Pondering Chartering: Importance of Public/Private Distinctions

Posted on October 30, 2015



The blogging has been quiet for a while. This is partly because I feel like most issues that arise have already been dealt with somewhere on this blog. Also because I’ve been involved in several, simultaneous, long-term projects. These projects intersect with many topics I’ve addressed previously on this blog. At times, this blog serves as a palette for testing/sharing ideas. So… in this, and a rapid fire sequence of follow up posts, I will share some excerpts of forthcoming, and early stage in progress work. 

[excerpt from forthcoming work]

Increasingly complex governance structures for charter schools provide the financial and legal frameworks shaping charters’ financial management and disclosure. Charter frameworks vary substantively from frameworks governing traditional district schools, generating differences in the flow of money into and out of schools as well as differences in how the two sectors finance the acquisition of such capital assets as land and facilities.

Individual Rights in Traditional District Schools and Charter Schools

Distinctions between “public” and “private” entities raise important public policy concerns, and the charter sector’s evolution and expansion raise numerous questions regarding the rights of students, parents and taxpayers.[i] Three broad policy arguments typically underpin advocates’ promotion of unfettered, deregulated charter school expansion and charter school replacement of district schools—and even entire local public school districts:

  1. Unlike “voucher-receiving” private schools, charter schools are considered “public” schools even if operated by private entities.[ii]
  2. The public (or state) interest rests not in who operates or governs charter schools, but rather in positive changes in student outcomes that can be achieved regardless of governance and organization of the provider. This premise is referred to as “sector agnosticism.”[iii]
  3. Accepting both premises above, government actors must be willing to “relinquish” government operated institutions to private providers and private parental choices in order to increase options available to parents/children and produce desired gains in student outcomes.[iv]

To a considerable extent, these policy arguments are divorced from the legal realities of mixed governance models for the provision of public services, including elementary and secondary education. Through legal challenges brought in both state and federal courts over the past few decades, we have learned that:

  • Private entities and individuals may not be subject to the same financial or other document/records disclosure laws that apply to state operated entities and public officials.
  • Employees of private entities are not guaranteed the same constitutional (and some statutory) protections they would be guaranteed under contractual arrangements with state operated institutions. Moreover, private entities operate under different labor laws than state operated ones.
  • Students attending privately governed entities are not guaranteed the same constitutional (and some statutory) protections they would be guaranteed while attending state operated institutions. [v]

Transparency laws adopted by state legislatures requiring open meetings, public access to records and financial disclosure commonly apply to public officials and state operated institutions. However, courts across states have offered mixed opinions as to whether and to what extent those laws apply to charter schools, their authorizers, operators and governing boards. [vi]

In addition, the U.S. Constitution prohibits the government or its agents from violating individuals’ rights to free speech, due process, and freedom from unreasonable searches. Therefore, students and employees in public schools maintain these constitutional rights. In contrast, students in schools run by private entities, or employees engaging in contractual arrangements with private entities, may not enjoy the same protections.[vii] In many of these cases, employment contracts or school discipline policies provide employees or students (and their parents) only the rights guaranteed under private contract law.

Governance and Funding in Traditional District Schools and Charter Schools

Figure 1 compares several delivery structures for the provision of publicly subsidized elementary and secondary education in the U.S. The shapes in the figure with white backfill are public, or government operated institutions. Institutions in dark gray shading are decisively “private” entities, such as private religious schools. Those institutions with characteristics of both public and private organizations are shaded in light grey. For simplicity, Figure 3 excludes other permutations, including relatively new “education savings accounts,” a variation on voucher and tax credit policies.[viii]

As the left side of the diagram indicates, district operated schools are governed by boards of local elected public officials and financed primarily by taxpayers. District schools typically receive a mix of state aid and local (often publicly approved) property taxes, and/or sales and income taxes. The state aid typically comes from income and sales taxes, as determined by state policies. Tax monies collected by state and local government agencies are, of course, public funds.

