“The education industry represents, in our opinion, the final frontier of a number of sectors once under public control... represents the largest market opportunity... the K-12 market is the Big Enchilada.” — Montgomery Securities prospectus quoted in Jonathan Kozol’s The Big Enchilada
Most of the time the charter school industry's corporate leadership is able to craft their messaging so as to distract the populace from the real purposes undergirding their project. Occasionally, someone in their sector goes off script and tells the truth about what chartering is all about. Usually it's those in the sphere of finance capital—gleefully celebrating how lucrative the charter school industry has been for them. The Forbes piece, Charter School Gravy Train Runs Express To Fat City , is an excellent example of this. Sometimes individuals in the neoliberal corporate education reform camp spill the proverbial beans. Industry proselytizers like Andy Smarick and Paul Vallas have been candidly honest about charters discriminating against Students with Disabilities (SWD), and charters eschewing veteran teachers, respectively. Revelations of the dark secrets behind the charter industry's insatiable drive for profits also shine cleansing light on a current local issue—namely the attempts of charter industry profiteer Refugio "Ref" Rodriguez, and his California Charter Schools Association's (CCSA) campaign to capture the Los Angeles Unified School District (LAUSD) Board of Education seat for District 5. One of Rodriguez's fellow CCSA profiteers inadvertently provided incontrovertible evidence of why the school privatization camp spent over three quarters of a million dollars in the primary election alone.
A Twitter follow from a name I recognized as a marginal player in the corporate education reform camp sparked curiosity. A moment spent checking their LinkedIn profile yielded a veritable gold mine of information unequivocally proving the charter industry's, and particularly CCSA's, drive for profits comes at the expense of children and community. The prose from their profile says it all:
Co-Founder/VP - School Services & Products
California Charter Schools Association
July 2003 – July 2007 (4 years 1 month)
Launched and operated association services and products division providing financial, insurance, special education, and other member services that broke-even the first year and generated 30% profit margins in subsequent years--with 20-30% lead generation and 20-50% close ratios.
Profit margins, lead generation, and close ratios… refreshing honesty from an industry that claims it "puts kids first."
Like the hedge fund managers discussed in the Forbes piece above, platitudes about helping kids are quickly subsumed by talk of plentiful profits, revenues, and business opportunities when charter school executives talk among themselves. This focus on profits drives Ref Rodriguez's CCSA charter school industry trade association to eliminate any political opposition, and also explains their unhinged viciousness and ruthlessness towards the Honorable Bennett Kayser, our sitting LAUSD Board member, who has had the temerity to oppose charter schools placing greed over student need. Let's look more closely at CCSA's business dealings, how they harm students enrolled in charters, how they harm students enrolled in public schools, and then return to the implications of the May 19, 2015 General Municipal Election in Los Angeles.
Charters convert public funds into private profits
California Charter Schools Association's (CCSA) business ventures were so outrageously profitable, they drew in an array of corporations, privately held companies, and large foundations wanting a share. Firms like EdTec, Arthur J. Gallagher & Co., Charter Impact, Inc., and Discover Re (The Travelers Indemnity Company) jumped in CCSA's profits pool. Longtime school privatization advocates The Walton Family Foundation and Bill & Melinda Gates Foundation loomed large. Seeing an opportunity to exploit public education dollars nationally, the CCSA, Walton Family Foundation, Travelers, and Gallagher & Co. launched School Risk Management, LLC, which later became known as CharterSafe/PrivateSafe. Here is an excerpt of a 2007 press release from one of the corporate entities involved in this deal.
"In 2007 as a response to the growing need for appropriate insurance for charter schools nationally, Gallagher partnered with the California Charter School Association JPA and the Walton Family Foundation to form a risk management and insurance program for charter schools. This program has been known as the CharterSafe program. Recently the California Charter School Association JPA began promoting their self insured pool program as CharterSafe. In an effort it differentiate the national program from the California based JPA program, we have decided to change our program name. Going forward, we will be known as the Charter First Insurance Program."
