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Why opening a charter school is like opening your own business

President-elect Donald Trump at the Mar-a-Lago club in Palm Beach, Fla., on Dec. 21. (Jabin Botsford/The Washington Post)

The “school choice” movement in the United States is bound to get a huge boost from President-elect Donald Trump’s selection of Betsy DeVos, a Michigan billionaire and choice advocate, as his secretary of education. If she is approved by the Senate, as expected, DeVos will push to expand a range of choice programs that use public funds for schools not part of traditional public systems.

DeVos has called the public education system in the country — which many see as the United States’ most important civic institution — as a “dead end” and a goverment-run “monopoly.” That’s why public-education advocates are worried about her impending leadership at the Education Department.

To Trump’s education pick, the U.S. public school system is a ‘dead end’

One of the pieces in DeVos’s constellation of choice programs is charter schools, which are publicly funded but operated independently from traditional systems, sometimes by nonprofit organizations and sometimes by for-profit companies. Nationwide, the charter-school sector has grown over the past few decades amid a debate about its virtues and drawbacks — and even over whether the publicly funded schools are public or private entities. Some charters are excellent. But as the sector has grown, so have problems that have gone unaddressed.

Ohio and Utah have troubled charter sectors, as does Arizona, where there are no laws against conflicts of interest and where for-profit charters do not have to open their books to the public. In Michigan, 80 percent of the charters are operated entirely or substantially by for-profit entities. Pennsylvania Auditor General Eugene DePasquale recently declared his state’s charter-school law the “worst” in the nation. California has more charter schools and charter-school students than any other state in the nation.

This fall I published a four-part series on California’s charter schools, often called the “Wild West” of the charter sector. Why? Here’s an example:

One charter school closed in 2014 after state auditors found a number of issues, including indications that administrators funneled millions of dollars in state funds to the schools’ operator and her family and friends. As the Los Angeles Times reported, some of the allegations against the school operator were downright “bizarre.” Auditors questioned the use of school funds to pay a more than $500,000 settlement to a former teacher who sued, claiming she had been wrongly terminated after she was ordered by the school director to travel to Nigeria and marry the director’s brother-in-law so he could become a U.S. citizen. The operator’s penalty? She paid “a $16,000 fine for misconduct that includes using public education funds to lease her own buildings,” the Times said.

That series was written by award-winning former high school principal Carol Burris, who is now executive director of the nonprofit Network for Public Education advocacy group. She chronicled many of the glaring problems with the charter-school law in California. Here is a new post by Burris about charter schools and the “choice movement.”

By Carol Burris

The drive to privatize the public education system under the guise of “choice” is well underway — and can be expected to pick up steam when Donald Trump becomes president. He chose as his education secretary a Michigan billionaire named Betsy DeVos, who is an ardent supporter of school choice who has said the public education system is a “dead end.”

During the past 60 years, public education has been the frog in the pot of water, as school privatizers and “education reformers” have slowly turned up the heat. Over 1 million students receive a taxpayer-funded voucher to attend a private school, and close to 3 million attend charters schools. Whether the adjective “public” is in front of the word “charter” or not, charters are at the forefront of school privatization.

Opening a charter is akin to opening your own business — but the cost and risk are fully funded by the taxpayers. In most states, taxpayer dollars provide the initial “investment.” This is an odd business model in which the corporation gets income for every customer who walks through the door, regardless of the individual ability to pay. And if the business fails, “owners” are not out a dime, but the customers, who are in this case children, are stranded.

It is remarkable that the American public has allowed such risk-free, taxpayer-funded entrepreneurship to occur.

If you think that publicly funded, largely unregulated businesses would be ripe for shady deals, oversized compensation and outright fraud, you would be right.

In September of 2016, the Inspector General’s Office of the U.S. Education Department issued its final audit report titled a “Nationwide Assessment of Charter and Education Management Organizations.” The report assessed “the current and emerging risk” that is posed by charter management organizations for fraud, waste and abuse.

The audited period was less than two years — between late 2011 and the early months of 2013. Thirty-three charters in six states were selected for review. Of the 33, the department found that 22 lacked the necessary internal controls, resulting in a significant risk to Education Department funds.  The report also made it clear that the Education Department itself is not doing enough to protect taxpayers from charter management fraud.  (The present secretary, John King, led one of the top five charter chains, Uncommon Schools.)

The inspector general’s report included specific examples of abuse. It pointed out that the chief executive of a Pennsylvania charter management organization wrote checks to himself totaling $11 million during the 2008-2009 school year alone. The report also cited examples of criminal cases of outright fraud due to charter management organizations and education management organizations having far too much control of charter schools and charter school boards. (CMOs are nonprofit entities that manage two or more charter schools; EMOs are for-profit organizations that manage charters.)

Yet charters connected to these chains are taking a larger share of, as reformers would say, “the charter market.” According to the pro-charter Bellwether Education Partners, only 15 percent of all charter schools were connected to a CMO or EMO in 2010. By 2015, the National Alliance for Public Charter Schools reported the percentage to be 41 percent.

Why are CMOs becoming popular, and what is the danger? Supporters of CMOs claim that they enable rapid charter-school growth by taking over administrative worries.

