How Charter School Operators Enrich Themselves In Real Estate
As the Trump administration plans to redirect taxpayer billions to privatize K-12 education, a scholarly article by some of the nation’s leading investigators of charter school rip-offs has highlighted how their business model is prone to fiscal self-dealing.
The article by Preston C. Green, Bruce D. Baker and Joseph O. Oluwole has the dense title, “Are Charter Schools the Second Coming of Enron?: An Examination of the Gatekeepers That Protect Against Dangerous Related-Party Transactions in the Charter School Sector?” But its analysis is striking, comparing corporate management practices at five large schools to the financial shell game that occurred at Enron, the Texas-based energy conglomerate that imploded a dozen years ago.
On the surface, Enron was in the energy business. But behind closed doors, it was engaged in an array of dubious investments and transactions that helped its top executives amass wealth. The charter schools cited in their report similarly present a public face of being alternative public schools. But their founders also used an array of financial tactics, especially involving school real estate deals, to become rich by diverting millions from their classrooms.
Nationwide, 43 states and the District of Columbia have 6,800 charters serving 2.9 million students. They comprise 6 percent of K-12 public school enrollment, which has increased six-fold in the last 15 years. When states approved the first charters in the 1990s, the idea was to nurture locally accountable experimental schools. However, since then a K-12 privatization industry has emerged that is dominated by companies seeking to create regional or national brands, akin to any other corporate franchise. These larger charter operations tend to have non-profit and for-profit arms, which can mask an array of complicated financial relationships.
The charter industry’s largest operations often are run by what’s called educational management organizations, EMOs, which “now control 35-to-40 percent of the industry with an estimated 45 percent of charter students,” the scholars said. These sophisticated operations can attract private investors because they can use their status as schools to get large tax breaks, which, in turn, are applied to a range of profit-making ventures that have nothing to do with educating under-served communities.
“Charter schools attract investors because of the potential for new revenue streams,” the authors said. “For instance, the New Market Tax Credits (NMTC) program provides investors the How Charter School Operators Enrich Themselves In Real Estate: