A bill to restrict for-profit charter schools
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A bill to restrict for-profit charter schools

In almost every corner of the United States, charter schools are nonprofit. Yet there are many ways to run a nonprofit to make a profit.

In two reports (Chartered for Profit and Chartered for Profit II), the Network for Public Education has provided numerous examples of the most common techniques. Some charter schools lease their buildings from affiliated companies. In one case in New York City, a charter organization leased space from the diocese and then leased that space to its own charter school for more than ten times what it was paying.

There are “sweeps” agreements, in which a nonprofit hires a for-profit management organization to handle everything, in exchange for almost every dollar the organization makes. As one EMO agreement cited in the report states, it receives “as compensation for its services an amount equal to the total revenues received” by the school “from all revenue sources.”

In many cases, nonprofit charter schools are simply a conduit for money to for-profit enterprises.

Why worry? Because every dollar spent on students is a dollar the company can’t keep. Every dollar that goes into the classroom doesn’t go into the company’s pocket. When for-profit companies provide humanitarian services, there’s a conflict of interest between the company and its customers.

Do public school districts not use for-profit contractors? Yes, especially for large expenses like preparing and operating buses. But those contracts are overseen and approved by elected school board members who are responsible for looking out for the interests of students, not vendors. Public schools also do not contract with vendors to run the core business of the school.

To address the problem of for-profit charter schools, U.S. Rep. Rosa DeLauro (CT-03) and Rep. Suzanne Bonamici (OR-01) introduced a bill this month Fair and Accountable Transparency in Education Reform Act (CHARTER). DeLauro said,

The CHARTER Act will ensure that for-profit educational management organizations can no longer bypass the loopholes that have allowed them access to funding that has always been intended for nonprofit entities. Our children’s education should be for their own enrichment and future well-being—not to maximize profits for their owners and investors.

The bill expands the definition of a charter school provided in Section 4310 of the Elementary and Secondary Education Act. In addition to other qualifications already included in the federal definition of a charter school, the bill would add that a charter school

Does not enter into an agreement with a for-profit entity, or have a charter or other non-profit entity enter into an agreement on behalf of the school, pursuant to which the for-profit entity operates, supervises, manages, or otherwise performs the administrative functions of such school, which may include developing curriculum, managing budgets, and managing personnel (such as hiring, firing, or supervising school-level staff);

The bill also provides that a charter school may enter into contracts for food, salaries, facility maintenance, transportation services, instructional materials and other support services.

The bill then requires the amended definition to be used for ESEA and IDEA, thereby barring schools that do not meet the amended definition from receiving federal funds.

The issue of for-profit charters has already been raised when the Biden administration tightened rules governing Charter School Program grants from the federal government. The changes required charters to be more transparent about where the money went and required the grantee to ensure that the for-profit CMO “does not exercise full or substantial control” over the school.

If the CHARTER Act gains support in Congress, it would continue the trend toward greater certainty that federal funds sent to charter schools will end up in the classroom and not in the bank account of some for-profit company.