As states have opened the door for investors to gain access to tax dollars through for-profit charter schools, an entire industry has developed. It is now booming, with private equity groups holding conferences to recruit hedge fund managers and others to invest in for-profit education opportunities, teaching them how to profit from state education dollars. (Click here to read about other efforts to privatize public schools.)
How for-profits get around the non-profit school requirement
Lobbyists for the for-profit schools have had a tremendous influence on state statutes regulating charter schools, and legislation often is designed to mask the for-profit agenda. For instance, charter school legislation may stipulate that charter schools must be non-profit entities but leave loopholes allowing charters to “contract with” for-profit companies to manage and operate the schools (the for-profit groups actually establish their own non-profit schools which, in turn, pay them “contract” fees). Such loopholes give corporations access to and control over taxpayer dollars meant for public, not-for-profit, education.
Closing the loophole
Every charter school bill that was taken up in the 2012 legislative session contained the loophole allowing for-profit management organizations to run charter schools. In the 2013 session, The Parents’ Campaign successfully advocated for bill language that would close this loophole. The final charter school bill, HB 369, prohibits charter schools from contracting with for-profit companies for comprehensive management services. The language is similar to Tennessee’s charter school statute; click here to see how our neighboring state eliminated the for-profit loophole. We anticipate that, in future legislative sessions, the for-profit lobby will push for changes to the charter school law to insert the for-profit loophole and allow them to tap into stated education dollars. We will continue to oppose such a push.
For-profit charter schools have become such a money-maker that their operators pay handsomely to influence education legislation to benefit their bottom line. Lobbyists (including those operating in Mississippi) aggressively push their agenda, donating to political campaigns through PACs that aren’t required to reveal their funders, running multi-million dollar ad campaigns to influence public opinion, and funding foundations that push their for-profit agenda.
K-12, Inc. is the largest of several for-profit virtual school companies that are profiting from state tax dollars, despite an abysmal record of student achievement.
A Pennsylvania study found that 100% of the state’s cyber schools, including K-12, Inc., had “significantly worse” outcomes than their traditional public school counterparts, for which the virtual companies were paid $10,000 per student from public school coffers. In turn, K-12, Inc.’s revenues for the first quarter of the fiscal year increased by 14.4% to $221.1-million. In 2011, K-12, Inc. paid its CEO $5-million.
Click below to see a CNBC interview with the CEO of Entertainment Properties Trust about charter schools as a high-growth, recession-resistant money-maker for investment portfolios. He says that public charter schools represent a “two and a half billion dollar opportunity” for investors.
CNBC Video: The Profit Potential in Charter Schools
States are banning for-profits
New York, a leader in the charter school effort, had such problems with for-profit charter schools that the state banned them – including for-profit management organizations – in 2010. At least three other states, Tennessee, New Mexico, and Rhode Island, also have banned for-profits from running schools. There is a fundamental conflict of interest inherent in the for-profit agenda: are the for-profits more concerned about their stockholders or the education of children?
Read about problems other states have had with for-profits running non-profit charter schools
Private company skirts public boards in running tax-funded charter schools
Local board secretly starts two school corporations in Texas