Equity & Adequacy. The Ohio Coalition for

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1 The Ohio Coalition for Equity & Adequacy Of School Funding William L. Phillis, Executive Director, 100 S. Third St., Columbus, Ohio (614) , (614) fax, Dr. T. Richard Murray, Chair, 205 N. 7 th Street, Zanesville, OH (740) , (740) , richard.murray@mvesc.org Testimony on House Bill 2 House Education Committee March 9, 2015 William L. Phillis, Executive Director Ohio Coalition for Equity & Adequacy of School Funding Mr. Chairman, members of the committee, I am William L. Phillis, Executive Director of the Ohio Coalition for Equity & Adequacy of School Funding. This is my 57 th year of work in public education in Ohio as a teacher, principal, superintendent, Assistant Superintendent of Public Instruction and Executive Director of the Ohio Coalition for Equity & Adequacy of School Funding. The gist of my testimony is that House Bill 2 (HB 2) reaches only the tip of the iceberg of the accountability and transparency that is required in the charter school industry. HB 2 needs to be greatly expanded to bring this largely unregulated enterprise under control for the benefit of students and taxpayers. In a February 22, Cleveland Plain Dealer article, State Auditor David Yost is quoted, I don t think that what needs to happen is on the table yet. I agree. School districts are highly regulated and for good reasons: Parents should have a guarantee their children are situated in a safe and educationally-rich environment; and taxpayers need to be assured the school funds are used effectively and efficiently. Regulations are often cumbersome and, typically, require some bureaucratic encumbrances but are highly desirable for the protection of students and taxpayers. The unregulated charter industry in Ohio is the reason for the financial fraud and dismal education results in a substantial sector of this privately-operated enterprise The regulations that the traditional districts are under have evolved in Ohio since These statutes, administrative codes and judicial edicts were handed down over time to correct problems such as nepotism; favoritism; conflicts of interest; financial fraud; abuse of legal rights; segregation; suspension and/or expulsion of students without due process; arbitrary exclusion of certain types of students, such as children with disabilities from a public education; school business being conducted out of public view; closed records; inaccurate student accounting; faulty fiscal accounting; felons serving in the system; requirement of being an 1

2 elector for those serving on school governing boards; parental withholding of their children from schooling, etc. When the charter industry was initiated in Ohio, a significant number of these time-honored protections for school employees, students and taxpayers were eliminated in the deregulation process. Charters were exempt from hundreds of regulations. (The Legislative Service Commission publication Education Laws and Community Schools, Volume 129, Issue 6, November 20, 2012, chronicles the requirements which charter schools are subjected to and those which they are not.) The zeal to rapidly implement and expand education choice overshadowed the state s responsibility to protect students, employees and taxpayers. When parents release their children to charter, they forfeit many of the protections their children are afforded in the traditional system. In fact, their children can be excluded from or expelled from charters without due process. Charter choice without accountability can, and does hurt vulnerable children. The $10.9 million pilot program in 1999, without any evidence to warrant expansion, turned into a $50 million project the second year and is now a billion dollars annual industry. In total, more than $7 billion have been deducted from school districts for the operation of this charter experiment from 1999 through this school year. Appendix A shows the total school funding and charter school deductions of each year since A record of the revenues that have flowed to two of the largest for-profit management companies is included in Appendix B. One charter operation has received over $1 billion for a mostly D-F operation. The deregulated charter industry and lack of enforcement of those regulations that the industry is subjected to, invite fiscal fraud, nepotism, and, on the average, low state report card grades. Some examples of irregularities that permeate the charter industry as depicted in news releases, news articles, editorials and other public statements are: Founder of closed charter schools is accused of robbing near east side home Feb. 12, 2015 Columbus Dispatch FBI raids 19 Gulen charter schools, including three in Ohio and the Concept Schools management company Search warrant reveals details of FBI raids of Concept Schools Cheating and sex scandals in Gulen charter school exposes Ohio s weak charter school oversight Concept Schools hired felon, unqualified Headline: Gulen Movement woos U.S. Congressmen with donations and free trips Daily Sabah Headline: Exclusive: FBI whistleblower and teacher expose Islamic Gulen Movement infiltrating U.S. through charter schools (Interviews Ohio taxpayers provide jobs to Turkish immigrants through charter schools 2

