In 2013, I published a post with this headline: “Why charter schools need better oversight.”The author of the piece, Jeff Bryant, wrote:

There are undoubtedly wonderful charter schools in existence, and Americans generally have a favorable opinion of charters, but hardly a week goes by without news of a scandal or a study tarnishing their image. ... 

Leading off the charter scandal parade was Pennsylvania where an auditor general found that the state’s largest charter school pocketed $1.2 million “in improper lease-reimbursement payments.” The scheme the school was running has become all too familiar to anyone following the nefariousness of some charter school operators. ...

In Texas, a charter school located in Houston was recently accused of funneling $5.3 million in federal funds to questionable destinations, including ”hotels, cruises and travel packages,” six-figure salaries, and, again, a real estate scheme involving a management company and the charter school.

Five years later, the same remains true: There are some wonderful charter schools, which are publicly funded but privately operated, but the sector is rife with scandal, and critics charge that they are harming traditional public schools, which enroll most of America’s children.

What was once billed as a model for the improvement of traditionally governed public schools has become a troubled parallel system of privately managed schools with, in many places, patterns of waste, fraud and segregation.

In this post, veteran educator and public education advocate Carol Burris looks at the charter sector and asks and answers these questions: Can charter schools be reformed? Should they be?

Burris is a former New York high school principal who now serves as executive director of the Network for Public Education, a nonprofit advocacy group. She was named the 2010 Educator of the Year by the School Administrators Association of New York State, and in 2013, the National Association of Secondary School Principals named her the New York State High School Principal of the Year. Burris has been chronicling problems with modern school restructuring and school choice for years on this blog. She has previously written about problems with charter schools in California and other states.

[Why it matters who governs America’s public schools]

By Carol Burris 

Last month, The Answer Sheet published a piece I co-wrote with education historian Diane Ravitch about school governance, which gave rise to a lively debate in the education community and additional commentary. Much of that conversation centered on the recent report issued by the California-based Learning Policy Institute, which framed public school choice as a rich tapestry of options that include charter schools.

Ravitch and I objected. The inclusion of charter schools — which are publicly funded but privately operated — as though they were the neighborhood school down the block, expands the definition of what it means to be a public school. It blurs the line between public and private governance, making it easier for public schools to be flipped into charter schools.

This “portfolio” model approach, popular with billionaires who advocate the privatization of public schools, views the governance of schools like the management of a stock portfolio — keep those that “profit” (meaning those that produce high test scores), and get rid of “the losers.”

Entrepreneurial governance, freed from most of the regulations and oversight mandated for true public schools, was at the heart of the “charter school experiment.” Thirty years later, we have the results. Charter school students generally do about the same academically as their public school counterparts; in some places, they do better, and in others, they do worse. There is no evidence that charters are more innovative than public schools, with many relying on “no excuses” discipline reminiscent of a late 19th-century school. The original charter idea of a teacher-led school designed to create replicable innovative practices has been lost.

We are therefore left with two very important questions. Can charter schools be seamlessly folded into the public school system while remaining privately governed? Should the charter sector continue to grow through government subsidies, even as demand for new charters has waned? The answer is a resounding “no.” Here are five reasons.

1. Freedom from regulations and oversight through public governance has resulted in persistent and undeniable patterns of waste and fraud. 

For the past year, the Network for Public Education, the nonprofit advocacy group of which I am executive director, has been tracking charter school scandals, posting news accounts here. Frankly, we have been shocked by the frequency and seriousness of scandals that are the result of greed, lack of oversight or incompetence. The independent California-based watchdog group, In the Public Interest, estimated alleged and confirmed fraud in California’s charter sector has topped $149 million, a figure it describes as “only the tip of the iceberg.”

Not even Massachusetts, which allegedly has the toughest supervision of the sector in the nation, is free of scandals. When public dollars freely flow without independent oversight, it is all too easy for dollars to find their way into employee pockets and bank accounts, for friends and relatives to get “sweetheart deals” and for school leaders to receive astronomical salaries that would be unheard of in public schools.

Although new regulations may decrease some abuse, private boards are insufficient to provide governance of the billions of taxpayer dollars that flow through the charter sector. Every serious legislative attempt to rein in abuse meets opposition from the charter lobby, which makes strategic donations to legislators to avoid accountability.

