Stories About How Charters Profit and Suspect Statistics from a Charter School Lobbyist

Setting the Record Straight.

Last week in Senate Appropriations, SB1328’s final stop before the Senate floor, Senate Democrats asked several excellent questions regarding charter school and their proposed sharing of district’s capital outlay funding. A lobbyist from one of Florida’s largest and most profitable corporate charter chains was given almost half an hour to spin tales/respond to their concerns. This blog is intended to set the record straight.

SB1328 has been placed on the Special Order Calendar for Wednesday, May 3rd. The House companion, HB1259, passed the House floor along party lines last week. These bills will require the sharing of locally derived capital outlay funds from the district’s discretionary millage on a per student basis and NOT according to need, as recommended in the recent OPPAGA report. Capital outlay funds can be used to purchase, construct, maintain or lease school facilities, but also for vehicles, machinery, technology and property insurance. The bills allow a “glide path” to full per pupil capital outlay sharing with charter schools in increasing percentages over the next 5 years, at which time, and thereafter, districts will be required to share the full per pupil amount.

When charter schools were first proposed decades ago, they insisted that they could provide high quality education for less money and would not need access to public funds for their capital funding. Since at least 2017, corporate charter school chains have been pushing for legislation giving them access to district capital outlay. A compromise was made, requiring district sharing of local capital millages only if the state did not provide adequate capital funding to charters through the Public Education Capital Outlay funds (PECO funds). Since that time, essentially ALL of the K-12 state PECO funds have gone to charter schools and district schools have had to rely solely on local property tax revenue for their capital needs.

When SB1328 was heard in Appropriations, senators had many questions which bill sponsor Travis Hutson felt might be better answered by Chris Moya, a lobbyist for Charter Schools USA, one of Florida’s largest and most profitable charter school management companies. Moya had registered to speak in support of the bill, like any other public commenter, but ultimately was given 25 minutes of committee time to lobby for the bill.

You can watch the presentation during the 4/20/23 Senate Appropriations meeting, beginning at 17:45, Moya’s testimony begins at 41:15.

I have a few comments about Moya’s testimony:

He begins by saying “The item here before you is not one about buildings, and that’s they key, the key is the item before you is about funding students on a per student basis, which is presently not done.” While operational funds are distributed through the FEFP based on the number of students, and their special needs, capital funds are not. He notes that rising property values have resulted in districts receiving more funding from their discretionary millage, despite, in some instances, declining enrollment, while charter schools continue to have PECO funds distributed to them on a per pupil basis. He points out that capital funds can be spent on more than buildings, and mentions the digital divide seen during Covid virtual instruction.

This is all true. The distinction is that districts collect local tax dollars to build and maintain public schools in their community based on a long term capital plan. These schools are then owned by the community and can go on to serve that community for generations. Needs are determined and the funds are spent, ideally, according to need. For example, the oldest schools would be scheduled to be renovated or rebuilt before the newer ones. While it makes sense to fund technology on a per pupil basis, rebuilding schools is better served based on need (as recommended by the OPPAGA report.)

Demographics and Graduation Rates:

At one point, Moya reminded the committee that Florida’s “charter school population is 70% minority and 50% plus Free and reduced lunch.” Moya told the committee that he was born to Cuban refugees and think it’s “really important to think about the kids in the system and people dont know these stats.” He went on to say that since charter schools didn’t receive capital outlay at parity, “it just fundamentally offends me that my people, cuban people, mostly in urban areas, those parents surrender a portion of their kids funding simply for choosing a school that better suits their kid.”

When asked, by Senator Powell, whether those minority and free and reduced lunch students in charter schools had better graduation rates than those on the traditional school path, Moya didn’t have the data but claimed that the Florida Department of Education releases an annual report demonstrating charter schools tend to outperform the districts schools, in many categories including graduation rates.

Lets look closer at those claims (data from the Florida Department of Education):

In Florida, charter schools serve lower percentages of low income children than their district managed counterparts. In 2022-23, 53% of Florida’s district managed public school population was economically disadvantaged, compared to 47% in Florida’s charter schools.

The racial breakdown of Florida’s traditional and charter schools are nearly identical with the exception that charters serve a higher percentage of Hispanic students.

When it comes to graduation rates, Florida’s district managed public schools SIGNIFICANTLY outperform charter schools.

The differences are even more striking when you compare the schools in Mr. Moya’s Charter Schools USA to district schools within the same neighborhood. In a 2021 report, “Chartered For Profit: The Hidden World of Charter Schools Operated for Financial Gain,” education policy researcher Ryan Pfleger, Ph.D., analyzed data comparing students who attend for-profit charters and those who attend public schools. Nationally, for-profit charters enroll fewer high needs students than district managed public schools. Such national comparisons hide even larger disparities in the communities where these schools are clustered. For example, Charter Schools USA:

LEP: Limited English Proficiency, FRPL: Free-or-Reduced Price Lunch, IDEA: Students with disabilities.

In other words, Charter Schools USA serves lower needs students in some of Florida’s highest needs neighborhoods, leaving the district managed schools to provide services to students with the greatest needs in those communities.

