How Charter School Owners Feather Their Nests & Other Conflicts of Interest

Many people in one of my home states — Arizona — seem to have no concept of a conflict of interest.

When charter schools were authorized in Arizona in the mid-1990s, it wasn’t long before a young woman “researcher” at the Goldwater Institute was appointed Chairperson of the State Charter School Board. And that very same Chairperson quickly issued a charter to a non-profit foundation — that was really an artifice created by K12 Inc. — that created the Arizona Virtual Academy (AVA), a huge cybercharter. Then Arizona Virtual Academy soon hired that very same Chairperson as its Director, who decided that all materials and services of the AVA would be purchased from K12 Inc. And before long and shortly after the Chairperson resigned from the State Charter School Board, K12 Inc. hired Chairperson into the position of Senior Vice President for Education, and Policy & External Affairs. So you see, this person is not only the director of one of the largest online Charter schools in the nation, but she also serves as a vice president of the company from which her charter school purchases nearly everything. (Incidentally, AVA is the cybercharter that got caught outsourcing essay grading to India.) Anybody have a problem with this? Not in Arizona.

One of the first brick-and-mortar charter schools in Arizona was named Citizen 2000. In the middle of its second year of operation, its 1,000 enrolled students showed up for class only to find a note of the door informing them that Citizen 2000 was closed for business. The Director was on her way to Chicago for good. She had been paying her divorce lawyer out of school funds, paying her mother’s mortgage, and had hired her sister as assistant director at an exorbitant salary. I was being deposed in a FOIA case by an Assistant Attorney General at about that time, and I asked whether the state had plans to pursue a case against the former Director of Citizen 2000. “No, we’re not interested.” Fine, so seemingly nobody in Arizona cares about conflicts of interest.

However, now and then the powers that be in Arizona will come down on some small fry in an attempt to prove that they are policing double dealing. Years ago, an assistant superintendent of public instruction got canned because he was running a textbook company on the side while subtlely suggesting to teachers and administrators that he knew where they could buy some really good textbooks. More recently, a school board member in a suburban Phoenix school district was nearly indicted when it was discovered that the board on which he sat was contracting with his HR company for some minor services.

Why then, is a blind eye turned to massive conflicts of interest in the charter school domain?

Consider the case of BASIS charter schools. If you have spent the last 15 years in Antarctica without internet access and no subscription to US News and World Report, then you probably haven’t heard of the BASIS charter schools. BASIS operates about a dozen charter schools, mostly in Arizona but also in San Antonio and Washington, D.C. BASIS is the creation of Michael Block, a retired econ professor from the University of Arizona. To read what the media write about BASIS, this econ prof has discovered the magic bullet, the secret to taking ordinary students and turning them into National Merit Scholars with their pick of any Ivy League college. But the truth is that BASIS charter schools — which claim to admit students only by lottery — put out a sales pitch that scares the bejeebers out of any parent whose kid isn’t already National Merit potential and then flunks out 90% of the students with a daunting gauntlet of tests from elementary grades right up to high school. By the time of graduation day at a BASIS charter, the elementary grades have been winnowed down from 200 to two dozen students. Based on graduates test scores and college acceptance rates, gullible outlets like US News and World Report rate a couple of BASIS schools in the top ten in the nation. Ridiculous, of course.

Some conflict of interest concerns have been raised about BASIS schools in the past. It was discovered that BASIS had been outsourcing bookkeeping services to Block’s wife’s relatives in the Czech Republic. Small potatoes. The really big potatoes are only now coming to light. BASIS has heretofore operated as a private corporation. Even though their revenues come almost exclusively from public money, they have refused to divulge even the most basic financial information. But for some unknown reason, BASIS Scottsdale — another one of the top ten high schools in the U.S. — has been operating as a non-profit for the first few years of its existence. Consequently, they must file an IRS Form 990 and report some financial information. IRS Forms 990 are publicly available. Voila!

And here’s what BASIS Scottsdale’s 990 Form looks like for fiscal year 2012. You can download a copy here.

It would take two accountants and three lawyers to decipher Form 990 for BASIS Scottsdale. But to an even moderately skeptical eye, a couple things stand out.

