Credit Ratings Agency: U.S. charter school sector “inherently risky and volatile”

Here’s our weekly analysis of privatization in the news and in communities nationwide. Not a subscriber? Sign up.

This week’s highlights

  • “The charter school sector is inherently risky and volatile, relative to other public finance sectors,” says the credit ratings agency S&P.
  • Democratic lawmakers are demanding that steps be taken to ensure federal employees and contractors will not be penalized for taking health precautions during the coronavirus outbreak.
  • The multinational financial firms invested in the U.K.’s Southampton Airport are feeling the heat partly due to coronavirus.

 

Education

1) National: In a major front page investigative article, The New York Times reports that Erik Prince, the brother of pro-privatization education secretary Betsy DeVos, “has in recent years helped recruit former American and British spies for secretive intelligence-gathering operations that included infiltrating Democratic congressional campaigns, labor organizations and other groups considered hostile to the Trump agenda.” Prince has urged Trump to privatize the war in Afghanistan and has run a series of private mercenary outfits over the years. DeVos is a vocal critics of teacher unions, one of which, the AFT, was targeted by Project Veritas’ spying operation. 

“AFT Michigan sued Project Veritas in federal court, alleging trespassing, eavesdropping and other offenses,” The Times reports. “The teachers’ union is asking for more than $3 million in damages, accusing the group of being a ‘vigilante organization which claims to be dedicated to exposing corruption. It is, instead, an entity dedicated to a specific political agenda.’” AFT President Randi Weingarten writes, “They didn’t succeed in their attempt to hurt our union but note what the right wing will do to try to eliminate workers’ voice.”

2) NationalJeff Bryant is wondering too: “Wha’dya bet this map of #CoronavirusUSA-related school closures is being used as a marketing plan by online edu companies?” K12 Inc. is up nearly 30% in the past month (set to one month and click on % tab).

3) National: Drs. Adam W. Jordan & Todd S. Hawley denounce Trump’s “national plan to end public education, and open the floodgates for voucher expansion and for the marketplace to double down on getting rich on public money.” They write, “we mention the Great Recession not to remind you that the bailouts went to banks and automakers, but to make sure you know that school funding has yet to return to pre-2008 levels. Clearly, the idea that public schools are important to helping create a better South and a thriving democracy were less important than draining funds and creating conditions where public schools could be seen—and labeled—as ‘failing.’ The wolves have been at the door for a while, but last month, President Trump pulled back the curtain and showed the wolves’ motivation. For the first time, an American president put all public schooling under the label ‘failing government schools.’”

4) National: Rep. Rashida Tlaib (D-MI) has introduced a bill to tighten up oversight and accountability of charter schools. The COAT Act (H.R. 5984) would require private charter management organizations (PCMOs) to disclose the following to the Department of Education in order to receive federal Elementary and Secondary Education Act funds:

  • The dollar amount and percentage breakdown of money being used by the PCMO on the operations of the school and on the operations of the PCMO.
  • The dollar amount every executive is earning in salary from the PCMO. 
  • The identity of any company or organization the PCMO has financial ties to.
  • Whether the PCMO is for-profit or non-profit.

In addition, school districts contracting with PCMOs would have to require the PCMOs to:

  • Hold board meetings that are publicly disclosed and accessible to the public.
  • Annually disclose the members of the board of directors.”

The bill has been referred to the House Committee on Education and Labor. NPE Action says “many non-profit charters are run by for-profit management companies. Tell your Rep—support the COAT Act! It is time for transparency for charter profiteers. Go here 2 email your Rep:”

5) National: Standard & Poor’s has issued an assessment of the charter school sector’s creditworthiness as part of an overview of public finance. “The charter school sector is inherently risky and volatile, relative to other public finance sectors, as reflected in our ratings distribution, and charter nonrenewal or revocations can affect credit quality swiftly. However, despite these intrinsic risks, the majority—82%—of S&P Global Ratings’ ratings in the sector carried stable outlooks as of Dec. 31, 2019. While the sector is facing increasing political support for stricter charter laws or oversight in some states, federal government support for school choice remains strong, per-pupil funding is generally stable to growing, and demand for charter schools continues to grow. From a financing standpoint, charter schools’ opportunities and options have expanded and interest rates remain low…

