Boy, did Moody’s Investor Service ever nail it this time. Last October the credit reporting agency warned of the dangers of charter schools, naming Michigan as the poster-child of how to get it all wrong. Their newsletter called it:
The dramatic rise in charter school enrolments over the past decade is likely to create negative credit pressure on school districts in economically weak urban areas. Charter schools tend to proliferate in areas where school districts already show a degree of underlying economic and demographic stress.”
Listing four risk factors, Moody’s put their finger on what the GOP push for expanded charters in Michigan is all about — they singled-out the state as an example of what not to do.
- Allowing districts to become vulnerable to charter take-over through financial pressures and unfavorable demographic trends.
- Limiting the ability of a school district to adjust to the changing situation.
- Over-promotion of school choice, with easy approval and ready funding of charters.
- Isolation of school districts from local and regional support networks.
Moody’s went on to highlight those Michigan districts they have downgraded due to charter influx:
For example in Michigan, the statutory framework emphasizes educational choice, and there are multiple charter authorizers to help promote charter school growth. In Michigan, Detroit Public Schools (B2 negative), Clintondale Community Schools (Ba3 negative), Mount Clemens Community School District (Ba3 negative) and Ypsilanti School District (Ba3) have all experienced significant fiscal strain related to charter enrollment growth, which has also been a contributing factor to their speculative grade status.
There’s much more than declining credit ratings to worry about though.
A MICHIGAN STORY
Several weeks ago, Smart Schools Management, Inc. was dropped simultaneously by two charter academies in Michigan — Bay City Academy and Grand Traverse Academy. The president of the charter management firm, Steve Ingersoll, had been acting as administrator for both schools.
The board of Bay City Academy dumped Smart Schools citing the school’s poor performance and expressed the need for a full-time administrator. In the case of Grand Traverse Academy, the Traverse City Record-Eagle reported that GTA Board President, Brad Habermehl, said:
“The board felt the direction we were heading in was not the direction that brought success to the school. We wanted a little bit more of an active role, active support in management of the school where we would see implementation of structure that brought that school its notoriety.”
Ingersoll co-founded GTA in 2000 and he was the driving force behind the 201o renovation of a Bay City church which opened as Bay City Academy the following year. The fact that both school boards dumped him and his management company at the same time is much more than a coincidence.
Last week the real reason came to light when U.S. Attorney Barbara L. McQuade indicted Ingersoll, his wife, his brother and two business associates for conspiracy to commit bank fraud and income tax evasion. The charges stem from a $1.8 million construction loan they took out with Chemical Bank for the purpose of retrofitting the Bay City church for use as an academy. The U.S. Attorney’s Office alleges that Ingersoll and his wife diverted $934,000 of the money into their personal bank account through a series of financial transactions intended to conceal the conversion of the money for personal use.
Also indicted were owners of a firm Ingersoll hired to do renovations at Bay City Academy where it is alleged they improperly handled and removed asbestos from the property.
There truly are things worse than a bad credit rating.
Although Moody’s put Michigan in the corner, they are not alone. In fact, it’s been a busy few weeks for charter school boards across the nation.
The StudentFirst Academy School of Charlotte is closing today, April 15th, and transferring its 300 students to other schools due to unspecified “money and management problems”. It is the 40th charter to be closed in 25 years in the state , when they swung open the school doors to charters. Thirty got sacked in the first five years. From the Associated Press:
“The large majority of those closures over a period of years have related to financial mismanagement,” said Eddie Goodall, a former state senator and charter school founder who heads the N.C. Public Charter Schools Association. “What I hope people realize is if this (school’s) board has in fact mismanaged our state’s funds, then they should be removed from operating a charter school. That is a good thing.”
Two weeks ago, YourErie.com reported that the Erie Rise Leadership Academy School was cited in an interim report for serious violations by the state auditor general over school board oversight, academic performance, and compliance with state laws and the school charter.
“It is alarming that the school’s board of trustees has essentially given the chief executive officer and a financial management company full rein over all aspects of the school without any real oversight. The charter school board should consider this interim finding as a wakeup call — get your act together and do it now. ”
BACK TO MICHIGAN
When the Muskegon Heights School Board voted several years ago to willingly forgo home rule and submit to emergency management to handle their fiscal crisis, the story didn’t get the attention it deserved because the move was “voluntary” — it lacked that certain dictatorial feel for journalists to stand-up and take notice. The first act of the emergency manager was to convert the district into a public school academy to be administered by a for-profit management company, Mosaica Education. They were charged with turning the district around both academically and financially.