2. De facto discrimination is baked into the charter school model. 

Nearly every charter school admission begins with an application that sometimes serves as a screen. In its 2016 report on discrimination in admissions by California charter schools, the ACLU of Southern California found 92 schools whose admissions requirements had a discriminatory effect.

Even more insidious are the programmatic features of charter schools that result in de facto discrimination. A recent report by the National Education Policy Center at the University of Colorado at Boulder connects the dots between privatization and discriminatory programmatic practices. The BASIS charter chain, for example, demands that students take six Advanced Placement exams and pass at least one with a score of 3 or above, to graduate. Students must pass comprehensive tests at every grade level or be left back. When combined with no free or reduced-priced lunch offerings, no free transportation and an expectation that parents will donate $1,500 a year, the population that applies to and is ultimately retained by BASIS is culled. These policies produce high attrition rates and a student body that does not reflect the demographics of the state. In Arizona, nearly half of all students are Latino. At BASIS, that number is about 1 in 10. Asian students represent 3 percent of all Arizona students but make up nearly one-third of the student population of BASIS.

The “no excuses” philosophy and discipline of Success Academy Charters result in extraordinary attrition rates, “got to go” lists and a lawsuit alleging discrimination against students with disabilities. A first-grade class of 72 became a graduating class of only 16 years later.

Finally, while the extreme racial isolation of minority students in urban charters is well documented, new studies show that charter schools are being used to create racially isolated enclaves for white students to avoid the integrated setting of the local public school system. Notably, North Carolina recently passed a charter school law that would accelerate such segregation.

3. Charter schools bleed money from the public school system, which results in either a lesser education for public school students or an extra burden on the taxpayers. 

Charters are predominantly funded in one of two ways — by “backpack” funding in which state dollars go with the child when he leaves the public school for a charter school, or district “tuition” funding, which requires the district to pay tuition to the charter based on district per-pupil spending.

Either way, the children in the public school get less. That is because stranded costs remain when the student leaves, and those costs are high. A study by the Pennsylvania nonprofit Research for Action found stranded costs ranged from about $8,000 to $17,000 per pupilduring the first year a student enrolled in a charter school. Five years later, those costs still lingered.

The same drain on public schools exists in states where charter school funding comes primarily from the state. In the Public Interest found that in one year alone, charter schools left $142.5 million in stranded costs in Oakland, San Diego and Santa Clara.

Only one state, Massachusetts, makes a serious effort to cushion the blow of stranded costs. For six years following a student’s enrollment in a charter school, the district still receives some funding for that student. As commendable as that may be, the increase eventually disappears, and the impact on the public school is felt. It also results in a substantial extra burden on the taxpayers of the commonwealth — they are paying more per pupil for the student than they would have had the student remained in the district public school.

4. Charter schools eliminate democracy from school governance, and this lack of voice is most acutely felt by parents in disadvantaged communities.

Charter schools are run by private boards that choose their members. Unlike public school boards, charter school boards are not elected by the public, nor do members need to live in the community or even the state in which the school is located. This results in board members that do not represent the community but rather represent interconnected financial interests.

To take a look at who actually governs charter schools, the Network for Public Education’s Darcie Cimarusti took a look at the members of the board of 14 of the largest charter chains. You can review what she found here.

The most frequently encountered career of the board members of the 14 chains was finance — hedge fund managers and directors of investment capital dominated several of the chains’ boards. KIPP has seven billionaires (or heirs to billions) on its board, either active or emeritus.

The overwhelming majority of charter school board members on the 14 chains are white and very wealthy. Other frequently encountered professions of board members are in real estate, insurance, the energy industry and law. The controversial Rocketship chain (which you can read about here) has two employees of the Bill & Melinda Gates Foundation on its board. The Gates Foundation has generously provided funding to technology-based Rocketship ($1,176,000 from 2011-2013).