“Our rated universe increasingly reflects more established charter schools, which generally have completed several successful charter renewals, maintain steady academics, and experience less credit volatility than newer schools. While there are inherent credit risks that can affect schools throughout the year, such as failure to meet authorizer standards, charter nonrenewal due to factors such as academics, or enrollment shortfalls, we believe the sector’s outlook for 2020 will continue being stable due to continued demand and growing per-pupil funding levels. However, should charter law and policy changes of significant impact occur in states where we hold a large number of ratings, or some of the broader risks (such as a slowing national economy or recession) transpire during this calendar year, charter schools could face more credit stress.” [Registration required]

6) National/International: An interesting snippet from Canadian math teacher Peter Phinney: “Just in case you didn’t see this, it is a reply to one of my tweets asking about the potential privatization on online learning in Ontario.” @Mike92219284: “I am currently a classroom teacher but for over a decade I served as Curriculum Director for a major US online provider. You are correct in assuming the children are being taught by uncertified and untrained call-center workers.”

7) NationalCharter school advocates are worried about Trump’s new budget, which they feel will cut their funding. “The Charter Schools Program, which in fiscal 2020 received $440 million to support new charter schools and the expansion of existing ones, would be eliminated and replaced with the block grant program. Tressa Pankovits, associate director of the Reinventing America’s Schools project at the Progressive Policy Institute, worries states might not maintain funding for charter schools. The institute is a moderate Democratic group.”

8) CaliforniaA former First Student school bus driver in Coachella Valley has pleaded guilty to inappropriately touching an 11-year-old girl multiple times while on the job in 2018, and he faces up to 16 years in state prison.

9) Connecticut/Revolving Door News: Stamford city lawmakers have blocked a controversial so-called “public-private partnership” that would have handed control of school buildings to a private, for-profit developer for decades. “Representatives have balked at turning over public property and questioned Handler’s assertion that a private company can build and maintain schools for 70 percent less than the city. Even representatives who voted for the funding Monday said they are not inclined to support a public-private partnership, but want to see what analysis consultants can provide.”

Meanwhile, Mayor David Martin has ordered reviews of “all major transactions between the city and Building and Land Technology that had been negotiated by former director of administration Michael Handler.” Handler is one of the key figures who was pushing the schools privatization deal. “Handler left his city post—the equivalent of a chief financial officer—on Feb. 28 after serving for eight years, saying he planned to spend more time with his family and that he had no other job lined up. But on March 4, BLT announced Handler was joining it as a member of its executive committee.”

10) Florida: The Republican-controlled House has rejected a proposal to ban discrimination against LGBTQ students in the state’s school voucher programs. “Friday’s debate about LGBTQ discrimination followed the January publication of an Orlando Sentinel investigation that showed more than 150 private Christian schools that take Florida scholarships have written anti-gay policies, and half of those explicitly say they could refuse admission or discipline students based on sexual orientation and gender identity.” Lawmakers are poised to pass a bill that would more than double the enrollment cap of the state’s newest school voucher program.

11) Michigan: The Levin Center at Wayne State University Law School has released a report it commissioned which finds that charter schools need more oversight and accountability, long a concern in Betsy DeVos’ home state. “‘Accountability is fundamental to good government, and oversight is fundamental to accountability,’ former U.S. Sen. Carl Levin, founder and chair of the Levin Center, said in a statement. ‘Both supporters and opponents of charter schools will agree that taxpayers need to know their money is being wisely spent. Based on today’s report by the Citizens Research Council, we can’t say whether or not that is true for charter schools because of the lack of oversight.’ The report recommends ways the state of Michigan can provide what it says is needed accountability for charter school authorizers ‘through better reporting and clear standards for these entities.’”

12) New York: A charter school principal in New York City has been arrested after hitting a child on the head with a door. “The arrest was made after school officials found a video of the incident and turned it over to police. At this point, only the investigators have seen that video. The boy’s mother wouldn’t speak with CBS2. Her attorney offered no comment. Epting has been on administrative leave since this happened. He’s had no contact with students, and police have charged him with felony assault.”

13) New York: The Buffalo School District says charter schools were overpaid millions of dollars and need to give the money back. “The Buffalo Public School District says due to a ‘formula’ used to pay charter school funding, the [Buffalo Public Schools] schools were ‘invoiced at an incorrect rate’ and charters were overpaid $6.83 million dollars. This has resulted in over payment that started in the 2007-2008 school year through the 2017-18 school year.”

