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WAL-MART? How the Family

Foundation’s Ideological Pursuit is Damaging Charter Schooling

Cashing in on Kids ABOUT CASHING IN ON KIDS We believe the American public school system should serve all students and prepare them to be good, productive citizens. Our public schools are the essential foundation of a functioning democracy and a healthy economy and require public control and vigilance to protect the common good and advance our broad public interests. Parents, teachers, students and taxpayers should have a strong voice in how we run our schools and educate our nation’s children. Our tax dollars belong in our classrooms and provide resources that teachers, students and communities need to create a healthy, vibrant and secure nation. Cashing in on Kids conducts research and public education programs designed to help ensure that public schools put the students’ interest above corporate interests that are increasingly taking control of public education policy and institutions. Six critical elements are necessary to meet this goal: transparency, accountability, quality, oversight, equity and public control. This website includes examples of charter schools, many of them run by for- profit companies, that lack these critical elements and, as a result, do a poor job of serving students and taxpayers. We highlight the problems with these charter schools because we believe policymakers must ensure that these principles guide all public education decisions and must also provide rigorous oversight of for-profit and non-profit charter schools. Cashing in on Kids isn’t only about highlighting problems – we also will include examples of thoughtful education policies, good practices and effective schools.

IN THE PUBLIC INTEREST In the Public Interest is a comprehensive resource center on privatization and responsible contracting. It is committed to equipping citizens, public officials, advocacy groups and researchers with the information, ideas and other resources they need to ensure that public contracts with private entities are transparent, fair, well-managed and effectively monitored, and that those contracts meet the long-term needs of communities.

AMERICAN FEDERATION OF TEACHERS The American Federation of Teachers, an affiliate of the AFL-CIO, was founded in 1916 and today represents 1.6 million members in more than 3,000 local affiliates nationwide. The AFT is a union of professionals that champions fairness; democracy; economic opportunity; and high-quality public education, healthcare and public services for our students, their families and our communities.

How the Foundation’s Ideological Pursuit is Damaging Charter Schooling

There was a sour breeze blowing through the feet of the Walton Family Foundation (WFF), nation’s charter schools in 2014. the Arkansas-based philanthropic arm of the Twenty-five years into our nation’s exper- family that brought us Wal-Mart. iment with independently operated, publicly When it comes to public education, the funded charter schools, the news didn’t look Walton Family Foundation is the largest good: In May, a new report revealed more than philanthropic donor in the U.S. after the Bill & $100 million in fraud, waste and abuse in just Melinda Gates Foundation. Gates also sup- 15 of the 43 states that allow charters. (A year ports charter schools, but the Walton Family later, the report was updated, and the figure Foundation ($164 million in educa- rose to $200 million.) Some of the stories tion grants in 2013) defy belief: a school in Philadelphia that was stands out because of doubling as a nightclub after hours; school op- its uncompromisingly South Miami-based charter erators embezzling millions to pay for high-fly- ideological approach to school management company ing lifestyles; real estate developers cashing in public education and its under federal scrutiny by using public funds to leverage sweet deals strong support for policy —Miami herald on millions of dollars’ worth of property. One advocacy in line with that April 20, 2014 after another, the stories emerged. And public approach. And as the officials around the country began to call for tower of cards began change. to shake, it is the Wal- In Connecticut, the state Department of ton Family Foundation Online charter school Education announced new policies to govern that—more than any accused of padding rolls 1 oversight of the state’s charter sector. In New other—should take the for school funding York, the charter lobby continued a seven-year blame. —The Columbus Dispatch fight to prevent the state comptroller from This report explores May 5, 2015 auditing charter schools.2 In Pennsylvania, the radical agenda of the the auditor general called the charter sector “a Walton family and the mess.”3 foundation it controls, and how that agenda How did an idea that promised small-scale has taken the U.S. charter school movement innovation as a way to improve the education away from education quality in favor of a strat- outcomes of disadvantaged children become egy focused only on growth. Under the guise a massive industry of more than 6,000 schools, of “choice” to improve schools for low-income spending upward of $20 billion from taxpayers children, WFF has supported the unregulated a year, despite demonstrating no significant growth of a privatized education industry— academic gains for students? quantity over quality, and “freedom” over A significant share of the blame lies at the regulation. It’s been lucrative for some, but a

