Admissions Data: the key, missing data to exposing charters

Finally, finally, finally…

The front door clear advantage awarded to charter schools by the Deformists in charge is city wide admissions. [The ejector seat advantage allows them to “counsel” ahem force out low performers.]  Charter schools can selectively admit from a disadvantaged demographic - not freely admit and act as a dictionary-definition neighborhood school.  They aren’t like a magnet school quite yet.  I like the term “privilege school” like “your attendance here isn’t a right it is a privilege.”

Here is an Alderman in Chicago who used a political moment - where UNO needed his support to obtain a zoning change - to extract a commitment that UNO would act more like a neighborhood school and less like a privilege school.  Now let’s see how it plays out.  I suspect The Friends of Juan (Rangel) was the determining admissions factor…not neighborhood address.  Joravsky won’t let this story go I’m sure.

Well, the last year hasn’t been so glorious for UNO. In February, Sun-Times reporter Dan Mihalopoulos began breaking stories showing that companies owned by the brothers of UNO’s former chief financial officer had received no-bid contracts for school construction.

With each new Mihalopoulos exposé, UNO became an embarrassment to the charter school community. Quinn temporarily suspended state funding for their projects. The Tribune wrote a critical editorial. Emanuel backed away a bit. And, ironically, Rangel agreed to let his teachers organize.

Moreover, Sposato was still on the case. Based on calls from constituents, he started to doubt that UNO was living up to its agreement to give local applicants the first stab at seats in the school. “Constituents told me they never got in even though they lived very close.”

So over the spring and summer he began asking UNO officials to meet with him. Specifically, he asked that they bring the addresses of applicants for this year’s kindergarten class so he could compare them to the addresses of the kids who got in.

"They said no problem," says Sposato. "But it took forever for them to meet."

And when they finally did show up to his office on August 16, they didn’t have the information he’d requested. “They gave me a piece of paper that said something like 45 kids out of 160 who applied came from the neighborhood,” Sposato says. “This wasn’t what I asked for or what they said they’d bring. It’s just numbers on a piece of paper. Bring me the proof. They said they’d come back for another meeting with what I wanted.”

Sposato suspects that UNO has gone back on its promise. He suspects it gerrymandered its admissions lottery to make sure that a favorite few got in.

At the very least, he vows to press on until UNO opens its books.

"It’s stall, stall, stall, stall," he says. "First they stalled before we met. Then they didn’t bring what they said they were going to bring. And now they’re stalling on another meeting. I just want to make sure they’re living up to their deal. What’s wrong with that?"

This is an inside joke that may reveal too much about my sense of humor.

"The World's Most Influential Public Intellectual"

Joshua Hendrick’s new book on Gulen - Gulen: The Ambiguous Politics of Market Islam in Turkey and the World - opens with an introduction with that title.

Teasers:

In a 2005 poll administered to determine “the world’s most influential public intellectual,” the U.S. political magazine Foreign Policy (FP), together with its British affiliate, Prospect, published an unranked list of one hundred people whom their editors believed to be the most impactful opinion makers, political leaders, policy advisers, activists, and scholars in the world…After four weeks and more than five hundred thousand votes, Fethullah Gülen was named “the world’s most influential public intellectual” by a wide margin (Nuttal 2008). The July 2008 edition of Prospect magazine subsequently published a series of articles asking the question—who is Fethullah Gülen?

More relevant to the charter school finance theme of this blog:

Indeed, access to public funding via the expanding “school choice” system in the United States has produced an environment whereby, with approximately 130 schools as of March 2012, the United States hosts more “Gulen-inspired schools” than does any country in the world outside Turkey.

This book is worth the money no matter the price.

I wrote the other day that “there is no conspiracy" when it comes to the school privatization forces in the United States.

In the English language only the word “conspiracy” applies to what Gulen’s adherents have - shockingly, shamefully, successfully - set up in their network of charter schools here.  

The more important question is: what are we prepared to do to force the necessary public debate about this conspiracy?

The wellspring of "Follow the Money" research

This is a long post but bear with me…

There is no conspiracy: the privatization crowd meets openly and publishes much of its playbook.  The moneyed advocates for privatization are secure in their world of beach houses, gated mansions, in-breeding and tax avoidance lawyers.  They hire  (“slummin’ til my real job prospects improve or daddy takes back his Cayenne”) white, black and brown strivers to carry out the privatization agenda in town after town after town.  Sometimes an independent journalist (rarely one at the corporate newspapers or news stations) writes a piece stringing it together and following the money back to some foundation.

But where to start?  Which foundation?  What city?

I go back to the Philanthropy Roundtable.  I would follow any group from your home town or state that donates any of its tax exempt money to this pro-privatization outfit.  If a corporate, (traditional) community or family foundation gives to the Philanthropy Roundtable, they have been hooked/lined/sinkered into the deform agenda.

How bad is Philanthropy Roundtable?

