Miami Herald: FL charter schools: big money, little oversight

[Guest guest]

Posted on Sat, Dec. 10, 2011

Florida charter schools: big money, little oversight

BY SCOTT HIAASEN AND KATHLEEN McGRORYshiaasen@...

Preparing for her daughter’s graduation in the spring, Tuli Chediak received a blunt message from her daughter’s charter high school: Pay us $600 or your daughter won’t graduate. She also received a harsh lesson about charter schools: Sometimes they play by their own rules.

During the past 15 years, Florida has embarked on a dramatic shift in public education, steering billions in taxpayer dollars from traditional school districts to independently run charter schools. What started as an educational movement has turned into one of the region’s fastest-growing industries, backed by real-estate developers and promoted by politicians.

But while charter schools have grown into a $400-million-a-year business in South Florida, receiving about $6,000 in taxpayer dollars for every student enrolled, they continue to operate with little public oversight. Even when charter schools have been caught violating state laws, school districts have few tools to demand compliance.

Charter schools have become a parallel school system unto themselves, a system controlled largely by for-profit management companies and private landlords — one and the same, in many cases — and rife with insider deals and potential conflicts of interest.

In many instances, the educational mission of the school clashes with the profit-making mission of the management company, a Miami Herald examination of South Florida’s charter school industry has found. Consider:

• Some schools have ceded almost total control of their staff and finances to for-profit management companies that decide how the schools’ money is spent. The Life Skills Center of Miami-Dade County, for example, pays 97 percent of its income to a management company as a “continuing fee.†And when the governing board of two affiliated schools in Hollywood tried to eject its managers, the company refused to turn over school money it held — and threatened to press criminal charges against any school officials who attempted to access the money.

• Many management companies also control the land and buildings used by the schools — sometimes collecting more than 25 percent of a school’s revenue in lease payments, in addition to management fees. The owners of Academica, the state’s largest charter school operator, collect almost $19 million a year in lease payments on school properties they control in Miami-Dade and Broward counties, audit and property records show.

• Charter schools often rely on loans from management companies or other insiders to stay afloat, making charter school governing boards beholden to the managers they oversee. Loans to two Pompano Beach schools were disguised as gifts in financial documents to avoid scrutiny from the school district and make struggling schools appear solvent, the schools’ former managers said in court papers.

• At some financially weak schools, tight budgets have forced administrators to cut corners. The cash-strapped Balere Language Academy in South Miami Heights taught its seventh-grade students in a toolshed, records show. The Academy of Arts & Minds in Coconut Grove went weeks without textbooks. Schools have also been accused of using illegal tactics to bring in more money — charging students illegal fees for standard classes, or faking attendance records to earn more tax dollars, court records show.

• Charter schools in Miami-Dade take a disproportionately lower share of black, poor and disabled children, records show. One in three students in Miami-Dade traditional public schools are black, while one in five charter school students are black. School district officials also suspect some charter schools have deliberately sought out high-performing students — contrary to the schools’ contracts.

This year, several South Florida charter schools made headlines for violating local rules or state laws, including Arts & Minds, which was accused of charging illegal fees to students, and Balere, which the school district said turned into an after-hours nightclub on weekends. The district withheld funding from both schools — before concluding that it does not have the legal authority to do so.

That’s because Florida’s charter school laws — considered among the nation’s most charter school friendly — are aimed more at promoting the schools than policing them, leaving school districts with few ways to enforce the rules.

When school districts have taken a hard line with charter schools, they have found their decisions second-guessed by state education officials in Tallahassee. And as the number of charter schools has climbed — almost 200 now operate in Miami-Dade and Broward counties alone — state lawmakers have chipped away at local school districts’ ability to monitor them.

“It’s frustrating for school district officials,†said Schuster, spokesman for the Miami-Dade school district. “The only cases where we can really intervene are safety-to-life, severe financial distress or poor academic performance.â€

MEDICINE FOR WHAT AILED USBringing marketplace principles to education

Charter schools first took hold in Florida in 1996, amid worries of overcrowded classrooms and poor student performance in urban school districts. They were seen as a cure for many of the problems in public schools, bringing innovative techniques and smaller classes to populations of students struggling to keep up. Charter schools were also designed to give parents more choices, and bring the principles of the marketplace to public education. Competition from charter schools was expected to force public schools to adapt and improve.