As indicated on the right side of Figure 1, however, some structures—the Cleveland and Milwaukee voucher programs, for example—allow financial subsidies to be provided directly to private schools. Under these models the schools remain “private” entities, not branches of government itself. But whether they receive public subsidies directly or not, voucher-funded private schools are unlike government operated schools in that they may promote or endorse specific religious values, can restrict student or employee freedom of speech/expression, and need not provide due process in cases of dismissal, unless explicitly required in laws for voucher receiving institutions.

Recently, direct subsidy voucher models have been replaced by tuition tax credit models which insert an additional layer of private governance. Instead of the government providing taxpayer dollars to private institutions, individuals and corporations receive a tax credit for contributing money to a private scholarship granting entity, which in turn provides vouchers. Assuming a 100% tax credit for money donated, the result is mathematically the same as if the government provided the voucher directly. However, the involvement of another private, non-government actor in the flow of funds further limits taxpayer ability to challenge the distribution of tax-related funds.[ix] And, the schools receiving students funded by the scholarships remain clearly private.

Figure 1.   Alternative Governance Hierarchies

Typology Figures_9_29_15

The middle of Figure 1 illustrates other governance options that occur under state charter school statutes. Charter schools are authorized to exist by an entity called an “authorizer”—either government itself or another entity with delegated authority. Charter schools are “authorized” to establish themselves as institutions eligible to receive taxpayer financed subsidies in order to provide elementary and secondary education to eligible children. The state may draw on its tax revenues to pay subsidies directly to “fiscally independent” charter schools. Or, the state may send its subsidies to local public school districts, which then pass on to charters a combination of state tax revenues and locally derived tax revenues. That is, under state charter school laws, districts that are geographic hosts to charter schools may be obligated to transfer to those schools both funds sent to the district by the state and funds raised from local property taxes. One permutation not depicted in Figure 3 allows local boards of education to authorize a charter school to operate independent of district governance (Wisconsin). Another permutation allows state approved authorizers to include such other public entities as universities, mayors, city councils, county boards and so on.

Other variations exist in state approaches to authorizing charter schools. In some states, the state agencies themselves exclusively determine who may operate a charter school, where that school may be located and who is eligible to attend. In other states, local public school districts may authorize establishment of charter schools within their jurisdiction. In both of these cases, the authorizing body remains “public,” and subject to the relevant legal obligations of public officials and government institutions.

Other states, like Ohio, permit private, non-government entities to serve as authorizers. That is, the state delegates responsibility for determining what entities should qualify for taxpayer subsidy. These authorizers are governed by boards of private citizens, not elected officials. As a result, their meetings, various activities, documents and so on may be shielded from public scrutiny, depending on case law and specific statutes in the state. Authorizers typically have the authority and responsibility to allow, renew and revoke charters. Public accountability of this system depends up authorizers and charter operators being independent entities.

Charter school operations and governing bodies also take many forms. In most states, charter school governing boards are appointed boards of private citizens, like those governing any private non-profit (and in some cases for-profit) institution. State laws vary in terms of how much private governing boards must disclose about their activities and documents as compared requirements for public entities. In theory, as would be the case with a non-profit private school, an individual or group of “founders” would seek and appoint a board of directors who would then collectively establish the mission and vision as well as bylaws of the institution. Just as a pending private school might seek accreditations and/or other endorsements (association membership, for example), the charter founders would apply to an authorizer for a charter to enroll students and receive the taxpayer subsidized funds that come with them.

Charter school governing boards may appoint school executives/leaders/managers, or alternatively they may contract with a private non-profit or for-profit management company, to handle some or all of the day-to-day operations of the school. For example, the charter school governing board may establish a contract with the private management company to both directly manage the school and to engage in all subsidiary contractual agreements; in this arrangement, the employer is the management company, not the school governing board. Any additional contracts, such as with food service providers or busing companies, are between the private management company and these subcontractors. That is, the governing board maintains only one contract, involving the transfer of the majority or all taxpayer subsidies to the management company, which then controls all other subcontracts. In such cases, only the single lump sum payment to the management company may be subject to public scrutiny, since all other contractual agreements are between private entities—if the charter governing board’s expenses are subject to public scrutiny at all. Further, agreements to abide by school discipline policies may be established between the private management company and parents, avoiding any role for public officials and government institutions and limiting students’/parents’ potential legal recourse.