In 2013, where would you expect the deformers to hold a group hive five and congratulatory road show?

In Philadelphia of course.  To wit:

September 30 – October 1

Union League Club – Philadelphia, Pennsylvania

Co-hosted by Delaware Valley Grantmakers
and Cities for Education Entrepreneurship Trust (CEE-Trust)

How can a philanthropist increase the number of great K-12 options in their city? Join donors from across the country as we examine the most promising strategies to grow what works in all of a city’s schools—charter, district, and Catholic/private—and explore the challenges and benefits of a city-based, multi-school sector strategy. How can donors increase a city’s total number of high-quality K-12 seats, regardless of the school sector(s) they fund? We’ll discuss investments that hold the promise of improving multiple types of schools and learn how donors are uniquely positioned to accelerate city-wide student achievement.

Discussions Include:

• Incubating and attracting top school providers


• Can school choice benefit private and public schools?


• Building teacher and leader pipelines that serve all schools


• How can blended learning be used in a purposeful city-wide strategy?


• What does each sector— charter, district, and Catholic/private—do best, and what can each learn from the other?

Speakers Include:

• Katherine Bradley, president, CityBridge Foundation


• Mark Gleason, executive director, Philadelphia School Partnership


• Scott Gordon, CEO, Mastery Charter Schools


• Ethan Gray, executive director, Cities for Education Entrepreneurship Trust (CEE-Trust)


• H. Edward Hanway, chairman, Faith in the Future Foundation


• Jeremy Nowak, president, J. Nowak and Associates


• Don Shalvey, deputy director, Bill & Melinda Gates Foundation


• Andy Smarick, research fellow, Bellwether Education

Schedule:

Monday, September 30

12:00 p.m.-4:00 p.m.: Site Visits*

Schools Include:

• Mastery Charter Schools


• Mercy Vocational High School

These school visits will feature an interactive, donor-led conversation of how philanthropists can grow and replicate high-quality schools to achieve major student performance gains in cities.

*Roundtrip transportation will be provided from the Union League Club

4:15 p.m. Special Session (optional):

Not Business As Usual: How Executives are leading Catholic School Reform
This special session will feature prominent business leaders who will explore the role of lay leadership in developing new and innovative Catholic school models.

6:00 p.m. Opening Reception

Tuesday, October 1

8:00 a.m. Breakfast Roundtable Discussions

9:00 a.m.-2:30 p.m. Conference

A significant portion of the conference will give attendees the opportunity to engage in intimate, topic-specific working sessions and discussions about different investment options for accelerating city-wide student achievement.

Meeting Location:

Union League Club of Philadelphia
140 S Broad St.
Philadelphia, PA 19102
(215) 563-6500

<END>

So clear so far…

In 2009, Philanthropy Roundtable released a paper (here in large pdf) still on their web site titled, “Investing in Charter Schools: A Guide For Donors.”  This doesn’t actually mean “invest” as in “earn a direct monetary return” but close enough to not be totally misinterpreted by the vulture capitalists.

This report had a subsection titled “Funders Referenced” that will tell you exactly for each city or state who is the primary ‘wellspring’ for deform activity in a locality.  [New York excepted because that’s where all the smarmiest, richest investors are and they can “invest” anywhere.] You’ll recognize some of these names more than others.  This coven of deformers has certainly spread since 2009. 

• Achelis & Bodman Foundations (New York, NY)


• Ahmanson Foundation (Beverly Hills, CA)


• Amar Foundation (San Jose, CA)


• Beginning with Children Foundation (New York, NY)


• Brighter Choice Foundation (Albany, NY)


• Boston Foundation (Boston, MA)


• Bradley Foundation (Milwaukee, WI)


• Broad Foundation (Los Angeles, CA)


• California Community Foundation (Los Angeles, CA)


• Annie E. Casey Foundation (Baltimore, MD)


• Challenge Foundation (Dallas, TX)


• Charter School Growth Fund (Broomfield, CO)


• CityBridge Foundation (Washington, DC)


• Cosmos Foundation (Houston, TX) [Gulen shout out!]


• Daniels Fund (Denver, CO


• Dell Foundation (Austin, TX)


• Richard M. Fairbanks Fdn (Indianapolis, IN)


• Doris and Donald Fisher Fund (San Francisco, CA)


• Ford Motor Company Fund (Dearborn, MI)


• Gates Family Foundation (Denver, CO)


• Bill and Melinda Gates Foundation (Seattle, WA)


• Greater New Orleans Foundation (New Orleans, LA)


• Charles Hayden Foundation (New York NY)


• Heinz Endowments (Pittsburgh, PA)


• Hewlett Foundation (Menlo Park, CA)


• Houston Endowmennt (Houston, TX)


• Jaquelin Hume Foundation (San Francisco, CA)


• Hyde Family Foundation (Memphis, TN)


• James Irvine Fdn (San Francisco, CA)


• Joyce Foundation (Chicago, IL)


