Walton Foundation-Funded Charter Schools Marred By Fiscal Mismanagement

The Right Wing

A quarter-century ago, when progressive educators and teachers union leaders first proposed creating charter schools as a way to innovate and improve public schools, they never imagined that one of the nation’s biggest conservative foundations would hijack their idea and leave a trail of profiteering and financial crimes, political corruption, lawsuits blocking audits, and lobbying against basics as simple as installing fire extinguishers in schools or offering lunch to poorer students.

But those and other problems are the legacy of the Walton Family Foundation’s billion-dollar effort to create a parallel school system—charters mostly funded by tax dollars—that has become known for a stunning lack of transparency and accountability, according to a new report, Cashing in on Kids, by In The Public Interest and the American Federation of Teachers, representing 1.6 million educators and staff.

“I may disagee with having two parallel school systems—and I do—but if you’re going to actually undertake this, you have to do it for the public good,” Randi Weingarten, AFT president, said Tuesday. “This is not a private corporation where you can wheel and deal any way you wish. That’s what this report is about… It’s about what’s going on about how the Walton Family Foundation is damaging even their own brand through unregulated growth, allowance of fraud, and lack of transparency and accountability, and what that does to children and what that does to the public good.”           

The U.S. has 6,400 charter schools with 2.5 millions students supported by upwards of $20 billion in taxpayer funds annually and multi-millions from foundations. The Walton Family Foundation was created by the family that brought America Wal-Mart. Like its commercial roots, it believes in “flooding the market with schools,” the report said, but without many of the regulations or oversight that have accompanied public schools for decades.      

The foundation has ties to 1,500 of the charter school across the country. It gives more than $200 million a year to a range of charter school initiatives, typically spending one-third to open new schools, and millions more to support existing schools and lobbying to avoid regulatory and public scrutiny. "We're committed to investing $1 billion over the next five years," its website says. High-profile recipients include Florida’s Foundation for Excellence in Education (FEE), which received $4.8 million since 2009 and was founded by ex-Gov. and now 2016 GOP presidential candidate Jeb Bush.

FEE’s Mike Thomas, quoted in the Cashing In On Kids report, explained the philosophy, saying, “Charters are competitors. They steal customers, deplete [public tax] revenues and increase costs. When charters siphon off kids, they not only take the money that comes with them, they often cause nearby schools to operate under capacity.”   

This business model and intentionally disruptive mindset has led to foundation spending that has not only fueled the rapid growth of unregulated charters, said Donald Cohen, In The Public Interest executive director, but also “hundreds of millions of dollars in fraud, mismanagement and poor oversight, and how the foundation’s grantees have lobbied against adequate oversight of this growing charter sector.” 

“We found that the free market charter advocates supported by Walton Foundation typically refer to charters as public schools in discussions about funding levels and access to public facilities,” he said. “But on the other hand, in almost every other instance, the same lobbyists and advocates argue that charter school governing boards are actually private corporations that should not be subject to same regulations and transparency that govern traditional public schools.”

Even though the Walton Family Foundation does not publish independent audits, its fast and loose education strategy has left a stunning trail of press reports of mismanagement, financial fraud, lawsuits blocking accountability to state governments—as well as a record of anti-democratic education practices, from cherry-picking students to fighting efforts to help poorer students, the report said. Consider the following examples:

• The New York Charter School Association, a Walton grantee that has received $3.6 million has been lobbying state legislators for seven years to block audits of charter schools—and even “took to the courts, arguing that the state did not have the authority to audit the schools because they were run by independent—not public—boards. Lawsuits by other multi-million dollar grantees promped the Legislature to require audits, which, even after the new law took effect, are still being flouted.

• The California Charter Schools Association, receiving more than $31 million since 2004, successfully lobbied that state’s Legislature in 2011 to defeat a proposal that would have required the schools to the same public safety standards as public schools. In 2014 in Pasadena, city officials shut down one school in mid-year because of fire code violations. In 2012, the CCSA opposed a bill requiring the schools offer free- and reduced-priced meals. Meanwhile, its lobbying arm have opposed public school construction bonds, and efforts to institute universal early childhood education.

