Charter Schools Part III: Cashing In on Education

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October 12, 2011 | 6:00 AM

By Ida Lieszkovszky

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Traditional public school districts and charter schools have long been at odds in Ohio, but that strain is most noticeable when it comes to schools run by for-profit corporations.

• Making Money On Education: the For Profit Charter SchoolNearly half of Ohio’s charter schools are run by a for-profit management company.Download

About six years ago, April Nagorsky was a kindergarten teacher at the International Preparatory charter school on Cleveland’s East Side. Then, one day, she says she came to work and was greeted with a big surprise.

“We all pulled in and parked and thought we were going into work and there was caution tape around the doors,” Nagorsky said, remembering that day. “It was all wrapped up and there were signs on all the entrances telling the parents the school was no longer here. And that was it. We weren’t allowed in; they weren’t allowed in.”

Ohio law says charter schools  — which get about half a billion dollars in state money each year — must be nonprofit. But they can hire for-profit companies to run them. Hasina and Da’ud Abdul Malik Shabazz operated International Preparatory as a business.

And the business did not go well.

Nagorsky says it took her by surprise, but in hindsight, she says there were definitely some tell-tale signs: “I remember obviously the pay checks bouncing, which was huge. I remember the phone call telling me I was $900 in the hole in my account because everything I had sent out had bounced.”

Nagorsky says she’s still not sure what happened. She asked a lawyer friend to see about getting her back pay. Small chance, she learned.  The couple still owes the state one point four million dollars.

“I’m sure they profited a lot more than any of us,” Nagorsky says.

She says this would never have happened in a regular public school, because too many people are watching.

As for charter schools, Nagorsky says she’s done with them. Recently, Nagorsky was laid off (and called back again) but even facing unemployment, she says she would “never consider trying a charter again. Never. I would be too nervous all the time.”

National Association of Charter School Authorizers President Greg Richmond says the problem is not the business model. He says there’s nothing “inherently problematic educationally or otherwise in running a school organized as a for-profit. There’s nothing in that model that says that can’t work or it has to be inappropriate.”

The problem, he says, is that Ohio exercises very little oversight of its more than 300 charter schools.

“What a lot of people thought in the 90’s was that running a school would be easy as long as you removed these regulations that were holding them back,” Richmond says. “And that turned out not to be true.”

He says the problem begins with the lack of oversight of charter-school sponsors. Those are the groups that at least nominally open and oversee the schools. He says in Ohio, “the doors were opened too wide and allowed too many people in who thought that they could do a good job. But it turned out that they couldn’t, and now they’re running dozens of schools. And it’s very hard to close a school, even if it’s not doing well.”

In many of those cases, the schools are run like a business. A bad business. Richmond says they operate largely unchecked until a crisis forces them to shut them down.

The most recognized name in for-profit education in Ohio is White Hat Management. The Akron-based company runs 45 schools in five states, but most of them are in Ohio.

White Hat has been sued by some of its own schools, and critics keep pointing to the poor grades most of the schools get on annual report cards.

White Hat’s president Tom Barrett says people need to stop picking on for-profit operators.

“We’re not greedy money-hungry people,” Barrett says. “We’re in this for the students; we’re in this certainly for the community, and we’re in this for our employees as well.”

White Hat is a privately held company.  It does not have to publicly disclose profits, losses or revenue. Barrett won’t reveal any details, but he says White Hat does not make much, nor are profits its top priority.

White Hat-managed schools received more than 84-million dollars from the state last year. But ten of those schools suing say even they can’t figure out where the money is going.

According to the lawsuit, White Hat gets at least 95 percent of the schools’ funding. It also owns everything from computers to student files.

White Hat hires, fires, buys textbooks and supplies.

School board members say they can’t even track what they are paying White Hat in management fees.

Kurt Minson is the board chairman for two White Hat schools in the Akron area that are involved in the lawsuit. He says taxpayers have a vested interest in this case, “because [the schools] were slated and structured as private organizations. Once the money goes into the black box, there was no scrutiny from the outside even though these were public dollars.”

Minson says that would not have bothered him, if he felt like students in his schools were getting a good education.

He did not.

“We saw a lot of strategies put in play that tried to lessen the cost of educational delivery on a couple of different points,” Minson says. “And that really gave us the vision that the number one priority of profit was in direct competition at times with educational delivery.”

Minson says the schools wanted to break away from White Hat, but Ohio law says if a school board has a problem with a management company, that company can fire and replace the school board, not the other way around.

April Hart is the lawyer representing the school boards. She says that law “is the switch around of the employee running the employer and because of that there was really no way out of the management contract.”

Hart says White Hat has yet to comply with a judge’s order in August to open up its books to the school boards.

White Hat President Tom Barrett says “both sides are aggressively working to resolve this amicably and quickly.”

In its court responses, White Hat dismisses most of the claims, saying it complies with everything Ohio law demands.

Barrett also dismisses complaints about his schools’ academic successes.

No Ohio White Hat school earned higher than the equivalent of a C on the state report cards. Most are in academic watch or emergency.

Barrett says that’s because White Hat has taken on a big challenge: his schools, like many other charters, target students who are failing in traditional schools. He says that means many of their sixth grade students come into their schools already several years behind grade level, “but when you are testing on the state test, that sixth grader is required to take the same test as everybody else. Of course we’re going to do bad.”

White Hat’s Life Skills schools are designed for students have dropped out of school entirely.

Students like 19-year-old Dante Mills work individually at computers. A tutor in the room provides support, but there’s no black board and no joint curriculum.

Mills sits at a computer with rap blaring into his ear buds. He’s reading about bio-science. When he’s done with the section, he takes a quiz online. If he passes, he can move on to the next question, and if he has any questions he can consult his teacher.

Mills hopes to graduate this winter.

His sister also went to Life Skills Akron. The school’s director, John Stack, says she failed math on the Ohio Graduation Test 13 times before transferring here. She failed again, but after one-on-one tutoring, she passed and graduated last year.

But lawyer April Hart says White Hat’s problem isn’t tough students. She argues it’s a teaching method that relies on computer instruction – a model she says is good for profits but not students.

“If you don’t care at the end of the day what’s going on in the school as long as your enrollment numbers are up, you’re going to have a problem in a for-profit situation,” says Hart.

Hart blames the state for not overseeing these schools closely enough.

“The Ohio Department of Education and the state of Ohio has to put more accountability in place for the operator,” she says. “If they’re going to make money, that is fine. But they have to deliver a product.”

But proponents of the for-profit school operators say the law of the market place argues they are doing a good job. If they weren’t, customers would go elsewhere and they would be out of business.