14) Oklahoma: The House has passed a bill to eliminate the Oklahoma Statewide Virtual Charter School Board and transfer its functions to the Commission for Educational Quality and Accountability. “The CEQA oversees the Office of Educational Quality and Accountability, which deals with teacher preparation, reports on public school performance indicators and conducts school performance reviews. The office was created nearly a decade ago by combining the former Oklahoma Commission for Teacher Preparation and the state’s former Office of Accountability.” The eliminated board sponsors five statewide virtual charter schools, including one operated by the controversial Epic Charter Schools. 

15) OklahomaA college recruiter used race to sort students at an Oklahoma City charter school. “‘The recruiter asked the students to line up from darkest to lightest skin complexion, and then line up from nappiest to straightest hair,’ Mr. Stefanick said in a telephone interview. As the students did as they were told, some of the teachers got up and left to report the request to school administrators, who intervened, he said.  ‘There was no purpose to it,’ he said. ‘We don’t condone that kind of behavior in our school.’ Mr. Stefanick said that when he complained, the university informed him that the recruiter was no longer employed after the incident.”

16) PennsylvaniaCharter school teachers in Baldwin Township staged a picket outside a school board meeting for what they said was a “lack of progress” over 18 months of contract negotiations. The group of about 40 teachers is represented by the Pennsylvania State Education Association. “The school is not negotiating in good faith and has continually stonewalled the process by refusing to agree to many of the most basic contractual items,” Matt Edgell, PSEA region advocacy coordinator, said in a statement. “Another issue that appears to be prolonging the negotiations is the fact that none of the school’s representatives at the bargaining table have any involvement in the day to day operations of the school. They don’t know what’s going on.”

17) Pennsylvania: One fifth of all school districts in Pennsylvania are calling for changes to the state law regarding charter schools. “Leaders in 108 of Pennsylvania’s 500 school districts are calling for charter school reforms advocated by Gov. Tom Wolf. One of the key reforms would better align payments made to charter schools with the actual cost of educating students resulting, according to the Governor, in savings of up to 280 million dollars.”

18) Rhode Island: The state’s oldest charter school, the Academy for Career Exploration, is closing in June. “The department, in its December 2019 review, found numerous problems with the charter. ACE opened in 1997 and serves about 145 students in grades 9 through 11. (The charter originally opened as Textron Chamber of Commerce Academy). According to the Department of Education, the school’s academic performance was getting weaker. On the latest SATs, only 23% of students were proficient in English and none were proficient in math. Last year, the school performed lower than the district average in math and about the same as the district in English. Moreover, the Department of Education said the school was not meeting its mission as a career and technical school. Not one student earned a recognized career credential last year.”

19) South DakotaA bill to create charter schools in Native American communities has died in the House. District 26 Senator Troy Heinert said of future prospects for such a bill, “Maybe we bring school boards in and see what their thoughts are, how they could possibly change, what they do at a local level right now.”

20) Tennessee: Controversy has surrounded the appointment of a healthcare company executive to the state public charter schools commission. “Johnson acknowledged Monday that she misstated Levine’s position at HMA, and noted that Levine’s other issues could stem from disagreement in how she presented the details. Johnson said she has done quite a bit of research and is continuing to receive more information from people in East Tennessee about Ballad Health, saying that residents are ‘thrilled’ someone is listening to them. ‘I’m certainly totally willing to correct any inaccuracies,’ she said. ‘I absolutely want to do that, but those details do not change what is happening in Upper East Tennessee with Ballad Health and how the folks up there are feeling.’”

21) TexasFaith Christian Academy in El Paso is becoming a government-funded charter school. The school “has not given a lot of details on why this change is happening, other than saying in a press release that it’s looking forward to working with an established charter school company to give a ‘first class educational opportunity for students.’ (…) It’s still not clear whether this switch from a private school to a charter school will impact teachers.” 

