Point of View

Savvy companies can use NC charter school laws to pocket millions

January 6, 2014 

North Carolina is ripe for an infiltration of nefarious profit-seeking characters in public education. The cap on charter schools has been lifted and the longstanding requirement for “innovation” gone. Local boards of education are no longer offered the opportunity to comment on new charter schools filing applications to open in their communities. The Department of Public Instruction is undeniably understaffed, and on-site audits of charter schools are infrequent at best.

There are many excellent public charter schools across our state. These charters were usually organized by grassroots efforts of visionaries within a community seeking to expand the public education opportunities available – people who believed in innovation and alternative teaching methods and who were willing to personally sacrifice so that the community’s children would gain. Unfortunately, that is not the story of all charter schools in North Carolina.

In North Carolina, charter schools are operated by “nonprofit” corporations, which are not subject to the same laws that demand public accountability for state and local tax dollars. These “nonprofit” corporations can be subsidiaries of larger for-profit corporations – all the nonprofit corporation needs is a “board” of purportedly earnest, well-intentioned people during the application process. Once the charter is granted, there is very little to stop the potential exploitation of our state’s limited public education resources.

In fact, one doesn’t have to look any further than the Eastern part of the state for a case study in how savvy companies use this loosely regulated system to pocket millions of taxpayer dollars.

Here’s how it works: A for-profit educational management organization “helps” the nonprofit board write the charter application. Once the charter is granted, the nonprofit board hires the same EMO to operate the charter school. The charter school pays the EMO sizable fees to “manage” the schools – those fees added up to over $15.7 million taxpayer dollars for one EMO in Eastern North Carolina over the past five years.

Coincidentally (or not), in at least one case, the founder of the EMO also happens to be the organizer of a second company that leases facilities and equipment to the charter school (i.e., landlord).

Now, remember, the nonprofit board hired the EMO to track and report all the financial data; and it is the EMO that advises the nonprofit board as to whether the landlord’s fees are reasonable. But don’t forget, the landlord also runs the EMO.

This deal got even sweeter for the landlord this summer when the General Assembly amended a statute. Now the landlord is no longer required to pay any state tax on the land the landlord rents to the charter school. I suppose from a business perspective nothing could be finer. Why isn’t this making headlines? Isn’t this illegal? Surprisingly, no. There is little to no public accountability for the financial decisions made by charter schools, and there is no transparency mandate from the General Assembly.

In a time of shrinking financial markets, charter schools remain an excellent marketplace for savvy corporations looking for consumers. To comply with the current application process, the corporation must write a plan outlining the proposed education, governance and financial structure of the school and find a “board” to be its face.

In the last round of charter applications, one corporation found three such “boards” of individuals willing to put their names on the corporation’s charter applications to the State Board of Education. Each “board” assured the (now defunct) Charter School Advisory Committee that the charter school it was proposing would meet the “unique needs” of its community. Unfortunately, the applications were not quite so “unique,” and neither were the communities: Wake County, Gaston County and the Lake Norman area of Mecklenburg County.

Three almost identical applications were submitted. Sometimes the names were changed in all the right places. Sometimes the “cut and paste” wasn’t very thorough – resulting in two of the three applications being denied, because the loan guarantees in the applications were for the wrong schools.

Our leaders must acknowledge that there are corporate charter “carpetbaggers” lurking. The State Board of Education will have this opportunity this week when it votes on approving new charters. Will these leaders look behind the charter school’s corporate veil or will they simply apply a blanket stamp of approval, turning a blind eye to the reality of a dysfunctional system?

Once the carpetbaggers overcome the initial hurdle of receiving a charter, unless fraud and exploitation reach the level of criminal activity, our laws, as written, will protect them. The oversight will be minimal, and the victims will be our children and taxpayers.

Charter schools have the potential to provide vibrant splashes of color to enrich the public education tapestry in North Carolina. But without public financial accountability, there is the potential that, in a few years, the only visible splash of color added by charter schools will be green.

Jessica B. Swencki is executive director of quality assurance and community engagement for Brunswick County Schools.

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