• BASIS Scottsdale took in more than $32,000,000 in taxpayer money, close to 93% of its total revenues.
• Roughly half ($18,593,866) of the revenues were paid as “Salaries & employee benefits.” The other half was paid for “Other expenses.”
• Then on page 38, one finds that BASIS Scottsdale charter school is purchasing its employees and “management services” from its parent company’s Director, Michael Block:

The $18,593,866 that BASIS Scottsdale paid their teachers is exactly the amount the school paid its Director Michael Block to lease employees from his private company. And in addition, Block received more than $7 million for “management fees.” (In the prior year, Block received $14.5 million for the “subject specialists” he leased to the school and $5.2 million for management.) How much managing does one little school of a couple thousand kids require?

So we see that more than $30,000,000 was paid out to a private vendor who happens to be the owner of the very charter school paying out the cash, and there is no transparency whatsoever on how that money was spent. Obviously, much of it went into the pockets of uncertified “subject specialists” (as BASIS prefers to call its teachers), and some of it went into the pockets of “managers.” How much of it went into Michael Block’s pocket will remain unknown. One can speculate that all the other BASIS charter schools are similarly leasing “subject specialists” from Michael Block Unincorporated and buying management services at the same store. We’ll never know.

Perhaps even doing business in the shadows is still too much accountability for BASIS schools, because their newest venture is a BASIS school in Silicon Valley which will be wholly private. Ironically, when BASIS Scottsdale was launched a few years back, it was advertised as a private school; but when the fall term came around and fewer than 10 students had enrolled, it quickly converted to charter school status. Crony capitalism is always safer than that nasty free market.

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Gene V Glass
Arizona State University
National Education Policy Center
University of Colorado Boulder

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The opinions expressed here are those of the authors and do not represent the official position of NEPC, Arizona State University, nor the University of Colorado Boulder.

STEM Shortage? Baloney

We said so in 50 Myths & Lies that Threaten America's Public Schools.

Now Hal Salzman joins the chorus of skeptics questioning the myth that the U.S. has a shortage of graduates trained in Science, Technology, Engineering & Math. In his article in U.S. News, Salzman says:

"All credible research finds the same evidence about the STEM workforce: ample supply, stagnant wages and, by industry accounts, thousands of applicants for any advertised job. The real concern should be about the dim employment prospects for our best STEM graduates: The National Institutes of Health, for example, has developed a program to help new biomedical Ph.D.s find alternative careers in the face of “unattractive” job prospects in the field. Opportunities for engineers vary by the field and economic cycle – as oil exploration has increased, so has demand (and salaries) for petroleum engineers, resulting in a near tripling of petroleum engineering graduates. In contrast, average wages in the IT industry are the same as those that prevailed when Bill Clinton was president despite industry cries of a “shortage.” Overall, U.S. colleges produce twice the number of STEM graduates annually as find jobs in those fields."

"Cries that “the STEM sky is falling” are just the latest in a cyclical pattern of shortage predictions over the past half-century, none of which were even remotely accurate. In a desert of evidence, the growth of STEM shortage claims is driven by heavy industry funding for lobbyists and think tanks. Their goal is government intervention in the market under the guise of solving national economic problems. The highly profitable IT industry, for example, is devoting millions to convince Congress and the White House to provide its employers with more low-cost, foreign guestworkers instead of trying to attract and retain employees from an ample domestic labor pool of native and immigrant citizens and permanent residents. Guestworkers currently make up two-thirds of all new IT hires, but employers are demanding further increases. If such lobbying efforts succeed, firms will have enough guestworkers for at least 100 percent of their new hiring and can continue to legally substitute these younger workers for current employees, holding down wages for both them and new hires.

"Claiming there is a skills shortage by denying the strength of the U.S. STEM workforce and student supply is possible only by ignoring the most obvious and direct evidence and obscuring the issue with statistical smokescreens – especially when the Census Bureau reports that only about one in four STEM bachelor’s degree holders has a STEM job, and Microsoft plans to downsize by 18,000 workers over the next year."

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Gene V Glass
Arizona State University
National Education Policy Center
University of Colorado Boulder

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The opinions expressed here are those of the authors and do not represent the official position of NEPC, Arizona State University, nor the University of Colorado Boulder.

