The Biden administration is moving to overhaul the federal Charter School Program with new rules finalized last week that make it harder for for-profit organizations to win taxpayer money and require greater transparency and accountability for grant applicants.

The program has awarded billions of dollars in grants over the past several decades for the expansion or opening of charters, which are publicly funded but privately operated, often with little or no public oversight. President Biden said during the 2020 election campaign that he wanted to end federal funding for for-profit charter schools, but the final regulations don’t go that far.

Charter school supporters strongly objected to a draft set of rules released earlier this year, saying they seemed intended to kill the program outright, which the Education Department denied. Nina Rees, president and chief executive officer of the National Alliance for Public Charter Schools, said in a statement that the final regulations appear to be “less harmful than the original proposal,” but added that more analysis of the details was needed.

Critics of the federal Charter School Program said both the draft set of regulation changes and the final versions were important moves to stop waste and fraud in the federal program and provide more transparency to the operation of charters.

Charter advocates say these schools offer necessary choices to families that want alternatives to troubled schools in traditional public school districts. Critics say charter schools drain funding from public school districts that educate the vast majority of children in the United States, and are part of a movement to privatize public education.

The Network for Public Education, an advocacy organization that opposes charter schools, has published several reports since 2019 on the federal program, revealing the waste of hundreds of millions of taxpayer dollars on charter schools that did not open or were shut down. The reports also showed that the Education Department did not adequately monitor federal grants to these schools. You can read about two of those reports here and here. A third report details how many for-profit management companies evade state laws banning for-profit charters.

This post analyzes the final rules that the Education Department released last week — though more details are yet to come. The following was written by Carol Burris, an award-winning New York school principal who is now executive director of the Network for Public Education and who wrote or co-wrote the reports mentioned above. Burris has written extensively about charter schools and other school reform efforts for more than a decade on The Answer Sheet.

By Carol Burris

Last week, efforts to clean up the wasteful federal Charter School Program (CSP) made remarkable progress. First, the fiscal year 2023 House Appropriations bill report not only made cuts to the CSP program budget, it demanded improvements. Then the day after the passage of the bill by the House Appropriations Committee, the long-awaited final regulations for the Charter School Program were published by the Education Department. Although a few concessions were made to the charter lobby, nearly all proposed regulations remained intact from a draft version released earlier this year.

Let’s start with the fiscal year 2023 House Appropriations bill. It reduced the Charter School Program budget by $40 million from President Biden’s request to keep funding for next year the same as this, at $440 million. The bill also called on Congress and the U.S. Education Department to phase out for-profit management organizations, and encouraged further investigations and reforms. In short, it supported the proposed CSP regulations.

During a June 30 hearing on the bill, two amendments — the first to defund the Department of Education’s regulation efforts and the second to restore the $40 million budget cut — were defeated in committee votes.

When Rep. John Moolenaar (R-Mich.) offered his amendment to kill the new regulations by defunding them, (watch beginning at 3:20:37), Rep. Rosa L. DeLauro (D-Conn.), chairman of the committee, expressed her “strong opposition.” She accused the National Alliance of Public Charter Schools of “peddling un-credible exaggerations” and “misrepresentations” to defeat what she characterized as modest reforms. She further stated that they had been “willing to take desperate measures to block accountability and transparency” to protect for-profit education management organizations. She voiced her strong support for reform of the CSP to address long-standing concerns. Moolenaar’s amendment was defeated 32 to 22.

The following day, on July 1, the department held an informational briefing on the final new regulations, the priorities, and the assurances applicants must provide to secure a grant from the Charter School Program (CSP). Following the meeting, three documents were posted here. The first describes the submitted comments and the department’s response to them as well as the new requirements for the three grant programs within the overall CSP (SE, or State Entity; CMO, or charter management organization; and Developer, or charter school developers).

The department received 26,580 comments on the proposed regulations, most of which were generated from letter-writing campaigns. Of all of the comments, 5,770 were unique. According to the department, “the majority [of comments] expressed general support for the regulations and the priorities.”

For those who have long advocated for overhauling the CSP program, here are the significant gains.

Schools managed by for-profits will have a difficult time securing CSP grants and, in some cases, will be excluded from funding.

If an applicant has or will have a contract with a for-profit management company (or a “nonprofit management organization operated by or on behalf of a for-profit entity”), they must provide extensive information, including a copy or description of the contract, comprehensive leadership personnel reporting and the identification of possible related party transactions. Real estate contracts must be reported, and “evergreen contracts” in which there is automatic contract renewal are prohibited. The school cannot share legal, accounting or auditing services with the for-profit. The state entity that awards the grant must publish the for-profit management contract between the awardee and the school.

The final regulations also include the reporting and exposure of the for-profit’s related entities. The Network for Public Education recommended the addition of “related entities” in its comments to the department. Our report, “Chartered for Profit,” explains how for-profit owners create separate corporations with different names to mask the complete control of the for-profit over operations of the school.

Finally, the applicant must assure that “the [for-profit] management company does not exercise full or substantial control over the charter school,” thereby barring any charter school operated by a for-profit with a “sweeps contract” from obtaining CSP funds.

