Are Charter Schools the New Subprime Mortgages?

A new study warns that we may be headed towards a charter school *bubble*…

sad bubbleEduShyster: It’s unusual to see the words *hair-raising* and *academic study* in tandem, but your new study merits that marriage. You and your co-authors make the case that, just as with subprime mortgages, the federal government is encouraging the expansion of charter schools with little oversight, and the result could be a charter school *bubble* that blows up in urban communities. Do I have it right?

Preston GreenThe problem of subprime mortgages began in part because the government tried to increase homeownership for poor people and minorities by enabling private entities to offer more mortgages without assuming the risk. Under the old system, the mortgage originator was still at risk if the mortgage went into default. With subprime, they were able to spread that risk by selling the mortgages on the secondary market. You had all these mortgage originators that could issue more mortgages without careful screening because they no longer had skin in the game. Now how are charter schools similar to subprime? In the charter school context, charter school authorizers are like mortgage originators.

EduShyster: There’s a great moment in the new movie The Big Short when Selena Gomez turns to the camera and explains to the world what collateralized debt obligations are. Here’s your opportunity to do the same, but for the convoluted world of charter school authorizing.

big shotGreen: Promoters of charter school expansion are calling for an increase in independent authorizers, such as nonprofits and universities. Supporters of charter school expansion believe that multiple authorizers will issue more charters, in part, because they are less hostile to charter schools than school districts. However, our research suggests another reason that multiple authorizers result in more charter schools: multiple authorizers are like mortgage originators with no skin in the game. In other words, these authorizers don’t assume the risk of charter school failure. That means that if something happens with the charter school, the authorizers don’t have to clean up the mess. Multiple authorizers may also weaken screening by giving charter schools the chance to find authorizers who *won’t ask questions.* In fact, CREDO has found that states with multiple authorizers experienced significantly lower academic growth. CREDO suggested that this finding might be due to the possibility that multiple authorizers gave charter schools the chance to shop around to find authorizers who wouldn’t provide rigorous oversight.

EduShyster: Your paper raises the spectre that a charter school *bubble* may be forming, particularly in urban areas where these schools are expanding the most rapidly, and often with the least oversight. Can you explain how a charter school bubble would form? And how can I bet against it?

Bubble-BurstingGreen: There is an intense push to increase the number of charter schools in Black, urban communities, where they’re very popular because of the dissatisfaction with traditional public schools. Because of this desire for more educational options, these communities are more likely to support policies that could lead to charter school bubbles forming. In fact, I would argue that we are at *Ground Zero* for the formation of such bubbles. Supporters of charter schools are using their popularity in Black, urban communities to push for states to remove their charter cap restrictions and to allow multiple authorizers. At the same time, private investors are lobbying states to change their rules to encourage charter school growth. The result is what we describe as a policy *bubble,* where the combination of multiple authorizers and a lack of oversight can end up creating an abundance of poor performing schools in particular communities.

EduShyster: What’s fascinating and frankly disturbing about your research is how well the subprime analogy fits, down to the edu-equivalent of predatory lending practices in particular communities. But it seems important to point out that these bubbles have their origin in worthy policy goals, like increasing home ownership, or sending more kids to college. Who would be against that?

choiceGreenWho would be against that? That’s the power of the choice argument. Folks in poor communities and Black, urban communities obviously want better opportunities for their kids. And I don’t blame them for really pushing for better options. But I do feel that there are people taking advantage of their desire to get better opportunities by pushing forward more options for charters without ensuring that these schools are sufficiently screened. The argument that I hear all the time that drives me crazy is that *obviously this is a good choice. Look at all the parents who are standing in line.* That’s just evidence that people want a better education. That doesn’t mean that they’re actually getting it. What I’d love to see happen is that we have programs and oversight in place to ensure that their choices have meaning. I’m afraid that we’re going down a path right now where we may not be setting up those mechanisms to provide those assurances.

The argument that I hear all the time that drives me crazy is that *obviously this is a good choice. Look at all the parents who are standing in line.* That’s just evidence that people want a better education. That doesn’t mean that they’re actually getting it.

EduShyster: You make a provocative argument that what could ultimately cause the charter bubble to burst in these communities is lawsuits, including those filed by parents against charter schools on civil rights grounds. Explain.