Note the prominence of the right-wing-reactionary Walton Family Foundation in the press release. Walmart fortune heiress, Carrie Walton Penner, is currently the CCSA Board Vice-Chair (term ending 6/30/2017). By most accounts Walton Penner is close to both profiteer "Ref" Rodriguez of the PUC Charter School Corporation, and the well-heeled Ana Ponce of the Camino Nuevo Charter School Corporation. Rodriguez was a CCSA Board member from 2005 to 2009, while Ponce currently serves as the CCSA Board secretary. Like all 501c3 "non-profits", the CCSA Board is unelected, and, to all intents and purposes, is unaccountable to anyone other than its charter executive membership and private funders. CCSA's public funders (the taxpayers) have no voice in the 501c3 corporation's affairs. Its private investors get seats on the board. Known for their aversion to public education, and their exploitation of working class families, the Walton Family Foundation is CCSA's biggest funder. In 2010 they showered the CCSA charter school industry association with a staggering $3,940,652.00. Annual investments like that are nothing when one considers the return of investment in the forms of profitable finance capital spinoffs like CharterSafe, LLC.
The avaricious insurance executive… ahem, "education entrepreneur" who oversaw growth of the hugely profitable CCSA CharterSafe enterprise, then launched his own consulting firm to skim more money from the trough of public funds. Funds which became entirely unregulated when the charter school industry was created by corporate interests in the nineteen-nineties. Refugio "Ref" Rodriguez's revenue hungry PUC charter school chain is a client of that selfsame consulting firm.
The money making aspect of chartering is so predominant, that peripheral concerns like pupils, pedagogy, or populace are not part of the discussion. Here is a LinkedIn endorsement for our CharterSafe protagonist by the Senior Vice President for Strategic Initiatives at the National Alliance for Public [sic] Charter Schools:
"Ted is one of the most creative people I know. He is an excellent partner because he always makes sure the business relationship benefits both parties. I have introduced him to our customers, and they always come away impressed."
I doubt many think of children, schoolteachers, or education when they see phrases like "business relationship", or "introduced him to our customers", but that's what the charter school project is all about—business. Big business at that.
The charter industry's profits-first agenda hurts it's own students
The CCSA counts 14 of the schools comprising Refugio "Ref" Rodriguez's charter empire among its membership. As mentioned above, CCSA and its business partners profit from selling financial products and services to its corporate charter members. Additionally, just like the U.S. Chamber of Commerce, CCSA charges dues. Their formula is based on enrollment. Of issue is whether these corporate charters can demonstrate that the dues they pay to their trade association come from somewhere other than taxpayer funds intended for students. Rodriguez's PUC has paid well over a hundred thousand dollars into the CCSA slush fund, which in turn is used for political lobbying to increase charter industry profits. Those funds, regardless if they came straight out of taxpayer pockets, or are front end investments from billionaire ideologues like Walton Penner, would be better spent on students. Yet as we saw above, when it comes between profits and pupils, the charter industry always prioritizes the former. The "non-profit" designation of the charter industry is simply a tax status, indicating they don't have shareholders. The 501c3 "non-profit shells" of these organization merely serve as a fronts to the myriad businesses they feed education funds to. Real estate, leasing, insurance, administration, and many more lucrative industries benefit from this arrangement.
