For-Profit Charter Operator Lobbies For Workplace Schools

Jun 29, 2017

As profit-driven charter school management companies seek growth opportunities, one of the country's largest for-profit firms is lobbying North Carolina legislators to create a new market for a type of school only rarely attempted.

The North Carolina legislation, modeled on a six-year-old Louisiana law, would allow corporations that help build or equip taxpayer-funded charter schools to reserve half the seats in those schools as an employee perk. With existing rules already allowing a charter school's employees and board members to claim places for their own children, the change could leave only a third of the seats in such schools for the general public.

Charter schools operate independently of other public schools under a contract, or charter, that allows exceptions to most state regulations. Enrollment is free, funded with tax dollars corresponding to the number of students they serve.

The North Carolina proposal comes at a time of increased excitement among charter advocates now that their most prominent lobbyist, Betsy DeVos, is President Donald Trump's education secretary. DeVos spent nearly two decades advocating for private-school vouchers and working for greatly expanding educational choices outside of traditional public schools.

The only workplace charter now operating in the country is affiliated with a massive retirement community in central Florida. Others have closed or businesses have cut ties since the first one opened for the Ryder truck rental company's suburban Miami headquarters in 1999. A Baton Rouge, Louisiana, medical center plans to open a workplace charter next year as part of a real estate development.

But a company lobbying for North Carolina to allow workplace charter schools believes they allow the private sector to fund school start-ups where states don't.

"There is a need and we would be filling the need and there is a demand for it," Charter Schools USA founder and CEO Jonathan Hage said in an interview. "To me, it seems like mom and apple pie and good stuff happening when people are talking about schools and corporations and businesses and people investing in education."

No companies have yet expressed interest in spending the minimum of $50,000 to get a North Carolina charter school off the ground for their workers, said state Rep. John Bradford, a suburban Charlotte Republican who sponsored legislation that passed the House earlier this year.

Bradford told The Associated Press that he doesn't know much about how similar laws have worked in other states. He said the legislation was brought to him by charter school advocates including a lobbyist for Charter Schools USA. The Florida-based company is one of the country's largest for-profit companies managing charter schools. It runs 85 schools in North Carolina, Louisiana and six other states — more than two-thirds of them in its home state.

The proposed North Carolina law could help reduce school construction financing costs and increase returns for Charter Schools USA's real estate development sister company, Rutgers University education professor Bruce Baker said.

A pattern at Charter Schools USA schools is that Red Apple Development buys the land and builds the school, then leases it to the non-profit board granted the charter to operate the school, which hires Charter School USA to manage the school. The board pays both a lease and school management fees, using taxpayer funds that follow students as they switch schools.

Hage told the AP he owns part of Red Apple, but it doesn't build all the schools Charter Schools USA operates.

"One would expect these charters, with a relatively guaranteed stable enrollment, and additional financial backing, to be a better bet than new start-ups dependent entirely on recruiting new choice students," said Baker, who teaches courses on school finance and management and has written about the business niches developed around charter schools. "By being a better bet in this regard, they also become a better bet on property acquisition for Red Apple."

These management fees and lease payments can total millions of dollars a year, according to the budget for one proposed North Carolina charter school planned entirely around Charter Schools USA's model.
West Lake Preparatory Academy is scheduled to open about 30 miles (48 kilometers) northwest of Charlotte next year. The founders said in their state application that they want Charter Schools USA because of the company's good results at operating schools nearby. The group projects paying almost $2.5 million in management fees over the first five years as enrollment ramps up to 1,100 students, according to the budget included in the school's state application. The school's lease payments are projected to be $7.23 million over those five years.

State Rep. Jason Saine, who co-sponsored the workplace charter legislation, is treasurer of a nonprofit board that secured West Lake's state charter, or authorization to operate. He said he has no business relationship to Charters USA and has not been personally lobbied by the company. Saine did get $3,000 in campaign contributions from Hage last year.

About 15 percent of the country's 2,900 charter schools are run by for-profit companies, according to the National Alliance for Public Charter Schools, an advocacy group.
Privately owned Charter Schools USA doesn't report its earnings, but business research provider Hoover's estimates annual sales at about $120 million. School management fees are about $50 million to $75 million a year, Hage said.

Bradford says the law might encourage a business mulling a move to one of the state's poorer counties.
"One of the ideas behind the legislation was to create an opportunity that if a business wanted to locate there" and didn't find schools attractive to their employees, "they could invest into the public school system and help start a charter," Bradford said.

Groups representing North Carolina's public school boards and teachers oppose the proposal, saying set-asides of up to two-thirds of the seats in a new school seems to contradict North Carolina law that charters are supposed to expand educational opportunities for all students.

"This really pushes us down the road on privatization that we had previously resisted going on charter schools," said Rep. Graig Meyer, a Chapel Hill Democrat.