Green: You’re already starting to see that happen. In New Orleans, for example, charters have been sued for failing to provide students with disabilities with an education. This is such a problem that the US Department of Education issued a guidance letter last year reminding charter schools that if they receive federal money, they also have to comply with federal statutes such as Section subprime3504 or Title 6. You may also start seeing state constitutional challenges, like we saw in Washington state. Where I see this playing out is that if you have too many charters or options that aren’t public having a negative impact on the education system as a whole, you may start seeing challenges in these communities saying that the state is failing to provide children with a system of public education, or that the options provided aren’t of sufficient quality to satisfy the state’s obligation to provide a public education. The assumption is that if kids fail to get an education in a charter school they can return to the traditional system. But what happens if you don’t have that option? You may soon see that develop in all of these urban settings. The really scary scenario that I could see happening is that you end up with all of these options that aren’t traditional public schools with insufficient oversight by the authorizers and no real pressure to get these schools to perform well.  

Where I see this playing out is that if you have too many charters or options that aren’t public having a negative impact on the education system as a whole, you may start seeing challenges in these communities saying that the state is failing to provide children with a system of public education, or that the options provided aren’t of sufficient quality to satisfy the state’s obligation to provide a public education.

EduShysterThe paper ends with some very helpful suggestions about steps that might be taken to avert a charter school bubble. Since the subprime mortgage crisis taught us that your advice will be completely ignored, I want to give you the opportunity to share here.

Green: If we’re going to have multiple authorizers, we have to impose standards to ensure that they do a good job, because without those standards there is really no incentive for them to ensure that these schools are operating in an acceptable manner. I should also mention putting sanctions in place to prevent the really squirrely practice of *authorizer hopping,* where schools are closed by one authorizer and then find another authorizer, which has happened quite a bit in places where oversight has been really weak, like Ohio. Further, authorizers should guard against predatory chartering practices, including fining students for discipline violations.

EduShysterAs someone who predicted the subprime crisis (who didn’t???), I’m going to go out on a limb and predict how this paper will be received. You, sir, will be characterized as an *anti-charter ideologue.* Is that an accurate description?

GreenI used to be much more pro charter than I am now. I was really, really, really pro charter. I see my research as explaining the systems aspect of charters. I look at how these schools fit into the system of public schools, and at what terms like *public* and *private* mean in terms of oversight and student rights. This particular paper lays out how instances of fraud and mistreatment of students can happen systematically—how they’re embedded in the system and not just examples of rogue charter school operators.

GreenPreston Green is the John and Carla Klein Professor of Urban Education at the Neag School of Education at the University of Connecticut.


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  1. Jennifer,

    This article/interview above touches on the latest developments in Adelanto California, where a couple years ago took place the nation’s first and only “successful” implementation of the controversial “Parent Trigger” takeover of an existing public school.

    It’s a long story, but worth the read (as it ultimately ties into the interview above):

    1) Parent Revolution, a corporate-funded and corporate-controlled entity that pushes school privatization through charter school expansion, unites with a minority of disgruntled parents in Adelanto and forms them into a “parent union”, then initiates a signature gathering process that promises to give these same parents “power” and “control” over their local elementary school by way of a takeover petition, as authorized by the Parent Trigger law;

    2) Using underhanded and dishonest tactics (long story), these same parents ultimately gather enough signatures, survive court challenges from anti-Parent Trigger parents wishing to rescind their signatures after claiming to be misled when they signed the petition (another long story), and then make what turns out to be the one and only decision these parents are ever allowed to make — they choose to turn over their school (its building, its annual budget, etc.) to a privately-run charter corporation run by one Debra Tarver; the school is ultimately called and re-opened as Desert Trails Prepatory Academy (DTPA);

    3) to preserve this victory, Parent Revolution and Tarver runs some of these “parent union” parents as candidates for the Adelanto School Board—the same entity that authorizes, renews, or non-renews (i.e. closes) Adelanto charter schools, including DTPA, apparently thinking that these “parent union” school board members will be compliant puppets who don’t ask questions, won’t exercise any authority over the newly-opened DTPA, and will dutifully follow the marching orders of their corporate masters;

    4) In an irony wrapped within an irony, those same parents elected to the Adelanto School Board find that they may actually be able to exercise some of that parent power that had been promised to them at the beginning;

    They start looking into the governance, finances, and operations of DTPA and are horrified to find widespread malfeasance, including a deliberately confusing web of corporations that act as the governance of DTPA’s operations, with various powerless and token Boards of Directors, as the whole labyrinth is traced to Debra Tarver, who alone runs everything;

    Some of this was covered here:

    5) These parents on the Adelanto School Board then begin making demands that Tarver reform her operations — governance, operations, finances, etc. Tarver responds by telling the board, “Butt out and shut up! This is none o’ yer business! You have no legal right!”

