Billionaire-Funded Charter School Juggernaut Hits Roadblock in Los Angeles

Over the past decade and longer, there has been a massively funded effort by the wealthiest people in America to replace public education and elected school boards with a privatized charter-school system. Walmart’s Walton Family Foundation just committed an additional $1 billion to the cause. The result has been a highly successful juggernaut leading to more than 6,700 charter public schools in 42 states and Washington DC, and funded by taxpayers, with nearly 3 million students.

Co-mingling substantially public funds with private dollars, leveraging the advantage of its own set of rules and laws enabled by state legislatures – which eliminated most public accountability – school privateers have run roughshod over school systems in many American cities. New Orleans, Detroit, Milwaukee and Philadelphia are just a small number of urban areas with a heavy presence of publicly funded private charters. Charter advocates and their deep-pocketed investors and supporters, using aggressive lobbying and campaign contributions of many wealthy supporters, have established strong footholds in Florida, Michigan, Ohio, Wisconsin, California and many other states. In California, there are now an estimated 500,000 students in 1,200 charter schools.

Along the way it became clear that a key tactic of privateers has been the scapegoating of public school teachers and locally elected school boards. The attack on teachers, so clearly articulated in the slick propaganda film, Waiting for Superman, attempted to hold teachers responsible for widespread poverty-induced school failures, which of course, were fundamentally out of their control. The formula for rapidly expanding non-union charters includes undermining teachers unions, and followed the overall game plan of a larger right-wing strategy by Walmart, the Koch brothers and others to weaken or eliminate public employee unions.

The larger goal? To get private access to $500 billion in taxpayer funds spent annually across America on K-12 public schools. Since the 1990s, the federal government has spent $3.7 billion on charter schools, mostly in the last decade. State spending has been harder to pinpoint because charter spin offs have raised multi-millions by selling government-backed bonds for real estate and construction deals – where they own the assets. No matter how you slice it, taxpayer funds increasingly have been shifted from traditional schools to private hands, while traditional schools have been starved of badly needed revenue.

It is important to note that all charter schools are not the same; charter chains come in different sizes with contrasting objectives. In many cities, there are charter schools idealistically developed by parents, teachers and local communities who seek to improve the environment for their children and bring values of openness and cooperation to the task. That was the idea in the 1980s when Albert Shanker, then the president of United Federation of Teachers, proposed creating “charter” public schools so new educational ideas could be tried. Charter schools became a reality in the early 1990s in Minnesota, but overall and increasingly, the charter movement has been co-opted and dominated by corporate-run chains and franchises mixing for-profit and non-profit operations. In California, most charter schools are organized as non-profits, but contract many administrative, accounting and real estate functions to for-profits. One example is California Virtual Academy, an all-online school that was founded as a non-profit in Simi Valley, but contracts with K12 Inc., a Virginia-based for-profit trading on the New York Stock Exchange.

Speed Bump or Road Block?

Given the lopsided advantages of unlimited money and political clout, the wealthy school privateers assumed that their efforts to displace traditional public schools could not be slowed down, let alone stopped. But to the surprise of many, and the consternation of the billionaire class, the private charter juggernaut has hit some major speed bumps and possible roadblocks.

Los Angeles provides one recent example. In December 2015, a highly flawed, top-down plan by the billionaire Eli Broad, the Walton Family Foundation and others to double the number of charters to more than half the school seats in Los Angles over the next eight years was unanimously rejected by the elected city-wide board of the Los Angeles Unified School District. The so-called Broad Plan was criticized by many, including some charter school advocates because it was so tone deaf in ignoring the opinions and needs of many communities in Los Angeles.

But the fight over charter expansion – and the teaching and services at the existing charters – continues. Broad’s backers rebranded themselves as a new group called Great Public Schools Now. The city’s largest charter operator, Alliance College-Ready Public Schools, which has 27 middle and high schools with 11,000 students and 650 teachers, has said it wants to double its number of schools, even though it is involved in a nasty dispute to try to thwart a teachers union organizing effort. Alliance’s tactics, which led Los Angeles County Superior Court late last year to issue several orders against the chain, were aided by the statewide California Charter Schools Association, which paid parents of alumni to work at a phone bank where they read anti-union scripts to parents of current students. The vice-chair of CCSA’s board is Carrie Walton Penner, who also is on the Walton Family Foundation Board, which gave Alliance a $250,000 grant a few years ago for its Los Angeles schools. (Penner also gave CCSA $620,000 in 2014-2015, according to state records. In the same period, Jim Walton gave $475,000, Eli Broad gave $355,000, Netflix CEO Reed Hastings gave $1.5 million, and ex-Apple CEO John Scully gave $500,000.)