Charter executives make sure they partake of the profits too. I remember interviewing a young person who had worked for a wholly owned subsidiary of the Green Dot Charter Corporation. They told me they had lost any illusions that they were a "non-profit" when they saw Green Dot's Alma Vivian Marquez roll up in a brand new Porsche Cayenne. A sampling of Los Angeles corporate charter school CEO salaries is eye opening, especially when one realizes that they all work for schools with a tiny fraction of the student population that the public school district serves:
| Charter Chain | Executive | Total Compensation | Form 990, Part VII§A |
|---|---|---|---|
| Celerity | Vielka McFarlane | $438,730.00 | 2012 |
| Alliance | Judy Burton | $330,400.00 | 2012 |
| Aspire | James R. Willcox | $293,687.00 | 2012 |
| Green Dot | Marco Petruzzi | $279,478.00 | 2013 |
| Camino Nuevo | Ana Ponce | $230,811.00 | 2012 |
While representatives of the lucrative charter industry claim they run public schools, entities tasked with using precise legal definitions all say otherwise. This includes the 9th Circuit U.S. Court of Appeals, the California Court of Appeals, and the National Labor Relations Board, all of which are on record stating that charter schools are not public entities. The most authoritative framing of this issue comes from the U.S. Census Department:
"A few "public charter schools" are run by public universities and municipalities. However, most charter schools are run by private nonprofit organizations and are therefore classified as private."
Like the rest of the private sector, the charter industry must continually increase market share in order to maintain profitability. One of the ways they do this is through advertising. Rodriguez's corporate charter schools squander untold amounts of taxpayer funds on advertising in pursuit of growing market share, and hence increased profits for the business interests associated with his schools and his CCSA trade association. The photo of a ubiquitous PUC advertisement below was taken by the author. Our tax dollars are being leveraged in order to secure more of our tax dollars to fuel the revenue hungry machine that is the charter school industry. Obviously this is of no concern to profit minded charter executives like Rodriguez, but those funds could, and should, be spent in the classroom for student learning, instead of growing market share for the burgeoning charter school sector. Ironically these corporate charter school chains frequently claim they have long "waiting lists," so why the need to advertise? In a word the whole waiting list myth is another part of their marketing scheme.
Despite having additional resources invested in them by billionaire foundations, not to mention their being able to control their student populations through selective enrollment, attrition, and outright discrimination against Students with Disabilities (SWD), PUC charter schools, while profitable, haven't done much for students. For example, in 2013 students from Rodriguez’s Early College Academy for Leaders and Scholars (ECALS) took the California State University (CSU) entrance exams. Half of those taking the test failed to test proficient in either mathematics or English. The fifty percent of Rodriguez's students that failed had to take remedial high school classes.
Other corporate charter school chains, like Alliance, Camino Nuevo, and Green Dot, have had years where up to ninety-eight percent of their "graduates" failed to test proficient in either mathematics or English. If the tradeoff for public control and oversight of our education dollars was supposedly to accommodate these so-called "high performing," privately managed entities, then we have been duped. The only area where charter schools have performed well is that of funneling precious education funding into the coffers of the corporate interests they serve.
The charter industry's profits-first agenda hurts public school students
I recently wrote in response to a charter chain getting away with defrauding the public for millions of dollars.
"One cringes thinking of all the Los Angeles Unified School District (LAUSD) public school libraries that could have been reopened with those millions "missing" from the privately managed Magnolia Gülen Charters."
This sentiment holds true across the board. For every education dollar that winds up in the hands of hedge fund managers, business bankers, and corporate executives, there is a public school child suffering from the inequity of a system being systematically starved of resources. In March of 2015 The Center for Popular Democracy released a groundbreaking report entitled Risking Public Money: California Charter School Fraud. The report meticulously details tens of millions of dollars in fraud stemming from this essentially unregulated industry, and suggests that "[b]ased on conservative estimates, California stands to lose more than $100 million to charter school fraud in 2015." As a community organizer I constantly hear parents talk about overcrowded classrooms and lack of resources. It is incomprehensible that at the same time our neighborhood public schools are in desperate need, our community's funds are wantonly, recklessly, and even fraudulently squandered by the opaque structures of the privately managed charter school industry.
In response to our public schools being short changed because of the myriad shortcomings of the lucrative charter school industry, the Honorable Jackie Goldberg founded the Transparency, Equity, and Accountability in Charter Schools (TEAch) organization a few years ago. Everyone should support TEACh, even families with children enrolled in privately managed charter schools. Their mission statement: "An organization working to ensure that charter schools are Transparent, Equitable, and held Accountable for their practices."
