The American Federation of Teachers (AFT) union isn’t too happy about the national rise in charter schools. This privatization of public schooling means teachers are no longer employees of the state, but rather of private companies, thus making unions a rarity in the world of charters.
While the need for unions can be debated, what can't are the growing number of news stories about for-profit management companies finding ways to benefit from money meant for the public education system. This is not a reality for all charter schools — there are many with completely clean books. However, the ones that have flipped a buck off the backs of children definitely taint the charter name.
The AFT, along with In the Public Interest, recently launched a new website, Cashing in on Kids, which highlights this trend of funding misallocation within the nation's school systems — particularly charter schools with for-profit management companies.
The website specifically examines five management companies they believe are the worst perpetrators when it comes to “cashing in on kids." Below are profiles on three of the management companies that have profited the most from the current zeitgeist of privatized public education. Stay tuned for part two, where we dive into the remaining two companies profiled and provide an analysis on why this trend is happening.
Academica is an education management company founded in 1999 by Fernando Zulueta. Today, the company runs over 100 charter schools in Utah, California, Nevada, Texas, Florida, and the District of Columbia combined; the majority of the schools are in Florida, where Zulueta is based.
The company benefits from political connections as well as real estate associations. For example, Zulueta’s brother-in-law, Erik Fresen, previously worked as a lobbyist for Academica and is currently a Florida state representative, chairing the state's House Education Appropriations Subcommittee.
Additionally, State Senator Anitere Flores is the CEO of private Doral College, which was created in conjunction with one of Academica’s charter schools, Doral Academy. In 2010, Doral Academy set aside $400,000 in public dollars to build a private college on its campus; today, Doral College provides college courses to 120 high school students in the Academica network. Since the college is unaccredited and unauthorized, the benefit to the high school students is unclear — what is clear, however, is the benefit to Academica, which gets 7.5% of the Doral College fees.
The political ties continue. According to a 2011 investigation by the Miami Herald, state election records show Academica’s owners, Fernando and Ignacio Zulueta, gave $150,000 in campaign donations to Tallahassee lawmakers and political committees under the guise of real-estate companies they control. In the past five years, an additional $120,000 has been donated to Florida legislators by the Zulueta family and Academica executives and school contractors — and the money has paid off. During this time, the Legislature raised caps on the size of charter school networks and passed a law promoting “high performing” charters; both reforms could be viewed as benefits to Academica.
While money has given the company influence in legislation, it is real estate that allows the Zuluetas to actually make those big bucks. Zulueta and his brother own many of the buildings they house their schools in — which means these buildings are exempt from property taxes — and the family can collect money as the landlords. According to the Miami Herald, the Zuluetas' real estate companies collected $19 million in lease payments from charter schools last year, and records show rent at nine of the schools was over 20% of their yearly revenue.
Charter Schools USA
Another Florida company, Charter Schools USA, is a for-profit education management company based out of Fort Lauderdale and run by Jonathan Hage, the former research director for Jeb Bush’s Foundation for Florida’s Future. While the majority of Charter Schools USA’s schools are in Florida, it also manages charters in Georgia, Illinois, Indiana, Louisiana, Michigan, and North Carolina.
From political connections to sly power moves, the company is embedded in a laundry list of eyebrow-raising activity.
Similar to Academia, Charter Schools USA is heavily connected to legislation. According to the Tampa Bay Times, during the 2012 election campaign, Charter Schools USA paid over $200,000 in political contributions.
Additionally, the company has used money in both Georgia and Tennessee to flex charter laws in its favor. In 2012, Charter Schools USA gave $50,000 to a Georgia PAC in order to raise the cap on charter schools in the state, and it lobbied with other charter companies the following year to amend Tennessee legislation and allow for-profit companies to operate in the state. The companies got their way.
According to a 2002 report by the St. Petersburg Times, in order to get around Florida’s law that charter schools had to be non-profit, Charter Schools USA employees began creating non-profit foundations to obtain charter schools and would then hire Charter Schools USA to manage the schools.
Tax-exempt bonds are a method used by the company to raise capital. In 2006, it was issued $21 million in tax-exempt bonds from the City of Palm Bay to build Patriot Charter School, LLC. When the school did not attract enough students to repay the debt, Charter Schools USA stopped payments on the bonds. A default notice was issued in 2012, but by then, Charter Schools USA was no longer the management company and, therefore, off the hook.
Based in Virginia, Imagine Schools is comprised of a smattering of companies that operate over 70 schools in 12 states and D.C. Founded in 2004 after Dennis and Eileen Bakke bought a struggling for-profit management company, Imagine is today made up of three entities: a non-profit called Imagine Schools Non-Profit, a for-profit management company called Imagine Schools, and a real estate development company called Schoolhouse Finance LLC. The triad allows the company to legally engage in the various — and lucrative — stages of charter development.
Through Schoolhouse Finance, Imagine Schools is able to profit in two ways. By owning the physical space, Imagine can charge schools to lease the buildings. But they can also profit another way: selling their buildings to investment companies, which then lease the schools back to Imagine.
Wait, what? You may be asking yourself how that benefits Imagine. While the deal does not benefit the individual schools, which are forced to pay their high rents with public tax dollars, it does allow the company to expand by opening new schools. So while some schools are dedicating almost half of their yearly operating expenses to rent, classrooms are missing out on important resources that the school can no longer provide. One of the saddest examples of this cycle is in — you guessed it — Florida, where Imagine's schools were paying such exorbitant rents that they went into debt.
The kicker: Debt leads to closure and closure means the schools owe the for-profit entity of Imagine thousands of dollars.
What Imagine does asides from making money from real estate — and a 12% management fee — is unclear. The school is known for low academic performance, for example in Missouri, state test results showed almost all Imagine School students were performing below grade level in reading and math.
One school employee who spoke anonymously with the AFT for fear of retaliation said, "It was rather baffling, but as a management company, they weren't providing any management services. With the exception of payroll processing and some accounting support, it wasn't really clear what they were doing for the school."
Even charter advocates are wary of the company. "A lot of my friends in education around the country are very supportive of the charter movement. But I have not had a single person once say to me, 'Wow! Imagine Schools.' It's always been, 'Watch out for Imagine Schools,'" said Pittsburgh Schools Superintendent Mark Roosevelt in 2010, when Imagine tried to open a school in the district.
Making matters worse is the oligarchic perspective of Imagine’s top officials. In 2009, the Fort Wayne Journal Gazette posted an internal memo from Imagine’s CEO, Dennis Bakke. In the letter, Bakke clearly explains he believes the schools operating under Imagine are controlled by the company and not the school boards. This sentiment leaves many feeling uncomfortable, as charter schools are still being paid for with public dollars and therefore should hopefully belong to the public and not a company.