Charter School Gravy Train Runs Express To Fat City
Charter schools are frequently a way for politicians to reward their cronies. In Ohio, two firms operate 9% of the state’s charter schools and are collecting 38% of the state’s charter school funding increase this year. The operators of both firms donate generously to elected Republicans
The Arizona Republic found that charters “bought a variety of goods and services from the companies of board members or administrators, including textbooks, air conditioning repairs and transportation services.” Most charters were exempt from a requirement to seek competitive bids on contracts over $5,000
In Florida, the for-profit school industry flooded legislative candidates with $1.8 million in donations last year. “Most of the money,” reports The Miami Herald, “went to Republicans, whose support of charter schools, vouchers, online education and private colleges has put public education dollars in private-sector pockets.”
Among the big donors: the private equity firm Apollo Group APOL +1.09%, the outfit behind the for-profit University of Phoenix, which has experimented with online high schools. Apollo dropped $95,000 on Florida candidates and committees.
Lest you get the idea charter schools are a “Republican” thing, they’re also favored by big-city Democrats. This summer, 23 public schools closed for good in Philadelphia — about 10% of the total — to be replaced by charters. Charters have a history in Washington, D.C., going back to 1996.
Unimpressive, especially when you consider charter schools can pick and choose their students — weeding out autistic kids, for example, or those whose first language isn’t English. Charter schools in the District of Columbia are expelling students for discipline problems at 28 times the rate of the district’s traditional public schools — where those “problem kids” are destined to return.
Nor does the evidence show that charters spend taxpayers’ money more efficiently. Researchers from Michigan State and the University of Utah studied charters in Michigan, finding they spent $774 more per student on administration, and $1,140 less on instruction.
So attractive is the math, according to a 2010 article by Juan Gonzalez in the New York Daily News, “that a lender who uses it can almost double his money in seven years.”
It’s not only wealthy Americans making a killing on charter schools. So are foreigners, under a program critics call “green card via red carpet.”
“Wealthy individuals from as far away as China, Nigeria, Russia and Australia are spending tens of millions of dollars to build classrooms, libraries, basketball courts and science labs for American charter schools,” says a 2012 Reuters report.
The formal name of the program is EB-5, and it’s not only for charter schools. Foreigners who pony up $1 million in a wide variety of development projects — or as little as $500,000 in “targeted employment areas” — are entitled to buy immigration visas for themselves and family members.
“In the past two decades,” Reuters reports, “much of the investment has gone into commercial real estate projects, like luxury hotels, ski resorts and even gas stations. Lately, however, enterprising brokers have seen a golden opportunity to match cash-starved charter schools with cash-flush foreigners in investment deals that benefit both.”
So how can you, as a retail investor, grab a piece of this? How can you reclaim some of your property tax dollars from the fat cats?
The history of publicly traded charter school firms is limited and ugly. Edison Schools traded publicly from 1999-2003. During that period, it reported one profitable quarter. Shares reached nearly $40 in early 2001… only to crash to 14 cents.
It has proven, at best, a trading vehicle.
The story also revealed CEO Ronald Packard collected a salary in 2011 — $5 million — nearly double that of the previous year. And that his bonus is linked not to student performance, but to enrollment.
“I spend a great deal of time, money and resources looking for new investment ideas that you, dear reader, can act on independently,” I wrote in my Apogee Advisory, early in 2012… “Sometimes what I find instead is outrage.”