Curt Cardine: Charter schools not a real choice without transparency, accountability

The economic theory behind school choice and vouchers relies on the “free” marketplace and the consumers of educational services to cull winners and losers. Children represent “backpacks full of cash” that follow the child to the school of their parents’ choice.

The data gleaned from 20-plus years of financial reports on charter schools paint a different story. In reality, Arizona families lack sufficient information to make an informed choice about what school their children attend. As Ronald Reagan might have put it, we have trusted without verifying the financial and academic results of that trust.

Since 1994, 424 charter schools have shuttered their doors, a failure rate of 43 percent. Thirty-four percent of all charters that fail do not meet the Arizona State Board for Charter Schools Financial Performance Recommendation. Another 90 charter groups that failed did not meet the Cash Flow Standard.

My concerns led to three years of intensive research. This effort was undertaken to statistically verify first-hand observations as a charter and district leader. Special attention was paid to the 2013 through 2016 audits, annual financial reviews and IRS 990s (used by the IRS for nonprofits).

The research findings are documented in a series of three policy reports from the Grand Canyon Institute, a nonpartisan public policy think tank.

The reports are “Following the Money,” “Red Flags” and “Teachers in the Charter Marketplace.”

Following the Money presents financial data on charter school management salaries. Charter administrative costs on average are twice district management costs. One case showed two administrators earning a total that exceeded $500,000 for managing one small school with less than 300 students. The top earners are often husband and wife teams, relatives or business associates of the charter holder, collectively making more than $200,000 to oversee a few hundred children.

Charters are not required to conduct a competitive bid process like public district schools. This allows many charter holders to earn compensation by doing business with their own for-profit companies. In one case, a charter holder paid his own “for profit” company $12 million in one year for learning-management software. The cost should have been less than 10 percent of that amount, based on what the Mesa Unified School District spends for a similar type of software.

In 2013-14, related-party business practices were worth a half a billion dollars, representing 48 percent of charter school transactions for contracts, leases and rents. As a comparison, public school districts are not allowed to do business with companies owned by the superintendent or school board.

Also, widespread irregularities abound in the financial information that some charter schools provided to different governmental agencies.

An individual charter school’s various financial reports to the state often present disturbing disparities when compared to their audits. Agencies acknowledged that they check the reports they receive for consistency with Form 990 submitted to the Internal Revenue Service.

When questionable financial practices go unchecked with substantial amounts of money diverted to profits and debt, financial instability results — the topic of the second paper in the series.

Public policy must be called out when it is not working as intended.

Key recommendations in this first report include compelling charter schools to conduct public bid processes, benchmarking administrator salaries to public district superintendents overseeing similarly sized student populations and requiring that financial information in reports submitted to state and federal agencies be reconciled to ensure consistency.

One-fourth of Arizona’s charter schools are operating in the best interest of their students, providing a quality innovative education while being responsible stewards of the state taxpayer dollars with which they are entrusted. Let’s honor their hard work and sound business practices by holding the other three-fourths to the same standards.