There will be greater transparency and accountability for charter schools, State Entities, and CMOs that apply for grants.

This is probably the most underreported win for those who support charter school reform.

Transparency gains include:

• An assurance that the grantee holds a public hearing on the proposed or expanded charter school. These hearings must be well advertised and include information on how the school will increase diversity and not promote segregation. Schools are obligated to reach out to the community to encourage attendance and then provide a summary of the hearing as part of the application. These public hearings are required of direct grantees and subgrantees — both SE and CMO.
• The publication of for-profit management contracts.
• The publication of the names of awardee schools and their peer-reviewed applications by states and CMOs.
• A requirement that the school publish information for prospective parents, including fees, uniform requirements, disciplinary practices, transportation plans, and whether the school participates in the national free or reduced-price lunch program.

Accountability gains include:

• More substantial supervision by state entities of the schools that are awarded grants, including in-depth descriptions of how they will review applications, the peer review process they will use, and how they will select grantees for in-depth monitoring.
• Restrictions regarding the spending of grants by unauthorized schools. Charter schools not yet approved by an authorizer will be eligible to use planning grant funds; however, they cannot dip into any implementation funds until they are approved and have secured a facility. This new regulation will limit, though not prevent, all funding that goes to charter schools that never open.

Regulations to stop White-flight charters from receiving CSP funding and ensure the charter is needed in the community.

The final regulations are good, but not as strong as initially proposed.

One of the more controversial aspects of the new regulations was the need for the school to conduct a community impact analysis. The charter lobby focused on one example by which a school could show need (district over-enrollment) and used it as a rallying cry to garner opposition to the regulations. In the new regulations, the department clarifies that there are other ways to demonstrate need, including wait lists and offering a unique program. It also eliminated the need for the applicant to provide a district enrollment projection.

The community impact analysis is now called a needs analysis. That analysis must include evidence of community desire for the school; documentation of the school’s enrollment projection and how it was derived; a comparison of the demographics of the school with the area where the students are likely to be drawn; the projected impact of the school on racial and socio-economic district diversity; and an assurance that the school would not “hamper, delay or negatively affect” district desegregation efforts. Applicants would also have to submit their plan to ensure that the charter school does not increase racial segregation and isolation in the school district from which the charter would draw its students.

The department went to great pains to reassure applicants that schools in racially isolated districts would not need to show diversity (this straw man argument had been used by the charter lobby and even some editorial boards to fight the regulations, although the original rules had made that clear). Those schools that are unlikely to be diverse due to the school’s special mission would also have to submit an explanation.

Still, there are some concerns about unintended consequences of the regulations.

With the additional caveat regarding “special mission,” the department is trying to preserve grants to schools that are themed to promote, for example, Native American culture in an area where Native American students are a minority population in the district. That is understandable.

However, White-flight charter schools could skirt the regulation by arguing that their mission is to provide a Eurocentric, classical curriculum.

For example, charter schools opened by Hillsdale College — a small Christian college in Michigan that promotes a “classical” curriculum — are disproportionately White. These schools could claim that their mission appeals to students with European backgrounds and that the strong “anti-CRT” message in their “1776 curriculum” does not appeal to Black families. Although Hillsdale College does not take federal funds, Hillsdale charter schools do. We have identified nearly $7 million awarded to Hillsdale member charter schools up to April 2021. Newer schools have likely secured CSP grants as well.

Priority 2 — which encouraged charter/public school cooperation — was retained but categorized as “invitational” for the 2022 cycle.

The second straw man argument the National Alliance for Public Charters used to fuel their #backoff campaign on the regulations was the claim that charter/public school district cooperative projects were required. They were not. They were a priority, and priorities can be mandated, competitive (assigned a few points), or invitational (looked up favorably but no point value).

As I explained here, it is rare for a priority to be mandated. For example, of the six priorities for the 2022 State Entities grants, only one is required, which is that authorizers use best practices. The department now makes it clear that it is unlikely that charter/district cooperative activity will ever be a mandated priority while leaving the door open to it becoming a competitive priority after the 2022 award cycle.

All regulations, priorities and assurances go into effect for this 2022 grant cycle with one exception: Developer grant applicants, a small program in which individual schools apply, do not have to submit a needs analysis in 2022 only. That is because applications are due shortly.

Summary

Since 2019 when the Network for Public Education issued its reports on the federal Charter School Program, the program has come under increased congressional scrutiny. We have followed up by submitting letters to the department, often co-signed by other groups, demanding reform and exposing abuses of the program.

These new regulations are an essential first step in making sure that fewer tax dollars go to schools that never open, schools that quickly close, and for-profit operators. Unscrupulous individuals who used the program for their enrichment will find it more difficult to do so. State Entities that have pushed money out the door will now be forced to provide more oversight and supervision. And so they should. State Entities get 10 percent of every grant, representing millions of federal dollars, to use for such supervision.

We do not doubt that some applicants will still provide false information, as we found time and time again, but now as all peer-reviewed applications go online, groups such as ours will serve as watchdogs and report falsehoods and misrepresentations to the Office of the Inspector General.

And for all of the charter schools that are fronts for for-profit organizations, the Education Department just put a big sign on the door that says “you need not apply.”