I have a very strange question about charter school operators

Is there ANYTHING in a charter contract that prevents the operator from taking the school private?

I just had this really weird thought. A charter is a school that gets public funding, but is run by a private company. Thanks to Bush's and Obama's love of charters they are getting quite a bit of money--more, possibly, than a similar public school.

Omni Educational Products gets a contract to run all the schools in Centerville. Acme is a for-profit corporation. They wrote profit expectations into their contract. Omni gets all of Arne Duncan's supplemental money for several years. Come May 2015, Omni has a press conference and announces that since the contract with the schools has not met Omni's profit expectations, they are cancelling the contract, taking the school system private, and any Centerville parent who wants to send their child to an Omni school can come up with $5000 per year, per child.

Is this something that could happen, and are there any ways to stop it?

Single parents would have a very hard time homeschooling, a lot of parents just don't WANT to do it even if they could, you'd have a percentage who think the Bible is a math book, and a group of parents who banded together to have their children "home schooled" could very well be declared a school then be required to meet all the requirements of a school--certified teacher(s), certain amount of space for athletics, certain amount of restrooms...

just a scenario created by the poster. A scenario that can never happen, btw.

(Though I agree, homeschooling rocks!!)

lose that fight in court. CPS would destroy a management company that tried to pull that. They are basically renting public property. Canceling a contract and appropriating the buildings and materials for yourself is theft. What they would be more likely to do is pull out completely and leave the school an empty shell, possibly without teachers or materials. The charters I'm familiar with have contracts to hire teachers and use proprietary curriculum. If they pull out they will take the curriculum with them and it is unclear what they will do with the teachers. That's a far bigger problem.

Chicago has NO shortage of empty buildings, though, and you can pick up cubicle partitions (or install fireproof curtain walls) and industrial heating systems fairly cheap. I think it would be totally within the realm of possibility for a charter company (especially one that had quite a bit of money behind it, like a defense contractor looking for tax loss) to buy a bunch of warehouses, install partition walls then just say "all your school are belong to us--give us money or teach your kids at home."

We bought a building from a local community college - so it was already in use as a school and was up to code - by college standards. It still cost us over 100K to upgrade the sprinkler system alone. I'm not sure if that's because the new building use was for students under 18 or if it was because the old tenants were grandfathered in and didn't have to get it up to that code.

Retrofitting sprinklers, plumbing, etc. is very expensive in existing construction because there's more work involved. I put hot water in two places in my old shop. One was in the "office" side of the plant. It took us three days to run PEX, which is very quick to install, from the water heater closet to the restroom. (Whoever was in that place before never plumbed it for hot water.) We needed to run another line across our factory floor. It was a longer run and we ran galvanized pipe, but that drop took half a day.

For most people building a school from scratch would be prohibitively expensive. I was thinking someone like Tyson--they have money, and their company is faith driven. (Go to http://www.tyson.com/Corporate/AboutTyson/CompanyInformation/CoreValues.aspx and read the third lines in "what we do" and "how we do it.")

I don't think they're in the business of schools, are they?

Tyson is a food company--specifically meats of all kinds. They sell fresh chicken and pork, plus cooked chicken, beef and pork.

But what's stopping them from going into the business? It would be a good place to pick up some tax loss, if nothing else--and the sick thing is, some people actually open businesses with that in mind. You use a lossy business to offset a really profitable one. Admittedly their core business is NOT highly profitable--no one ever went into the grocery business to get rich--but they could use a little loss, right?

they might start a private school if they were interested, or even try to sponsor a "charter school" - but there are certain guidelines and laws - you can rest easy.

dictates what happens. CPS seems to drive a hard bargain. My wife works in several schools in the city and one of them is run by a charter management firm, but the teachers are all unionized and CPS employees. CPS demanded that much in order for the contract to go through (as far as I know, and that is very little). With multiple companies competing for these schools, as long as the local district drives a hard bargain then I don't think these doomsday scenarios are possible. But that's only true so long as the district has the upper hand.

In Indiana, where the governor and head of the department of ed. are so eager to sell off the schools, the recipe for disaster is much more spicy. Mitch Daniels was a Manchurian candidate for the wholesale privatization of public resources. He seems to be doing everything he can to undermine the leverage local school districts have to protect themselves from poaching and perhaps a hostile takeover.

