Three needed reforms to rein in charter school profiteering

December 5, 2018 10:01 am

Rep. Eddie Farnsworth speaking at an October 2014 town hall in Mesa. According to media reports, Farnsworth will make nearly $14 million by selling his chain of charter schools to a non-profit company that will continue to contract Farnsworth to run the schools. Photo by Gage Skidmore | Flickr/CC BY-SA 2.0

We’ve been reading about it for months. Charter school CEOs, including a powerful Arizona legislator, are making millions off publicly funded charter schools.

Oh, well, we shrug. They took a risk, invested money, and made a profit. That’s what businesses do. Except Arizona charter schools aren’t supposed to function like private sector businesses. Rather, they are classified as public schools, receiving almost all of their funding from Arizona taxpayers.

The contract is simple: We supply the cash to operate the schools with an understanding our dollars are neither squandered nor stockpiled. We expect school administrators, whether the title be district superintendent or charter CEO, to take reasonable compensation for the schools they oversee, not treat them like their personal ATM.

But the Legislature has broken that trust with taxpayers, crafting loopholes to benefit their charter school friends and turning a blind eye to negligence and fraud.

For instance, public-school regulations include strict procurement and conflict of interest rules. That’s why we aren’t seeing headlines about district school administrators with multimillion-dollar compensation packages or superintendents leveraging a school’s assets to create millions in personal real-estate gains. Without basic transparency or accountability measures, self-dealing isn’t simply allowed, it becomes the norm.

Last year, a report authored by the bipartisan Grand Canyon Institute found an astounding 77% of charter operators used taxpayer monies for “questionable financial transactions.”

Seventy-seven percent.

The report detailed many of the practices used to create enormous personal wealth. Practices that are legal for charter owners but strictly forbidden in district schools.

GCI’s bombshell report should have elicited cries of reform from Gov. Doug Ducey and the GOP-led Legislature.

Instead, the governor’s closely aligned charter school defenders went on a crusade to discredit the report, not by disputing specific facts but by throwing out accusations that GCI is anti-charter.

The counterattack worked. The Legislature went on its merry way, enacting yet another measure in last year’s budget exempting charter schools from tougher procurement laws.

But things have suddenly changed. After the Arizona Republic doggedly covered Rep. Eddie Farnsworth’s $13.9 million taxpayer-enabled windfall, the governor had an epiphany, saying he’s open to reform.

My guess is any reform rolled out next session will have the blessing of the Arizona Chamber of Commerce and the Arizona Charter Schools Association. There will be plenty of pomp and circumstance, but little substance, and that shouldn’t be a surprise to anyone paying attention. Those that created this mess will not be the ones to solve it.

Instead, we should look for reforms backed by the whistleblowers and watchdogs and the charter owners who have been operating under good faith. And yes, there are quality charter schools out there with ethical managers. Individuals who see public education for what it should be: a public good.

If we want real reforms, then they should have, at a minimum, three important criteria:

  1. Required annual audits by the state auditor general: It is simply mind-boggling that the auditor general, the state entity charged with pursuing agencies that misspend tax dollars, is not allowed to conduct or review the audits of charter schools. Without this crucial oversight, charters will continue to operate in a vacuum of accountability.
  2. End the epidemic of self-dealing: Adopt procurement rules that mandate competitive bids and forbid charter owners and their relatives from profiting off rental agreements, curriculum, management fees, and a host of other items that are illegal for district schools.
  3. Put restrictions in place to prevent inflated administrative overhead and compensation packages that turn some charter CEO’s into millionaires while their district-school counterparts continue to maintain low overhead costs.

Charter school watchdogs have been promoting these reforms for years, but so far, they’ve been ignored. 2019 needs to be the year when we finally rein in the profiteering. If the Legislature cannot or will not do it, then voters should consider running an initiative to put those restrictions in place.  

Arizonans deserve an accounting of our public-school dollars. We need a system designed to serve students, not legislators and their politically connected friends.

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Julie Erfle
Julie Erfle

Julie Erfle hails from North Dakota, but has called Arizona home for more than twenty years. She began her career in Phoenix as a creative services producer at KPHO-TV5 and 3TV. Blending her background in communications with her passion for community activism, Julie launched the political blog Politics Uncuffed in 2011, and began working as a communications director and consultant on candidate and initiative campaigns. She is the former executive director of Progress Now Arizona, a progressive communications and advocacy non-profit, and a fellow with the Flinn-Brown Arizona Center for Civic Leadership and Leading for Change.