William Mathis on "Economics, Education and Sitting Bull"

"William Mathis is Managing Director of the National Education Policy Center, a former school superintendent and member of the Vermont state board of education. In this essay, his opinions and analysis reflect something remarkable about the culture and politics of the State of Vermont. At root, he also asks questions about the nation’s economic policy, equality, and the very purpose of universal public education. ​  

“Let us put our minds together and see what life we can make for our children.” ~Sitting Bull

Facing the extinction of Sioux culture, Sitting Bull realized that their hope – their only hope – was in the life they made for their children. Confronted by this reality, he saw that education was something far more than the narrow teaching of a set of test-based, academic skills. Education must impart the knowledge of the ways of the society, of fruitful interactions, of sustaining and nurturing cultural beliefs and rituals, of language and of the economic order, if you will, of a group of independent but related nomadic tribes. (And when the Anglo forces won, they established Indian schools to stamp out this culture).

The existence of any society demands the adoption and embracing of a common set of beliefs, mores, laws and rules. Yet, in a world where vision often reaches no further than the length of an arm holding an electronic screen, such unifying concepts appear as alien and archaic as a buffalo hunt. In times of great fragmentation, in a world which has such massive destructive power, and where hostile forces can easily reach around the globe, the need for national and international cooperation for the common good becomes even more vital.

In a different age with different challenges, our founders understood this necessity. Vermont’s Constitution says that schools must be maintained for the “encouragement of virtue and the prevention of vice.” In the language of the day, virtue meant civic virtue, the building and strengthening of society. Vice was actions that subtracted from the good of all. This resonating and grander purpose of education overshadows the anemic ranking of test scores that obsessively dominates the attention of contemporary reformers. Such simplification also appeals to a media whose own existence is, ironically, reduced to the race for quantifiable rankings, substituting the easily measurable for the important.

The weak narrative of numbers is echoed by U. S. Secretary of Education Arne Duncan:

The fact is that we are falling further behind our international competitors educationally. In the U.S., we are still just talking about the steps many leading countries are actually taking to prepare their students for a competitive global economy. Falling behind educationally now will hurt our country economically for generations.

Leaving aside his inflated claims, Duncan's is a far smaller vision than Sitting Bull’s. Duncan argues that we should beat other nations; Sitting Bull focuses on people acting together. The Secretary focuses on what we should do for the economy; the Chief concentrates on what we should do together for the children.

The measure of our society is reflected in the health of our schools. The well-being of society can be measured in the quality and the equality of the education we provide all of our children. The United States is one of the very few nations that spend less on needy children than on the affluent. The achievement gap is not primarily a product of low quality schools; it directly mirrors the educational opportunity, educational spending, and economic gaps in our nation. Unfortunately, over the last forty years, the achievement gap has widened. The gap was smallest when our policies focused on building the strength of our schools rather than on just testing them.

Thomas Piketty’s seminal work, Capital in the Twenty-First Century, tells us that when the rate of return from invested wealth outruns the rate of growth in production wealth (as now in the U.S.), then democratic society, economic vitality and social justice are threatened. Not surprisingly, those who profit from such an arrangement work to protect their advantage. Unfortunately, wealth inequalities contributed to the 2008 Great Recession and slowed the recovery as lower and middle-income segments of society stagnated. And no Western or industrialized nation has a greater wealth or a greater achievement gap than the United States. Regrettably, the strongest predictor of test scores is not school quality; it is the socio-economic status of the children.

While Vermont does have a high per-pupil cost (which is a topic for another day), the state’s hidden and greatest outcomes for education may not be in our very high test scores as much as in the social indicators: the highest graduation rate, the second highest well-being of children, and low youth risk behaviors. A healthy society is our best return on investment.

As we enter the 2014 election cycle, there will be any number of claims about educational spending accompanied by a blizzard of opaque analyses and exotic extrapolations. Piketty cautions us against reading too much into such elaborate statistical explanations. Often, they are obfuscations masking the shifting of burdens to middle and lower-income citizens – which has the effect of making the problems worse.

Sitting Bull also said, “Inside me are two dogs. One is mean and evil and the other is good and they fight each other all the time. When asked which one wins, I answer, the one I fed the most.” As for the coming debates, we will certainly hear from the fighting dogs. Then, we choose which dog we feed. Hopefully, we put our minds together to see what life we can make for our children.

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William J. Mathis is the managing director of the National Education Policy Center, University of Colorado Boulder. The views expressed here are his own.