Infrastructure

22) National: Market volatility from the coronavirus crisis is disrupting the municipal public finance world. “As fear and uncertainty over COVID-19 increase by the minute, it has sent yields for both municipals and Treasuries [to] never before seen low levels—begging the question if we could see zero or negative yields here in the States.” The Bond Buyer quotes Jim Colby, senior municipal strategist and portfolio manager at VanEck, as saying “Some of the muni bond product is linked to revenue-generating enterprises, such as airports, convention centers, hospitals, etc. and certainly there is going to be an impact and the knee jerk reaction would be: I have exposure to some of these places and they are going to feel an economic impact as a result of this virus and to what extent?”

23) National: Congress is giving mixed signals about whether action on infrastructure can be taken before the November elections. “DeFazio has pledged to release a draft of a five-year reauthorization bill covering highways, bridges, mass transit, rail, wastewater, harbors and airports by the end of this month and for the committee to complete its work by the end of April. The Senate Environment and Public Works Committee last year unanimously approved a five-year reauthorization for highways and bridges, but the Senate Banking and Urban Affairs Committee has only just begun work on the section covering mass transit.” [Sub required]

24) InternationalMacquarie and Ferrovial are scrambling to save their Southampton Airport “public-private partnership” in the UK after the low cost carrier Flybe, which accounted for 90% of the airports traffic, went bust. “Flybe’s collapse is the latest UK airport stumbling block for Ferrovial, which as the largest shareholder of Heathrow Airport in London suffered a blow last week after a Court of Appeal rejected current plans for a third runway at the UK’s largest hub. The court found the government’s policy statement on the third runway contravened its commitment to the Paris Agreement.”

Criminal Justice and Immigration

25) National: The propaganda outfits laboring to give positive spin to the private prison industry are hard at work. Writing in TruthOut, Gin Armstrong and Maggie Corser of Eyes on the Ties write “In late 2019, the three largest private prison operators joined forces to establish a new group to push pro-industry talking points to the press and on social media: the Day 1 Alliance. Why is the private prison industry going on the offensive to improve its public image and secure positive earned media?” Their answer: to “reframe the industry” in the wake of multiple successful campaigns to shine a light on the finance industry’s support of prison profiteering—and the national scandal of immigrant family separation. They provide a rundown of Day 1 Alliance and its activities and messaging.

Last week, Alexandra Wilkes of the organization wrote in to the Financial Times to complain about their coverage of the private prison industry’s financial unpopularity—and to take verbal shots at Joe Biden and Bernie Sanders, who oppose private prisons. The FT ran an article on February 27 that said, “The pressure from campaigners on asset managers appears to be paying off. Fidelity has sold its Geo stock, and owns just 1.5 per cent of CoreCivic having been a top-10 shareholder last year. The fund manager denied this was a response to client pressure, but said it considered ‘social responsibility’ when structuring its investment portfolios.” The FT piece ran down pension fund and investment fund displeasure with GEO Group and CoreCivic. [Sub required]

26) National: CoreCivic has “accused a financial advising firm of defamation in California federal court Wednesday, saying the adviser falsely claimed that it housed unaccompanied children at the border detention facilities it operates. CoreCivic said in its complaint that Candide Group LLC made false statements, including that the prison operator lobbies to incarcerate ‘as many people as possible for as long as possible.’ ‘Defendants’ falsehoods have had their intended effect and have caused CoreCivic financial and reputational harm, prompting the public to shun and avoid the company and driving up the cost of capital for the company,’ CoreCivic said.” [Sub required]

27) Colorado: Ali Budner of Mountain West News Bureau has provided an update on the situation with Denver’s move to eliminate private prison companies operating its halfway houses. “For her part, Councilwoman Cdebaca said she’s not altogether opposed to private companies running reentry services like halfway houses. It’s a matter of scale and accountability to the community. ‘Let’s get on the record that there is a difference between simply a private entity and a multibillion-dollar corporation,’ she said. Either way, Denver is committed to ending its relationship with CoreCivic. Who will fill the gap, and how much it will cost, remains to be seen. ”