• Ewing Marion Kauffman Foundation (Kansas City, MO)


• Kern Family Foundation (Waukesha, WI)


• Marcus Foundation (Atlanta, GA)


• MCJ and Amelior Foundation (Morristown, NJ)


• Newark Charter School Fund (Newark, NJ)


• Newschools Venture Fund (San Francisco, CA)


• Prudential Financial (Shelton, CT)


• Pumpkin Foundation (NY, NY)


• Riordan Foundation (LA, CA)


• Robertson Foundation (NY, NY)


• Robin Hood Foundation (NY, NY)


• Rodel Charitable Foundation (Scottsdale, AZ)


• Rodel Foundation of Delaware (Wilmington, DE)


• Rogers Family Foundation (Oakland, CA)


• Ronald Simon Family Foundation (Newport Beach, CA)


• Sallie Mae Fund (reston, VA)


• The Reinvestment Fund (Philadelphia, PA)


• Tiger Foundation (New York, NY)


• Victoria Foundation (Glen Ridge, NJ)


• Walton Family Foundation (Bentonville, AR)


• Weingart Foundation (LA, CA)

Happy fishing!!!

Orrick and Bond Buyer Charter School Bonds Presentation

The slides speak for themselves but are probably the short version of what the July 10 event at the Hahvahd Club in NYC covered.   LISC was involved in both. The smug comes through exceptionally well with Billy “Its all for the benjamins I mean kids” Wildman.

Note that one of the “Exemplar Transactions” is for New Plan Learning, the land-owning wing of Gulenists’ chain Concept Schools.  It would have been a much bigger deal if it hadn’t have been for those meddling kids. Fitch downgraded these bonds in March 2013 but it was a mixed assessment with bleets of increasing enrollment supporting increasing revenue (note the absence of the “best practices” supporting academic performance that LISC feels necessary).

It will be interesting to see how the interest rate shock impacts the deals in the pipeline.  This year’s first six months saw 26 issuances close compared to 28 in same period in 2012 and 22 in same period in 2011.

Walton money for "Advocacy" Exceeds $100 million

The Walton family foundation was in news recently as Valerie Strauss published her annual accounting of WFF education donations.  Strauss focused on the recent WFF donation to Michelle Rhee, and rightly since her DC readership will always chime in on news about Rhee.

But the Walton’s tenticles go all over the country.  So this coverage made me revisit my data.

I am struggling with how to make tumblr do what I want it to do so I had to load this table to google docs as a workaround.

https://docs.google.com/spreadsheet/pub?key=0AmQmVjgMAh5EdFJvSU1xT0ptQ0VLNnVUOUNhV0RhSWc&output=html

I’ve added a set of categories to the full database and just labeled the most deforminess groups as EdAdvocacy even though the WFF made another hundred million or so in contributions to other orgs like state “charter school associations.”  This subset for EdAdvocacy has 161 contributions totaling $108 million since my data started in 1996.

The exercise we did way in the past was a calculation of the WFF contribution as a percentage of the total revenue for that group in that year (assuming that the reporting years for WFF and the recipient lined up).

To take an example, the Walton Fam Fdn gave the WI outfit “Milwaukee Charter School Advocates” a grant of $235,027 in 2012.  Milwaukee Charter School Advocates in its IRS Form 990 in 2011 reported total $150,000 in contribution/grants.  Is it fair to say that MCSA is a wholly-owned subsidiary of the Walton Family Foundation?  If one looks at who runs MCAS on its web site - besides the Waltons’ man in Wisconsin Howard Fuller - one sees that Tim Sheehy, President of the Metropolitan Milwaukee Association of Commerce, is on the board of directors.  Lo and behold, the Walton Fam Fdn has given the “MMAC Community Support Foundaton nearly $10 million since 2001 with $7.6 million alone in 2001.

This is how the Waltons can stay in the shadows while buses carry unknowing parents to rallies on capital steps year after year.

Who in NYC Enabled $23 million Bond Deal with Walton Family Foundation?

The Walton Family Foundation is unquestionably the vampire squid equivalent to Goldman Sachs in the education deform world.  I am working to update my data for WFF donations over last decade and half.  I am open to suggestions on how to release this and with whom; send me a comment if you’d like a copy or have any ideas.

If one looks at the first years of nearly any charter school in the country the chances are very good that the school founders received either a charter application writing grant (usually $20,000 or $30,000) or a start-up grant (between $225,000 or $250,000) or both from the Walton Family Foundation.  Bronx Charter School for Excellence is one such school. 

And the doors to other financing from the state or other funders usually open after a school secures a WFF start-up grant.  Such a school has a few years to prove itself but it can go back to WFF-backed funds like New Schools Venture Fund or New Schools for Chicago or Newark Charter School Fund or others to secure on-going support.  I’ve always suspected that many charter operators were happy to take WFF money but didn’t want long term association with the Waltons so by agreement these pass-through entities were created (and also its a nice job program for wingnut welfare.)