But efficiency of scale comes with a price, even when no “for profit” motive is apparent. When charters outsource to CMOs, the limited taxpayer funds that should be used for student instruction are siphoned away to service fees, an additional layer of administration (often with oversized salaries), marketing, and in some cases corporate profits. A 2016 study by the Pennsylvania School Boards Association determined that charter schools allocated a greater proportion of their budgets to administrative costs than public schools (13.3 percent vs. 5.6 percent) and three times as much per student on administrative salaries.

The chain with the largest number of schools is KIPP. The KIPP Foundation claims it exists to support the work of the 200 schools in the network — all of which have their own revenue streams. The foundation is most akin to the “central office” of a school district. Its 2014 expenses were over $72 million — more than $360,000 a school. In 2014, the KIPP Foundation spent over $2 million on fundraising alone. The foundation’s administrative costs were nearly $6 million that year. That same year it operated at over a $3 million loss[1].

Those at the top of the KIPP Foundation make salaries that rival private industry, far above the compensation of chancellors of public schools in major cities. In 2014, KIPP co-founder David Levin received a compensation package of nearly $475,000 from the foundation. Co-founder Mike Feinberg received $219,596 from KIPP Inc., which manages the Houston charters, and an additional $221,461 from the KIPP Foundation. According to the organization’s 990s, Feinberg works 50 hours a week for the Houston schools, plus 40 hours a week for the foundation.

Levin’s and Feinberg’s salaries are dwarfed, however, when compared with the compensation package of Success Academy’s Eva Moskowitz, who received $600,000 in 2014 as the CEO of 41 charter schools.

And Moskowitz’s hefty comp package is dwarfed by that of the new CEO of the for-profit online charter provider K12. Stuart J. Udell receives a base salary of $650,000 plus a performance-based bonus to exceed his salary, equity incentives, and a sign-on bonus of $400,000. Online charters, overall, have a four-year graduation rate of 40 percent. K12’s Colorado Virtual Academy had a 2013 four-year graduation rate of 21.5 percent. Nevertheless, taxpayer dollars pour in.

Five CMOs dominate the American market in terms of the number of schools governed: KIPP, Gulen-linked schools, IDEA, Aspire and Uncommon Schools.

Of the big five, none are more controversial than the Gulen-linked charter schools, which educate more than 72,000 students in 167 schools in 26 states and the District of Columbia. While the schools are under the umbrella of different CMOs, such as Harmony, Magnolia, Horizon and Sonoran, they all share common characteristics that identify them as Gulen-linked or, as the Gulen movement likes to say, Gulen-“inspired” schools. Gulen refers to Fethullah Gulen, an Islamic preacher who lives in self-imposed exile in Pennsylvania and who has inspired a network of charter schools in the United States. Turkey’s leadership accused him of being behind a failed coup attempt this year, which Gulen denied.

Sharon Higgins is a longtime public-school supporter who lives in Oakland, Calif. She has been keeping a careful watch of the Gulen charter-school world for nearly seven years. According to Higgins, Gulen-linked schools share a constellation of characteristics that include founding boards and school leadership composed of nearly all Turkish men; curriculum that includes the Turkish language and Turkish cultural instruction; extensive use of the H-1B visa program to employ Turkish and Turkic nationals; and an emphasis on teaching math and science. Another characteristic is the participation of students in numerous “competitions,” including ones that promote Turkish culture and the philosophy of the Gulenist movement, which Higgins and others have described as “cultlike.”

“Gulen-linked schools around the world used to participate in what they called the Turkish Olympiad, featuring students who competed at regional events,” Higgins told me. “That pageant has morphed into a traveling show, the International Festival of Language and Culture.” One of the regional festivals/competitions took place in Las Vegas in 2014.

Nowhere are charter chains more prevalent than they are in Texas, a state where the authorization process favors charter chains. With 54 Gulen-affiliated charters, 48 of which are associated with the CMO known as the Cosmos Foundation (doing business as Harmony Public Schools), Texas has the greatest number of Gulen-inspired charter schools in the nation. The Harmony schools boast a “100 percent” college acceptance rate.

However, according to Higgins, a sizable number of Harmony graduates are accepted to North American University, recently cited for, among other things, not abiding by its own admissions standards. A complaint lodged with the Texas Education Agency also provides evidence of deep financial and governance ties between North American University, which enrolls about 600 students, and Harmony schools[2].

The North American University website shows an imposing building as the university’s site. I visited the campus this fall. There was no outside signage that indicated that the university was located in the building. Elderly patients were entering and exiting the building, which housed medical offices. The university, which offers three majors, occupied a small suite.

What will the future hold under DeVos, who believes that “the more of a ‘marketplace’ we have for education, the more, I think, the better”?

Will we have more charter schools with entanglements with foreign governments? Will we have taxpayer-funded charter schools run by white supremacists? Will vouchers go to schools run by jihadists?  Will fraud and abuse escalate? These are serious questions to ponder when the marketplace is the only regulator of school choice.

Donald Trump claims our public schools run by locally elected boards of education are “government schools” that fit better with the old Soviet Union. I wonder whether he has thought through his alternative. Freewheeling, government-funded schools, unaccountable to the taxpayers, sound awfully more dangerous to me.

[1] All information found on the 990 for KIPP on Guidestar.

[2] See Page 12 of

Correction: Eva Moskowitz’s name was misspelled in an earlier version of this post.