When Public Schools Go Private

Originally published in The American Prospect on September 28, 2016.
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The Census Bureau released new data earlier this month that showed the median household income in 2015 was $56,500, up 5.2 percent over 2014. This marked the largest single-year increase since at least 1967, the federal agency reported. Moreover, this income growth was concentrated among the poor and the middle class, and 2.7 million fewer Americans were living in poverty in 2015 than a year prior.

Despite these encouraging trends, they come nowhere close to reversing the dramatic rise in inequality we’ve seen since the late 1970s. As the Economic Policy Institute reported in June, in 2013, the top 1 percent of American families gained 25 times as much income during that time as the bottom 99 percent. And as The New York Times recently noted, the median household still earns 1.6 percent less in inflation-adjusted dollars now than it did prior to the housing market collapse.

With that in mind, a new report released today by In the Public Interest, a research and policy organization, makes the case that the increased privatization of public goods and services over the last few decades has contributed to, and exacerbated, the stark inequalities we see today. The report sifts through various sectors that have grown increasingly privatized—from foster care and transportation, to public schools and prisons—outlining commonalities between them, and recommending ways to undo some of the harms of private contracting.

One area the report focused on is charter schools, which are publicly funded but privately managed. While income inequality is a concern for these schools—charter teachers are generally non-union, work more hours, and earn less money on average than their traditional public school counterparts, In the Public Interest also delves into concerns of oversight and segregation, issues common among increasingly privatized sectors.

The heated debate over whether charters are “public” or “private” tends to grow quite muddied, particularly as most charter schools are structured as nonprofits. Charter supporters point out that these schools are open to all students, funded by taxpayers, and free to attend—ergo, public. Critics say that charters are happy to take advantage of public laws and benefits when it suits them, and claim private status otherwise. The dean of Harvard’s Graduate School of Education, Jim Ryan, remarked in an interview earlier this month that he “scratches his head” when he hears that charter schools are efforts to privatize public education, and that “it’s hard to see how [such claims] have a lot of merit.”

Donald Cohen, the executive director of In The Public Interest, hopes the group’s new report can help cut through some of this confusion, and provide progressives with a more useful way to conceptualize privatization in public education. “People tend to think privatization is about giving it to the private sector, or a private corporation,” he says. “But privatizing is more than that. It’s when there is less public control, fewer regulations, and more governance by market forces.”

And despite two recent National Labor Relations Board decisions that found charter school employees to be private-sector workers, Cohen says this shouldn’t deter progressives from viewing the teachers who work in charters as public employees.

“If you’re a subcontractor working as a janitor in City Hall, or a subcontractor picking up trash around a neighborhood, you’re still providing a public service,” he says. “There’s a falsehood that we can create through subcontracting that they’re not our employees, and our responsibility.” In The Public Interest’s report argues that when governments directly provide services, they generally offer living wages and decent benefits to workers. But when private companies take control, they tend to slash labor costs, hurting not only individual workers and their families, but also local economies and the stability of middle- and working-class communities.

For Cohen, the nonprofit/for-profit debates also tend to obfuscate some larger issues regarding regulation and public control. He notes that nonprofit charter schools still regularly contract out their operations to for-profit companies anyway. And while traditional public schools also engage in some level of subcontracting, the public’s ability to review the deals and financial contracts their school makes with private companies, paid for by tax dollars, is made far more difficult when those institutions are nonprofits and for-profits.

As a result, education advocates have started to push for laws that would require greater accountability and transparency in the charter sector—lifting up unacceptable instances of fraud, discrimination, and abuse. A report issued in 2014 by the Annenberg Institute for School Reform laid out some concrete policy recommendations, many of which have been since promoted by teacher unions across the country.

Lastly, In The Public Interest’s new report also discusses the ways in which charter schools accelerate the racial and economic segregation of public schooling—something they say is common for sectors that grow increasingly privatized. They cite research from the Civil Rights Project at UCLA showing that charter schools are more racially isolated than neighborhood public schools in almost every state and large metropolitan area in the country. Rapid charter growth, coupled with increased segregation, In The Public Interest says, helps to destabilize school finances, resulting in fewer resources, particularly for students of color, disabled students, and poor students.

