Reign of Error: The Hoax of the Privatization Movement and the Danger to America's Public Schools

by Diane Ravitch

  Charter schools are deregulated and free from most state laws other than those governing health and safety. This freedom allows charter schools to establish their own disciplinary policies and their own admissions rules. Deregulation also frees charters from the financial oversight that traditional public schools receive. Some states exempt charters from the teacher evaluation schemes that are imposed on public schools. In Louisiana and some other states, charter school teachers do not need to be certified. Charter schools are funded with taxpayer dollars; some receive additional private-sector support and spend more than local public schools.

  With encouragement and funding by the federal government, major corporations, and the big foundations, the charter sector has become a bustling enterprise zone for entrepreneurs, consisting of both nonprofit and for-profit organizations. Albert Shanker’s idea that charter schools would collaborate with the public schools was obsolete. In the new era, the watchword for charters was competition, not collaboration.

  After the enactment of No Child Left Behind, all schools were put on notice that they must raise their proficiency rates or suffer humiliation and possible closure. The law made clear that those rates must rise every year without fail for every designated group of students until all were proficient, without exception. In this climate, any school that enrolled the lowest-performing students was doomed to lose the competition. The harsh consequences of NCLB created incentives for schools to avoid the weakest students, by whatever means necessary.

  The convergence of NCLB and the charter school movement was a boon to the latter. Even though charters were new and unproven, the law offered them as a remedy for low-scoring students. At the same time, NCLB pressured charters to prove they could get higher test scores than public schools. This encouraged charters to try to prove their superiority to public schools, not to collaborate and share their strategies. To succeed, many charter schools devised subtle or obvious ways to limit or exclude students with expensive disabilities, students with limited English proficiency, and students with low skill levels. Even the lottery system, while seemingly fair, is a selection mechanism, since the least functional families seldom take the steps necessary to enter.

  NCLB’s demand for testing and ever-rising scores determined the direction of the charter school movement. With rare exceptions, charters would not seek out and enroll the weakest students, because to do so would endanger their survival and their reputation as panaceas. Charter schools that took the risk of enrolling large numbers of low-performing students might not last long.

  But an even more troubling development occurred. Wall Street hedge fund managers became interested in school reform and became devotees of the charter school movement. They believed that charters would provide the educational opportunities to poor children that they assumed the public system could not provide. These are men who like to compete and win and have succeeded in the free market. They judge their own success by metrics (dollars), and they judge the success of their schools by test scores. They want their schools to have higher scores than anyone else’s schools. The hedge fund managers created an organization called Democrats for Education Reform (DFER), which gives generously to candidates and elected officials who support the expansion of charter schools and to organizations that open charter schools. Many of the hedge fund managers serve on the board of directors of a charter. In New York City, they sought and received free space for their schools in public school buildings and then crowed that they were far superior to the public school whose space they shared, even though the public school typically had higher proportions of the students with severe disabilities and English-language learners. The spirit of collaboration was extinguished. What mattered most was winning, by getting higher scores than the public school.

  Other financiers saw public education as a potentially lucrative opportunity. They looked at the hundreds of billions of taxpayer dollars spent each year on schools and saw a market waiting to be exploited. Their interest was not philanthropy but making money on real estate deals and educational services, taking advantage of federal tax credits and a steady flow of no-risk public funding.

  The federal government first created a program to support the creation of charter schools during the Clinton administration. Under the George W. Bush administration, the federal charter school program grew to more than $100 million annually. The Obama administration expanded financial support for privately managed charters still more. In addition to direct funding of charter schools, the federal government provides tax breaks to encourage banks and individuals to invest in charter school construction. The Community Renewal Tax Relief Act of 2000 included the New Markets Tax Credit, which allowed investors in charter school construction to collect a safe and reliable return of 39 percent over seven years.7 Construction loans to charter schools are also lucrative. In Albany, New York, one charter school saw its rent jump from $170,000 in 2008 to $560,000 only a year later, just to pay debt service to its financiers for construction loans.8

  Another federal program known as EB-5 enabled foreign investors to get immigration visas (green cards) by investing $500,000 or more to build charter schools. A Reuters reporter found that “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.”9

  Real estate investment trusts have found it lucrative to buy buildings and lease space to charter schools. One called Entertainment Properties Trust manages over $3 billion in properties, including megaplex movie theaters and charter schools. David Brain, the head of the company, explained that charter schools are “a very stable business, very recession-resistant … a very high-demand product … [I]f you do business with states with solid treasuries, then it’s a very solid business.” Brain cited bipartisan support for the charter sector—“it’s part of the Republican platform and Arne Duncan, secretary of education in the Obama administration, has been very high on it”—and said that he liked to have charters in his company’s portfolio because the sector offers “a great opportunity set with 500 schools starting every year. It’s a two and a half billion dollar opportunity set in rough measure annually.”10

