School supporters. You see Forbes is not a friend of unions, teachers or public
education but it they recognize that Charters are around to solely make money
for their investors then hopefully more of the public will too.
parent/teacher driven laboratories of learning free of often burdensome red
tape. The reality of charter schools however is vastly different; instead they
have become publically funded private schools whose bottom line is profit not
educating our children and for the most part they are doing a pretty poor job.
From Forbes Magazine by Addison Wiggin, On Thursday, July 25, dozens of
bankers, hedge fund types and private equity investors gathered in New York to
hear about the latest and greatest opportunities to collect a cut of your
property taxes. Of course, the promotional material for the Capital
Roundtable’s conference on “private equity investing in for-profit education
companies” didn’t put it in such crass terms, but that’s what’s going on.
are now more than 6,000 in the United States, up from 2,500 a decade ago,
educating a record 2.3 million children,” according to Reuters.
policy, and the applications can be as complex as those at private schools. But
the parents don’t pay tuition; support comes directly from the school district
in which the charter is located. They’re also lucrative, attracting
players like the specialty real estate investment trust EPR Properties EPR -0.25% (EPR).
Charter schools are in the firm’s $3 billion portfolio along with retail space
and movie megaplexes.
for politicians to reward their cronies. In Ohio, two firms operate 9% of the
state’s charter schools and are collecting 38% of the state’s charter school
funding increase this year.
from the companies of board members or administrators, including textbooks, air
conditioning repairs and transportation services.” Most charters were exempt
from a requirement to seek competitive bids on contracts over $5,000
industry flooded legislative candidates with $1.8 million in donations last
year. “Most of the money,” reports The Miami Herald, “went to
Republicans, whose support of charter schools, vouchers, online education and
private colleges has put public education dollars in private-sector pockets.”
equity firm Apollo
Group APOL -0.19%,
the outfit behind the for-profit University of Phoenix, which has experimented
with online high schools. Apollo dropped $95,000 on Florida candidates and
schools are a “Republican” thing, they’re also favored by big-city Democrats.
This summer, 23 public schools closed for good in Philadelphia — about 10% of
the total — to be replaced by charters. Charters have a history in Washington, D.C., going back to
when he ran Chicago Public Schools. Today, he’s the U.S. secretary of education.
In 2009, Duncan rolled out the Obama administration’s “Race to the Top”
initiative, doling out $4.4 billion in federal money to the states — but only
to those states that lifted their caps on the number of charter schools.
don’t learn any better than those in plain-vanilla public schools. Stanford University
crunched test data from 26 states. About a quarter of charters delivered better
reading scores, but more than half produced no improvement, and 19% had worse
results. In math, 29% of the charters delivered better math scores, while 40%
showed no difference, and 31% fared worse.
consider charter schools can pick and choose their students — weeding out
autistic kids, for example, or those whose first language isn’t English.
Charter schools in the District of Columbia are expelling students for
discipline problems at 28 times the rate of the district’s traditional public
schools — where those “problem kids” are destined to return.
charters spend taxpayers’ money more efficiently. Researchers from Michigan
State and the University
of Utah studied charters in Michigan, finding they spent $774 more per
student on administration, and $1,140 less on instruction.
well is limit the influence of teachers’ unions. And fatten their investors’
makes charter schools so lucrative: Under the federal “New Markets Tax Credit”
program that became law toward the end of the Clinton presidency, firms that
invest in charters and other projects located in “underserved” areas can
collect a generous tax credit — up to 39% — to offset their costs.
to a 2010 article by Juan Gonzalez in the New York Daily News, “that a
lender who uses it can almost double his money in seven years.”
It’s not only wealthy Americans making a killing on charter schools. So are
foreigners, under a program critics call “green card via red carpet.”
“Wealthy individuals from as far away as China, Nigeria, Russia and
Australia are spending tens of millions of dollars to build classrooms,
libraries, basketball courts and science labs for American charter schools,”
says a 2012 Reuters report.
The formal name of the program is EB-5, and it’s not only for charter
schools. Foreigners who pony up $1 million in a wide variety of development
projects — or as little as $500,000 in “targeted employment areas” — are
entitled to buy immigration visas for themselves and family members.
“In the past two decades,” Reuters reports, “much of the investment has gone
into commercial real estate projects, like luxury hotels, ski resorts and even
gas stations. Lately, however, enterprising brokers have seen a golden
opportunity to match cash-starved charter schools with cash-flush foreigners in
investment deals that benefit both.”
So how can you, as a retail investor, grab a piece of this? How can you
reclaim some of your property tax dollars from the fat cats?
As with many other instances of “extraction”… good luck.
Sure, you could buy shares of the aforementioned EPR Properties.
Unfortunately, you’re buying strip malls and ski parks along with charter
schools. It’s not a “pure play.”
The history of publicly traded charter school firms is limited and ugly.
Edison Schools traded publicly from 1999-2003. During that period, it reported
one profitable quarter. Shares reached nearly $40 in early 2001… only to crash
to 14 cents.
“There’s a risk to taking education to Wall Street,” says Education Week
— “one that helps explain why so few publicly traded companies cater to the
educational needs of students in elementary, middle and high school.”
That risk is spotlighted by the only pure play currently trading on a U.S.
exchange. In December 2007, just as the “Great Recession” got underway, K12
Inc. went public under the ticker symbol LRN.
It has proven, at best, a trading vehicle.
Share prices hit nearly a four-year low in December 2012 when The New
York Times published an expose on a K12 online charter school venture.
Nearly 60% of its students are below grade level in math, and 50% in reading.
One-third don’t graduate on schedule.
The story also revealed CEO Ronald Packard collected a salary in 2011 — $5
million — nearly double that of the previous year. And that his bonus is linked
not to student performance, but to enrollment.
It’s a lot easier to escape this sort of scrutiny if your charter school
venture is privately held — or, in the case of EPR, mixed in with other
ventures that have nothing to do with education.
Well, I tried.
“I spend a great deal of time, money and resources looking for new
investment ideas that you, dear reader, can act on independently,” I wrote in
my Apogee Advisory, early in 2012… “Sometimes what I find instead is
For now, the big money in charter schools is confined to those on the
inside. In late 2010, Goldman Sachs announced it would lend $25 million
to develop 16 charter schools in New York and New Jersey. The news release said
the loans would be “credit-enhanced by funds awarded by the U.S. Department of
Education.” Of course.