Charter group lays off 1/6th of staffSqueezed by budget cuts, unwise borrowing
The Los Angeles charter school organization ICEF Public Schools laid off 100 staff members – about a sixth of its work force – last week as part of a reorganization to keep its doors open.
The financial troubles facing ICEF, a network of 15 charter schools serving 4,500 primarily low-income African-American children in South Los Angeles, offer a cautionary tale of a non-profit organization that tried to expand too fast – 11 schools in three years alone – and then failed to make tough choices when state budget cuts hit hard.
Last month, the trustees of ICEF (Inner City Education Foundation) came within days of declaring bankruptcy and closing schools immediately, leaving students to transfer to Los Angeles Unified schools and other charter schools. Instead it called in the cavalry: Caprice Young, the former LAUSD board president and former president of the California Charter Schools Association, and philanthropists Eli Broad and former Los Angeles mayor Richard Riordan. Broad, Riordan and others gave an emergency gift of $2.5 million for ICEF to make payroll; Young agreed to serve as the temporary CEO, replacing ICEF’s founder, Mike Piscal. (Young’s job is supposed to be part-time, but when I caught up to her on Friday, she had been up all night, preparing a grant application to the Broad Foundation.)
ICEF serves about 7 percent of African-American students in Los Angeles Unified (two of 15 schools are largely Latino), and is recognized as one of the more successful charter networks, with a 95 percent high school graduation rate. Every graduate in the past five years was accepted to college (91 percent of students remained in college after three years, more than twice the national average for African American students). The proficiency rate of 71 percent for students in its five elementary schools equals that of white students and is 28 percentage points higher than African-American students in LAUSD.
Young said there was no evidence of malfeasance but substantial bad judgment and a lack of transparency with ICEF’s finances. ICEF relied almost entirely on state tuitions. Like may charters in LAUSD, ICEF rented outside facilities, an added expense, especially for small schools (charters have been feuding with LAUSD over the use of district buildings, to which charters are entitled under Proposition 39). Rather than hurt academic programs, Piscal borrowed when the state cut payments to schools substantially during the past two years.
Then, when the state further deferred payments to schools this fall, for lack of a state budget, ICEF was trapped. Unlike school districts, which have been able to borrow through lower interest Tax Revenue Anticipation Notes or TRANs, often through county offices of education, most charter schools had to turn to a more expensive private market.
ICEF’s board of trustees sensed there were financial problems and hired an accounting firm last winter, but was given only an oral report and not fully aware of the severity of the problems, Young said. The telltale sign was that ICEF ended up borrowing against state revenues beyond the current year – “a terrible idea,” she said.
The mid-year layoffs were painful but necessary, Young said. They included half of ICEF’s central office staff, many teaching assistants and teachers. The arts and athletics programs, which parents pleaded to save, were largely spared, although parents at the performing arts high school will have to raise $300,000.
Principals collaborated to come up with ideas. Some schools will share instructors of elective courses, and there will be come consolidation of space. Adopting the staff model of Rocketship Education, which I have written about, teaching assistants will lead lab periods and teach physical education and arts, reducing credentialed teaching positions.
ICEF is not out of the woods yet. Young said it will seek to raise $9 million in grants from Broad and other foundations to retire its debt. Beyond that, it will put aside $6 million of the $38 million in expected state revenue next year to build a reserve and to set aside money for future expansion of the network.