"50 Myths" & the Two Worlds of Public Education

A few people have asked me recently why this blog is called Education in Two Worlds. The reason is because K-12 public education is caught in a political struggle between progressives and conservatives — the "two worlds" — as never before. There are reasons why this is so, and they are the same reasons why Congress is strung up between two worlds and is unable to act, to the chagrin of the vast majority of American voters. In particular, the advent of huge capacity high speed computers and the ready availability of detailed Census data have made the gerrymandering of legislative districts a nightmare for those who believe that politics is the art of compromise. No more: politics has become the art of feeding raw meat to your base so that you can hold onto your seat.

Never was the political struggle in education brought home to me more clearly in a personal way than when Peter Smagorinsky published a review of the book that David Berliner and I and our young Associates wrote this year. We are most grateful to Smagorinsky for the care and insight that went into his look at our book.

It was the comments from the public at the Atlanta Journal Constitution web site that provide the stunning example of how far apart the public is on the major policy issues facing K-12 public education. Below, I present a sample:

• So it's all just in our minds. A myth, or a series of them, says Smagorinsky. The stories of dysfunctional classrooms your own children bring to the dinner table, the dumbing down of the curriculum and the second rate test results our nation produces ... are just myths. I think most parents wish the organized resistance to reforms such as charter schools was a myth.
• Thanks for the tip about this book. I will be one who will read it.
• So in your opinion, we should dumb down our standards so that anyone from anywhere can drop into any Georgia school and graduate. I know of a specific case in our hometown where a student was not going to graduate from the public high school. Solution, he transferred to the local private school and surprise, surprise, surprise, he graduated! One size does not fit all. Our community has rampant welfare "participation", the primary growth industry is EBT card acquisition. Our teachers struggle everyday to overcome apathy towards education yet you believe we should be doing the same things as say, Gwinnett County or how about Washington D.C.? Before you jump on the Common Core bandwagon, you might want to investigate where it is heading. I know, you didn't mention Common Core, but that is the matra of the Grand High Socialist and his administration.
• Once again, Dr. Smagorinsky hammers it. Thanks, Dr. S. I've just requested the book through interlibrary loan. I so wish that all who are quick to jump on the charter bandwagon and other such regressive, corporate "reforms" would really search the available literature for deeper answers. There are good ideas out there, but turning over our public schools to folks full of ulterior motives and manipulative distortions and lies is not one of them.
• Lots of "myths" about the schools,but there are also lots of "myths" from the schools: a) There is an efficient,fair process for removing an incompetent or ineffective teacher. b) That there is no self interested bureaucracy that thwarts real reforms in order to maintain their power and position. c) That the dispensing of public monies leads to gross corruption and outright theft and malfeasance such as with the Beverly Hall scandal d) That the largest union in America is the NEA, and the NEA stands foursquare against ANY school reforms that don't expand its power and reach. e) That the system,with all of its conflicts and incestuous political machinations, can reform itself.
• So, your response to this information that cuts through the propaganda with actual facts and destroys many of the myths being espoused by "reformers" is... Everyone should watch one of the most blatantly obvious pieces of pure propaganda ever produced (waiting for superman). Brilliant.
• Rent the film "Waiting for Superman" to see what's missing from this article.
• Too much of the education establishment is only interested in maintaining the existing system that pays their salary and guarantees a fat pension. Thankfully, these feeders at the public trough are not nearly all the teachers and many faithful, talented teachers remain in the profession and in the public schools.
• Smagorinsky points to a book that spins statistics to allegedly prove that public education doesn't suck.
• Professor Smagorinsky, the challenged state of our public schools is not a myth. I've seen it firsthand. But in a system where politics and education is inextricably linked, I find myself very concerned if our nation can ever get it right. Not when public education is a microcosm of the never-ending struggle between Jeffersonian and Hamiltonian governance philosophies. With no consensus, there is no hope for a solution that our citizens will support in large numbers. And so we have the turmoil we are faced with today - merely a snowball that has been rolling for decades and getting more and more powerful - until it crashes. Have we crashed yet? I hope not.

And the debate goes on and on. One half sees U.S. public education as an abject failure, propped up by the mendacious, greedy, and all-powerful National Education Association. The other half sees it as one of the last institutions in America attempting to protect the common good. No compromise in sight.

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Gene V Glass
Arizona State University
National Education Policy Center
University of Colorado Boulder

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The opinions expressed here are those of the authors and do not represent the official position of NEPC, Arizona State University, nor the University of Colorado Boulder.