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Who Is Profiting From Charters? The Big Bucks Behind Charter School Secrecy, Financial Scandal and Corruption

What we know about the financial incentives offered by charter schools.
 
 
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Photo Credit: Shutterstock.com/Viorel Sima

 

This article is part of a two-part series that looks at mass school closings targeting America’s inner cities and the promise of charter schools as a magic solution to alleged “failing schools.” Part I explained how the charter school movement cynically appropriates civil rights rhetoric, but often leaves the most vulnerable students worse off than before. In Part II, AlterNet looks at a more likely motivation for the “reforms”: Profit.

Studies shows that charter schools don’t typically outperform public schools and they often tend to increase racial and class segregation. So one must wonder, what exactly is motivating these school “reformers”? And why have they pushed for more and more closure — and new charter schools — at such an unprecedented rate in recent years?

Pro-charter supporters will tell you that it’s time for public institutions like our schools to start competing more like for-profit institutions. Test scores and high enrollment, then, define success. Unsuccessful schools, they say, should close just as unsuccessful businesses do. For neoliberal school reformers from today’s Arne Duncan-led Department of Education to scandal-ridden movement leader Michelle Rhee to billionaire Bill Gates, it is taken on faith that market principles are desirable in education.

But since it’s not clear that market principles are benefiting students on a large scale, it seems likely that something else is at stake. And reformers may be more than a little disingenuous in publicly ignoring that other, less high-minded thing: Profit. Critics of charter schools and school closings point out that proponents may not really be motivated by idealism, but by self-gain.

But who precisely is profiting? And how? Untangling answers to these questions is a more daunting task. Compared to public schools, charters schools are an extremely unregulated business. They contract with private companies to provide all kinds of services, from curriculum development to landscaping. Most of the regulations that bind charter schools are implemented at the state level. And unlike public institutions, the finances of charter schools are managed on a school-by-school basis. Because they are not consistently held accountable to the public for how they distribute funds, charter schools are often able to keep their business practices under wraps, and thus avoid too much scrutiny.

For an article of this scope, it’s impossible to describe the profit issue in anything approaching thorough and accurate generalization. Instead, we will look at a couple of decades-old federal incentives for charter investment that may have helped pave the way for the explosion of charter schools today, and provide some examples and snapshots of what is happening on the ground in those major cities where the charter school movement is most influential.

 Hedge Fund Managers and Real Estate Developers

As AlterNet has previously reported, two little-understood policies helped pave the way for the kind of charter growth we are seeing today. One, called the New Markets Tax Credit (NMTC), began in 2000 at the end of President Bill Clinton’s administration. According to the Treasury Department, the credit combines:

…the private sector and the federal government—to bring economic and community development to low-income communities. From job creation to increased access to essential educational, health, and retail services, and from the rehabilitation of blighted communities to the development of renewable energy sources, NMTC projects have benefited neighborhoods throughout the country.

And what precisely is the NMTC doing to restore these so-called “blighted communities”? It’s providing hedge fund managers and wealthy real estate investors with opportunities to cash in on the charter school boom. The government frames it as a useful tool that builds communities up, operating on the assumption that charter schools provide some sort of de facto restoration. But as Part I demonstrated, they don’t.

 
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