Brought to You by Wal-Mart? 1 disaster for many of the nation’s most vulnera- improve across the board. In public education, ble students and school districts. that means flooding the market with schools, aggressively closing those that are labeled as THE WAL-MART WAY: INTENSELY “failing,” and opening up pathways to allow IDEOLOGICAL AND MARKET-DRIVEN new school operators to take their place. The Walton Family Foundation holds this and his brother, Bud, founded theory dear, and has relentlessly pressed for the Wal-Mart and got rich. Really rich. Sam Walton rapid growth of privatized education options and his wife Helen’s four children (along with (vouchers and charters) and against any gov- their families) now share in what is estimated ernment intervention (read: regulation) that to be a collective worth of $150 billion. Of the might deter entry into the education market by 10 richest Americans according anyone with an idea to try out. “Charters are competitors. to Forbes magazine, four are Although the foundation implies that this They steal customers, deplete members of the Walton family. market-based model will lead to the improve- revenues and increase costs. The Walton Family Foun- ment of all schools in a system, a different dation was established in 1988 endgame is clear through its philanthropic When charters siphon off kids, and is based in Bentonville, portfolio: The foundation endorses the eventu- they not only take the money Ark., the home of Wal-Mart. al elimination of public education altogether, in that comes with them, they The late John Walton, who died favor of an across-the-board system of privately often cause nearby schools to when the small plane he was operated schools. operate under capacity.” piloting crashed in Wyoming If the principals of the Walton Family in 2005, his widow Christy, and Foundation decline to state publicly that their brother, , shared in press for deregulation and rapid expansion is the leadership of the family foundation. John, designed to undermine and eventually disman- more than the others, crafted the foundation’s tle public education, their grantees have been agenda. Carrie Walton Penner, the daughter of more than willing to do so: Sam Walton’s eldest son Rob, and her hus- band, , have also been instrumen- “Charters are competitors. They steal tal in the family’s education work, sitting on customers, deplete revenues and increase the boards of numerous education advocacy costs. When charters siphon off kids, they and charter organizations and giving gener- not only take the money that comes with ously to the political campaigns of like-mind- them, they often cause nearby schools to ed politicians from their $20 million home in operate under capacity. This increases in- Atherton, Calif. , the youngest of efficiencies and per-student costs because Sam and Helen’s four children, is best known all that empty space still must be main- as an arts collector. But she, too, doesn’t tained. hesitate to lay down some cash in the political As charters continue to expand, they arena when the family’s education agenda is will force districts to make more and at stake. more tough choices on personnel, clos- The foundation’s stated mission is to infuse ing schools and redrawing attendance public education with competitive pressure boundaries, both political poisons. We are through school choice. The theory is based seeing this play out in spectacular fashion in retail: If consumers have options, they in some older urban areas.”4 will choose either higher quality or cheaper products. Merchants who can’t compete will That’s Mike Thomas of the Foundation for go out of business, opening up space for new Excellence in Education (FEE) arguing that entrepreneurs to enter. Through this constant Florida should allow more rapid expansion of churn of options, the theory holds, quality will the charter sector not despite, but because of

2 Cashing in on Kids the “spectacular” negative impact this expan- eventually the financial crisis will become sion is having on traditional public schools and a political crisis. ...” the children who remain in them. Founded by former Florida Gov. Jeb Bush, FEE has received So much for improving all schools. Smarick’s more than $4.8 million from the Walton Family article offers a road map for the dissolution Foundation since 2009. of public school systems. The Walton Family But the most chilling articulation of the Foundation seems to be using that map in its Walton agenda came in a 2008 article published giving strategy. in EducationNext.5 The article, called “Wave of The foundation’s education program the Future,” was written by Andy Smarick, who pursues this endgame through three major pro- has worked for a number of Walton-funded gram areas: support for vouchers, both publicly entities. Smarick, too, calls for the replacement and privately funded; support for charter school of traditional public school districts: start-ups to encourage and enable the rapid growth of the sector; and public policy advoca- “… The only course that is sustainable, cy, to ensure that the road is clear for expansion for both chartering and urban education, with minimal regulatory interference. embraces a third, more expansive view A description of the foundation’s giving in of the movement’s future: replace the each of these areas follows. district-based system in America’s large cities with fluid, self-improving systems of VOUCHERS: DIRECT FUNDING charter schools.” FOR PRIVATE SCHOOLS

Toward the end of his article, Smarick offers The Walton Family Foundation’s flagship strat- a “road map” for destroying public school egy for transforming public education was (and districts. It includes a saturation investment continues to be) to allow taxpayer dollars to pay strategy to build market share in a few targeted private school tuitions for selected students. districts. Once the charter sector reaches a tip- The nation’s first publicly funded voucher ping point in student market share, he predicts, program was launched in Milwaukee in 1990. traditional districts will no longer be financially That same year, John Walton or politically sustainable: helped create the Alliance “As chartering increases for School Choice, a national “As chartering increases its market umbrella group for state- its market share in a city, share in a city, the district will come under based voucher advocacy the district will come under growing financial pressure. The district, organizations (many of which growing financial pressure. despite educating fewer and fewer stu- are funded by the WFF). The district, despite educating dents, will still require a large administra- As other states estab- fewer and fewer students, tive staff to process payroll and benefits, lished voucher programs, will still require a large administer federal programs, and oversee the Waltons’ support—both administrative staff to process special education. With a lopsided adult- personal and through the payroll and benefits, administer to-student ratio, the district’s per-pupil foundation—was instrumen- federal programs, and oversee costs will skyrocket. tal. When the Ohio Legisla- At some point along the district’s path ture created a pilot voucher special education.” from monopoly provider to financially program in Cleveland in unsustainable marginal player, the city’s 1995, the Walton Family investors and stakeholders—taxpayers, Foundation funded new private schools and foundations, business leaders, elected an advocacy organization, HOPE for Cleve- officials, and editorial boards—are likely land’s Children, which helped recruit and place to demand fundamental change. That is, students in them (WFF gave the organization

