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October 1, 1998
Vol. 56
No. 2

For-Profit Charter Schools: What the Public Needs to Know

Are for-profit managers of charter schools removing the "public" from public education? A study of 11 schools in western Michigan found cause for concern.

Numerous articles address the topic of charter schools, but the subtopic of for-profit management seldom appears. For-profit corporations that manage charter schools provide millions in dollars of start-up money and receive millions in additional tax-free funds from state and federal governments. As researchers in western Michigan—where corporations hold the reins of the charter movement and for-profit management is an aggressive undertaking—we wanted to learn how this new enterprise is affecting public education.
At the start of the 1997–98 school year, the Grand Rapids metropolitan area had 15 charter schools, 11 of which were managed by for-profit corporations—the Educational Development Corporation, the Leona Group, and Malone Management. Our research looked at these 11 schools and focused on three questions: Do the cost-cutting strategies necessary to achieve a profit affect such areas as transportation, special education, and socioeconomic mix of students? Are there adequate communication links between managers and the stakeholders they serve? Does for-profit management shift ownership of public schools from the public domain to the private?
Our conclusions proved to be troubling. First, cutting expenses is indeed part of the for-profit strategy, with results in transportation, in special education, and in the socioeconomic mix of students. Second, we concluded that the public likely is not aware of how drastically for-profit management is altering the profile of public education in western Michigan, for no easily accessible source of information is available on the activity of these management groups. Finally, de facto ownership of these 11 schools rests more with their management companies than with the public. In most cases, the bureaucracies the corporations have superimposed over these schools have eradicated two cardinal tenets of the charter movement—the freedom of educators to practice site-based management and innovative teaching methods, and the provision of choice in public education.

Cost-Cutting Strategies

Charter schools receive the same funding as other public schools. However, for-profit managers, one could conjecture, do what they can to enhance profit. We hypothesized that their profit strategy included cutting expenses. Transportation, special education, and the socioeconomic mix of students account for much of the increased cost of education (Molnar, 1996b); therefore we focused our hypothesis on these areas.
Transportation. In 1994 the Michigan legislature passed a law that radically changed the funding of public education in the state. One major effect was to discontinue providing school districts with transportation dollars on the basis of their reported need for transportation of students. Instead, transportation funds now are bundled into the annual per-pupil foundation grant allocated by the state. Charter schools receive the same foundation grant per pupil as all other public schools in their respective districts. During the 1997–98 school year, the foundation grant cap in Michigan for charter schools was $5,924, according to Michigan's State Department of Education Charter Schools Specialist (G. Cass, personal communication, August 19, 1997).
In 1995 the first charter schools managed by for-profit groups in our area opened their doors. Only 1 of the 11 schools studied provides transportation. In effect, these management groups receive funding for a service they don't provide. For the sake of comparison, it is worth noting that in Rockford, a large suburban school district in the Grand Rapids area, transportation costs account for 6 percent of total expenditures, or $325 per student, according to the Assistant Superintendent for Financial Affairs (R. Nyenhuis, personal communication, December 16, 1997).
Special education. We were interested in how many special education students were in the 11 schools and what level of special education they were receiving. Further, we wondered whether these schools were following the pattern of some charter schools in Massachusetts, which tell parents of special education students that only inclusion is available, and if they desire the full spectrum of services their children are legally entitled to, perhaps they should look for a more accommodating school. Often, as a result of convincing dialogue initiated by charter school officials, parents choose to waive their child's right to all or partial entitlements under the law (DiLorenzo, 1997a, p. 4).
In 10 of the 11 schools studied, special education students account for only 3 percent of total enrollment, far below the normal 10 to 13 percent in traditional public schools. Moreover, many special education students in these schools receive only minimal services, specifically, speech therapy. Twenty percent of the special education students who came from other schools legally dropped their special education designation when they enrolled in the schools we studied. Principals reported that some parents do sign legal waivers to relinquish their child's entitlement to all or some special education services. Principal Steve Mattson from Grattan Charter Academy reported that his management group sends out a representative to talk to parents about signing these waivers, a scenario similar to what is occurring in Massachusetts (personal communication, November 11, 1997).
The salient fact to keep in mind is that these for-profit groups receive the full stipend for each student with a special education label even though they do not provide full services. Public schools that provide the full spectrum of services do not receive any more funding than the charter schools for each student designated "special education," according to the Executive Director of Special Education from Rockford, Michigan, Public Schools (M. Polinowski, personal communication, December 20, 1997). Special education, it would appear, is an area of profit for these management groups.
Socioeconomic considerations. The absence of free busing has sociological ramifications. For students from neighborhoods beyond a charter school, the absence of busing "clearly diminished poor students' choices of schools" (Di Lorenzo, 1997b). Amy Stuart Wells (1997) argues that charter school policymakers should provide students free and accessible transportation to charter schools outside their communities, assure these students receive information on their school choices, and guarantee their equal access to charter schools in wealthier areas.
Gary Cass, Michigan's charter schools specialist, estimated that only 10 percent of all charter schools in Michigan bus their students, and he emphasized that no public schools are required to transport students, (personal communication, August 19, 1997). For-profit managers of the schools studied have used this omission in school law to their advantage. Only 1 of the 11 schools transports its students. None of the schools is located in the inner city of Grand Rapids. In fact, the schools are located in middle- to upper-middle-class areas. Eighty-three percent of the students are Caucasian, and only 10 percent qualify for free and reduced lunch.
It appears that this absence of busing hinders many economically deprived inner-city or rural students from choosing the schools in our study. As William Julius Wilson (1997) of Harvard University's School of Social Science has noted, "Poor, urban residents cannot afford cars, and they do not have a network system that supports carpools." These schools purport to offer choice to parents, but real choice for parents means "more than just freedom to walk away from schools they don't like. They also have to be able to get their children into schools they prefer" (Molnar, 1996, p. 158).
It would be valuable in future studies to determine whether "skimming"—with the intent of gleaning a pool of the most easy-to-educate students—is occurring in these charter schools and in others across the country. If so, it could possibly be considered subtle social discrimination. Principal Bill Kirkwood from Knapp Charter Academy told us his school would be opening its middle school wing in fall 1998. When asked if it planned to open with 6th through 8th grades, he said, No. We don't want to open up the floodgates because then we'd get all kinds of kids and all kinds of behavior problems. We prefer to bring them up through the ranks. We'll add one grade per year. (personal communication, November 25, 1997) The other schools in this management group also add one grade a year and give preference to siblings of students already enrolled. Principals in all the schools studied told us their best advertising is word-of-mouth. Sociologically speaking, it appears these management groups have created a closed and perhaps biased system of education.