But a new actor (to me at least) in the WFF orbit was the latest vehicle for Bronx Charter School for Excellence to obtain its $23.3 million tax exempt bonds in April 2013.  This financial enabler, the Charter School Financing Partnership, was co-signer with Bronx CSE at the New York City Economic Development Corporation. 

The NYCEDC is seemingly moving in new direction with issuing tax exempt bonds for city charter schools with the Bronx CSE and a second deal [for International Leadership Charter School; subject of a future post] in 2013 where in the past NYCEDC had no track record for conduit financing for charters.  In fact, EMMA counts only 5 issuances total since 2008 in New York so the new willingness of NYCEDC to issue such debt marks a big development for the pro-charter lobby in New York City.

The NYCEDC has a board full of heavy political hitters.  Including:

• Seth Pinsky, President of the New York City Economic Development Corporation


• Amanda Burden, Chair Commissioner of the Department of City Planning


• Michael Cordozo, New York City’s Corporation Counsel and chief legal officer of New York City


• John Liu, New York City Comptroller


• Albert M. Rodriguez, General Counsel for Bronx Borough President Ruben Diaz Jr.


• Robert K. Steel, Deputy Mayor for Economic Development of the City of New York


• Kevin Doyle, Executive Director of 32BJ

For some officials simply waiting to take a position with the Bloomberg Family Office after the end of his misrule, the association with charter schools is not problematic.  But association with the Waltons may be a bridge too far.  That’s where the Charter School Financing Partnership provides plausible deniability or at least the public relations distance from the Waltons.

The Charter School Financing Partnership is a key player for using small amounts of private money (“enhancements” from the Waltons or ugh the US Dept of Education) to get leveraged funds ie debt through tax exempt bonds.  I had not looked at CSFP before but its role is clearly laid out through the promotions of its related partners:

Five community capital organizations have formed the Charter School Financing Partnership to increase capital access for high-performing, emerging charter schools. With credit enhancement from the US Department of Education and the Walton Family Foundation, CSFP offers innovative, flexible-financing solutions for schools. Through CSFP, schools can buy down the effective rate on tax-exempt bond executions and enhance New Market Tax Credit transactions as well as other conventional financing products.

Partners

• Community Reinvestment Fund


• Housing Partnership Network


• NCB Capital Impact


• Piper Jaffray & Co.


• Raza Development Fund


• The Reinvestment Fund


• US Department of Education


• Walton Family Foundation

CSFB Program Benefits

• Program enhances the security of the tax exempt bondholders by:

- reducing the leverage
- improving the debt service coverage ratio
- reducing debt per square foot and debt per student
- reducing other underwriting metrics investors and rating agencies consider when reviewing charter school’s credit

So CSFP can take the financial supports from WFF to sweeten the pot for bond investors in evaluating the credit worthiness of individual charter schools by providing “enhancement.”  Why would “bondholders” need enhanced “security” in the case of the Bronx CSE deal?

Because even the New York Charter School Institute recent financial evaluations "dash board" release on April 30 put forward a less-than-secure assessment for Bronx CSE for the 2011-12 year.  The key metrics from the NYCSI were: “fiscally needs monitoring”, “working capital risk: high”, “acid test ratio: high”, “debt to asset ratio risk: medium”, “months of cash risk: high.”

The school is purchasing its present facility for $7.455 million and acquiring/constructing a building attached to it for $16.773 million.  In comparison the school paid $1.05 mm in “land/rent/lease” payments in 2011-12 according to CSI financial dash board, the school will pay $1.151 mm in debt payments in 2014 and $1.67 mm in 2018 to pay bondholders.  In essence that is $500,000 more per year (until 2043 unless re-financed!) at a school already recognized as needing monitoring by its authorizer SUNY CSI.

The school governing board is primarily responsible for deciding that more debt to get a bigger building is the most prudent way forward for Bronx CSE.  The board leadership should be asked that question:

1. Chairman Joyce Frost, “Secretary of New York Cares”


2. Vice Chair Stacey Lauren, “a private tutor for New York city private schools”


3. Treasurer Dierdre Flynn, “an independent consultant managing finance and operations of growth companies and not-for-profits”


4. Secretary Kimberly Hartman, “founder of KH Designs and interior design firm in New York City.”

I don’t have much confidence that this board leadership will be able to give full accounting of how 30 years of public funds paying private bondholders millions of dollars in interest payments advances public education in the Bronx and if this huge outlay for a small school will bring systemic change in the borough.

But if you asked the Walton family and the ideologues they employ, they could clearly explain how their money in Bronx CSE was a worthwhile investment for their policy goals.