28) Idaho: The Idaho Statesman has come out against a deal that would send prisoners out of state to prisons that are run for profit. The state is getting close to a contract with CoreCivic. “A contract to send some Idaho prisoners to a private prison in Colorado may also involve a long-term lease of the facility. Details have not been released, but Gov. Brad Little told the Idaho Statesman editorial board that the state is considering several options, including a long-term lease of a prison in Colorado. (…) Entering into a contract with private company CoreCivic does not instill confidence. This is the same company, albeit with a different name (Corrections Corporation of America), that ran the Idaho Correctional Center in Kuna, which was so violent that prisoners called it ‘the gladiator school.’ Corrections Corporation of America also was later found by an Associated Press investigation to have falsified work records, and the state severed ties with the company and brought the prison system back in house. We’re glad that Idaho is getting prisoners out of Eagle Pass, Texas, run by Geo Group, which also has a bad track record of taking care of Idaho’s prisoners, including one death there last year. ‘The corrections board is looking at some capacity,’ Little said, ‘but right now, short-term, I can’t even get one built, because I’ve got jails where people are laying on the floor. We’ve got a fiscal crisis and a humane crisis.”

Public Services

29) National: As reports emerge of airport screeners being infected with the novel coronavirus, Democratic lawmakers are demanding that the Office of Personnel Management “take steps to ensure federal employees and contractors will not be penalized for taking health precautions during the COVID-19 outbreak.” Government Executive reports “the senators said that, as was demonstrated during the last government shutdown, many federal employees and contractors live paycheck to paycheck. They asked OPM to be generous and make sure employees can protect themselves without fear of losing pay.” [Read their letter]

Writing in TruthOut, Jeremy Mohler of In the Public Interest highlights the key role that unions have played and are playing in addressing the spread of the virus. “There is, however, a glimmer of hope in the actions of nurses, hospital staff, baggage handlers, and other working people. Nationwide, flight attendants are calling on commercial airlines to help stop the spread of COVID-19, the infectious disease caused by coronavirus. They’re demanding hand sanitizer stations, equipment, ticketing change waivers for sick passengers, and more. In Oregon, health care workers are raising concerns about the health care industry’s ability to cope with a widespread contagion. Members of Service Employees International Union (SEIU) Local 49 and the Oregon Nurse’s Association are requesting training and more equipment. In New York, airport workers are buying their own respiratory masks as they wait for airlines to do their part.” 

Julie Greene Collier and Tim Schlittner of AFL-CIO’s State of the Unions podcast sat down with M.K. Fletcher, AFL-CIO’s Safety & Health Specialist, “to talk all things coronavirus (COVID-19), what the labor movement is doing and how we are responding to ensure the needs of frontline workers are taken care of.” 

30) International: United Kingdom healthcare workers are facing challenges with the spread of the coronavirus, and contract workers are most vulnerable. “Officials have said little about the risks posed to low-paid contract workers like Al-Hakim, who constitute a growing number of the health service’s work force. The N.H.S. is one of the largest employers in the world, with a staff of more than 1.3 million. Even so, the service has a staffing shortage of roughly 100,000 positions, one of the reasons it has turned to private contractors. The result is a two-tiered employment structure in which contract workers can find themselves paid less and receiving fewer benefits. Al-Hakim does not qualify for any pay during his first three days of sick leave, and receives only 94.25 pounds ($120.50) a week afterward. By comparison, regular NHS employees receive their full salary from their first sick day, for at least one month and up to six depending on the length of their employment.”

Everything Else

31) Maryland: Lawmakers are poised to add a surcharge to management fee income and carried interest, and private equity firms are up in arms. “If passed, the bills would apply to income beginning in the 2020 tax year. The bills have been referred for review by Maryland’s House Ways and Means Committee, which gave an unfavorable report on a similar bill proposed in 2019.” [Sub required]

Governing for the Common Good

32) NationalPublic schools are embracing mindfulness, though practice doesn’t always make perfect, NPR reports. “One in 5 American children struggles with anxiety, according to the National Institute of Mental Health, and almost half experience at least one serious stressor at home—like divorce, poverty or a parent’s addiction—according to the nonprofit Child Trends. To help students cope, a growing number of schools like Warner are turning to mindfulness. Its boosters claim all kinds of benefits, and there is research to back them up. But mindfulness in schools can mean many different things, and the explosion of interest has some researchers and proponents advising caution.” 

​​​​​​​The Pennsylvania State Education Association says “experts say ‘it’s hard to do mindfulness effectively unless teachers walk the talk. And that, of course, takes a holistic approach, with lots of resources, time and support—three things that are often in short supply in the nation’s schools.’”