Charter failure prompts scrutiny

Zeiger sees tens of millions of dollars lost

The bankruptcy of a one-year-old charter school in West Sacramento has underscored difficulties with state and federal funding of startup schools and raised questions about the State Board of Education’s long-term capacity to oversee dozens of charter schools that it has approved.

There are probably practical fixes to the funding issue that could reduce the odds that millions of dollars would be squandered on bad-bet charter schools. The issue of the State Board’s oversight of charters raises a deeper question: Who should approve and monitor charters ­– local districts, the State Board on appeal, or perhaps independent agencies and universities, as in other states, with the expertise and a disinterest in the charters they would regulate?

Louis Freedberg, the new executive director of EdSource, writes about both developments in a two-part blog posting that ran Wednesday and today. He details the cautionary tale of the California College, Career and Technical Center, which came up at the State Board’s September meeting.

Before declaring bankruptcy this month, the charter had spent nearly a million dollars funded through a federal startup grant, a state loan, and standard state tuition payments. CCCTEC had encountered setbacks from its opening, when delays with its facility led to a sizable defection in student enrollment, contributing to escalating financial problems that led to a default in payments and loss of government money.

Richard Zeiger, Chief Deputy Superintendent of Public Instruction, told the State Board that CCCTEC’s failure was symptomatic of other charter school defaults, which happen “with great regularity,” and over two decades totaled “easily into the tens of millions of dollars, and it wouldn’t surprise me if it went higher.” Zeiger didn’t elaborate further at the meeting and didn’t provide Freedberg with specific numbers, saying the Department of Education is doing the research. It’s presumably a small portion of the 1,400 charters that have been granted over two decades, including more than 900 currently operating.

The federal Department of Education is already paring back grants to California and setting aside more money for proven charter management organizations. On Wednesday, it announced multimillion-dollar startup grants to Palo Alto-based Rocketship Education ($1.9 million), San Francisco-based KIPP ($9.5 million), and Los Angeles-based Alliance College Ready Public Schools ($3.1 million).

However, Eric Premack, executive director of the Charter Schools Development Center in Sacramento, which provides technical advice and training for charter operators, acknowledged that the state could cut funding losses by tightening procedures for awarding grants and tracking attendance.

Charter operators run on thin margins and need advance money to get rolling, especially first-time charters that start with one or two grades and are projected to break even when they reach full enrollment. That’s why the federal government started the Public Charter School Grant Program, with grants of up to $600,000, and the state started a revolving loan fund, repayable over five years. Throw in deferrals of state tuition payments and unexpected encounters with fire marshals, and new charters can find themselves in precarious spots.

But a more competitive process for grants, with check-off dates for when charters must have enrollments and facilities lined up, could catch problems. There also needs to be stricter scrutiny of attendance figures, on which advance state payments are based, made on the 20th day after the opening of a school. In CCCTEC’s case, fewer students attended than enrollment figures indicated, leading to $219,000 in overpayments last year alone, according to Freedberg.

Time for more authorizers?

Most charters are granted by local districts, but the State Board has granted three dozen – less than 4 percent of the total number of charters statewide – mostly on appeal after rejection by district trustees and county school boards. CCCTEC is one of those.

As State Board President Michael Kirst told Freedberg, “There are charter schools that are turned down by both local districts and counties that deserve to operate and so there needs to be some state appeal mechanism.” Some local trustees are unabashedly antagonistic to charters.

Whether the State Board should be saddled with oversight responsibilities – or contract out that function and leave the Board strictly with policy decisions – is a question that the State Board should confront as the number of appeals and approvals increases.

Charters pay fees, between 1 and 3 percent, to their authorizers, but, with rare exceptions, few districts do the monitoring well. It’s not clear that the State Board should have caught CCCTEC’s spending anomalies and possible misrepresentations earlier. But a review of the events leading up to bankruptcy should be part of the Board’s postmortem.

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  1. I have a question for John and Louis.
    The State Department of Education used to award a $450,000 grant to anyone who wanted to start up a charter school, to be used for the initial costs of preparing and pursuing the application. At one point, when I was blogging about it, I confirmed that the Department of Education had provided that grant to two ultimately unsuccessful applicants to start up charters in my district, San Francisco Unified: a local group that wanted to start a Russian language/culture-themed charter, and the Gulenists who run Bay Tech, an Oakland charter. (For more on Gulen schools, please see the blog Charter School Scandals.)
    I talked to a spokesperson for the CDE who said there were few requirements and little documentation involved in that grant.
    I’d like to know if that program still exists; how much it has awarded over the years; and whether its elimination has been considered in the current budget climate, if it does still exist. Thank you.

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    • Caroline: The federal Public Charter School Grant Program, which the state distributes, continues. It actually operates on a sliding scale, with $450,000 on the high end. At one point there were pre-planning grants of up $50,000 but this was discontinued, makingit harder for those without deep pockets, like teachers, to start a charter on their own. The money is given in chunks, and the first comes only after a charter is approved; that can take a long time in districts like San Francisco Unified, which just turned down its first proposal by highly successful Rocketship Education; it now has to take its appeal to the State Board. The second and third amounts come only after a charter actually opens.

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  2. If a local education agency (LEA) authorizes a charter (probably because state law leaves them little choice) and then does not provide “oversight” (except for the financial portion, oversight is very poorly defined by law) that LEA is responsible for all liabilities of the charter. 

    CCCTEC was denied at the local level, denied on appeal by the County Office, but was granted by the millionaires who comprised the State Board of Education(people who financially benefited from the charter school movement)   Maybe the bill to return the public funds should be sent to those millionaires who voted to apporve CCCTEC since they did not provide oversight and it appears that the locals were correct.