Nina Rees' Former Company Grows Amid Odd Bond Financing in Gary

It doesn’t take a crystal ball to see where all this reforminess at the urging of corporate interests is intersecting with the school closures.  The ongoing struggles in Phila and Chicago around mass closures are rightly getting the headlines.  But the smaller scale urban districts and their shuttering of small number of schools show what is in store.  The school will close, a charter operator will obtain the building and property, the operator will apply for bond financing, then contract out the school management to an unaccountable EMO or CMO and the neighborhood school is transformed into a ‘privilege school’ with private selectivity policies and public money.

A slightly different story is unfolding in Gary, IN in the case of the 21st Century Charter School as told in the very large PDF linked here.

I am unsure if the charter was application an initiative of the board or of the management company.  One of the surest indicators of possible financial mismanagement is the backwards arrangement of an operator selecting the board and leasing the facility to the board’s school a la Imagine Schools.

But the confluence of the managers and school board founders is curious.

A member of the founding team is Arlene Colvin, “the director for Community Development for the City of Gary and is the former Chief of Staff for the past four mayors of Gary.  She has served as city planner, economic director and city attorney.”  Colvin is now the Secretary Treasurer of 21st Century Charter School.  Colvin should be asked how this deal makes sense in light of the considerable debt burden now on the school and the circumstances and due diligence around purchase of the building from the management organization, GEO Foundation.

What about GEO Foundation?  The intrepid Indiana blogger Craig Martin said this in 2011 about GEOF:

When Indianapolis Mayor Greg Ballard announced he was closing the Fountain Square Academy charter school last month because of low performance, he focused the blame solely on the Greater Educational Opportunities Foundation, which received a $1 million grant from the U.S. Department of Education less than a year ago.

<SNIP>

If we peer into GEO Foundation CEO’s history, we get a hint at the group’s mindset. As a former member of the Heritage Foundation, the Reason Foundation, the Reagan Office of Public Liaison, and other rightwing groups, Kevin Teasley has been a figure in the voucher/charter movement in several states from the get-go.

While at the Reason Foundation in California, Teasley was associated with the voucher group Excellence Through Choice-in-Education League (EXCEL), which was funded by Indiana’s own Dan Quayle, William Bennett (who once desired to dismantle the U.S. Department of Education and has recently radio-interviewed the very proud Indiana Superintendent of Public Instruction Tony Bennett), and Milton Friedman (whose Foundation for Educational Choice is in Indianapolis now), a group which then-California State Superintendent of Public Instruction Bill Honig said was attempting to use taxpayer money to breed “cult schools.” The voucher measure, on the November 1992 ballot, did not pass.

<SNIP>

Former Domestic-Policy Adviser to Dick Cheney and implementer of No Child Left Behind for the Bush U.S. Department of Education, Nina Rees also helps run GEO. If this were not enough to set off sirens, Rees also is Senior Vice President for Strategic Initiatives and is responsible for early-childhood education and after-school tutoring for Michael Milken’s Knowledge Universe.

The outline of the bond transaction and use of bond proceeds also suggests more than meets the eye.  The $13.5 million raised will put $3.5 m to the purchase of the building from GEO Foundation; $7.55 m to build a new facility (“the construction and equipping of a new 50,000 square foot building facility on land donated by the City of Gary”); $1.01 m in a reserve fund not to be spent on any school operations; and the remaining in fees.

First about the present building, the board is taking on a lot of debt paying 6% and 6.25% on two tranches to buy out the present landlord GEOF.  The local newspaper in December wrote a piece about the transaction that said

Kevin Teasley, founder and president of Indianapolis-based GEO Foundation, which is the management company for 21st Century Charter School, said the school has been leasing the space since it opened eight years ago. For the first four years, the board leased the building for $300,000 a year and then paid $360,000 per year for most of the remaining years after an addition was made to the building.

Teasley said the foundation borrowed $7 million more than eight years ago to construct two new schools — the 21st Century Charter School in Gary and one in Indianapolis. He said the school buildings are identical, and they cost more than $3.5 million each to construct.

"It actually cost us about $4 million to construct and we discounted it to the school," Teasley said. "We spent another $250,000 when we added a music room above the cafeteria four years ago. It was the decision of the board at 21st Century to buy the building because it will save them money as opposed to continuing to pay rent on the building."

Teasley and School Treasurer Dana Johnson said the school is paying roughly $12 per square foot, which is “pretty reasonable.”

Teasley also said the management company is not making any money off the sale. He said it has acted as a “pass through” agent.

"We (the foundation) took the risk by borrowing the money and simply passed the cost on to the school," he said.

Added Johnson, “We have not really made anything. We have essentially been paying a loan we received from the bank. The rent was set based on the amount owed to the bank.”

In a supplemental audit report released by the independent auditors nearly a week later on Dec. 12, auditors criticized the charter school for not following several accounting guidelines.

That’s pretty rich.  What do you think GEOF could get for the building in Gary on the open market without the insider deal to its tenant?

What savings will the school get now that they aren’t paying rent?  In fact they will pay $841,000 in interest only in 2014, $1.01 million in 2015 and more than a million per year until 2043.