Profiting Off Public Education Dollars

Senator Polsky asked a simple and straightforward question: If charters only get the money from per student allocation, “Can you explain how some charter schools actually make a profit?”

Moya chuckled (he did) and replied “Very, very small margins.” He reminded the committee that, by law (f.s.1002.33), “every single charter school is a not-for-profit.” He notes that, like public school districts, they can, and do, contract out to for-profit entities for things like construction, employee leasing or technology.

Senator Polsky reminded Moya that large charter corporation wouldn’t be in the business if they weren’t making money and asked him to explain how they make their money. Moya responded:

“I’ll let the cat out of the bag, we don’t have collective bargaining… I said the quiet part out loud, we don’t have unions.”

Having non-unionized staff and being thrifty is actually NOT how corporate charter chains make their vast profits – lucrative management fees, self dealing and rent extraction are the key to profits in the charter sector.

Self-dealing

There have been several reports outlining how corporate charter chains profit from public funds. “Chartered For Profit: The Hidden World of Charter Schools Operated for Financial Gain”  explains how contractual agreements known as “sweeps” between the charter school and their for-profit manager give the for-profits parent company the authority to run all school services in exchange for all or nearly all of the school’s revenue.

Page 20 of the “Chartered for Profits” report details Charter Schools USA’s strategy. CSUSA creates non-profit foundations that manage one or more schools and then contracts with these foundations.

“According to the contract, CSUSA performs the day-to-day management of the school; implements and administers the instructional program; selects and manages technology services; manages all personnel, including professional development; provides special education services; manages the recruitment of students to the school, and manages all business and accounting operations. If instructional materials, paid for by the taxpayers, are developed by CSUSA, CSUSA, according to the contract, owns them.

All public funds received by the school are deposited in a financial institution approved by CSUSA, and CSUSA can have a signatory on the school’s bank account. CSUSA has access to all student records, no matter how private, and can even conduct student disciplinary hearings.

The fee for management services is 15 percent of all revenue. Additional profit is accrued with the other services provided. However, the real money made by CSUSA is in real estate. Jon Hage is also the owner of Red Apple Development, LLC, which he founded in 2007 to facilitate his charter schools’ construction. The Red Apple website’s “Our Schools” page displays a map with 66 CSUSA schools Red Apple has developed and, in most cases, owns and leases.”

Page 20. Chartered For Profit: The Hidden World of Charter Schools Operated for Financial Gain

This image (from the report) summarizes the structure of CSUSA, its affiliates and how it generates a profit.

publicly funded Real Estate Scams

In addition to lucrative management and service contracts, real estate dealings generate vast wealth for Florida’s for-profit charter corporations. This report by the National Education Policy Center, entitled “The Business of Charter Schooling: Understanding the Policies that Charter Operators Use for Financial Benefit,” explains how the public can end up paying for a building—more than once—while the building remains privately owned. 

Academica, Florida’s largest and most politically-connected corporate charter network has amassed a real estate fortune, funded by public tax dollars. A 2011 Miami Herald investigation, “Academica: Florida’s richest charter school management firm,”  reveal the Zulueta brothers, real estate developers who build their first charter school in 1997, controlled more than $115 million in South Florida real estate (through more than two dozen other companies), all exempt from property taxes as public schools and served as landlords for many of Academica’s schools. In 2010, these associated companies collected about $19 million in lease payments from charter schools, often charging rents significantly above market rate.

Academica also profits by selling its charter school buildings from one subsidiary to another. As highlighted in “Chartered for Profit”:

In doing so, for-profit charter corporations are able to cash out, pocket the profits and ask the public to fund the school’s buildings again.

SB1328 and SB986 Will Be A Gold Mine for Corporate Charter Chains

I recently wrote about how the combination of SB1328 and SB986 will be a gold mine for Florida’s corporate charter chains. SB1328/HB1259 will require the distribution of school district capital outlay funds to charter schools on a per pupil basis, regardless of demonstrated need and SB986 will allow corporate charter chains to share (technically it’s a 5-year loan) any unneeded revenue with charters in the same corporate network but in an entirely different county. The goal of the SB986 language? To expand corporate charter schools across the state (and simultaneously defund public schools).

Here are a few Florida Charter School facts:

• 17% of Florida’s “public” schools are publicly funded, privately managed charter schools. 83% are district managed public schools.
• 30% of Florida’s School District have no charter schools at all.
• 70% of charter schools are in just 25% of Florida’s School District.
• The majority of Florida’s charter schools are managed under the umbrella of a for-profit management company, like CSUSA or Academica.
• Florida still has independent, home grown charter schools serving perceived needs in their communities. These charter schools operate on shoe-string budgets and rely on extensive fundraising efforts to stay in business. These schools, in many cases, would be better served by a needs based distribution of capital outlay (as recommended by OPPAGA).

SB1328 has been placed on Special Order Calendar for 05/03/23. HB443 (the companion to SB986) passed the Senate on 5/1/23 (36Y-4N, with Book, Davis, Pizzo and Torres voting NO). With a Republican super-majority, SB1328 is certain to pass.

Many thanks Senators Powell and Polsky for asking the CSUSA lobbyist important questions. I hope you read this and appreciate the real answers to your questions.