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  3. Charter schools can and should be a welcomed addition to the ‘public’ school set of options for parents. Many are very good and perform the way that they should. However, there is no equal playing field for regular public schools. Charter school have some fair (e.g. parents who have the time and motovation and are fully engaged in their child’s education) and unfair (lower percent of special education students, fees charged through foundations, while regular public schools must serve all types of students from all socio-economic backgrounds, etc.) advantages that make some schools resemble a private school at taxpayer expense.  Charter schools are, and should be, an option for all students! Traditional public schools and districts should be afforded many of the same flexibilities as charter schools to make local adjustments to improve and maximize their programs.

    Most of those charter schools that the CDE has had to oversee, due to the political bent of the previous State Board of Education, have fundamental flaws. Further, all of the charter schools overseen by the CDE need to be independently examined by the State Controller and the Attorney General’s Office. (Taxpayers are being ripped off for the personal gain of the school owners — opps, I mean operators! Some have made millions of $ personnally.) A properly funded and properly designed independent oversight body IS the right way to go. The CDE is too far removed to understand and monitor State-approved charter school. Further, closing bad charters needs to be a more simple process. Charter school zealots like Mr. Premack are hardly in a position to proposed balanced measures for for oversight.

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  4. Would it work to have county offices of education oversee charters that they initially denied? They seem to be the people with the access and resources to best do so.

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  5. Of particular interest was the next, or nearly the next, agenda item for the SBE involving over-riding the denial of a charter by the LAUSD. And yes, LAUSD cited a number of “irregularities” in fiscal matters re the charter as well as low numbers of EL, ED, and special education students.
    That is a number of the same issues that Geiger had pointed out concerning the charter that is the source of the article. The issues the SBE and CDE lack capacity to address.
    Needless to say, the SBE granted the charter.

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  6. In response to @el: Here in San Francisco, the SFUSD BOE also serves as the county BOE, due to the fact that our city and county are contiguous. So that would be awfully burdensome for our BOE.
    (Isn’t there some way to make the charter movement pay up for some kind of independent oversight body, as they’re the ones raking in the bounty while draining resources from our public schools?)

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  7. Gary
    You stated: “That is a number of the same issues that G(Z)eiger had pointed out concerning the charter that is the source of the article”.
    To correct the record CCCTEC never had issues with EL, ED or Special Education.  To be sure we were serving a disproportionally high number of each.  Our biggest issue was lack of operating capital in the first year of operation.

    Thank you.

    Paul Preston
    530 632-9786

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  8. Much of the charter school movement is fed by a general public and parents who think that charter schools are ” autonomous” schools exemp  from constraints required of regular public schools which are “free” for students to attend.  The the report about the “charter failure” should disabuse any ideas about the possibility existing of  what is perceived about charter schools by large segments of society.   The article uses terms, “oversee, oversight, monitor, regulate, scrutiny” to describe failures of all the above to foresee and detect what made the charter school under discussion to be  bankrupt.   The entire concept of charter schools, the idea of government funded entities correcting  what is wrong with regular schools, through government funded “competition and/or free market competitive” models is a delusion and lie which too many lay people and educators have bought hook line and sinker.   Charter schools surviving the “oversight, monitoring, regulating, et al” will conform to a work force training model until they can be converted to the next step in the process for Distance Learning.
    Along the way, those that will  fall along the wayside will continue to consume and waste Federal, state and local money until they self destruct.

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  9. Mr. Preston:
    It was the issue of “fiscal irregularities” that I meant to attribute to CCCTEC. I should have been clear on that point.

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  10. Then that must be different money, because the funds I’m talking about come BEFORE the school is approved, and an unknown number of would-be charter operators have acquired them for school that were never approved. I confirmed this with a CDE spokeswoman some years ago.
    For the record, SFUSD’s BOE is not particularly anti-charter — I can break out the names of each commissioner and give their views in detail if you like — and rejects charters based on an assessment of the merits of the proposal. I’m mentioning that because you’ve previously mischaracterized the BOE as dominated by an anti-charter ideology.

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  11. Responding to myself — my previous post was in reply to John’s, but didn’t post as a reply. So, again, to clarify: I asked about funds that the CDE offers or has offered to those who want to propose a charter, BEFORE the charter is approved and apparently at the very beginning of the process of seeking approval. I know that charters have received those grants and have never opened. John’s response apparently referred to a different type of grant, for startup costs in charters that have already been approved.

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  12. Gary
    We were under funded before at opening.  Despite reassurances by CDE that CCCTEC would be loaned the entire amount of the Charter Schools Revolving Loan Fund of $250,000 at start up we were only funded for $100,000.  This became problematic for CCCTEC in many ways. CCCTEC unlike other established corporate charters who got full funding was not considered a priority per Ed. Code.
    As it was explained to me by CDE staff at the time the larger more established charters with a successful track record were being given priority for the Revolving Loan funds.
    Paul Preston
    California Ed. code states:
    Ed. Code Section 41365.(d) Priority for loans from the Charter School Revolving Loan Fund shall be given to new charter schools for startup costs.

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  13. Caroline
    The CDE does not offer pre-planning grants.  When a school is approved they have to make application for the Public Charter Schools Grant Program.  If a school does not open in the year they were approved they can use some of the money from the PCSGP for planning purposes.  The reality is the CDE is delaying these funds to new charter schools to the point most will not open because they simply never get the funds.  New charters do not open and the state claims the money.  If you’re a charter that is a “corporate” charter sponsored by one of the corporations then you will get the money.  As it was explained to me by the CDE  the large charter corporations were being given priority for these funds because they had proven records and were more likely to be successful over the smaller unproven charters.  This is what happened to CCCTEC.  CCCTEC was delayed funds at it’s opening by the state and then never given funds it was owed.
    Paul Preston

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