That second building on donated land will generate some income for 21st Century - because it will be leased to another charter school called Gary Middle College.  And Gary Middle College hires GEO Foundation to serve as management organization.

This is the new pattern where elected and appointed officials simply stop supporting its public schools and instead enable access to (or worse participate in the turnover of) buildings and land that fuel the financialization of school buildings and services.

First a personal update

i started the job and worked two weekends at an orientation for new presidents and then a legislative conference.  Then we moved into our new apartment over two other weekends.

Happy St Patricks Day.  Regular programming to resume shortly.

Response to Geauxteacher

The lesson is the “dog that didn’t bite.”  Meaning the testimony as submitted hasn’t been legally challenged so the working assumption is it is wholly true and irrefutable.

The deformistas are a litigious bunch.  So Skandera is cornered by the truth as submitted.

The collected work by In The Public Interest on Skandera and the other Chiefs for Change will haunt Jeb as he attempts to triangulate his way towards a meaningful position in the GOP.

Geauxteacher

Would you check this out? http://blogs.edweek.org/teachers/living-in-dialogue/2013/03/new_mexico_education_commissio.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+LivingInDialogue+%28Teacher+Magazine+Blog%3A+Living+in+Dialogue%29

What does one call a two-days-at-school/three-days-homeschool charter program?

The finances of this deal are straight-forward so this is not a financial exposure story (at this stage) but the disclosure of other details were intriguing.

Although I haven’t looked all that hard, I’ve long suspected that the profit seekers and homeschool parents could make certain internal compromises and design a charter school program to fit their particular needs.  So now I’ve stumbled on such a program because the State of California Charter School Finance Authority in its wisdom approved tax-exempt bonds to let one such school buy/build a part-time school facility to be called Coastal Academy.  The present Coastal Academy in 2011 had about 927 students in K-8 in a unique setting.

Coastal Academy is one school inside a three school chain going by the name “Classical Academies” even though there is no legal entity serving as the charter management organization.  “Classical Academies” are so active in promoting charters in the state that the Walton Family Foundation’s California Charter School Association gave its founder Cameron Curry (a former Escondido, CA city planning official) an award in 2011.

The bond’s Official Statement [link here opens large PDF] laid out the schools program and even hinted at some of the more spiritually-minded aspects of the program too.

First, the “Classical Academies” educational program (p. A-1)

"The borrower offers two award winning and state recognized educational models of independent study.  Although both of these two distinct models combine elements of classroom-based and nonclassroom-based instruction, for purposes of ADA calculations (due to the regulatory definition of nonclassroom-based ADA) as explained more fully below both models are considered to be nonclassroom-based programs.

Track A and Track B. The first option for students is  mix of in-seat time combined with an at-home component.  In this option, students attend class on campus two days per week in a traditional classroom setting.  Within this option there are two tracks of students.  Students on Track A attend classes called “workshops” on Tuesday and Thursday and students on Track B attend “workshops” on Wednesday and Friday. This program doubles the enrollment possible in a facility by having two sets of students using classrooms on alternative days. [dwelker note: also potentially doubling revenue, brilliant!]

Workshops are led by a State credentialed teacher in a traditional classroom setting with a class ratio of 20 students to 1 teacher.  Workshop days cover core academics: reading, writing, mathematics, history and science and offering enrichment in computer literacy and music.  This is done to maximize group projects, discussions and activities.

Track C. The second option, known as Track C, allows even more flexibility with a student’s choice of curriculum, enrichment labs and personalized learning.  Students on Track C complete the majority of their education in an independent study environment off campus under the supervision of the parent.  Each family has their own credentialed student, who we refer to in the program as an “Educational Specialist.” Educational Specialists become advocates and personal guides in assisting students and families in curriculum, course selection and lesson planning.

The Educational Specialist, working in partnership with the parent, assigns academic work to be completed by the students.  The Educational Specialist monitors and evaluates what the student has completed, where they are excelling, and where they are struggling to ensure that assigned work is modified to meet the specific academic needs of the student in his or her care.

Students on Track C also have the opportunity to participate in weekly on-campus “C’Lectives” classes and labs as well as optional field trips and specially selected programming for these students.

For both Track A/Track B and Track C programs, parents or guardians are the primary educators on non-workshop days and work collaboratively in partnership with the classroom teacher to ensure that individual student needs are addressed.  This relationship of student, parent, and teacher creates a winning formula directly tied to the student’s academic success.

Sure, what could possibly go wrong.

Within this “Track” program, overall school enrollment has grown dramatically.  In 2007-08, there were 360 students combined in Track A/B and 207 students in Track C; by 2012-13, there were 440 students combined in Track A/B and 487 students in Track C.  The school projects enrollment in its newly constructed facility to be 720 combined in Track A/B and 399 in Track C.  [dwelker note: this suggests a low-ball figure perhaps so as to not freak out the authorizer, the Oceanside Unified School District.]