Aside from budget woes created by the charter sector syphoning our education dollars off into corporate coffers, another area where public school students are most hurt by charter industry's profits-first agenda is that of special education. The 2008 Andy Smarick piece alluded to earlier outlines how the charter industry deliberately avoids enrolling Students with Disabilities (SWD) to save money and uses that additional financial burden to bankrupt the public school district. His words echo the neoliberal ideology of eliminating the public commons in favor of a profitable, private sector:
"As chartering increases its market share in a city, the district will come under growing financial pressure. The district, despite educating fewer and fewer students, will still require a large administrative staff to process payroll and benefits, administer federal programs, and oversee special education. With a lopsided adult-to-student ratio, the district's per-pupil costs will skyrocket." [emphasis mine]
As a society we must stand against the exploitation of our most vulnerable. Frankly, any school getting public funding should be obligated legally, ethically, and morally to educate every child. If it is too difficult for the charter school industry to stop prioritizing corporate greed over special education need, then there needs to be discussions of shutting down their industry. Los Angeles School Board members who have attempted to enforce these obligations on charters have been savaged by the CCSA. Bennett Kayser's principled stand against the lucrative Aspire Charter Corporation is notable. Depending on which source one cites, Aspire either served a negligible number of SWD, or none at all at the time of Kayser's opposition to their charter renewal:
"But a look at area special education programs provides insight into the types of students served by Aspire. ¶ El Dorado's special ed program does not serve a single visual or hearing impaired student nor students with multiple disabilities, orthopedic or brain injuries, according to state reports. L.A. Unified's program serves many of these disabilities, requiring highly-specialized, costly care." (KPCC, April 16, 2014)
This is unacceptable. We already saw James R. Willcox's compensation package above. Children in both the public school system, and the privately managed charter school sector, deserve better than to have the funds we alloted them diverted into private hands.
The billionaire backed CCSA campaign for the May 19, 2015 School Board election
With prodigious profits for themselves and their investors at stake, the California Charter Schools Association (CCSA) launched a scorched earth campaign to get one of their longtime industry operatives, Refugio "Ref" Rodriguez, elected. Dr. Andrew Thomas, the third place finisher in the primary election for the LAUSD District 5 seat, wrote the following commentary regarding the ideologically charged billionaires supporting CCSA's SuperPAC for Rodriguez:
Why are out-of-district billionaires such as Netflix Chief Executive Reed Hastings, former New York Mayor Michael R. Bloomberg, Jim Walton of the Wal-Mart founding family, and local philanthropist [sic] Eli Broad spending over a $1 million in this school board race?
In defense of their profits, Rodriguez and his CCSA trade group launched the most deplorable and dishonest political campaign in recent memory. One lie and innuendo packed CCSA mailer attacking the Honorable Bennett Kayser was so repugnant that it saw Kayser's fellow board member, the Honorable Dr. George McKenna, calling the CCSA out for being "racially inflammatory". Rodriguez's CCSA trying to paint their opposition as racist is no small irony, given that the CCSA was founded by bigoted nativist Steve Poizner. Another series of Rodriguez's CCSA attacks mocked Kayser's disability. Kayser, who suffers from Parkinson's Disease, has been one of the strongest advocates for Student with Disabilities (SWD) the district has had in years. As discussed above, the charter school industry sees SWD as an impediment to their profits, so Kayser's standing up for those students has made him CCSA's biggest target.
With almost unlimited funding at their disposal, Rodriguez and his fellow CCSA profiteers look to seize the LAUSD District 5 Board of Education seat and use it as a means to increase charter market share, proliferate profits, and eliminate any oversight interfering with those first two goals. An important question we should be asking ourselves is why can charter industry executives run for our public school board, but no member of the public can ever run for the boards of their charter school empires?
If you live in LAUSD District 5, I implore you to demonstrate to profiteer Rodriguez and his CCSA trade association that our community values pupils over profits by voting for Bennett Kayser in the May 19, 2015 General Municipal Election.
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