"A charter is a school that gets public funding, but is run by a private company. "

This is true for some (most) but not all charter schools - it's not inherent to their structure. Some are run by public state employees, no private company involved whatsoever - the equipment, facilities, etc. are owned by the state like any other school district.

For the ones which are privately owned and operated, I imagine they could use tax dollars to fund private facilities (like a church taking tax funds to run a charity - in effect using tax dollars to expand their church building). Seems like the state should have their name on any building mortgage and equipment bought should be state property to remove any incentive/ability of a company to use charters as a scheme to acquire private assets.

"Private companies" - that is a myth.

No, charters are NOT "getting more money than a similar public school"

Omni does not "get all of the suppemental money"

Here's some info for ya -

77.5% - are run by local "mom&pop" independents - teachers, parents, educators, local businessmen/women..
10.5% - are run by EMO's - Education Management organizations. These are the "for-profits" that MANAGE schools (And the ones you hear so much about even though there are so few.)
12.0% - are run by CMO's - Community Management organizations. These are NON-profits that MANAGE schools.


Education laws vary from state to state so I cannot state definitively that I've researched EVERY state. However, it is my understanding that generally speaking there are certain aspects that are typical of all charters.

First off - the EMO (educational management company - a forprofit organization) is NOT theh "owner" of the school. The school has contracted with them for certain services. So if the management contract is terminated, they just don't get paid. The charter school can then hire another management company - for- or non-profit, or decide to run it themselves. In no way can the management company "take over" the school.

BTW - did you know that some traditional public schools are run by management companies? ?


********

Funding for Charter Schools
As public schools, charter schools are funded through a combination of federal, state, and local tax dollars. Different than non-charter public schools, though, charters have the freedom to determine how to spend their funds – in exchange for being held accountable for their academic, fiscal, and operational results.

There is wide variation from state to state, though, in how the funding of charter schools actually works. Some of the most serious funding problems involve restrictions on the use of funding by charter schools, delays in payments to charter schools, and forcing charter schools to pay for their facilities out of their operational budget.

What is consistent across the country – and most problematic – is that public charter schools receive significantly lower funding than non-charter public schools. According to a recent study, the average public charter school receives $1,800 per pupil, or 27.1 percent, less than what the average non-charter public school receives. For an average-sized charter of 250 students, the total funding difference is $450,000. http://www.publiccharters.org/node/44

********

In re that approximately TEN PERCENT (yeah, 10%) of all charter schools are run by "for-profit" agencies. There are a number of restrictions on them:

From the IRS:
When considering exemption with respect to charter schools that have contracted with
for-profit entities for management services, the Service is particularly interested in whether
the charter school board remains in control and continues to exercise its fiduciary
responsibility to the school. The board may not delegate its responsibility and ultimate
accountability for the school's operations to a for-profit management company without raising
the issue of whether the organization is operating for the private benefit of that company. The
following discussion highlights some of the factors the Service considers when looking at a
charter school application and discusses the concerns regarding independence of the board of
directors and the arms-length negotiation of contracts.

A. Independent Board of Directors
A charter school board of directors composed of parents, teachers and community leaders
provides structural independence. A board appointed or dominated by a comprehensive
management company raises questions as to whether the school will be operated for the benefit
of the management company. In considering exemption under IRC 501(c)(3), the Service
looks to whether a structurally independent board is involved in active oversight of the school’s
operations or whether the board has delegated its duties and responsibilities to the management
company.
To establish active oversight, the Service evaluates all the facts and circumstances. A
board must show that it is not a front for the benefit of the management company. While it is
impossible to specify every duty and responsibility a board should undertake, the following are
some indicia of independence:
(1) Regular Meetings -more-
(2) Conflict of Interest -more -
(3) Oversight - more-
(4) Fiscal Responsibility - more -

B. Arm’s Length Negotiation - more-

C. Contract Terms - more -
(5) Compensation
Management company fees must be reasonable and commensurate with the services
provided. A management fee structure should not be based on total income (i.e., all fees, grants,
contributions, and unusual receipts). Compensation should not be above the market rate
generally charged for the service provided. This can be established through evidence of
comparative shopping for services.

http://www.irs.gov/pub/irs-utl/topicj00.pdf


****