As for the other “enrichment” opportunities, this is where the questions arise for possible other motivations of the school’s operators.

Leadership. Leadership courses are designed for middle school students and teach the value of becoming self-motivated leaders with integrity and purpose.  The core curriculum has been adapted from the Situational Self Leadership program by The Ken Blanchard Companies, and through employees of the Blanchard Companies who are parents in our program.  There are three years of leadership training available, beginning in 6th Grade.  Leadership is an optional class that meets weekly and has a homework and community service requirement.  Students are encouraged to initiate opportunities to serve their family, school and community through the school year. (p. A-6)

Ken Blanchard is a prolific writer of management self-help books including one big seller titled Lead Like Jesus.  This web site states its beliefs clearly: “We believe that the Bible is God’s verbally inspired, complete written revelation to mankind.”  Blanchard is the “Chief Spiritual Officer” at The Ken Blanchard Companies.  There is a Ken Blanchard College of Business at Grand Canyon University, a publicly listed [NASDAQ:LOPE] “private, accredited, Christian university located in Phoenix, AZ.”  ProPublica’s Sharona Coutts focused on GCU in its series on for-profit universities in 2009 - 2011.

Character Education.  Coastal Academy incorporates character education into daily lessons, emphasizing the 8 Keys of Excellence through specialized lessons, assemblies, workshops, speakers, community service and field trips.  The 8 Keys of Excellence were developed by the Quantum Learning Network. (p. A-6)

I hesitate to re-post anything I found - either pro or con - on Quantum Learning Network, its program called SuperCamp or its founder Bobbi DePorter.  At a minimum, positive reviews on SuperCamp are easily found on the California Homeschooling Today web site.  The reader will have to draw her own conclusions.

In the end, the promotional details in this bond’s Official Statement seem to re-state what appears to be an open secret in San Diego County.  The Voice of San Diego in 2008 did a story on the homeschool/charter school issue and even had a quote from a parent at the Classical Academy, sister-school of Coastal Academy:

"My concern was, am I qualified to give my kids a quality education?" asked Lyn Burnes, whose two sons attend the Classical Academy, an Escondido charter school for homeschooled children. Burnes decided to quit the public school system because her son, a fast learner, felt lost in a large classroom. A self-described Christian, Burnes was also unnerved by the public schools’ take on U.S. history and evolution.  “I wanted the oversight of an established institution,” Burnes said, “and I wanted to reinforce that with my own values, at home.”

The Voice of San Diego is presently running a series on the insider dealings of public school systems and the bond industry players who donate to bond campaigns.  The old adage Follow the Money is keeping a lot of people busy.  In the case of Coastal Academy, the money leads to a school model that raises what I’d classify as church and state issues. 

But from a profiteers perspective, one can see the perverse logic in an investment in a facility that doubles its revenue generating business (if it fulfills the ADA definitions etc) by alternating days it services its full paying “customers.”

Gates Employee Touts Gates Study Promoting Gates Schools as Worthwhile Investments

Alternative title: Don Shalvey Promotes LISC Study Promoting Charter Schools as Worthwhile Investments.

I am not going to be able to do justice in a single post to the absurdity of Shalvey’s claim that “Wall Street doesn’t fully understand charters” from his post on the Gates blog.  The whole point of this blog is to demonstrate through analysis of the charter financial dealmaking that these are risky investments for institutions and individuals and bad investments as education policy.  Wall Street ratings agencies price many many charter school bonds as just-above-junk status based on the individual schools’ financial or operational track record after evaluating each school deal.  (I can’t believe I am defending any ratings agency practices at all ever.)

What Shalvey attempts to do is what others like Bruce Baker have repeatedly nailed the charter industry proponents for when they cite specific, “anointed” charter school chains and then generalize and extrapolate across all charter operators.  Shalvey, like every other charter industry salesman, knows that for each single KIPP school or ASPIRE school there are a dozen or two dozen middling/wasteful or failing/corrupt school slipped through the process and into the “education portfolio” across the country.

Look at how Shalvey accomplishes this slight of hand (bold is mine):

• "…Even though charters, particularly those that have consistently raised student achievement, have long-since proven themselves both as educational institutions and as borrowers”

• "Investors assume stormy political threats. Both extrapolate from isolated school failures.  They put all of that together and assume charters are on shaky financial ground despite a default rate by the highest performers of less than one half of one percent.”

• "Charter school bond issuers, as a whole, beat market expectations.”

• "If charter bonds received a triple AAA rating – similar to what traditional school districts receive – they would have an additional $120 million per year to invest in academics."

Furthermore, as for putting charter schools on same footing with school districts, there is a fundamental difference at the origin of the revenue for charters or districts.  In most instances, districts issue debt that is backed by the ability to raise further revenue (Read: money derived from increased taxes) to pay off previous investors. So districts may have material weaknesses but the chance of default is almost nil.