On the frontline of this fight, not surprisingly, are teachers and parents at Alliance schools and the teachers’ union, United Teachers Los Angeles. The issues call into question many charter school practices that go beyond compensation. There are big questions about student-centered curriculum, transparency of budgets, and the right to advocate without fear of reprisals and management interference. The teachers and counselors at Alliance are organizing a union with the full backing of UTLA, with more than 150 educators signing an open letter of support, even as Alliance has spied on them, blocked union e-mail, eliminated physics curriculum at one of their high schools because it was taught by one of the teacher organizers, refused union reps access to their campuses, and interfered with the legal rights of public school teachers to organize under state law.

This is a classic example of charter schools wanting to have it both ways: They say they’re public schools when it comes to taking taxpayer per-pupil dollars and other public perks, such as issuing multi-millions in government-backed bonds for real estate deals. But then they say they need to run like private corporations and be exempt from other state laws, including public employee rights to unionize and public records requests. All of that is in play in Los Angeles with the ongoing union drive at Alliance, which also happens to be the largest charter-school teacher organizing campaign in US history.

Alliance, true to the national charter school chain playbook, last winter initially reacted with hostility by refusing to formally acknowledge the presence of teachers wanting to engage the chain in questions about the curriculum, teachers’ roles, classroom resources, staff turnover and transparency surrounding school policies. At the same time, according to court orders issued late last year, Alliance also responded by spying on teachers and organizers and deluging parents with anti-union e-mails, the first in a wave of escalating tactics to thwart the union drive. Management illegally polled teachers regarding their support for Alliance, broke up after-hour meetings at the school claiming it was private property and blocked e-mails to teacher organizers and more.

The result: California’s Public Employment Relations Board, a state agency created to enforce state labor laws, last fall issued a series of complaints against Alliance and then sought a temporary restraining order (TRO) and an injunction in Los Angeles County Superior Court, and won two rulings ordering the Alliance chain to cease its propaganda and misinformation campaign and follow laws regarding public employee unions, starting with meeting with the teachers and UTLA.

The first assumption has to do with how to improve schools. Most education experts, reflecting years of evidence, understand that severe poverty, which is epidemic in the US, especially in southern states and inner cities, is the primary cause of student failure. Poverty results in fractured families, trauma and PTSD, hunger and a whole range of urban catastrophes including drug and alcohol addiction, violence and crime that have a powerful impact on chances of education success. Student absences, impaired attention and concentration, reduced cognition and creativity, lack of social skills and judgment, lack of motivation and effort, likelihood of increased depression, and even reduced brain cell growth all have been traced to impoverished conditions that originate outside the classroom. For schools to improve for many of these students, there must be a large-scale effort to alleviate poverty.

Yet charter advocates place the blame for education failure on a long list of red herrings: teachers (and their unions), lack of testing and accountability, poor management, bureaucratic rules and slow-moving school boards. This analysis ignores the fact that the majority of wealthy school districts have a 95 percent graduation rate, while only 20 percent of the poorest districts have graduation rates of 75 percent or more. America’s most successful public schools have always been successful, while schools in impoverished areas, with very rare exceptions, have always “failed,” despite any number of innovations over the past 50-plus years.

The second fallacy is the claim that schools organized on a corporate model, freed of regulatory requirements for transparency and accountability, often using new and relatively inexperienced teachers with little training and high turnover, will succeed where long-standing public schools in poverty areas have not. In fact, numerous studies have shown that in many cases, charter schools perform less well than the public schools they are aiming to replace. And for those that do fare better, the improvements can be explained by the cherry-picking of students, heavy use of suspensions and other suspect strategies that can lead to an overall group of students likely to perform better on tests than their peers in public schools, which are required to enroll everyone.

The Powerful Charter Business Network

The charter school super establishment has created a powerful network of funders, think tanks, lobbyists, advocacy groups, public relations companies and consultants. The huge amounts of money pouring into charters comes first from super-wealthy benefactors such as the Walton Family Foundation, which has spent $1 billion to date and takes credit for creating one-quarter of the nation’s 6,700 charter schools, and then from the hundreds of millions spent by states and the federal government annually for charters. Other large funders include Bill Gates, the richest man in the world; Michael Bloomberg, who gave CCSA $600,000 in 2014-’15; Mark Zuckerberg, who gave $100 million to charters in Newark, New Jersey and just started a charter in East Palo Alto; and most recently, Reed Hastings, who pledged $100 million for more charters and has called for abolishing elected school boards.