Brought to You by Wal-Mart? 3 $1.8 million between 1996 and 1999). When ed vouchers elsewhere, the idea of using public the Cleveland program was challenged in court dollars to help kids attend private schools later that year, John Walton personally helped hasn’t been as appealing to the general public bankroll the defense. He also contributed $2 as it is to the Waltons. Public opinion polling million to Michigan’s 2000 voucher ballot ini- has consistently shown majorities of Americans tiative.6 Multiple state-level voucher advocacy opposed to public funding of school vouchers.7 groups have been created and endowed by the The Waltons needed a back-door approach to foundation. privatization. And that back door opened in In 2013, the Walton Family Foundation an- 1991 with the passage of the nation’s first char- nounced that it would provide $6 million to the ter school law. Alliance for School Choice to double the num- ber of students in the U.S. attending private CHARTERS: USING PUBLIC FUNDS schools with publicly funded vouchers. AND PRIVATE OPERATORS TO In addition to publicly funded voucher CORNER THE MARKET programs, the foundation offers significant support to so-called voucher-lite programs that The idea of chartered schools as incubators for offer corporations and investors generous tax education change was put forward by progres- credits in exchange for contributions to a schol- sive educators and teachers union leaders. arship fund that covers Early charter enthusiasts believed that granting tuition costs for low-in- a small number of public schools the freedom come families that enroll to innovate with instruction, ways of grouping Report: Millions of dollars their children in private students, the use of time and other education in fraud, waste found in schools. These programs strategies would allow the development of charter school sector have been created in practices that might better serve disadvan- —Washington Post states where public and taged students. The assumption was that April 28, 2015 policymaker sentiment successful strategies then could be brought to against direct public scale in public districts. funding for vouchers To the Walton family, chartering offered a has blocked their use. compromise to politically unpopular vouchers, Nearly $1 million from It’s important to note, and a way to take privatization to scale. charters went to firms however, that these tax The Waltons’ theory of change asserts that named in FBI probe credit programs strip the quality of individual schools will improve —Chicago Sun-Times millions of dollars from as options grow. The foundation is the largest August 18, 2014 public coffers that private funder of charter school start-ups, hav- would otherwise be available to ing spent more than $355 million since 1997 public schools. In 1998, John Walton co-found- on charter launches. In a news release dated ed the Children’s Scholarship Fund, which Feb. 5, 2014, Mark Sternberg, the foundation’s works through partner organizations in 22 director of Systemic K-12 Education Reform cities to manage and distribute tax credit-fund- reported that the foundation has kick-started ed vouchers. The organization has received more than 1,500 schools, approximately one more than $223 million in WFF support since out of four charters in the country.8 Over the its founding. last five years, the foundation has spent be- Both the Alliance for Children and the tween $63 million and $73 million annually to Children’s Scholarship Fund continue to thrive, fuel new charter openings. with affiliates in dozens of states. However, The Waltons concentrate much of their ef- despite the recent adoption of vouchers in fort on charter operators that have the capacity some states, such as Indiana, and the ongoing to scale up their schools rapidly. In 2000, the availability of both publicly and privately fund- foundation helped launch the Charter School

4 Cashing in on Kids Growth Fund, which offers start-up and facili- ed) National Alliance for Public Charter Schools ties financing, multiyear program grants, tech- declares that having no limit or caps on the nical and other supports to a select number of number of charter schools in a state is the No. charter networks each year. The purpose of the 1 “essential component” of a model charter fund is clear: Recipients are evaluated based law. With help from the Obama administration, on their ability to expand. The Walton Family which made lifting charter caps a criterion for Foundation has invested more than $101 mil- states to receive federal Race to the Top grants,9 lion in the growth fund since its inception. 15 cash-strapped states removed charter caps In 2010 (two years after Andy Smarick rec- in 2009. In 2013, three additional states re- ommended a targeting strategy to flood vulner- moved caps.10 able markets with privatized charter schools), the Walton Family Foundation moved to con- Opposing Regulation solidate its funding in what it called “market The original intent of “flexibility” for charter share demonstration sites” (now simply called schools was to allow experimentation with “investment sites”). In these districts—there education practices. For the Walton family, any were 16 in 2014—the foundation concentrates regulation is an impediment to growth. Hence, funding to create new schools with advocacy Walton-funded advocacy groups oppose efforts, support for the recruitment and train- initiatives requiring charter school governing ing of new teachers (primarily through Teach boards to comply with state conflict-of-interest for America) and other programs. or contracting rules, for example, or even rules To further pave the way for rapid growth, the requiring that governing board meetings be foundation funds a large network of aggressive open to the public. policy advocacy organizations that work to Free-market charter school advocates are ensure the market is open for business. quick to refer to charters as “public schools” in discussions about funding levels and access ADVOCACY FOR DEREGULATION to public facilities. But in almost every other instance, WFF-funded lobbyists have argued After its funding for charter start-ups, the Wal- strenuously that charter school governing ton Family Foundation’s second largest educa- boards are private corporations not subject to tion program area is for shaping public policy. the same regulations that govern traditional The foundation has spent nearly $280 million public schools. Examples of this doublespeak since 2009 to support advocacy organizations abound: in more than 30 states. These state charter and voucher associations, think tanks and advocacy n New York State taxpayers have been wit- groups work to ensure that state laws are privat- ness to a seven-year tug of war over whether ization- and growth-friendly. charter schools, like traditional public schools, The groups can be counted on to lobby in are subject to audits by the state comptroller. two main policy areas: In 2005, the State Assembly passed the School District Accountability Act, extending the Opposing Limits on Growth power of the comptroller to audit all public Fundamental to the Waltons’ belief in an unfet- schools, both traditional and charter. The New tered market is opposition to any limits on the York Charter School Association, which has number of charter schools allowed in a given received $3.6 million from the Walton Fam- state or district. In the early years of chartering, ily Foundation, took to the courts, arguing many state legislatures placed caps on growth that the state did not have the authority to as a way to maintain control over the quality audit the schools because they were run by of the schools. WFF grantees have doggedly independent—not public—boards. In 2009, opposed these caps. In fact, the (Walton-fund- the Court of Appeals agreed with the charter

