the public schools’ fault than they are the charters’. “In fact, I would say that even if charter schools are allowed to opt out of a pension system, they should be required to help pay down the legacy costs to maintain a level playing field,” she says. “Otherwise it creates a downward spiral, where every public school has an incentive to convert to a charter and/or every family has an incentive to choose a better-funded charter school, leaving fewer and fewer students—and less and less funding—in the regular school system to cover the legacy costs.”

In Morrissey’s view, the legacy costs are owed by taxpayers, not students in either regular public schools or charter schools. Thus, she says, “if funding is supposed to follow the students, legacy costs should be taken out of the equation and considered part of the overall budget, not something owed by certain schools and not others. Otherwise, students in regular public schools are effectively provided with less education funding than those in charter schools.”

There have always been disagreements between charters and traditional district schools, but Susan Spicka, the interim director of the advocacy group Education Voters of PA, says that losing those charter reimbursements in 2011 greatly exacerbated tensions between the two sectors. “We support the charter reimbursement and we think it’s a valid argument that, yes, you do have some costs you can’t get rid of right away just because you have fewer children,” Spicka says. “There should be some type of compensation [for districts] to handle those costs.”

Not everyone agrees. Such academics as Marguerite Roza and Jon Fullerton say that policies designed to help districts cope with the effects of shifting student enrollments “weaken the incentives that should drive change and adaptation.” Roza and Fullerton question the idea that schools have all these “fixed costs,” and argue that districts should think more seriously about cheaper alternatives like online schooling, defined-contribution plans, and modified tenure systems. Only by “adopting more nimble expenditure structures,” they have written, can districts feasibly adapt to a changing landscape.

Other “fixed costs” that tend to receive far less attention in conversations about the fiscal impact of charters are the billions of dollars owed by states and districts in pension obligations—and what effect the expansion of charter schools means for local districts saddled with these payments.

Unfunded pension liabilities are the estimated value of benefits earned by employees minus the assets set aside to pay them. Unfunded liabilities can arise because required contributions have not been made in full, or because actuarial assumptions have not been met. States and districts with large unfunded liabilities are now scrambling to find the dollars to pay up, resulting in painful cuts in other areas, including salary reductions for current teachers.

While some unfunded pension liabilities are due to market fluctuations, including sharp stock market declines in 2002 and 2008, leading economists say the most severe cases are due to politicians’ failure to keep up with employers’ share of pension payments over many years (most public-sector workers also contribute toward their own pensions). Instead of setting aside money for future retirees, political leaders opted to defer their responsibilities, borrowing against the next generation of public school students and taxpayers.

Though some education reform advocates have dismissed the idea that districts can’t sufficiently downsize when students leave for charters—they chalk the problem up to bureaucratic recalcitrance—many people acknowledge that such expenses as pension commitments simply cannot be scaled back when student enrollment shifts. “Lifetime health benefits and defined-benefit pensions, sometimes guaranteed decades ago, have created ongoing costs for districts that are unconnected to revenues and enrollment and cannot be easily reduced,” Roza and Fullerton write.

Others disagree.

“The approach of the incumbents—the unions, the administrators—is to chain new teachers to the Titanic because they don’t want to let anyone escape,” says Michael Podgursky, a school finance researcher at the University of Missouri. “These young teachers, charter school teachers, TFA teachers, are cross-subsidizing the pension plans, so [the incumbents] don’t want to let anyone escape.”

He acknowledges that leaving districts to handle those costs alone as charters expand might make things more difficult for traditional school districts. But he says charters “didn’t make this mess.”

Josh McGee, a prominent pension reform advocate at the Laura and John Arnold Foundation, also thinks it would be wrong to ask charters to help pay down legacy costs, though he says it’s true it could be “cumbersome” if local districts have to pay the bulk of those pension liabilities alone. “But charter schools didn’t contribute to that legacy debt, nor can they raise funds from local taxpayers,” McGee says. “Charging charters for the unfunded liabilities that they weren’t around for is just a way to tax them and reduce their state aid.”