 Maintenance of public accountability relies on the presumption that any charter school’s (or any business entity’s) board of directors is sufficiently independent of the contracted private management company that it may sever ties with that contractor and seek alternatives for school management, if necessary.[x]

Local public districts can also contract, and have contracted, private management firms to operate some or all schools within their jurisdictions.[xi] So too could private schools. But when public districts have contracted private management in the past, districts have maintained collective bargaining agreements for those teachers and other employees in schools operated by private contractors.[xii]

Traditional districts also contract with private for-profit busing companies, food service providers, providers of curricular materials, data management products and professional development programs. Employee contracts in these areas are unlikely to be subject to public scrutiny. Similarly, details of such expenditures may be shielded from public view.[xiii] Such is the nature of complex public-private business relationships.

It is not clear if a traditional district, governed by a board of elected or appointed public officials, could use private managers to shield themselves from disclosure requirements or violations of the constitutional rights of students, parents or employees. The multiple layers of private school operations and management, governing boards of private citizens, and in some cases, authorization by private entities, presents far greater opportunity to shield documents and avoid constitutional and statutory protections in the charter sector.

Table 1 summarizes key distinctions between traditional public school districts and privately managed, privately governed charter schools.

Table 1.   Key Differences in Traditional Districts & Charter Schools

Dimension Local Education Agency Privately Governed Charter (Non-State Actor)
Governance Governed by public officials (with all rights & immunities)

Elected or appointed

Subject to open public records & open meetings laws

Required to comply with public bidding requirements

 

Governed by appointed (self-appointed) board of private citizens

May not be subject to open records or meetings laws

May not be required to engage in public contract/bidding requirements

Private appointed board may hire private management firm

Disclosure

 

Required to disclose finances (reported relatively consistently in most state data systems, including detailed AFRs (annual financial reports) & public posting of budgets)

 

Public officials subject to open meetings laws

All documents/employee contracts/financial documents & communications between officials subject to open records laws.

Usually required to report expenditure of public funding. State data systems spotty and inconsistent on charter school revenue/spending data (may be required to disclose IRS filings [form 990])

Board members & managers may not be subject to open meetings. Many documents/contracts with private manager, etc. considered private/proprietary.

Individual Rights

 

Public employees with key constitutional and statutory protections

Retain rights to not have their government (school) infringe on various constitutional and statutory rights, and to uphold key statutory obligations.

Private employees may forgo certain rights to bring legal challenges against their employer

Students may forgo numerous rights under privately governed discipline codes.

Notes

[i]   Green, P.C.; & Baker, B.D.; & Oluwole, J. (2015, forthcoming). The Legal Status of Charter Schools in State Statutory Law- University of Massachusetts Law Review.

Green, P.C., Baker, B. D., & Oluwole, J.O. (2013). Having it both ways: How charter schools try to obtain funding of public schools and the autonomy of private schools. Emory Law Journal, 63, 303-337.

Mead, J.F. (2015). The Right to an Education or the Right to Shop for Schooling: Examining Voucher Programs in Relation to State Constitutional Guarantees, 42 Fordham Urban Law Journal 703.

[ii]     See, for example “Friendly Reminder: Charter Schools ARE Public Schools.” Education Post, January 8, 2015 http://educationpost.org/friendly-reminder-charter-schools-public-schools/#.VXGGB1LG_hU

[iii] McShane, M.Q. (2012) Moving from a School System to a System of Schools. Education Next http://educationnext.org/moving-from-a-school-system-to-a-system-of-schools/

[iv] See, for example the blog of Neerav Kingsland, formerly of New Schools for New Orleans, at: http://relinquishment.org/what-is-relinquishment/

[v]   Green, P.C.; & Baker, B.D.; & Oluwole, J. (2015, forthcoming). The Legal Status of Charter Schools in State Statutory Law- University of Massachusetts Law Review.

Green, P.C., Baker, B. D., & Oluwole, J.O. (2013). Having it both ways: How charter schools try to obtain funding of public schools and the autonomy of private schools. Emory Law Journal, 63, 303-337.