Brought to You by Wal-Mart? 5 lobby. Two years later, the Legislature tried meals to their students, the CCSA stated that again. In exchange for more than doubling requiring charter schools to do so would create the number of charter schools permitted to “profound challenges”15 and place schools operate in New York, the Legislature again in “an impossible situation.” The California conferred on the state comptroller the author- Food Advocates, which supported the bill, ity to audit charters. In July 2013, after only noted that it was the low-income students who two charter school audits had been released probably were profoundly challenged, stating, by the comptroller (both finding material “Hunger should not be a choice.”16 concerns), Eva Moskowitz, the director of Members of the Walton family have been Success Academy Charter Schools in New generous supporters of political candidates York City, which has received $4 million from who support their policy advocacy. In the the Walton Family Foundation, filed suit again 2010 election cycle, five members of the in the state Supreme Court. In March 2014, a Walton family collectively contributed nearly Manhattan Supreme Court justice ruled in her $57,000 to 35 state Assembly races in Wiscon- favor,11 but the following month, the General sin, as well as to Scott Walker’s gubernatorial Assembly—in exchange for allowing New York run. Walker won that race, and proceeded to City charter schools increased access to public win legislation slashing the state’s education school buildings—gave both the state comp- budget and forcing teacher layoffs across the troller and the city comptroller the authority state. Two years later, when Scott Walker faced to audit charters.12 The debate continues. a recall election after massive voter protests, contributed $50,000 to Walk- n TheCalifornia Charter Schools Association er’s campaign to beat the recall. In 2013, the (with more than $31 million in WFF grants Legislature’s proposed budget included $73 since 2004) is a particularly strident purveyor million to expand the state’s voucher program. of the Walton anti-regulation ideology. In 2011, the association defeated a proposal that would n In Indiana, Alice Walton’s contribution of require charter schools to comply with a range $200,000 to the re-election bid of State Super- of school safety regulations that are manda- intendent of Public Instruction Tony Bennett tory for traditional public schools, including was not enough to push him over the top in that charter schools have a dependable and 2012, after a public backlash against Ben- operative fire alarm system. 13 (Three years nett’s pro-charter policies. Just a month after later, a charter school in Pasadena was closed his Indiana defeat, Bennett was appointed by the city fire department for having multiple Commissioner of Education in Florida. But fire code violations and creating an “imminent Bennett was forced to resign just eight months danger” to the school’s 300 students, accord- later when the reported that ing to the Pasadena Independent newspa- while serving as the state superintendent in per. 14 Among its findings, the fire department Indiana, Bennett had been personally involved spokesperson noted that the school did not in changing the letter grade given to a charter have either an automatic sprinkler system or school founded by one of his campaign con- a fire alarm system. Nor did the school have tributors. Bennett, like other advocates for mar- sufficient exits or exit lighting to safely and ket-based education reform, had put in place a quickly evacuate students in case of an emer- school grading system that ranked schools with gency.) The CCSA opposed another bill in 2012 grades from A to F, with the grades determining that would have required charter schools (as school funding, or even closure. The Associated public schools) to offer free and reduced-price Press, through a Freedom of Information Act meals to qualifying charter students. Although request, revealed that when Christel House more than 80 percent of California charter Charter Academy (a network of three charter schools already provide free and reduced schools that together have received $441,000 in

6 Cashing in on Kids WFF funding) was given a grade of “C” in 2012, 23 schools in 2008 in an effort to right-size Bennett worked with his staff to rejigger the against the growing charter sector. grading formula so that the school’s designation IFF is a Chicago-based charter school was lifted to an “A.”17 finance and real estate advisory organization, Members of the Walton family disburse and a favorite of the Walton Family Foundation. their riches generously across the country, to IFF has received more than $9 million from the policymakers and causes supported by their foundation since 2007. advocacy grantees, even when local char- The IFF study for D.C., “Quality Schools: ter operators object. Carrie Walton Penner Every Child, Every School, Every Neighbor- contributed $370,000 to California Charter hood” was released in January 2012 and Schools Advocates (the lobbying arm of the recommended closing several additional D.C. California Charter Schools Association) when public schools and transferring other public the organization was engaged in a campaign schools (and school buildings) to private char- against a proposed school construction bond ter operators. in West Contra Costa Unified School District. Two D.C.-based researchers with many Why oppose a bond for new school construc- years of experience with the District’s troubled tion? Because the district’s board had not public school system agreed to share the proceeds of the bond with found the report “serious- local charter schools.18 The organization spent ly flawed.” In a detailed $100,000 on fliers and other efforts to defeat response published in the Charter school the bond proposal. Some charter operators Washington Post,20 they indicates FBI raid in the district expressed dismay at the CCSA’s noted that IFF had made is over federal campaign, noting that it could undermine similar recommendations grant money their relationships with the district board, in five other cities (three — Indy Star which authorizes charters, and that the CCSA of which are Walton June 6, 2014 campaign put them “in a difficult position.” investment sites). Back in 2006, Carrie Walton Penner’s hus- Yet when asked at band, Gregory Penner, contributed $250,000 to a hearing on the block universal early childhood education in proposal, IFF’s re- California.19 search director could Charter founder In addition to its lobbying and direct policy not provide a single facing trial on advocacy, the Walton Family Foundation instance in which its bank fraud charges grantees offer school districts and state depart- strategy of transfer- —Detroit Free Press ments of education comprehensive research ring a low-performing February 7, 2015 reports that they promise will help design a school to a charter man- road map for school improvement. But these agement organization reports typically regurgitate a predictable had resulted in academic gains for the students. litany of pro-privatization recommendations— After 20 years, the Walton Family Founda- school closures, new charters and restraints tion’s education advocacy has swept across on collective bargaining for teachers. A case nearly every state that allows charter schools, in point is the report developed by the Illinois providing the capital needed to flood urban Facilities Fund (IFF) for the District of Colum- markets with new charter schools and sup- bia Public Schools (DCPS). porting aggressive advocacy in line with its In 2011, the Walton Family Foundation paid free-market ideology. Family members have IFF to study the District’s public schools and backed up the foundation with hefty contribu- make recommendations to DCPS, which was tions to policymakers and issue initiatives. But then engaged in a multiyear modernization has all this money, dumped into states without and reorganization initiative. DCPS had closed public comment or hearings, actually helped