I asked Cohen what he hopes to see come out of this new study. “Look, this is a big, deep, and dense report,” he answered. “We deal with privatization and outsourcing in a million pieces—the charter schools here, the prisons there. We wanted to say no, there’s something bigger going on here that’s a significant contributor to growing inequality. And that’s the slow and steady transfer we see from public responsibility to private responsibility.”

The Charter School Business

Originally published in The American Prospect on December 22, 2015.
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Rutgers University professor Bruce Baker is a longtime expert on charter schools, which are in the crosshairs of a nationwide debate over school performance standards. Recently, Baker, and his colleague Gary Miron, authored a study about the ways in which individuals, companies, and organizations profit through laws and regulations governing the charter school sector. In an interview with The American Prospect, Baker discusses some of the most egregious policy problems, and steps that governments could take to fix them. What follows is an edited transcript.

Rachel Cohen: Your report explores what you call, “The Business of Charter Schooling.” Has this been studied much before?

Bruce Baker: I don’t think it’s been systematically studied because I don’t think there are many unified data sources for this information—it’s more like investigative reporting. I had been repeatedly asked to look into charter school real estate deals and things like that but getting good data just isn’t easy. This was really just a first cut at summarizing the business practices and financial transactions occurring in the charter sector, and what policy structures encourage or permit these things to happen.

RC: You say that current laws and policies governing charters are increasing the privatization of public schooling. What do you mean?

BB: I want to be careful on this issue of ‘privatization’ because I don’t think the intent of our report was to say that public policy is promoting privatization, or that privatization is necessarily bad or good. But there is a long line of case law that carefully parses under what circumstances, and in what settings, certain activities of charter schools are public or private. I’ve coauthored law review articles where we discuss extensively how the charter school industry claims it is “private” when dealing with questions of employee rights, student discipline policies, student handbooks, or contracts, and “public” in other respects.

The idea put forth in our report is that there are certain policy structures, and in some cases lack of policy controls, that are permitting more extensive degrees of privatization in some states. Sometimes it just makes business sense for charter operators, good or bad, or it affords them a way to do something more quickly or cheaply. But I think that some actors in the charter world such as Imagine Schools, White Hat, and Charter Schools USA, are taking advantage of these opportunities in ways that are self-enriching and not in the public interest.

RC: What are some examples?

BB: Sometimes charter providers take actions that are illogical and inefficient from a public policy standpoint, but it might simply be what they have to do to get by. For example, sometimes charter providers create third-party entities, and then pay rent for the school facilities to these new entities. Since charters can’t directly purchase land themselves, these third-party entities allow them to take advantage of tax incentives and to carry revenue-bond debt to purchase property. Unfortunately, because they’re doing this through revenue bonds, they’re getting a crappier interest rate than a district might get and they have to spend a greater part of their operating funds to get facilities. That’s one example of how policy basically backs a charter school into engaging in inefficient activities.

In other cases, charter providers may engage in ethically suspect, but perhaps not illegal, behavior. For example Imagine Schools runs its own property acquisition arm, Schoolhouse Finance. Similarly, Charter Schools USA, a for-profit company, runs Red Apple Inc., and acquires properties to lease them back to the charter school. And in some cases it does actually become illegal. In Kansas City a court ruled that Imagine Schools went over the line with self-dealing, because they overcharged themselves so much in lease payments. [These leases are being paid for with public dollars.]

RC: You note that many public school districts have privatized services for years. What makes what’s happening in the charter sector different?

BB: The modern era of privatized contracted school management started out in the 1990s, as traditional school districts would engage in contracts with private organizations to run schools. But in these cases, the contracted manager works for a local board of education, and is paid through a district budget. So at least at the top level of the organization, the district and the board of education know the details of that private contract.

Whereas if you look at some states, sometimes it may be private entities that actually authorize charter schools, and charters are established through boards of private citizens who then might contract a private company to run their school. The opportunities to shield disclosure, at multiple levels of the hybrid, publicly funded, privately managed and governed system, are dramatically increased in the charter sector.