In comparison, the charter schools have no taxing authority and most schools have the state transfer of per-student funds as their sole revenue (big chains do get substantial philanthropic support but most charter don’t have this teet to rely on).  Additionally in many charter school bonds, the ONLY WAY the deal is completed is if there is an intercept of state funds - essentially, an intercept is where the state deposits its funds into a bank account which pays out the bond investors first and the balance can actually, you know, be used to educate the kids. [More on intercepts later.]

But there is a some investing wisdom in Shalvey’s post.  He admits he doesn’t understand the the limitations of charter bonds from the perspective of the investor. And if that is the case, why would anyone take investment advice from a Gates Foundation employee that charter school bonds as an asset class are a good place to park your money?

FISH AROUND: Steps to Issuing Charter School Bonds

Again it is really helpful to download the “how to” produced by Orrick, a leading bond counsel law firm.  Go here.

The following are the steps from Orrick’s primer to getting a charter bond deal completed.  Upcoming discussions will look at many of the specific steps with an eye towards where additional public disclosure or public input fits in the timeline.

• Consult Bond Counsel [dwelker comment: remember Orrick bills by the syllable to this naturally comes first in their list]

• Engage the Underwriter [the bank that will promote and sell the bond]

• Adopt Reimbursement Resolution [an act by the Charter School governing board]

• Determine with Bond Counsel and Underwriter what public entity will serve as Issuer of the Bonds [the issuing authority is the public office serving as a conduit for the schools to the markets]

• Bond Counsel prepares and circulates the initial draft of the Indenture and Loan Agreements [billable hours!]

• Charter Schools works with Underwriter or Disclosure Counsel to describe financial/operational information about Charter School [billable hours!]

• Underwriter’s counsel prepares and circulates initial draft of Bond Purchase Agreement [billable hours!]

• Conference calls to discuss document drafts [billable hours!]

• Draft documents are submitted to ratings agencies if applicable

• Another round of document review [billable hours!]

• Meeting of governing board of charter school to approve bond issue [first potential public notice through open meetings laws]

• Hearing on and approval of the Bonds by the Issuer [very important public hearing at Issuer]

• Meeting of the governing board of the Issuer to adopt bond resolution [potentially important decision point by Issuer; see an example here]

• Underwriter mails Preliminary Official Statement to potential purchasers of the Bonds [first broad public release of preliminary disclosure documents]

• Pricing of the Bonds

• Sale of the Bonds between the Issuer and Underwriter

• Preparation of final Official Statement

• Closing of the deal [purchasers of the bond register their holding with the Trustee bank]

Fish Around: Why Use Tax Exempt Bonds?

So the first thing everyone who wants to look into this bond rabbit hole needs to do is download the “how to” produced by Orrick, a leading bond counsel law firm.  Go here.

“Why Use Tax Exempt Bonds” is the title of Chapter two of the Orrick primer.  Orrick is trying to sell its services through this marketing document.  I’ve learned a lot by reading this paper sort of like how Kremlimologists used to read Pravda.  As much for what is left unsaid as is for what is said.  The whole document is full of unintentional insights like the following in a section titled “Unrated Bonds”:

"The evolving investor community analyzing charter school bonds is largely comprised of sophisticated institutions accustomed to conducting rigorous due diligence review of credit risk prior to making an investment decision (and may be motivated in part to advance the purposes of the charter school movement through such capital investments.)"

 I can only hope to build a community of sophisticated individuals conducting due diligence and protecting public funds from the wrong people.

Note how this works here in this one sentence.  Lots of multi-syllable words (Orrick is paid by the hour or perhaps the syllable) saying essentially that some investors are IDEOLOGICALLY INLCINED to buy charter bonds regardless of the schools inability to obtain even the (often flawed) imprimatur of a ratings agency like Moody’s or Standard and Poors.   Many charter schools get low ratings [see the UNO “just above junk” bond from 2011 per Pure’s statement.] and thus have to pay higher interest rates (which inversely results in more profits for the private entities buying their bonds) but some schools can’t even get an investment grade rating.  An important aspect of our work here will be to suss out the deals going directly to private placement (as poor as films going directly to DVD) and not intended for public float. 

REMEMBER: The investors in such tax-exempt bonds are NOT paying federal income tax and often NOT paying state income tax while getting higher returns for a ‘riskier’ investment.  Why make a philanthropic donation to build a charter facility when you can make money offering loans (buying bonds) at higher than market rates and avoid paying taxes on the capital returns?

I want to get to the bottom of these questions: Why are the sell-side finance institutions like Orrick working so hard to push more deals onto the public investor?  Is it because if there is only such demand for charter school bonds among the IDEOLOGUES (say the Walton’s family office investment advisors or US-domiciled investment vehicles for Gulenists) then such financing will be seen as transitory and experimental much like the charter schools once were viewed?   And then somehow the window for charter school tax-exempt bond deals will be closed down?