Brought to You by Wal-Mart? 7 improve education outcomes for students? It fewer charter schools than states with poor is becoming increasingly clear that the answer charter performance, and is no. n Of the five states (Arizona, Florida, Ohio, California and Texas) that opened the greatest IMPACTS: QUANTITY AT THE number of charter schools in the first 10 years EXPENSE OF QUALITY? of chartering, four posted negative student achievement results while the fifth (California) At the Walton Family Foundation the prima- showed no significant difference between char- ry driver of school quality is supposed to be ter and traditional public school performance. competition fueled by choice—i.e., growth of the market. Sadly, extensive research efforts So the impact of all this expansion and (many of them funded by WFF) on the aca- churn on student academic outcomes is neg- demic impact of public charter schools have ligible. But what about other consequences suggested that after 20 years there is little of the Waltons’ aggressive drive to privatize? across-the-board improvement to show for it. There are several: At best, it appears that some charter schools perform very well, but that the majority n weakened oversight created by the rapid perform no better, or even significantly worse expansion of schools without commensurate than neighboring traditional public schools. increases in the apparatus in place to monitor In fact, the drive for them; quantity may actually n fraud and malfeasance, a predictable by- come at the expense of product of the wide-open arms of the market, quality. The authors of a inviting any and all to partake of the public CHARTER SPENT commentary in Education trough; and Week in 200921 reported n the gradual undermining of traditional $2.27M ON that an analysis of the public school districts and, in turn, the in- 2009 CREDO (Center for creased segregation of some of the nation’s ADVERTISING Research on Education most vulnerable students in traditional public —The Columbus Dispatch Outcomes) study on char- schools that no longer have the resources to March 8, 2015 ter school performance serve them. found several reasons to be concerned about None of these outcomes should come as a Exposing the charter the impact of aggressive surprise; indeed, they are predictable results of growth of the market the foundation’s drive for market growth. Since school lie: Michelle on student outcomes. the analysis referenced above in Education Rhee, Louis C.K. The commentary Week, CREDO has released new reports show- and the year phony noted: ing improvements in some states while real education reform n If, according to problems continue to exist in states like Ohio, the CREDO report, Florida, Texas and Arizona. revealed its true colors —Salon 17 out of 100 charter January 1, 2015 schools improve WEAKENED OVERSIGHT student outcomes, but 37 actually worsen out- Charter school authorizers are charged in comes, then the rapid expansion of the sector is most states with monitoring the performance creating more poorly performing schools than and operations of the schools they license. high-quality schools; Without additional resources, as the number n The states in which CREDO reported of schools increases, the capacity of these strong charter performance had, on average, authorizing agencies to adequately monitor

8 Cashing in on Kids the health and well-being of their schools is FRAUD AND PROFITEERING diminished. Despite all the rhetoric about “increased Lack of oversight, and the “everybody come” accountability,” when it comes to issues like atmosphere created by the almost total dereg- full financial transparency, compliance with ulation of the charter application process has state laws on contracting, or even background inevitably allowed some bad actors entering the checks on employees, lack of adequate over- market to treat charter schools as tax-funded sight creates the inevitability of poor quality, ATMs. In 2014, the Center for Popular Democ- non-compliance with laws governing the racy and Integrity in Edu- schools and outright fraud. cation released the results Many of the schools and entities In 2012, in North Carolina 33 new of a media survey of charter caught up in the scandals, or charter schools were approved—a 33 school fraud, waste and abuse percent increase in the total number of in just 15 states (43 states have with documented examples schools in the state—without any correspond- active charter school laws). of profiteering off the charter ing increase in oversight capacity. The state’s The groups found more than industry, have been funded by Office of Charter Schools had three consul- $100 million in fraud (later the WFF. tants overseeing 133 schools—or 44 schools updated to $200 million). per consultant.22 In Philadelphia, the School Many of the schools and en- Reform Commission’s Charter Schools Office tities caught up in the scandals, or with docu- has been without a director for nearly two mented examples of profiteering off the charter years, and in 2014 had a staff of only six. Two industry, have been funded by the WFF: of those staffers are assigned to oversee the 23 operations of the city’s 86 charter schools. n The Brighter Choice Foundation, which Even the president of the Pennsylvania manages 11 Albany, N.Y., charter schools and Coalition of Charter Schools acknowledged has been the recipient of more than $9.4 million that the office was failing to provide adequate in Walton Family Foundation grants, hired oversight.24 Ronald Racela as the director of finance for its Without strong monitoring, some charter four direct-run charter schools. A year later, in schools have played fast and loose with the 2011, Racela was promoted to chief financial rules, setting up barriers to enrollment that officer of the Brighter Choice Foundation. In divert or deny admission to low-performing 2013, Racela was arrested and charged with students, those with special needs, or undoc- embezzling more than $200,000 from both the umented immigrants. Additionally, charters Brighter Choice Foundation and the individual around the country have established rigid schools he worked for. discipline policies that charge monetary fines n The Harambee Institute of Science and to students for even minor infractions like Technology Charter School in Philadelphia chewing gum, and give the schools leeway to doubled as a nightclub until it was shut down push out—through suspensions and expul- in 2010.26 sions—large numbers of students. These n Two Los Angeles charter schools run by practices have become so prevalent that in the Magnolia charter school chain were closed May 2014, the U.S. Department of Education in 2014 after fiscal mismanagement and report- saw fit to issue two “Dear Colleague Letters” a ing irregularities were found. week apart, reminding charter schools of their n Concept schools in Ohio and Illinois are obligation to comply with federal civil rights also under federal and state investigation for law regarding school enrollment policies, a range of concerns around contracting and access to charter schools for students with hiring, management of funds and others.27 disabilities and English language learners, n A chain of 60 schools in Miami-Dade and fairness in school discipline policies.25 and Broward Counties in Florida is run by the