RC: You note that school districts, many of them starving for cash, have been selling off their public assets—such as school facilities and land—to the charter sector. If one day, the public sours on charter schools, and wants to return to traditional public education—might this not be possible?

BB: Yes, the turnaround would just be too expensive. Maybe 15 years down the line it will be different, but as it stands now, the case for spending sufficiently on a system of public schooling is just not strong. Despite the economic turnaround, most states are still spending less and less on schools.

If you start thinking how much short-run expense would be required to even acquire new urban land to educate students, and then to develop suitable facilities—well, it’s very high. And in some cases, the land and buildings that are being used by charter operators are actually owned by for-profit real estate investment trusts. They’re certainly not going to sell land and buildings back to cities below market value just to support the public good.

I think we do need to be paying more attention to the capital available to educate the children we’re responsible for educating. If we sell it off, and change our minds about charters down the line, we are screwed.

RC: You recommend instating far greater financial reporting requirements. How would this help?

BB: Any entity, private or public, engaged in the delivery of school services should have to report their expenditures. Right now we have to go fishing through IRS 990 forms—if the manager is nonprofit—and it gets very messy. I’d like to see charter financial data reported into a publicly accessible system. Some states do a much better job of this, but you really have to fish for these little pieces of information here and there to try and pull it all together. There’s got to be better accounting for the overlapping financial relationships, so that people can understand how money is being passed between interested parties.

RC: People often talk about charter networks like KIPP, but it seems like there are far bigger networks that slip under the radar. Your research suggests that these networks come with more problems or ethical concerns.

BB: There are certain charter schools we hear about in the media—like KIPP, Uncommon Schools, and Success Academy. And I have my own concerns about the pedagogy and compliance with students’ rights issues at those schools, but when you start looking nationally, what we see is that the dominant players operating charter schools in many states are Imagine, which has found itself in court for self-dealing, White Hat, which was just involved in an Ohio Supreme Court case, National Heritage Academies, Mosaica, Charter Schools USA … and in many states, and nationally in the aggregate, these are much bigger than KIPP or Achievement First, etc.

These networks are not the names we hear about when we hear about the next big study to show how well charters are doing. These are not the networks we hear charter advocates saying we need to expand. Rather we see advocates saying that if we just remove caps and deregulate we’ll see a lot more networks like KIPP. That’s not the case. It hasn’t been the case. And it won’t be the case.

RC: School choice advocates often say that more money is able to “get down to the classroom level” in charter schools, because we do away with large district bureaucracies. This was a common theme in Dale Russakoff’s recent book, The Prize. Is it true?

BB: It’s a complete mischaracterization. It’s one of those cases where the public rhetoric and the research that’s been done really over quite a long period of time are entirely at odds. There are numerous studies that have looked at the administrative overhead expenses of charters and found them to be very high. The vast majority of charters have relatively low total classroom instructional expenses, and studies have consistently found that the proportions spent on administration and other centralized expenses are much higher in charters.

My graduate student, Mark Weber, wrote about the misuse of data in Dale Russakoff’s book.

RC: What recommendations in your report do you expect to garner the most opposition?

I would expect to get significant pushback from the various types of private entities that have enjoyed their current opportunities to shield disclosure.

We also make the case for a centralized, publicly governed authority to manage facilities, or perhaps even all capital resources. Allocating public space to charter operators both reduces the potential for inefficient expense by charter operators and maintains the public’s interest in its public assets.

Some public school advocates, who are fairly anti-charter, have been opposed to the idea of “co-location” which is where a charter and a district school share space within the same building. It has led to some problems, but when I look at the big picture, it’s a hell of a lot better for the public to maintain the public facilities and allow charter operators to use them, rather than sell them off.

I fear this report is going to be seen as us saying all charters are evil, or bad, or money grabbing. What we’re saying is there are good charters but also bad ones, and the bad ones are bigger than you think. Charters represent a significant portion of our public school system system and we’ve got to figure out how to make them work better for the public interest.