In many ways, the plan succeeded. Florida now has 519 charter schools — from small, specialized schools tucked in strip malls and churches to sprawling new campuses with 3,000 kids from kindergarten to 12th grade.

Some charter schools rank among the highest in the state in academic performance. School districts in Miami-Dade, Broward and around the state have responded to the competition by creating more magnet schools and specialized programs.

By design, charter schools are unshackled from many of the bureaucratic rules of traditional public schools, with independent school governing boards making most decisions instead of the local school district. Charter school advocates say this freedom is needed for schools to be creative and nimble, and to encourage start-ups.

While this freewheeling system has minimized the oversight of school districts, it has given rise to a cottage industry of professional charter school management companies that — along with the landlords and developers who own and build schools — control the lion’s share of charter schools’ money.

In Miami-Dade and Broward, about two in three charter schools are run by management companies, which charge fees ranging from 5 to 18 percent of a school’s income. These fees can exceed $1 million a year at a large charter school.

Some management companies handle only school finances, while others control the budget, hiring and the curriculum.

In some cases, the managers effectively take over the schools, using financial leverage to render the schools’ governing boards “irrelevant,†said Pam Hackett, a retired legislative aide who has served on the boards of five Broward County charter schools.

“They push the little guy into a corner where they can’t afford to do anything but acquiesce or go out of business,†Hackett said.

Two years ago, Hackett sparred with the Leona Group, a Michigan-based management company, after the company removed a popular principal from two affiliated Hollywood charter schools on whose board she serves — Sunshine Elementary and Paragon Academy of Technology. When the board tried to rehire the principal, the management company objected, saying it alone had that power.

“They basically told us: ‘According to the contract, we can do whatever we want,’ †Hackett said.

The board had other complaints with Leona: The management company refused to provide school records, including contracts and spending documents, and failed to follow the school’s education plan, school officials said. The board canceled Leona’s contract in July 2009.

When school officials later tried to access the schools’ bank accounts, Leona refused to give up the money — and its lawyer accused them of attempting to steal it, court records show.

Leona “is committed to criminally prosecuting those individuals responsible for their attempted theft from the account,†attorney Wood wrote in a letter to the schools’ attorney. The dispute is now in litigation.

Leona executives did not return phone calls seeking comment.

Hackett says the schools now operate without any for-profit managers; instead, the principals make all financial and educational decisions. “Overall, it’s cheaper and more efficient and more accountable,†she said.

Many charter schools depend on management companies not just for expertise, but for cash. Schools often borrow money from the managers, creating an uneasy arrangement that can stifle a governing board’s independent oversight.

The Leona Group, for example, gave more than $360,000 to four Broward charter schools — money described as gifts in the schools’ financial reports. But in court papers, the management company said the payments were really loans disguised as gifts to make the schools appear financially sound.

“The funds were referred to as a ‘one-time gift’ so that the schools would not have to show the funds on their balance sheets,†the management company’s lawyers wrote. The schools insist the payments were gifts, not loans.

It is not uncommon for management companies to give or lend money to schools to get them up and running, said Hage, president of Charter Schools USA of Fort Lauderdale, one of the region’s largest charter school operators.

Most charter schools lose money in the first year or two as they try to expand enrollment while paying rent, construction costs and other start-up expenses, he said. In addition, new charter schools often find it difficult to get financing from banks.

Hage and other charter school supporters say the state’s funding formula for charter schools is inadequate, making it difficult for smaller schools to survive without assistance. Hage’s company benefits from scale, he said. “Being able to spread overhead costs over many schools and many students helps.â€

Statewide, about one in four charter schools have shut down since 1996, either voluntarily or at the command of local school districts — double the national average. Most schools close for financial rather than academic reasons.

SCHOOLS AND THEIR LANDLORDSFor property owners, it’s a profitable deal

Charter schools generally receive more than 80 percent of their income in per-student payments from the state. In addition to the roughly $6,000 per-student allocation — slightly less than what traditional public schools receive — charter schools also get some state funds for facilities and maintenance.

For most charter schools, finding a location is the greatest difficulty and expense. Most schools rent their facilities — in churches, shopping centers, or brand-new school buildings erected by real-estate developers. Any property used by charter schools is exempt from property taxes.

Some schools devote less than 5 percent of their income to rent. Others pay crippling rates.

“Rent continues to be the greatest financial impact for our school,†administrators at Broward Community Charter West wrote in a report to the state Department of Education last year. The school was $118,000 in the red that year.