Brought to You by Wal-Mart? 9 for-profit Academica Corp. The schools have These and many more instances of fraud received more than $1.1 million in grants from and profiteering have sparked new cries for the Walton Family Foundation since 2005. stronger regulations on charter schools to The business dealings of Academica’s CEO, a protect taxpayer dollars. But perhaps the former real estate developer, have been the most disturbing outcome of all, although one subject of an investigative series in the Miami anticipated and welcomed by the pro-market Herald. The newspaper’s reporting has re- ideologues, is the undermining of traditional vealed millions of dollars of profiteering with- public school districts. in the company, mostly through the purchase of properties for school buildings, which are SMARICK’S ROAD MAP PLAYS OUT then leased at a profit to the school governing boards that Academica controls.28 Moody’s Investment Services issued a report in 2013 which found that the dramatic expan- n Options Public Charter sion of charter schools in some economically Moody’s Investment Services School in Washington, D.C., weak urban areas puts increasing financial issued a report in 2013 serves students with severe stress on traditional school districts31 and which found that the dramatic physical and/or mental weakens their ability to serve their students. expansion of charter schools in disabilities. The school came Because students who transfer to charter some economically weak urban under fire in 2013 when it was schools come from across a district and from areas puts increasing financial discovered that three mem- multiple grade levels, districts are not able stress on traditional school bers of the school’s governing to reduce their expenses proportionally. The board had jointly created effect is to force the traditional district to cut districts and weakens their two for-profit corporations programs, lay off teachers, increase class sizes ability to serve their students. that were then contracted to and close schools to make ends meet. These provide services to the school. actions in turn hasten the exodus of more One of those corporations families, who would prefer a strong neighbor- handled Medicaid billing for the school (and hood public school, but see the writing on the other D.C. charters) and Options was found wall and flee to the better-resourced charter to be overstating the severity of disabilities of schools. Their flight creates a downward spiral some students in order to increase the federal that few districts have been able to stop. reimbursements for them.29 The cycle identified by Moody’s is present- ed in technical terms. But the impact is deeply Sometimes, the oversight process itself personal: Students with disabilities, English becomes tainted. In Washington D.C., the language learners and other disadvantaged Public Charter School Board—one of the only students are less likely to be enrolled in a char- authorizers to receive direct funding from the ter school, and more likely to be kicked out if Walton Family Foundation ($5.8 million)—was they do enroll. These students end up overrep- responsible for monitoring Options Public resented in the traditional public district at the Charter School, cited above. But Jeremy Wil- same time that the resources needed to serve liams, the CFO of the authorizing board, was them are stripped away. later arrested and charged with taking $150,000 “We believe that in providing choices we in payments from the trustees of Options, in are also compelling the other schools in an order to steer the authorizer away from review- ecosystem to raise their game,” says WFF’s ing the school’s contracts, and helping to pitch Marc Sternberg 32 Yet, as Moody’s Investment the services of the two for-profit corporations Service reports, and as Walton grantees like established by Options trustees, to other char- Mike Thomas of the Foundation for Educa- ter schools in the district. Williams is now the tional Excellence gleefully acknowledge, just subject of a criminal investigation.30 the opposite is happening.

