When Charters Close, Public Schools Foot the Bill
Tuesday, Dec. 4, 2007 | Spending scandals brought down Children’s Conservation Academy, a City Heights charter school shuttered in 2007, only two years after it opened. A year earlier, A. Phillip Randolph Leadership Academy dissolved, with questions swirling around its finances. Its closure echoed that of Jola Community Charter School, a girls’ charter that sunk two months after opening in 2005.
These schools and two other closed charters owe more than $300,000 to San Diego Unified School District in unpaid fees and property taxes. None have repaid the district. School staff doubts they ever will.
Closed Schools, Open Tabs
Charter schools are intended to enjoy greater flexibility, but also greater accountability, a trade-off meant to spur creativity and experimentation. School districts can revoke a school’s charter or refuse to renew it if the school strays from its charter, a document that lays out the expectations and governance of each unique school.
But while charters can be snuffed, ending experiments gone wrong, the closures aren’t painless. In San Diego, shuttered charters still owe thousands to the school district and the state in unpaid fees. Public schools rarely recover those funds unless a charter director is prosecuted for a crime, such as fraud, and forced to repay the district. Ordinary debts go unpaid.
Nor does closure — or the threat of it — guarantee accountability, critics say. When fiscal problems crop up, district staffers say they lack the power to halt misspending, and don’t learn about issues until it’s too late. Closure is both a last resort, they say, and their only resort.
“Nobody’s monitoring charter schools that closely,” said Andrea Niehaus, the district’s director of audits and investigations. She recently asked to hire another auditor for her seven-person office, to specialize in charter schools. “They don’t keep the same documents. We can’t even see how they’re taking attendance — and that’s how schools are funded. We have no way of knowing.”
“It’s very disturbing,” Niehaus said. “I don’t see anyone doing any real oversight.”
Closures also have an emotional cost. Shut-downs are sometimes abrupt, with little advance notice for parents, stranded children, and even teachers, who scramble to find jobs long after most schools have hired. When Randolph Leadership Academy in San Diego dissolved, some graduates found their diplomas had gone void because the school never sought accreditation, said Peter Rivera, program manager in the district’s Office of School Choice. Others couldn’t retrieve transcripts to prove they had attended.
Charter schools are publicly funded, but don’t operate by the same rules that govern public schools. Instead, they’re bound by their charters. School districts and other public entities authorize charter schools, and oversee their operations, passing along public funds that flow from the state, to the county, to the schools. Districts collect fees from charters for providing buildings, special education, school police and other services to charter schools.
Closure is at the heart of charter accountability. Proponents argue that because charters can be closed, they’re more accountable than public schools, which don’t run the same risk.
“We’ve introduced an unprecedented level of accountability into the public school system. … If you’re not improving learning, you can be closed,” said Gary Larson, spokesman for the California Charter Schools Association. “Ultimately, that’s supposed to happen. … There should be consequences, for not educating kids today.”
Criminal Court Only Route to Recovering Funds
Financial woes cause most charter school closures, according to the Center for Education Reform, a pro-charter think tank. Some schools fail to attract enough students; many struggle to find facilities. When school districts seek to close low-performing charters, they may cite financial problems instead of academics, because money trouble frequently accompanies sinking scores, and is easier to prove. Other schools are accused of outright theft, pilfering public money for personal gain.
Despite their debts, few charters nationwide have been held accountable for outstanding money after they close, said Kyo Yamashiro, director of San Diego Unified’s school choice office. The few exceptions are splashy, high-stakes criminal cases. Jola’s founder, Donna Johnson, fled a floundering charter school in Cleveland, and now owes Ohio $341,000, the state charges. She allegedly spent public funds on luxury clothing, Luther Vandross concert tickets and out-of-state hotels. Johnson subsequently opened Jola Community Charter School, a San Diego school that closed two months after opening.
A similar scandal propelled California to pass new guidelines outlining how school districts cope when charters dissolve. C. Steven Cox allegedly looted $23 million from California Charter Academy, a system of 60 charter schools, to pay off friends and family, according to a San Bernardino County audit. In September, he was indicted on 113 felony counts of misappropriation of public funds, grand theft and tax evasion, and jailed on a $1 million bail.
But when charter schools close, most close without fanfare, and many never balance their books. After a handful of San Diego’s charter schools sunk, their debts went unpaid.
The only practical way the school district could recoup those dollars, Rivera said, is to make a case for fraud or other criminal conduct, committed by individuals. Ordinary debts that stem from mismanagement can’t be claimed. But even if district staffers suspect fraud, it’s up to prosecutors in the District Attorney’s Office to take — and prove — the case. Thus far, none of San Diego’s charter directors have been prosecuted in San Diego, despite questions about their spending.