McGee says there is an argument to be made that local taxpayers should bear some of the pension costs, but suggests that states pick up the bills in order to mitigate any financial harm to school districts. Currently, according to Keith Brainard, the research director for the National Association of State Retirement Administrators, the source of the employer contribution varies across the country, ranging from local districts paying the full cost, to states paying the full cost, to “everything in between.”

Still, Brainard says, it would be fairly unusual for states that don’t currently pay the employer contribution to absorb those costs back from districts, as McGee suggests, though they could increase aid in other ways. In some places where states do currently pay the pension costs, like in Illinois, legislators are even trying to unload their pension obligations right back onto the backs of local districts. (The only district Illinois does not pay the pension contributions for is Chicago Public Schools.)

Some charter operators have begun to explore how they might extricate themselves from their state pension plans. “Charter schools are a cash cow for the pension plans, and once you’re in, it can be hard to get out—which is what a lot of operators face now,” says Podgursky. “As the costs are going up and up and up, many are saying ‘hey, we want out of here’—though generally escaping is hard.” In an effort to avoid adverse selection, pension plans do not typically allow individual schools to opt out.

As a result, some charter operators are turning to the courts. In 2013, charters in Georgia argued to the state supreme court that they shouldn’t be responsible to help pay down debt they didn’t create. Georgia’s high court agreed, and ruled that charters cannot be asked to share in the burden of paying down unfunded pension liabilities.

To complicate things still further, the question of whether charter employees should be eligible to participate in state pension plans remains unsettled. “They’re private employees for some things, like collective bargaining, but public for other things, like pensions,” notes Podgursky. Since 2011, the Internal Revenue Service and the Treasury Department have been scrutinizing this issue, and working to determine whether private charter teachers are “governmental” enough to participate in state plans. Asked to check on the status of this guidance, the IRS told The American Prospect that, five years later, it still has not been finalized.

For districts saddled with pension payments, the consequences can be severe.

“If the total payroll of the pension plan is slower than expected, by virtue of slow growth in the number of employees or slower growth in salaries, then there are fewer dollars available to fund the plan,” explains Brainard. Essentially, if charter schools do not participate in their state plan, either by not contributing to it as employees or not helping to pay down legacy costs, then there are fewer available dollars to pay down existing debts—obligations that cannot be “downsized” through layoffs or school closures.

In the absence of increased state and federal funding, tense battles over school spending are likely to be handled in piecemeal—and controversial—fashion. In 2015, for example, the Philadelphia School Partnership, a local philanthropic education reform group, offered to pay the Philadelphia School District $25 million in order to take the issue of stranded costs “off the table.” Partnership leaders wanted to push for more charter schools, without having to contend with school district worries about their fiscal impact. But the school district said the group’s offer was too low—generous, but insufficient to cover the yearly stranded costs they’d bear if more students were to leave for charters. Local advocates also protested the organization’s offer on democratic grounds.

“It would be a terrible mistake to take the money,” Susan Gobreski, the former executive director of the Education Voters of PA, told Newsworks at the time. “We cannot let benefactors make decisions like that. I’m very concerned about how much pressure is being put on the district to make decisions that are not in the best interest of the district or most of the kids in Philadelphia, and certainly not in the interest of Philadelphia as a community. This is ideology gone wild.

Tensions surrounding funding for the charter and traditional public school systems are not going away, and indeed are likely to grow more serious over time. While Bifulco and Reback offer some policy suggestions for ways to help mitigate financial stress as charter schools expand—such as constraining when students may enroll in charters in order to help districts plan their budgets more systematically—right now ideological divisions have left the two sectors at a stalemate. Charters market themselves as ways to “escape” failed school districts, touting their autonomy and independence. Traditional school districts resent charters for wooing away their students, and now fear charters are hollowing out their budgets. The bitter divide between education sectors has blocked cooperation and solutions. As the bickering over money continues, more and more public school students will likely cram into overcrowded classrooms, studying in schools without basic resources like textbooks, computers, teachers, and guidance counselors. With fewer and fewer dollars to go around, the price for policymakers’ impasse will invariably be paid by students.