On the governing board of the charters in the Harmony Public Schools chain in Texas, half of all members are Turkish men. Harmony is part of a group of charters in different states — unofficially known as the Gulen network — that have been under repeated investigation for hiring practices that favor Turkish nationals, abuse of the H-1B visa process, preferences in the award of contracts to related Turkish businesses and kickbacks to the Gulen political movement. Gulen refers to Fethullah Gulen, an Islamic preacher who lives in self-imposed exile in Pennsylvania whose followers have opened many charter schools in this country and private schools around the world.

What is crystal clear when you examine the boards of charter chains is that members do not represent the families that their schools serve in lifestyle, wealth and demographics. In a recent article, journalist Jeff Bryant explains how the expansion of charter schools has disenfranchised communities of color, particularly in large cities, and how parent activists are now fighting back. In 2016, the national NAACP, the oldest civil rights organization in this country, passed a resolution calling for a moratorium on new charter schools in part after listening to the voices of parents who were unhappy with the treatment of their children in charter schools, yet had no real recourse for complaint within the system.

[NAACP sticks by its call for charter school moratorium, says they are ‘not a substitute’ for traditional public schools]

5. Loose laws around conflict of interest combined with a lack of transparency regarding spending have provided fertile ground for profiteers and grifters. 

Imagine starting a business for which you assume no personal financial risk and you receive taxpayer income from every customer who comes through the door. That is a charter school. Not only is there little or no risk, there are ample opportunities to realize profit. In many states, charters are exempt from laws prohibiting conflict of interest and nepotism.

Consequently, charter schools regularly hire relatives as consultants, teachers, contractors and executives. For example, officers of Learn for Life, a California storefront charter school chain, play musical chairs with titles, often receiving compensation from several corporations.

Real estate deals are one of the primary ways that charter operators “cash in.” Take the recent case of Eddie Farnsworth, a member of the state legislature of Arizona.

Farnsworth is the sole owner of a for-profit charter chain, Benjamin Franklin Charter School. Even though the taxpayers paid for the physical campuses, the owner of the property is Farnsworth, who is the sole proprietor of LBE Investments. It owns the chain’s four campuses and leases them to the school. Taxpayers have already paid for the schools twice — once for their construction and then again in lease payments to LBE. Now, Farnsworth is selling the for-profit charter school chain to a nonprofit chain that bears the same name. He will net an estimated $30 million from the sale and probably still run the schools.

According to the Arizona Republic, Farnsworth is not the first to become a multimillionaire from Arizona charter schools. It said:

“A yearlong investigation by The Republic found Primavera online charter school’s CEO paid himself $8.8 million, while producing a 49 percent dropout rate. Basis Charter Schools Inc. has directed $10 million in management fees to a company owned by its founders. American Leadership Academy founder Glenn Way made at least an $18.4 million profit building schools under no-bid contracts with that charter chain.”

In Pennsylvania, one real estate developer used his properties to create a revolving door of failing charter schools to bring in a steady stream of income. In North Carolina, another charter owner, businessman Baker Mitchell, had his school buy nearly all of its supplies from his for-profit company. Even when states make such conflict-of-interest deals illegal, they still occur.

Even though few states allow for-profit charter schools, nearly all others (34) allow the charter management company to operate for profit. Charter management organizations (CMOs) and education management organizations (EMOs) are where much of the profiteering occurs — hidden behind a veil of secrecy. Thirty-eight states have no required transparency provisions regulating the spending and funding by charter schools' educational service providers or charter management organizations, be they for-profit or nonprofit.

The relationship between Imagine Schools, a CMO with 55 schools in eight states and School House Finance, a for-profit LLC, provides an illustrative example. School House Finance, owned by the charter schools’ founder, bought the buildings that housed the charter schools. It then sold them to Entertainment Properties, a real estate investment trust that would lease it back to School House Finance. School House Finance then rented the buildings to Imagine Charter schools, with schools paying up to 40 percent of their income toward the lease.

It is time to acknowledge that what may have begun as a sincere attempt to promote innovation has given rise to fraud, discrimination and the depletion of public school funding. Thirty years of charters have resulted in an increase in profiteering far more than it has resulted in innovation. Democratic governance is disappearing.

The bottom line is this. It is foolish to fund a parallel system of privately managed schools at the expense of the nation’s public schools. By integrating charter schools into district “portfolios,” we will embed all of the problems outlined above into our wider systems of real public schools that remain.