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Cloaking Inequity: California Just Banned For-Profit Charter Schools. Why?

California just banned for-profit charter schools.

Existing California law, the Charter Schools Act of 1992, authorizes charter schools to elect to operate as a nonprofit public benefit corporation. However, despite the original legal and policy vision for non-profit schools, thousands of students are now enrolled in charters controlled by for-profit corporations. Currently in California, according to the Assembly Education Committee, for-profit corporations operate schools that serve over 25,000 students.

In 2015, the California Assembly passed AB-787, which was a bill that sought to address a growing concern from educators, parents, civil rights and community groups that California charter schools were evolving to focus more on profits instead of kids. The final version of AB-787 prohibited a charter school from operating as, or being operated by, a for-profit corporation. At the time, the California Charter School Association (CCSA) opposed and actively lobbied against the bill. Governor Jerry Brown, essentially following the advice of CCSA lobbyists, basically threatened all legislation related to charters with vetoes.

As part of its strategy, CCSA has typically inserted poison pills (i.e. requiring legal claim immunity in AB-276, a bill about charter transparency) during the legislative process that has made compromise with associations representing educators, civil rights organizations and other public education stakeholders nearly impossible. And consistent with CCSA lobbying efforts, Jerry Brown vetoed AB-787, stating, “I am returning Assembly Bill 787 without my signature… I don’t believe the case has been made to eliminate for-profit charter schools in California…I am unable to sign AB-787.”

But since then the world has changed.

On September 7, 2018, Governor Brown signed AB-406, which prohibits charters from operating as, or be operated by, “a for-profit corporation, a for-profit educational management organization, or a for-profit charter management organization.” Not only did Jerry Brown and CCSA support the signing; they now publicly “celebrated” the same ban that they very recently opposed.

So why the flip flop?

First, a growing body peer-reviewed literature and policy reports from academics and policy think tanks have demonstrated that online charters perform dismally just about everywhere they have been tried. For example, research organization In the Public Interest found that California Virtual Academies, the largest online charter network in the state, had an overall graduation rate of only 36 percent compared to 78 percent for all of California.

Not only did Governor Jerry Brown and the California Charter School Association support the signing; they now publicly “celebrated” the same ban that they very recently opposed. So why the flip flop?

Second, U.S. Secretary of Education Betsy DeVos may have poisoned the proverbial well for for-profit charters in California. In Michigan, her home state where she was hugely influential in education politics and policy, more than 80 percent of charters are for-profit, and they’ve typically performed poorly.

Furthermore, President Trump’s administration iscontroversially forcing migrant and refugee children to attend for-profit charters at detention camps run by for-profit prison companies. It’s fair to say that DeVos’s for-profit vision for education and her stamp of approval isn’t desired by everyone who supports school choice. In Blue California, it appears that having DeVos’s support for education reform ideas is now kryptonite, even for Democrats.

Third, a growing number of states have banned for-profit charters. Education Week reports that New York, Tennessee, Rhode Island, and New Mexico have passed legislation that bans or restrict for-profit charters. Since 2010, Maine, Mississippi, and Washington have enacted new legislation prohibiting outright or in-part for-profit companies from running charters.

Fourth, civil rights organizations are determined to inject transparency, accountability, and direct democratic control into the school choice movement. Statements and resolutions from national civil rights networkssuch as the Journey for Justice Alliance, Movement for Black Lives, and the NAACP, have brought more attention to the downsides of private control and privatization of education enabled by for-profit charters.

The new California bill does have naysayers. Critiques of AB-406 have argued that the bill won’t actually impact the 25,000 students now attending for-profit charter schools. This sentiment has likely been influenced by K12 Inc., the national largest for-profit charter school provider. A spokesman for K12 commented on AB-406, telling EdSource his company, “doesn’t believe it will have to change how it does business to comply with the new law—the schools are already independently run by their boards.”

However, a reading of AB-406 relative to a review of K12 Inc. management practices conducted by In The Public Interest suggests that these views are incorrect and litigation could ensue if K12 Inc. continues to conduct business as usual in California. K12’s California Virtual Academies (CAVA) is a prime example of how for-profit corporations can run “non-profit” charter schools behind-the-scenes. In the Public Interest found that K12 “self-deals”—the corporation is both the manager of each CAVA board’s school funds and the primary vendor. K12 also explicitly contractually prohibits CAVA from accepting competitive bidding and seeking other vendors for services.

Furthermore, K12 California’s agreements with CAVA allow it to directly pay itself for services out of charter school bank accounts it is authorized to manage. K12 also has contractually required structural conflicts of interest because top CAVA administrators are employees of K12 while teachers work for CAVA. Further, CAVA boards risk the closing of the school unless they cooperate with K12’s budget proposals that allow it to charge exorbitant rates for services that essentially handcuff schools with “budget credit” debt every year. Because schools are always in debt to K12 Inc., the indentured financial arrangement directly limits the independence of CAVA locations from K12 Inc.

These financial shenanigans by a for-profit corporation to exert direct control over the CAVA charter schools will now be subject to much stricter scrutiny and regulation under California law. The definition of “operated by” sets limitations on what these for-profits can now do in California. The new law does not allow K12 to have say in board members, personnel, day-to-day operations, managing expenditures that are not authorized by the board, or providing services before a governing body of the charter school has approved the contract at a public meeting.

Clearly the new legislation is not perfect. Policymakers will likely have to come back and address loopholes that K12 and other corporations will most certainly find. However, the new law sends a clear signal to for-profit corporations who run charter schools, or plan to. Policymakers in California are now paying attention. In addition, more broadly, it sends an important political signal to education privatization supporters that transparency and accountability in the school choice movement is a major issue that will be addressed in an escalating and strategic fashion.

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Julian Vasquez Heilig

Julian Vasquez Heilig is the Dean and a Professor of Educational Policy Studies and Evaluation at the University of Kentucky College of Education. His current res...