  Charter schools satisfied a long-standing ideological drive by libertarians to remove schools from government control and shift public assets into private hands. ALEC—the American Legislative Exchange Council—immediately saw the possibilities. ALEC, an organization of some two thousand state legislators and business leaders, promotes privatization and corporate interests. ALEC’s model law for charter schools is called the Next Generation Charter Schools Act. It has several key points: first, it insists that charter schools are public schools, even though they may be controlled by private boards and operate for profit; second, charter schools should be exempt from most state laws and regulations applied to public schools; third, charter schools may be authorized by multiple agencies, such as the state board of education, universities, and charter-friendly organizations, which maximizes the opportunities to open new charters; and fourth, the governor should have the power to appoint a board to authorize charters and override local school boards, which are often reluctant to grant these charters because they drain resources from the school system whose interests they are elected to protect. This legislation encourages the acceleration of privatization and undermines local control of schools. The corporate agenda of privatization and free markets, in this instance, takes precedence over the traditional conservative belief in small government and local control. In that sense, the reform agenda is not really a conservative agenda but a radical attack on local control that serves corporate interests, not Main Street.11

  Several states have recently adopted the ALEC model law for charters. In Georgia, for example, ALEC members in the legislature introduced a bill to create a state commission to circumvent local objections to charter schools. It passed easily. The language mirrored the ALEC charter model law. When the G
eorgia Supreme Court declared the law unconstitutional, the legislature passed it again as an amendment to the state constitution, which was submitted to voters in a referendum; the campaign for the measure received heavy financial support from charter operators, the Walton family, who own Walmart, and other out-of-state donors. In New Jersey, education legislation sponsored by Governor Chris Christie mirrored the language of ALEC model legislation, in some places verbatim.12

  In North Carolina, legislators introduced a bill in 2013 that reflected ALEC priorities. The bill would create a charter commission appointed by the governor and other state leaders. By law, the commission would be composed of charter supporters, of appointees who have “an understanding and commitment to charter schools as a strategy to strengthen public education.” Charters would apply for authorization to this commission, bypassing the local board. They would be overseen by this board, not by the local districts or the State Board of Education. Local districts would be required to lease any available space to the charters for $1 a year. The charters would not be required to hire certified teachers. Charter school staff would not be required to pass criminal background checks. The proposed law would not require any checks for conflicts of interest—not for the commission members or for the charter operators. The bill, in effect, would remove all meaningful oversight of charter schools, putting them under the wing of their advocates. Not surprisingly, the bill was warmly endorsed by the chairman of the NC Alliance for Public Charter Schools, who owns an academy that runs two charter schools; this individual “received more than $3 million from the two charter schools for management fees and the cost of renting the buildings,” according to the charter schools’ tax returns.13

  But is ALEC right? Are charter schools really public schools? Or is this rhetorical spin, meant to assuage those who instinctively recoil at the notion of public funds going to private schools? Charter operators insist that they are public schools, fully entitled to be treated the same as other public schools and to receive the same funding, even though they are privately managed and are exempt from most of the rules and regulations that public schools must follow. Many call themselves “public charter schools.”

  Charter operators want to have it both ways. When it is time for funds to be distributed, they want to be considered public schools. But when they are involved in litigation, charter operators insist they are private organizations, not public schools. The courts and regulatory bodies have agreed with the latter point. In 2010, the Ninth Circuit Court of Appeals ruled that a charter school operator in Arizona was a private nonprofit corporation, not an agency of the state, when a teacher who was discharged sued the school. Even though state law says that charters are public schools, the federal court ruling rejected the claim that charters are state actors.14 Legal scholars, taking note of this decision, warned that “students of color may be unwittingly surrendering protections guaranteed under the Constitution when enrolling in charter schools.”15

  In 2009, the New York Charter Schools Association successfully sued to prevent the state comptroller from auditing the finances of charter schools, even though they receive public funding. The association contended that charter schools are not government agencies but “non-profit educational corporations carrying out a public purpose.” The association maintained that charter schools were no different from social service agencies or a “construction contractor.” The state court of appeals agreed with the charter association by a vote of 7–0. By contrast, public schools may be audited by the state comptroller and have no grounds on which to object. The year after the court’s ruling, the state legislature authorized the state comptroller to audit charter schools.16

  Labor issues were another front on which charter schools preferred to be treated as private entities. In 2011, when more than 60 percent of the staff at the New Media Technology Charter School in Philadelphia tried to form a union, the school countered that it was not a public school. The school was funded entirely by more than $5 million of public money each year to educate 450 students. Its lawyer maintained that it was not a public employer subject to state labor law, but was governed by the National Labor Relations Board (NLRB) as a private employer. Coincidentally, at the same time, the school’s former board president and founder and its former chief executive officer pleaded guilty and were sentenced to prison for stealing over half a million dollars from the school’s funds for business and personal expenses.17