Mead, J.F. (2015). The Right to an Education or the Right to Shop for Schooling: Examining Voucher Programs in Relation to State Constitutional Guarantees, 42 Fordham Urban Law Journal 703.

[vi]   Green, P.C.; & Baker, B.D.; & Oluwole, J. (2015, forthcoming). The Legal Status of Charter Schools in State Statutory Law- University of Massachusetts Law Review.

Green, P.C., Baker, B. D., & Oluwole, J.O. (2013). Having it both ways: How charter schools try to obtain funding of public schools and the autonomy of private schools. Emory Law Journal, 63, 303-337.

Mead, J.F. (2015). The Right to an Education or the Right to Shop for Schooling: Examining Voucher Programs in Relation to State Constitutional Guarantees, 42 Fordham Urban Law Journal 703.

[vii] For a thorough discussion of related case law see:

Green, P.C.; & Baker, B.D.; & Oluwole, J. (2015, forthcoming). The Legal Status of Charter Schools in State Statutory Law- University of Massachusetts Law Review.

Green, P.C., Baker, B. D., & Oluwole, J.O. (2013). Having it both ways: How charter schools try to obtain funding of public schools and the autonomy of private schools. Emory Law Journal, 63, 303-337.

[viii] 5 states have this type (most notably Nevada) and it is different. For a discussion see,

Julie F. Mead, The Right to an Education or the Right to Shop for Schooling: Examining Voucher Programs in Relation to State Constitutional Guarantees, 42 Fordham Urban Law Journal 703 (2015).

Arianna Prothero, What’s the Difference between Vouchers and Education Savings Accounts? EDUC. WK.’S BLOGS (June 9, 2015, 5:17 PM), http://blogs.edweek.org/edweek/charterschoice/2015/06/school_vouchers_ education_savings_accounts_difference_between.html

Arianna Prothero, Some States Put Parents In Charge of Student Spending, EDUC. WK. (Feb. 24, 2015), http:// http://www.edweek.org/ew/articles/2015/02/25/some-states-put-parents-in-charge-of.html.

[ix] ARIZONA CHRISTIAN SCHOOL TUITION ORGANIZATION v. WINN . The Oyez Project at IIT Chicago-Kent College of Law. 25 August 2015. <http://www.oyez.org/cases/2010-2019/2010/2010_09_987&gt;. see also McGee v. Boyd, http://law.justia.com/cases/alabama/supreme-court/2015/1130987.html

[x]   Richards, C.E.; Shore, R.; & Sawicky, M.B. (1996). Risky Business: Private Management of Public Schools. Economic Policy Institute

See also: Richards, C.E.; Baker, B.D.; & Cilo, M. (1996) Is Privatization more Efficient: The Case of Education Alternatives, Inc. in Baltimore. Annual Meeting of the American Education Research Association, New York. Available at: https://schoolfinance101.files.wordpress.com/2010/01/eai.pdf

Ascher, C.; Fruchter, N.; & Berne, R. (1996). Hard lessons: Public schools and privatization . New York: Twentieth Century Fund Report.

[xi]   Marsh, J., Hamilton, L., & Gill, B. (2008). Assistance and Accountability in Externally Managed Schools: The Case of Edison Schools, Inc. Peabody Journal of Education, 83(3), 423-458.

Miron, G., & Gulosino, C. (2013). Profiles of for-profit and nonprofit education management organizations: Fourteenth Edition—2011-2012. Boulder, CO: National Education Policy Center. Retrieved July 10, 2015 from http://nepc.colorado.edu/publication/EMO-profiles-11-12

[xii] Richards, C.E. Shore, R., Sawicky, M.B. (1996). Risky Business: Private Management of Public Schools. Washington DC: Economic Policy Institute.

[xiii] Llopis-Jepsen, C. (2015) USD 501 says private buses don’t pose concern for public information access. Topeka Capital Journal. http://cjonline.com/news/2015-05-10/usd-501-says-private-buses-dont-pose-concern-public-information-access

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