    It turns out that the Parent Trigger critics were right after all. Those parents who signed the petition made one and only one decision — choosing Tarver’s private charter corporation to take over — and that was all she wrote for the promised parent empowerment (Diane Ravitch refers to this bait-‘n-switch tactic as the “Parent Tricker.”)

    6) The parents on the board effectively responded to Tarver, “Oh yes, it is our business, Debra.” Led by (the Parent-Revolution-founded) “parent union” leader, and current Adelanto Board Member Teresa Rogers, they then tell Tarver that without such reforms being instituted, the charter will not be renewed, and DTPA will be closed in June 2016.

    In effect, the puppets have cut their puppet strings, and turned on their puppet masters.

    7) Tarver stonewalls and refuses any such reforms, then plays the victim to the parents of the students at her charter school, in an effort to manipulate them. As these parents are long-time friends and neighbors of the parents on the board, this leaves them utterly bewildered as they scratch their heads and ask Tarver:

    “Wait, what? NOW you’re telling us that the NEW board members — our friends and neighbors — are the BAD GUYS? Aren’t they “parent union” members? I thought you said that the OLD board controlled by evil teachers unions were the BAD GUYS, and that we threw them out in the last elections. I’m confused. This doesn’t make any sense … ”

    8) After giving Tarver multiple offers to “negotiate” the needed reforms, and Tarver refusing any such negotiating, the Adelanto School Board unanimously votes to “non-renew” (close) DTPA. The Adelanto Board motion to do so is a real scorcher, as it goes into minute detail about the corruption in DTPA’s governance, operations, finances, etc.

    Read it all here:$file/Resolution%20for%20Denial%20-%20Desert%20Trails%20Preparatory%20Academy.pdf

    9) This means that DTPA will close in June 2016, and that the nation’s first and only “Parent Trigger” takeover of an existing public school — an event that has been highly-touted in the corporate media, and in their Hollywood-style feature film based on the Adelanto takeover, the laughable bomb “WON’T BACK DOWN” — will come to an ignominious end.

    And now … finally 😉 …. here’s how that whole story is tied into the article/interview above.

    10) Tarver’s latest public statement is that she will now go “authorizer shopping”, first to the San Bernadino County Board of Education, and ultimately all the way to Sacramento and the State Board of Education. If successful, the original parents who, at the outset, were promised control of their school will be utterly and totally cut out of any of the decision-making power they had been promised at the beginning, while Tarver will be able to run the school unchecked by little, if any regulation whatsoever … as other charters authorized by the County BOE and State BOE have been allowed to in the past.

    Now, you may ask, “If Tarver and DTPA are as corrupt as the Board motion indicates, won’t those other potential authorizers deny her?”

    Would that it were so.

    Well, in the past, similar charter operators have been authorized by either the County BOE or State BOE. I can give you examples, but I’ll leave it at that.

  2. Yea Jennifer! And Preston Green is the John and Carla Klein Professor of Urban Education at the University of Connecticut’s Neag School of Education.

    I will contact Prof Green and I am a CT Voter and agree with his assessment!

  3. The thing is, politicians are pushing charter schools, NOT parents. I have two kids in middle school. I see charters sucking money out of the school system– without the same accountability for curriculum we have in our public schools or the same level of transparency. There are good charters out there– the ones that solve particular community needs– but the bulk of them a swarm on locusts, denuding the fields and taking our tax dollars elsewhere. They are businesses; they do not care about our kids.

  4. […] In a recent interview, a professor of urban education at the University of Connecticut shares his concerns that the proliferation of charter schools could presage a bubble much like the subprime lending market, and could have the same disastrous effects, but this time on education not the financial market. […]

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