• Illinois Facilities Fund, a Chicago-based charter school finance and real estate advisory firm, which has received more than $9 million since 2007, released a report in 2012 that recommended Washington, D.C, close several public schools and consolidate students into other buildings under private managers. The Washington Post reported that  “IFF’s research director could not provide a single instance in which its strategy of transferring a low-performing school to a charter management organization has resulted in academic gains for the students.” But as was the case in many other examples given, such private management became an invitation to financial malfeasance and taxpayer ripoffs.

• In Indiana, the former state superintendent of public instruction, Tony Bennett, when running for re-election, received a $200,000 campaign contribution from Alice Walton. Though he lost that race, he changed the state’s assessment grade for another foundation grantee, Christel House Charter Academy, which received $441,000, from a “C” to an “A” before leaving office. Bennett, who was appointed Commissioner of Education in Florida after that, was forced to resign from that post after the media broke the story.

• The record of financial fraud and undue enrichment stretches from coast to coast. The chief financial officer of The Brighter Choice Foundation, a Albany, New York, charter group that received more than $9.4 million, was arrested and charged with embezzling more than $200,000. In Washington, D.C., a city official on a board charged with financial oversight of charters, was arrested and charged with taking $150,000 from the trustees of one school under its jurisdiction. In the Miami, Florida, region, Academia Corp., a chain that runs more than 60 schools and received more than $1.1 million in grants, was exposed by The Miami Herald for “millions of dollars of profiteering” in transactions tied to buying and leasing school buildings.

• Other eyebrow-raising examples include: a technology charter school in Philadelphia that “doubled as a nightclub until it was shut down in 2010;” two Los Angeles schools closed in the middle of last year due to “fiscal mismanagement;” concept schools in Ohio and Illinois that are under state and federal investigation “for a range of concerns around contracting, hiring, management of funds, and others,” and Detroit school operators indicted for fraud, self-dealing and lack of oversight.             

Meanwhile, according to Lisa Ranghelli, director of Foundation Assessment at the National Committee for Responsive Philanthropy, too many Walton grantees cherry pick students for their schools, which is an effort to boost test scores and reputations while leaving students with learning challenges in traditional public schools.

“The foundation says that it cares about quality, accountability and access in its charter school work,” she said. “But as this report finds, their advocacy suggests quite otherwise, particularly children with disabilities, English language learners, other students are being siphoned out of the charter school pipeline or just not being served well.”

The report’s authors want the Walton Foundation to commit to a series of principles that amount to opening their books and policies—so that, as the initial charter school vision suggested, the schools’ failures could be rooted out and best-practices emulated. They have launched a MoveOn.org petition drive. As it now stands, the Walton ideology rejects that accountabily agenda developed by the Center for Popular Democracy.   

“Charter schools were inspired after a speech the former AFT president Al Shanker in Washington,” Weingarten said. “Charter school should be a public school that allows parents and teachers to come up with different ways, new ways, innovative ways of educating our children. Let the innovators take risks. And if that worked, that you would share that with the public school at large.”

But Weingarten said that charter schools run by movement conservatives—especially the Walton Family Foundation grantees—will aggressively attack traditional public schools for their lapses while hiding their own management failures and pushing to remain unaccountable for using billions in taxpayer funds.  

“The Walton Foundation and others of the charter school constellation often talk about this transparency and accountability. And they will often look at their scores at the end of a cycle and say, ‘See, look how good those scores are.’ And yet they fight to be as non-transparent as they possibly can,” she said. “What is going on with charter schools?”

“The question becomes what are they afraid of?” she continued. “What are they hiding? And why are they doing this? And why they not out there as rigorously and vigorously as we are, when they see fraud in the charter sector? And why are they not out there as rigorously and vigorously as we are when they see that there are some instabilities that are created because of the rapid growth of charters? I find it quite ironic that some of the people that they fund will do that in a nonosecond when it comes to criticizing the public system, and legitimately criticizing what the public system is not doing. But there’s a stone cold silence and underneath that silence the network of trying to thwart any transparency.”

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