District staffers suspect fraud in the closures of some San Diego charters, most notably Children’s Conservation Academy, which closed in August. San Diego Unified claims that CCA spent hundreds of dollars on Padres tickets, cell phone bills and gym memberships, and paid more than $11,000 to executive director Nicole Decatur’s mother, a past board president, with little proof of the work she’d performed.
CCA’s former attorney, Lisa Corr, declined to comment.
Nor has San Diego Unified taken debtor schools to civil court. When charters close, it’s sometimes unclear who bears responsibility for the debt, Rivera said, complicating any attempt at a lawsuit. And the sunken schools are rarely able to repay their debts in assets, Yamashiro said.
“The resources spent investigating, let alone prosecuting, would far outweigh the amount of money being lost,” Yamashiro said. “And in every case they’ve owed money, I don’t think their assets outweigh the money that they owe.”
Unfortunately, those costs are a fact of bankruptcy, said Colin Miller, director of policy for the California Charter Schools Association.
“If a charter school goes bankrupt, it’s like a business going bankrupt. No one has deep pockets to pay the debts,” he said. “… If the money’s not there, it’s not there.”
District Lacks Power to Stop Paying Charters
When trouble surfaces, evidenced by unpaid employees or lapsing insurance, district staff pore over charter schools’ bank accounts, checking where money is flowing. If charter schools are misspending public money, school districts can threaten to revoke their charters, shutting down the schools. That’s a significant tool to alter a charter’s behavior, said Colin Miller, director of policy for the California Charter Schools Association.
“It’s the big hammer,” Miller said. “Even a simple letter that says, ‘We’ve noticed these problems, and we’ll consider revocation’ — that’s a very serious threat.”
But revoking a school’s charter takes time — time the school district doesn’t always have. Charter schools get a chance to clean up problems and can appeal their charters, if revoked. Sometimes, however, the schools crumble before the process is complete and opt to surrender their charters to the district. Jola dissolved in only two months, well before it had undergone its first audit, and had already racked up a nearly $75,000 bill with San Diego Unified.
Short of threatening revocation, San Diego schools lack gentler tools to steer charters back into the black. If revocation is the “big hammer” Miller describes, Yamashiro and Rivera want a chisel.
For instance, San Diego Unified can’t cut off funding to charter schools, even if payment problems are rampant. San Diego Unified authorizes payments to charter schools from the county treasury, said Yamashiro, but only acts as a “button-pusher,” with no authority to stop the spigot of funds.
“We can bug the schools over and over again, but until we start threatening revocation, they won’t listen,” Yamashiro said.
And since charters rarely pay their debts after closing, revocation doesn’t pay off financially for public schools. Yamashiro stresses that the children’s well-being takes precedence over the district’s budget. Bad charters should be closed for kids’ sake, she said.
Still, “it creates a disincentive to close these schools,” said Andrew Rotherham, co-director of Education Sector, an education think tank. “No one wants to have an implosion on their hands. And generally when a school goes into a tailspin, the money does get lost.”
Oversight Lags Behind Charter Problems, Staff Complain
In California, charter closures are now routine. Twenty-three charters have closed in San Diego County since the birth of the charter movement in the 1990s. In San Diego Unified, where nearly 10 percent of public school students attend charters, 14 of an estimated 50 charters have been shuttered, according to the County Office of Education.
Closures sully the reputation of charter schools, often to other charters’ chagrin. They also reflect on the districts that approve them, critics charge. A February 2006 report sponsored by the Center for Reinventing Public Education questioned “why charter school authorizers, 85 percent of which are local school boards, are not subject to any real consequences for poor oversight of charter schools. … Nobody is looking over the shoulders of charter school sponsors to see that they are playing by the rules.”
But in San Diego, staffers say trouble can be tough to spot beforehand, despite the district’s efforts.
San Diego Unified has only three staffers, including Yamashiro, overseeing 35 charter schools. Every year, they visit charter schools alongside a team of independent evaluators, thumbing through budgets, interviewing staff, and checking whether teachers have background checks and tuberculosis tests.
Charters undergo greater scrutiny now than under the district’s previous superintendent Alan Bersin, said Cinda Doughty, principal of Darnall Charter School.
“The district has always had very regular scrutiny of our finances and accounts,” Doughty said. Darnall’s test scores rank the school in the 70th percentile when compared to similar schools statewide. “They’ll even notify us if we haven’t put something in the right line item.”
Staffers also review independent annual audits of each charter school, delivered in December for the previous school year. Dipping funds or empty reserves set off the district’s alarm bells. But in dire cases, the audit arrives long after budgets are drained, both Yamashiro and Niehaus said.
“We want to be accountable, to show the district that we’re fulfilling our educational mission,” Doughty said. “If a charter school isn’t working, it should be closed down. But for every school that closes, dozens are doing really good things for kids.”