  Two-thirds of the teachers at the Chicago Math and Science Academy sought to form a union in 2011. The charter operator, as in Philadelphia, fought their action by claiming that it was not subject to state law because it was a “private entity.” In 2012, the National Labor Relations Board agreed that the charter school was not a public agency, asserting that it was neither a government agency nor administered by officials “who are responsible to public officials or the general electorate.” The NLRB concluded that the charter school is a private, nonprofit corporation whose board is selected not by government but by the board itself. In effect, it is a private entity operating under contract to the government and is therefore subject to federal laws governing the private sector.18

  Bruce Baker of Rutgers University analyzed the question of whether charter schools are private, public, or some sort of hybrid. He noted that they are similar to voucher-supported private schools in several ways. They have limited public access in that they can cap enrollment and class size according to their individual preferences; they can admit students only in certain grades and at particular times of the year and are not required to admit students midyear or in any grade; they can adopt their own disciplinary procedures, which are sometimes harsher and more restrictive than those typical in public schools; and “they can set academic, behavioral and cultural standards that promote exclusion of students via attrition.” Baker and his colleagues also documented that charters often spend substantially more than public schools. Some charters—for example, those in Washington, D.C.—have been found to have far higher expulsion rates as well. In general, public oversight and control of their financial, academic, disciplinary, and admissions policies are far less than with public schools, which “must accept students at any point during the year” and “cannot shed students who do not meet academic standards, comply with more general behavioral codes or social standards, such as parental obligations.”19

  Reasonable people may reach different conclusions on the question of whether charter schools are truly public schools. Charter school operators have asked the courts and the National Labor Relations Board to rule that they are private entities, private employers, and private contractors. This seems reason enough to conclude that they are private actors and that their expansion represents privatization.

  The rapid proliferation of charter legislation and the growth of the charter sector produced a new phenomenon in American education: national charter school chains. These are described either as educational management organizations (EMOs) or as charter management organizations (CMOs). The terms are used interchangeably. The development of chain schools is akin to the development of retail chain stores, like Walmart or Target or McDonald’s, which provide a central management structure and an economy of scale in some aspects of the operation. The CMO or EMO provides a “brand” and a certain uniformity of administration, curriculum, and policies, as well as financial oversight, back-office operations, human resources, marketing, and public relations. There are currently about two hundred different CMOs or EMOs operating in twenty-eight states. About 35 percent of all charter schools are part of a CMO or EMO; nearly half of all charter school students are enrolled in a charter chain school.20

  One of the fastest-growing nonprofit charter chains is KIPP, founded in 1994 by two alumni of Teach for America. KIPP managed somewhat more than a hundred charter schools across the nation in 2013 and was poised to add more. KIPP stands for Knowledge Is Power Program. It is nonprofit but has collected many millions of dollars from corporate, foundation, and government sourc
es. KIPP typically spends more per pupil than the public schools in the same district. It boasts a “no excuses” culture, where discipline is strict. The KIPP schools created a behavioral technique called SLANT: Sit up, Listen, Ask questions, Nod, and Track the speaker with your eyes. It has longer school days and longer school years than public schools. With few exceptions, its schools are non-union. Critics maintain that KIPP schools have an unusually high attrition rate, especially among black males, but KIPP denies it.21

  The largest chain of charters in the nation is not KIPP but the Gulen charter schools. These are charter schools loosely affiliated with a reclusive imam named Fethullah Gulen, who lives in rural Pennsylvania but commands a powerful political organization in Turkey. As of 2013, there were nearly 140 Gulen-associated charter schools, which focus on mathematics and science, in at least twenty-six states. These schools employ many Turkish teachers, and their boards are usually made up entirely of Turkish men. They have names like Harmony Science Academy, Horizon Science Academy, Magnolia Science Academy, and Sonoran Science Academy. Auditors in Texas and Georgia have criticized Gulen schools for steering contracts to vendors affiliated with the movement. The New York Times reported that the three dozen Gulen schools in Texas received some $100 million annually in public funding and “had granted millions of dollars in construction and renovation contracts to firms run by Turkish-Americans with ties to the movement, in some cases bypassing lower bids from firms with no connections to the movement. The Texas schools awarded contracts for cafeteria food, after-school programs and teacher training to organizations affiliated with Gulen followers.” Three Gulen charters in Georgia defaulted on bonds, and auditors in Fulton County questioned hundreds of thousands of dollars awarded to Gulen-connected vendors.22