10 Cashing in on Kids The students left behind—among our most reliance on strict discipline policies that push vulnerable—have become collateral dam- students out, or enrollment hoops that give ac- age in the Waltons’ ideological crusade. The cess to better-resourced families—and embrac- majority of students in Chicago, Newark, N.J., es them. Efforts to move away from zero-toler- Philadelphia, Washington, D.C., and other ance discipline policies are “a big mistake,” he cities where public school districts have been declares. Segregating students by ability allows devastated by the cycle of resource extraction the “strivers” to “be challenged and [to] learn cited by Moody’s, continue to attend tradition- side by side with others who share their thirst al public schools. For these students, as well for knowledge.” And he calls for policies that as students in the cities’ poorly performing funnel precious education resources up the charter sectors, the foundation’s policies have economic ladder to the “especially deserving hurt, not helped. poor.” While the federal No Child Left Behind law BROUGHT TO YOU THE WAL-MART “shined a spotlight” on the Ohio charter schools may be WAY: CONCLUSION needs of the most disad- charging taxpayers for empty vantaged students, says seats; Akron’s White Hat The Walton family may come from modest Petrilli, “let’s not overlook roots. But the empire it has built has cata- their slightly less disad- among those cited — pulted the family to seats among the wealth- vantaged peers—the Akron Beacon Journal June 16, 2015 iest Americans: the top .01 percent of the 1 boys and girls who come percent. From that vantage point, the Waltons from low-income but have deduced that what poor children of color perhaps not as dys- in the nation’s big cities need to get a good functional homes and education is a lesson in market economics— who aspire to graduate Cheating the School kids: that what they offer Wal-Mart consumers is from college and enter Corporations Don’t Pay bound to work for parents and schools. But the the middle class.” Their State Taxes assumption is clearly flawed. This is the elephant in —City Watch As if to justify the rising inequality and lack the room for the so-called January 6, 2015 of equitable education opportunities emerging education reform move- from the now balkanized public school systems ment. Is the intent of the in some of our largest districts—places like movement to indeed serve all students, as Chicago, Los Angeles, New York, Philadelphia the tradition of public education has held— and Washington, D.C.—the Thomas B. Ford- particularly since Brown v. Board of Education ham Institute (a Walton grantee), has begun was decided by the U.S. Supreme Court 60 offering a blunt assessment about the direction years ago—or are we willing to accept a system of market-based education reform, suggesting of schools that serve only those who are will- that perhaps equity is not a necessary goal for ing to participate as consumers in a free-mar- our public schools. In 2013, Mike Petrilli, now ket, privatized network? the president of the institute, wrote a commen- There is a better direction. The increasing tary for Education Week, titled “The Especially number of state legislators, auditors, comptrol- Deserving Poor.”33 In it, he argues that schools lers, parents, students and academic institu- should “spur on the strivers,” even at the tions that are calling for more accountability in expense of more needy students. This means, the charter sector are right: If we are committed he continues, that “policies and programs … to a public education system that strives to should be designed to help people with the serve all children, with the understanding and drive, work ethic, tenacity, and motivation to the expectation that each and every one mat- rise.” He lifts up some of the very policies that ters, has potential and deserves the resources have been so disturbing in the charter sector— and opportunity to succeed, then we must rein

Brought to You by Wal-Mart? 11 in the current growth model of charter expan- 9.“Charter School Caps” by the National Conference of State sion, and insist instead on a well-regulated and Legislatures, December 2011. Available at: http://www.ncsl. org/documents/educ/CharterSchoolCaps.pdf equitably resourced system of public schools that works for all children. 10. Measuring Up to the Model: A Ranking of State Charter To do that, supporters of public schools de- School Laws,” National Alliance for Public Charter Schools, January 2014. Available at: http://www.publiccharters.org/ signed to serve all children must not only work wp-content/uploads/2014/01/StateRankings2014.pdf to change how politicians and policymakers 11. “Judge Rules that state Controller Thomas DiNapoli view charter schools. We also must change the cannot audit charter schools,” NY Daily News, March 14, Walton Family Foundation, which has driven 2014. Available at: http://www.nydailynews.com/new-york/ the current market-based reform agenda over education/state-comptroller-audit-charter-schools-judge- article-1.1721265 the past 20 years. This report, and the accom- panying petition, are a first step in making 12. “Scott Stringer says he’ll audit charter schools as city change at the Walton Family Foundation. comptroller,” Chalkbeat New York, March 14, 2014. Available at: http://ny.chalkbeat.org/2014/03/14/scott-stringer- says-hell-audit-charter-schools-as-city-comptroller/#. ENDNOTES VFP0EvnF9lw

