Loosely regulated, charter schools pose fiscal risk

While the subprime mortgage crisis remains the epitome of what occurs when greed and corruption go unchecked, a growing number of experts and observers are warning that a new economic scandal is taking shape in the United States.

In an article published earlier this month, Business Insider observed: “We just got even more evidence supporting the theory that charter schools are America’s new subprime mortgages.”  The magazine wrote: The Office of the Inspector General (OIG) released the results of a damning audit of the charter school industry which found that charter schools’ relationships with their management organizations pose a significant risk to the aim of the Department of Education.

The findings in the audit, specifically in regard to charter school relationships with CMOs, echo the findings of a 2015 study that warned of an impending bubble similar to that of the subprime-mortgage crisis one of the authors, Preston C. Green III, told Business Insider.

With more than 6,700 charter schools spread across 42 states and the District of Columbia, fraudulent activities associated with the publicly funded, but privately owned, charter school industry have become the fodder for almost daily news stories.

According to an October 2015 investigation conducted by the Center for Media and Democracy (CMD), the federal government has spent more than $3.3 billion over the past two decades on the creation and maintenance of the charter school industry.

CMD noted: “The Department of Education is pushing for an unprecedented expansion of charter schools while paying lip service to accountability, but independent audit materials show that the Department’s lofty rhetoric is simply not backed up by its actions.” The report added, “the lack of tough financial controls and the lack of public access to information about how charters are spending federal tax dollars has almost inevitably led to enormous fraud and waste.”

The impact of waste, fraud and corruption are hardly isolated, with newspaper and blog headlines like “Who Is Profiting From Charters?,” “The Big Bucks Behind Charter School Secrecy,” “Financial Scandal and Corruption; The Ugly Charter School Scandal Arne Duncan Is Leaving Behind and As Scandals Plague Charter Schools, Calls for Oversight Grow” becoming increasingly commonplace.

Recently, the depth of the charter school scandals even made it to John Oliver’s HBO show, “Last Week Tonight,” where he observed, in Philadelphia alone, at least 10 executives or top administrators have pleaded guilty in the last decade to charges like fraud, misusing funds and obstruction of justice.

And earlier this fall, the Washington Post’s “Answer Sheet” blog focused on the growing controversies surrounding charter schools observing: Ohio and Utah are known in education circles for having extraordinarily troubled charter school sectors, and the same is true in Pennsylvania, where Auditor General Eugene DePasquale issued a report this year and declared his state’s charter school law the “worst” in the nation.

But there is yet another place with a scandal-plagued charter sector, and is one that is receiving far less national attention than it should be: California.

The Washington Post continued: “There is a never-ending stream of charter scandals coming from California. For example, a report released recently (by the ACLU SoCal and Public Advocates, a nonprofit law firm and advocacy group) found that more than 20 percent of all California charter schools have enrollment policies that violate state and federal law. A Mercury News investigation published in April revealed how the state’s online charter schools run by Virginia-based K12 Inc., the largest for-profit charter operator in the country, has ‘a dismal record of academic achievement’ but has won more than $310 million in state funding over the past dozen years.”

Charter schools were originally envisioned to serve as incubators of excellence where teachers and schools were given the flexibility to explore alternative strategies for helping children succeed. However, that model was quickly replaced by those who saw charter schools as a mechanism to profit off the privatization of public education. Today, billions of taxpayer dollars are being diverted from the nation’s public schools to charter schools and with those funds has come a growing crisis of so-called education entrepreneurs who are using some of those scarce public funds to line their own pockets.

With minimal oversight and regulation, the charter school scandals will grow until elected and appointed policymakers take dramatic action to overhaul the country’s charter school system and demand greater accountability from those involved.

Pelto is a former state representative in Connecticut, an education advocate and blogger. He is the founder and coordinator of the Education Bloggers Network, a confederation of more than 250 pro-public education bloggers from around the country. Follow him on Twitter @jonathanpelto

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