3 Imagine Schools Columbus Primary Academy, a charter school of about 150 students, paid $700,000 in rent for one year to a subsidiary of Imagine Schools A federal judge in Missouri ordered Imagine Schools to pay nearly $1 million for forcing a lucrative lease agreement on a school it operated Records of Gateway Academy charter school not auditable Ohio adds two charter schools to misconduct inquiry Ohio is the Wild, Wild West regarding charter schools State Auditor: Charter school head count much less than students reported for payment Robert H. Crosby, Salem, MA, businessman, Ohio is the profit-making EMO (Education Management Organization) capital of America. National report slams performance of Ohio charter schools Charter school board: High-priced lease disservice to school Former charter school leader gets plea deal in $148,000 scam Columbus charter school part of expanded state investigation Ohio Virtual Academy graduation rate is 36.6% in four years $554 million in charter school property eligible for tax exemption Attendance questioned at charter school The Columbus Dispatch editorial Where are the students? Buckeye Online School for Success, with approximately 600 students, paid $185,000 in one year for advertising Turkey revokes passport of exiled Muslim cleric, Fethullah Gulen, living in Pennsylvania (Horizon Science Academies and Noble Science Academies are associated with Gulen) Headline: Popular ECOT poor performer Headline: Akron schools make private and charter students walk too far, must spend another $1 million White Hat Management claims ownership of the physical assets that were purchased with public money State Auditor: half of all misspent tax dollars statewide were in Ohio charter schools 92 percent of charter schools received a D or F on the 2014 report card compared with 64 percent of the traditional urban public schools St. Aloysius Orphanage, which sponsors 53 charter schools, sublets its sponsorship duties to a private company Headline: From Excellence to Failure: 7 High-Performing Districts lose $10 million The cost of administration of charters is twice as high as school districts Yost pushes law to bar felons from charter boards (State Auditor Yost) Revelations regarding the failed charter school experiment are not new. For example, nearly ten years ago, Scripps Howard News Service counted students entering certain charter schools, finding absentee rates as high as 64 percent. (The State Auditor recently released a report with similar findings.) Scripps Howard News Service published a report of their findings (Ghost Schools) but it did not result in anyone being held accountable or any changes in state policy. 3

4 The Ohio version of the charter industry has inherent inefficiencies affecting taxpayers and reduces educational opportunities for students choosing to remain in the districts. The state encouraged and demanded school district consolidation from the beginning of formal public schooling in Ohio to foster financial efficiencies and increase the breadth and depth of educational programming. In 1900 there were 10,000 one-room schools and more than 3,500 school districts in Ohio. Today there are 613 school districts and no one-room traditional public schools in operation; however, the state has permitted the formation of nearly 400 new school agencies in the form of charter schools since years of Ohio school consolidation history has been mocked by the formation of these new entities. Many school districts cannot reduce the cost of district educational programs and services due to the loss of students to charter schools; however, they lose funding for each charter student. Brick and mortar charter schools result in the duplication of facilities and business operations. This duplication creates gross inefficiencies in the provision for education. The original notion of the charter schools was to allow teachers and parents to form an innovative, creative educational program under a charter granted by the district board of education. Charter schools were supposed to be small incubators of innovation and creativity designed to inform traditional public schools. This idea was hijacked by numerous interests, including the for-profit charter school sector. Charter schools have become competitors of the traditional public system. The charter industry is essentially a counterfeit of the public common school. It is unlikely that the original purpose of the charter school industry will be restored due to powerful choice forces; however, some serious statutory changes are required in addition to those included in HB 2. A complete systematic overhaul of the charter regulations is required. The task of overhauling charter school policy and monitoring the charter industry calls for an ongoing legislative research and study commission comprised of legislators equally divided between the two parties. Had such a commission been implemented 15 years ago, there would have been ongoing charter policy reform. Instead, a horrific debacle has emerged in this industry. Appendix C is a suggested amendment to establish the Legislative Office to Research Vouchers and Charter Schools. The ultimate solution to this colossal problem is simple: subject all schools that operate in full or in part on public money to the same rules and require public governance. Meanwhile, some recommended additions to HB 2 are: Fund charter schools with an appropriation separate from the foundation program without diminishing support for school districts Clarify that real estate and other physical property purchased with public funds are public property. 4

5 Prohibit for-profit management companies from operating in Ohio. For-profit operators could restructure and operate as a 501 (c) 3 non-profit. For-profits remove funds from the classrooms. Require background checks for charter school sponsors and operators. Require that members of charter school governing boards file full financial disclosure reports and identify any potential conflicts of interest, relationships with management companies, or other business dealings with the school, its management company, or other charter schools. Require online access to minutes from charter school governing board meetings, the school s policies, information about staff, instructional strategies, curriculum, school rules and behavior codes, school budgets, and information about management companies or other large contracts. Make charter schools and all authorizers subject to state law regarding freedom of information, public records, and public meetings; create specific and escalating sanctions for schools that fail to comply. Require complete contracts for management services to be electronically posted on the schools websites within ten days of execution. The posting should include detailed information about the services to be provided by the management company and all financial commitments and compensation, as well as all fees and bonuses to be provided to the management company. Require full public financial disclosure by charter management organizations of their expenditures and profits related to the operation of each school they serve. Prohibit any one with a financial relationship to a management organization or the staff of any authorizing agency from serving on the governing board of any charter school. Require the Ohio Auditor of State to audit the full operations of both charter school sponsors and operators at least every other year, regardless of corporate structure, and audit charter schools after their first year of operation, then every two years thereafter Require charter school sponsors and operators to produce reports outlining how they are spending taxpayer money, regardless of the organizations corporate structure Require charter school operator performance reports on the state s Community School Annual Report Require that if a charter school is rejected by a sponsor, neither it nor any similar facsimile of it, can apply to another sponsor until a full school year passes. Require the adoption of charter authorizer standards modeled on national standards to ensure only the best, most diligent organizations, with expertise in delivering education services, sponsor charter schools. Require that any teacher evaluation requirements must apply to all teachers equally, regardless of school type Require that charter school sponsors have enough fiduciary responsibility to be able to re-pay the taxpayers of Ohio if any charter school they sponsor closes prior to the end of the academic year. Those repayments should be returned to the districts from whence the closed charter s children came. 5