Under Mosaica management, Muskegon Heights School Academy ran out of money two weeks ago and couldn’t meet payroll. The state had to front them $231,000 to keep the doors open. At the time, their attorney referred to the problem as an accounting “glitch”. Perhaps the fact that the school ended fiscal year 2013 with more than half a million in red ink is similarly just a “glitch”.
Founded in 1977 by Gene Eidelman, Mosaica Education currently manages about 90 schools generating more than $125 million on revenue. Their mission statement reads: “To empower students to learn and achieve — every child, every day.”
Their rap sheet doesn’t bear that out:
January this year, Atlanta Public Schools decided not to renew the contract with Mosaica to run the Atlanta Preparatory Academy, citing poor academic performance and shaky financials. The recommendation for closure came from Alan Mueller, an executive with APS, who is also a former executive of Mosaica. From the Atlanta Journal-Constitution:
…Mueller, a former Mosaica executive, said the school’s performance is a continuing concern. “There are four schools in the neighborhood that out-perform Atlanta Prep in math,” he said. The small percentage of money it spends on classroom instruction is troubling as well, he said.
Last school year Atlanta Preparatory received $4,629,276 from APS. According to the school, 49 percent of that was spent on classroom instruction. Mueller said he is not opposed to for-profit charter management companies “if they deliver. But they aren’t delivering. And we want as much money as possible going into the classroom.”
The numbers tell the tale:
According to Mueller, the K-8 school with about 450 students ranks in the bottom 20 percent of schools statewide in academic performance; its enrollment is 45 percent lower than originally projected; and it owes $801,384 to for-profit education management company Mosaica Education, Inc.
In December of 2012, the Mosaica-managed STEAM Academy of Winston-Salem hired a new school administrator named Susan Lawyer Willis just prior to their annual standardized testing. Mosaica admitted that, at the time of hire, they knew she had been fired from her previous job amid test scandal allegations. In April of 2013, the Winston-Salem Journal reported:
Lawyer Willis declined to discuss the issue Monday with the Winston-Salem Journal, following a lengthy article Sunday on the school’s financial problems and its need to pass state end-of-grade tests or face revocation of its charter, which would effectively close the school.
Lawyer Willis was accused of juggling class schedules for 31 students at Fleming High School in Roanoke, Va., so they wouldn’t have to take end-of-year Standards of Learning tests, which are similar to North Carolina’s end-of-grade tests. A Virginia Department of Education investigation found that she and other school administrators were “responsible for egregious violations” and that “course schedules were manipulated for the purpose of influencing (Fleming High School’s) pass rates” in 2008 and 2009.
In 2008, the Howard Road Academy, run by Mosaica, was found to be cheating on standardized tests, by literally supplying students with the test and the correct answers prior to the exam. The Washington Post reports:
The teacher at Howard Road Academy Public Charter School suspected something was seriously amiss in April when a student taking the math portion of the DC-CAS standardized test announced that she was finished — way early.
“You can’t be finished. Go back and check your work,” the teacher said.
“We did this yesterday. I know all of the answers,” the student said.
The scene comes from a report by school officials detailing the investigation of a cheating scandal at their G Street campus in Southeast D.C. When the probe was done, an administrator and two teachers were dismissed and 27 fourth and sixth-graders had their test scores invalidated.
The report also strongly suggests that school politics may have helped create an environment in which cheating could take root. It includes a letter of “reprimand” and another of “admonishment” to two unnamed Howard Road employees from Mosaica Education Inc., the company that operates Howard Road and charter schools in eight states.
And in 2006, the Times-Picayune reported on troubles with Mosaica’s management of the Lafayette Charter School in New Orleans. The management company had been contracted to run the school after the flood, amid a flurry of post-Katrina charter take-overs. Within days of the school re-opening, irregularities emerged — among them were curriculum problems, failure to produce a contractually agreed after-school program for struggling students, and the absence of required transportation for students.The school district sued, and was awarded a $350,000 judgement against Mosaica.
Yep, it’s much worse than just a bad credit rating.
Amy Kerr Hardin
This article also appears in the Town Broadcast – Wayland