The economic model for many charters involves a highly successful fiscal sleight of hand. Most charter chains are operated by CMOs – charter management organizations – that are set up as non-profits over a set of individual schools, while at the same time creating limited liability corporations (LLCs) to own and control school properties. In California, for example, the LLCs control valuable real estate, supported by rent and lease reimbursements, and other monies available through state and federal agencies, including the ability to issue taxpayer-backed bonds. Many statewide charter school associations push for model laws provided by the American Legislative Exchange Council, an avowedly anti-union and free-market espousing group. In many instances, these laws privilege the charter chains by removing regulatory oversight and other requirements – such as competitive bidding for contractors – that give charters an unfair advantage over the public schools they seek to displace.

Overall, the wealthy charter school advocates have created and are hell-bent on expanding a parallel, privatized education system that reflects corporate values and is not publicly accountable to parents and communities. This effort exacerbates income inequality as it drains funds from public school districts and undermines their success.

Charter school chains, by their nature, are anti-democratic businesses. Like the corporate model they are built upon, charter chains are often designed to avoid public accountability and transparency. As a result, in cases that have been documented from coast to coast, CMOs have become a breeding ground for self-dealing, real estate scams and a wide range of corruption and mismanagement. In mid-2015, the Center for Popular Democracy reported on more than $200 million of such abuses, from “ghost schools” that never opened to other failures that left tens of thousands of students in a lurch.

The Alliance Model

Back in Los Angeles, critics point out that the Alliance College-Ready Public School chain shares many of these same features as other major players in their industry nationally. It is building a real estate empire with a large collection of properties throughout the city. These properties are largely paid for by public tax dollars and through a rent-lease program financed by issuing tax-free bonds via the state’s California School Finance Agency.

Alliance has set up school-by-school LLCs that own the facilities and rent them to the school, which hides the true costs of operating the charters. However, should the schools close for any reason, Alliance’s management company, the LLC, retains ownership of the property. Its 2014-2015 audited financial report listed property and related assets of more than $200 million.

Alliance also projects an image of autonomy among its 27 schools, but all are controlled by central headquarters and by a small group of board members who oversee them. All Alliance schools have nine board members. Five come directly from corporate headquarters and the corporate board of directors, while four (two teachers and two parents) are appointed by the principal. Its board is not filled with lifelong educators, but with corporate executives. The chair is Frank Baxter, whose Baxter Family Foundation is a funder of the education section of the city’s largest newspaper, the Los Angeles Times. The paper didn’t disclose that conflict of interest until last fall, when the Washington Post questioned its credibility.

In other words, Alliance’s business model seeks to have it both ways, acting as a public school for various taxpayer-backed revenue-gathering strategies, and as a private corporation – either an LLC for its property holdings or claiming private-sector corporate privilege – when it comes to labor rights, public information requests and fiscal transparency.

What Does the Future Hold?

Alliance’s stated goal of expanding to 50 charter schools in LA in the near future is part of a persistent push by the charter advocates to keep growing as fast as regulators will allow. Los Angeles is one of 13 cities across America cited by the Walton Family Foundation in its strategic plan for investing $1 billion in charters through 2020. Meanwhile, the Broad Foundation’s plan to turn half of the city’s schools into charters in eight years has not vanished, even though the LA school board voted against it last year.

But the grandiose plans made in boardrooms at the Walton Foundation, the Broad Foundation, California Charter School Association and Alliance College Ready Public Schools, to keep privatizing the country’s second largest school district, are clearly running into unexpected opposition from those on the real frontline of the city’s schools: teachers and parents.

“We are all very concerned with Alliance’s campaign against its own educators, including creating a school environment where teachers are made to feel afraid even to say that they want a voice and a union,” the previously mentioned coalition of parents wrote to Alliance CEO Katzir late last fall. “Equally troubling is the level of resources that Alliance is devoting to fighting its own teachers and counselors’ right to organize the union; resources that should be devoted to our children’s educational needs.”

As the drive by Alliance teachers and United Teachers Los Angeles continues, with a California court issuing a temporary restraining order and an injunction against Alliance’s anti-union activities and yet to rule on all of the unfair labor practice complaints brought by the state Public Employment Relations Board, what’s clear is that what happens at Alliance is a microcosm that reflects one of the most troubling trends in America: the billionaire-led takeover and dismantling of America’s public school education.