Public Communication

When we began our investigation, we expected to easily acquire a list of the charter schools in our area under for-profit management. Such was not the case. Both the Michigan Department of Education and the Michigan Association of Public School Academies indicated they had no information on for-profit charter schools. We then contacted a resource person in charge of disseminating a special report that the governor had mandated to inform the public about Michigan's public schools. When asked whether the report included information about for-profit management of charter schools, the resource person replied, "For profit? That's not something public schools are supposed to make" (K.-S. Chung, personal communication, August 15, 1997). He remained incredulous as we endeavored to explain the existence of the for-profit sector in the state's charter schools.
Finally, we contacted the authorizing university for each charter school in our area. The universities told us which of their charter schools were under for-profit management and supplied us with the name of each management group. The difficulty we encountered acquiring information about what are supposed to be public schools testifies to the need for publicly accessible information about for-profit management.

The Question of Ownership

From the beginning of the charter movement, proponents have declared that at last teachers, parents, and students would be freed from the constraints of public school bureaucracy and able to achieve true innovation and choice. The charter movement would place effective authority within market settings and would be "radically decentralized" (Chubb & Moe, 1990, p. 29). However, we discovered a strong centralized authority imposed over the schools in our study. We question whether, in practice, these schools do not belong to the corporations who manage them rather than to the public.
We discovered an especially strong centralized bureaucracy in six schools managed by the same corporation. This management group uses a generic parent handbook in all its schools and organizes parents into the same committee structure. The calendar is identical at each school, as is the curriculum, except in one school that uses a different math program. All principals stated that their schools use a "back-to-basics" curriculum determined by the management group, and the discipline policy is the same in these schools.
Another notable feature is the similarity in professional background of the schools' principals. All but one had retired after at least 20 years as principals in the Grand Rapids public school system. As a group, they meet regularly and frequently with their management corporations. They also reported that they identically manage their schools according to their corporation's direction.
The power of this particular management group extends beyond curriculum and management to actual ownership of all buildings and equipment. The corporation uses the same blueprint to construct wood-frame buildings, and each individual school board leases the school buildings and equipment from the corporation and the leasing companies it has created. If these schools were to close, the buildings and equipment would apparently revert to the management corporation, which would be free to sell them and keep the proceeds.
Forget individuality. Forget imagination. Forget innovation. What these management corporations have created is a kind of rubber-stamp formula to educate students in the Grand Rapids area. Given the findings of our study, the emergence of for-profit charter schools in western Michigan is cause for concern. Issues related to cost-cutting strategies, communication, and public
ownership of the public schools deserve serious attention if these charter schools are to match the expectations and meet the needs of the constituencies they are intended to serve.

Chubb, J. E., & Moe, T. M. (1990). Politics, markets, and America's schools. Washington, DC: Brookings Institution.

DiLorenzo, A. (1997a, May). Charter schools: A look at accountability. (Available from the National Education Association, 1201 16th St., N.W., Washington, DC 20036-3290)

DiLorenzo, A. (1997b, July 23). Statement before the Interim Study Committee of the Idaho Legislature.

Molnar, A. (1996a). Giving kids the business: The commercialization of America's schools. Boulder, CO: Westview.

Molnar, A. (1996b, September 18). Giving kids the business: The new mercantile edge to school reform. Education Week, pp. 44, 37.

Wells, A. S. (1997, April 9). Statement to the Committee on Education and the Workforce. United States House of Representatives.

Wilson, W. J. (1997). The economic future of America's cities. Presentation to the Department of Housing and Urban Development.

Christy Lancaster Dykgraaf has been a contributor to Educational Leadership.

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