Struggling Arizona charter operators to remain open under agreement

The decision was made during an Arizona State Board for Charter Schools meeting Tuesday and involved a total of 10 contracts from the Learning Foundation and Performing Arts and Edkey charter school networks. For Edkey, one of the state’s earliest adopters of Arizona’s charter school law, the board placed an enrollment cap even as the district sees positive growth in its online program.

The state board annually reviews the financial health of every charter school or network that has a contract with it. The charter holder is then rated within three standards: good standing, adequate standing or intervention.

An intervention rating is given when a charter holder fails to meet one or more financial measures. These measures include key areas of concern such as declining enrollment, debt and budget deficits. Receiving an intervention rating two or more years in a row results in probation, which is then classified under three levels of risk.

All 10 contracts discussed during the August meeting involved charter holders that received the highest level of risk.

Charter holders get second chance

Charter schools, like traditional public schools, receive funding from state and federal dollars for every student enrolled. They are tuition-free and allow for more flexibility across curricula. Unlike traditional public schools, however, charters are operated under a performance contract and run independently by a governing board instead of elected officials.

CAFA, Inc., which oversees the Learning Foundation and Performing Arts network of schools, had three campuses placed under probation. This included a K-6 school in Mesa and two Gilbert schools that serve K-12.

Kent Taylor, the business manager for Learning Foundation and Performing Arts, said declining enrollment has greatly impacted the district’s budget, and the district took action last year by reducing staff to match the smaller student body.

This school year, he said the district took it a couple of steps further. Additional staff reductions, consolidated positions and bus routes, shared staffing between campuses and reduced employee benefits save about $750,000.

According to Taylor, the district’s budget estimates took a conservative approach and factored a lower head count than its actual enrollment for the 2026-27 school year. He also said staff reductions would not impact the 10-to-1 student-to-staff ratio.

“Multiple hats are being worn,” Taylor said. “It was difficult. We had staff members that had been with us for over twenty years that we had to really sit down and decide, 'How are we going to make this work?’”

Declining enrollments also impacted the standing of one of the state’s oldest charter school networks.

Edkey, which opened just two years after Arizona’s charter school law passed in 1994, met with the state board to discuss the future of its eight contracts under probation.

Nicholas Strange, the CEO of Edkey, said the network operated at a loss of about $15 million in the 2023-24 school year, and a $12 million loss in the 2024-25 school year. According to Strange, the district has since undergone a major restructuring to correct its financial performance.

Edkey brought on Charter Impact, a financial management service company, to help right-size its expenses. Strange said this was all done with minimal disruption to the classroom.

Now, the district is looking at finishing the 2025-26 school year with a loss of under $1 million, according to Strange. He said if the district delivers its current budget as planned, it could have a positive operating income for the 2026-27 school year.

“We are not fully where we need to be. However, by the end of this fiscal year, we should be back to standard and be fully compliant,” he said.

Mary Gifford, who serves as chair of the Edkey board of directors, said the charter network still faces enrollment declines, but it has recently partnered with a national marketing firm to recruit new students. She also said its online school that was placed on probation, Sequoia Choice Arizona Distance Learning, has been seeing growth.

Still, state board President Jessica Montierth requested an enrollment cap for Edkey’s online school. Strange said Sequoia Choice Arizona Distance Learning is where the district has seen the most growth and is critical for its future. He requested a cap of 5,000.

The board then approved a consent agreement that would allow Learning Foundation and Performing Arts and Edkey to continue to operate, but added an enrollment cap of 5,000 for the eight Edkey charter holders.

The charter holders must have their governing board members approve the consent agreement before it becomes finalized.