1. “State Announces New Policies for Charter School 13. “Bill Analysis, AB 269” Available at: http://www. Oversight,” NBC Connecticut. Aug. 11, 2014. Available at: leginfo.ca.gov/pub/11-12/bill/asm/ab_0251-0300/ab_269_ http://www.nbcconnecticut.com/news/local/State- cfa_20110425_154929_asm_comm.html Announces-New-Policies-for-Charter-School-Over- 14. “Charter School shut down by Fire Marshal,” Pasade- sight-270802881.html na Independent, Aug. 27, 2014. Available at: http://www. 2. “Stringer begins charter audits, including Success,” Cap- pasadenaindependent.com/news/charter-school-shut-down- ital. Oct. 30, 2014. Available at: http://www.capitalnewyork. by-fire-marshal/ com/article/city-hall/2014/10/8555751/stringer-begins- 15. See bill analysis, posted Oct. 5, 2012, available at: http:// charter-audits-including-success?news-image totalcapitol.com/?bill_id=201120120AB1594 3. “State auditor rips charter school oversight,” Inquirer, May 16. California Food Policy Advocates fact sheet, Feb. 22, 2012. 14, 2014. Available at: http://articles.philly.com/2014-05-14/ Available at: http://cfpa.net/ChildNutrition/ChildNutrition_ news/49823808_1_charter-schools-charter-office-robert- Legislation/CharterSchool-JustTheNumbers-2012.pdf fayfich 17. “Tony Bennett, Florida Education Commissioner, 4. Mike Thomas quote available at: http://excelined. Resigns Over Indiana Grading Scandal,” Huffington Post, org/2013/01/15/local-charter-school-approval-is-a- Aug. 7, 2013. Available at: http://www.huffingtonpost. conflict-too-large/#sthash.zLVD8zFF.dpuf com/2013/08/01/tony-bennett-resigns_n_3688690.html See 5. “Wave of the Future,” EducationNext, Winter 2008, also “Tony Bennett resigns Florida education post amid scan- Vol. 8, No.1. Available at: http://educationnext.org/wave-of- d a l ,” Washington Post, Aug. 1, 2013. Available at: http:// the-future/ www.washingtonpost.com/local/education/tony-bennett- resigns-florida-education-post-amid-scandal/2013/08/01/308 6. False Choices: Vouchers, Public Schools and our Children’s 2416a-faef-11e2-a369-d1954abcb7e3_story.html Future” Rethinking Schools, Fall 2001. Available at: http://www.rethinkingschools.org/special_reports/ 18. “Charter schools’ $100,000 opposition helps sink district’s voucher_report/v_collect.shtml bond measure,” EdSource, June 19, 2014. Available at: http:// edsource.org/2014/charter-schools-100000-opposition- 7. “Americans Support Charters, Oppose Vouchers, Poll helps-sink-districts-bond-measure/62981#.VBHW7fldXZ0 Finds,” Education Week, Aug. 21, 2013. Available at: http://blogs.edweek.org/edweek/charterschoice/2013/08/ 19. “No on 82” contributions, California’s Secretary of State americans_support_charters_oppose_vouchers_poll_finds. website. http://cal-access.ss.ca.gov/Campaign/Committees/ html . For older poll data, see this article about the PDK/ Detail.aspx?id=1282131&session=2005&view= Gallup poll in 2003: http://www.thefreelibrary.com/ received&psort=TRANS_NUMBER More+Americans+oppose+school+vouchers%2c+says+ 20. “What’s wrong with D.C.’s facilities/charter study?” Gallup+poll.-a0109027994 Washington Post, Feb. 23, 2012. Available at: http:// 8. “Walton Family Foundation Surpasses 1,500 Charter www.washingtonpost.com/blogs/answer-sheet/post/ School Startup Investments,” news release of the Walton Fam- whats-wrong-with-dcs-facilitiescharter-study/2012/02/12/ ily Foundation. Feb. 5, 2014. Available at: http:// gIQAdcnkTR_blog.html dbd7853403f6a0e4167e-9fe3b5899298e1c7d591332d27bb114. 21. “The Charter School Express: Is proliferation interfering r52.cf1.rackcdn.com/documents/cd4175e2-161c-4434- with quality?” Education Week, Oct. 7, 2009. Available at: 8cce-22ef67533b7c.pdf

12 Cashing in on Kids http://www.edweek.org/ew/articles/2009/10/07/06miron. 33. “The Especially Deserving Poor,” Education Week, Oct. h29.html 10, 2013. Available at: http://blogs.edweek.org/edweek/Bridg- ing-Differences/2013/10/the_especially_deserving_poor.html 22. “Expansion of charter schools should bring better oversight and more accountability,” NC Policy Watch, Sept. 18, 2012. Available at: http://www.ncpolicywatch. com/2012/09/18/expansion-of-charter-schools-should- bring-better-oversight-and-more-accountability/

23. “Charters need closer watching,” Philadelphia Tribune, July 15, 2014. Available at: http://www.networkforpubliced- ucation.org/news/charters-need-closer-watching-philadel- phia-tribune/

24. “Turnover plagues district’s charter office as state considers changes to law,” The Notebook, Nov. 7, 2013. Available at: http://thenotebook.org/blog/136617/turnover-charter-school- office-state-debates-changes-law

25. Catherine E. Lhamon, Philip H. Rosenfelt, and Jocelyn Samuels, “Dear Colleague Letter: School Enrollment Proce- dures,” U.S. Department of Education (May 8, 2014) http:// www2.ed.gov/about/offices/list/ocr/letters/colleague-201405. pdf and Catherin E. Lhamon, Dear Colleague Letter: Charter schools,” U.S. Department of Education (May 14, 2014) http://www2.ed.gov/about/offices/list/ocr/letters/ colleague-201405-charter.pdf

26. “Philly charter school moonlights as a nightclub,” Salon, March 30, 2010. Available at: http://www.salon. com/2010/03/30/us_charter_school_nightclub/

27. “Islamic cleric linked to U.S. charter schools involved in Turkey’s political drama,” Washington Post (Dec. 26, 2013) http://www.washingtonpost.com/blogs/answer-sheet/ wp/2013/12/26/islamic-cleric-linked-to-u-s-charter- schools-involved-in-turkeys-political-drama/

28. “Academica: Florida’s richest charter school management firm,” Miami Herald, July 10, 2014. Available at: http://www. miamiher ald.com/news/special-reports/cashing-in-on-kids/ article1939207.html

29. “D.C. officials in talks to run Options public char- ter school,” Washington Post, Jan. 22, 2014. Available at: http://www.washingtonpost.com/local/education/ dc-officials-in-talks-to-run-options-public-charter- school/2014/01/22/0fb59084-8395-11e3-bbe5-6a2a3141e3a9_ story.html

30. “Former D.C. charter board CFO promoted private companies that allegedly paid him,” Washington Post, Aug. 16, 2014. Available at: http://www.washingtonpost.com/local/ education/former-dc-charter-board-cfo-promoted-private- companies-that-allegedly-paid-him/2014/08/16/54469012- 1e6e-11e4-ab7b-696c295ddfd1_story.html

31. “Charter Schools Pose Growing Risks for Urban Public School Districts.” Moody’s Investors Service, Oct. 15, 2013.

32. “A Fortune, Spreading Charter Schools,” New York Times, April 25, 2014. Available at: http://www.nytimes. com/2014/04/26/us/a-walmart-fortune-spreading-charter- schools.html?_r=0

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