6 Require that charter schools carry enough insurance to be able to re-pay the state for what an average charter school of its size and type would collect in a year. Those insurance payments should then be returned to the districts from whence the closed charter s children came Require that charter schools, their sponsors and operators should meet the same public records and open meetings requirements and notifications as every traditional public school has to do, including informing the media about charter school board meetings and making public the names of charter school board members. Require the charter school board members to be U.S. citizens and qualified electors. Several of these recommendations were included in legislation introduced in 2006 by then- Representative Scott Oelslager and then-senator Kirk Schuring (HB 213 and SB 129). Unfortunately these bills were not enacted. State officials have known about flaws in the charter school law but have chosen not to correct them. Much more could be said about this matter but the time constraints do not permit such. That is why it is imperative that the legislature establish a committee to research choice programs. 6

7 Appendix A School district funding and charter school deductions since 1999 TOTAL FOUNDATION FUNDING FY 90 $2,832,941,541 FY 91 $2,945,758,626 FY 92 $2,937,792,352 FY 93 $3,058,530,975 FY 94 $3,068,396,921 FY 95 $3,189,596,974 FY 96 $3,369,791,323 FY 97 $3,477,577,979 FY 98 $3,737,739,199 TOTAL FOUNDATION FUNDING AFTER COMMUNITY SCHOOL DEDUCTION COMMUNITY SCHOOL DEDUCTION FY 99 $4,235,083,815 $4,224,098,794 ($10,985,021) FY 00 $4,482,790,766 $4,431,131,863 ($51,658,903) FY 01 $4,831,396,174 $4,739,511,098 ($91,885,076) FY 02 $5,325,730,297 $5,186,788,597 ($138,941,700) FY 03 $5,640,649,972 $5,436,918,553 ($203,731,419) FY 04 $5,795,376,841 $5,494,237,362 ($301,139,479) FY 05 $5,956,600,281 $5,534,864,143 ($421,736,138) FY 06 $6,087,991,590 $5,606,432,174 ($481,559,416) FY 07 $6,147,709,219 $5,617,126,761 ($530,582,458) FY 08 $6,457,640,481 $5,872,711,285 ($584,929,196) FY 09 $6,635,286,811 $5,988,782,261 ($646,504,551) FY 10 $6,536,792,132 $5,856,347,304 ($680,444,828) FY 11 $6,514,716,126 $5,791,435,462 ($723,280,663) FY 12 $6,268,418,459 $5,491,803,850 ($776,614,608) FY 13 $6,318,597,076 $5,489,193,437 ($829,403,640) FY 14 $6,604,012,740 $5,688,768,674 ($915,244,066) FY 15 $5,901,323,239 $4,955,643,572 ($945,679,667) as of Feb. 27 FY 15 ODE report 7

8 Appendix B School district revenue received by two of the largest for-profit charter school operations since they were started Electronic Classroom of Tomorrow 2004 $28,768, $38,139, $39,762, $44,540, $50,475, $57,233, $59,990, $67,510, $78,860, $80,581, $99,287, $103,265, $748,416, Ohio Virtual Academy 2003 $5,524, $10,086, $14,424, $16,915, $20,713, $29,819, $42,152, $47,833, $58,693, $72,764, $69,685, $84,972, $75,369, $548,955,

9 Appendix C Legislative Office to Research Vouchers and Charter Schools Purpose The committee shall study and make recommendations regarding the role of voucher programs and charter schools in the context of the state s constitutional responsibility to secure a thorough and efficient system of public common schools, the educational opportunities currently provided in the voucher programs and charter schools, the cost-effectiveness of high quality educational opportunities in these education settings and the effects of these programs on the education of students in traditional public school districts. The committee shall study all policies related to these programs and make recommendations. Appropriation FY 2016 FY 2017 The foregoing appropriation shall be used to meet the expenses of the Legislative Office to Research Voucher Programs and Charter Schools to research the effectiveness of charter schools and vouchers programs, determine the actual cost of such programs, assess the effects of such alternatives on the students attending traditional public schools and make recommendations to ensure that students who attend such choice programs are afforded high quality education programing in a cost-effective manner. The committee shall consist of six members of the Senate and six members of the House of Representatives. Not more than three members from either the House of Representatives or Senate shall be of the same political party. Within 30 days of the effective date of this bill, the Speaker of the House and President of the Senate shall make the appointments from their respective chambers. The committee may employ such consultants, experts, and other personnel it deems necessary to perform its tasks. The committee shall have all the powers of committees of the General Assembly as provided by law and the rules of the General Assembly. In meeting its responsibility, the committee shall conduct hearings at various locations in the state and may appoint a citizen advisory committee to assist it. The committee shall report its findings and recommendations, including specific legislative proposals, to the 131st General Assembly by July 1, 2016 and by July 1, each even year thereafter. 9