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Posted at 5:02 PM ET, 05/ 9/2010

Charter schools: Is this the way it was supposed to work?

By Valerie Strauss

With Education Secretary Arne Duncan promoting the expansion of publicly funded charter schools as if they had been proven to be the silver bullet for school reform (they haven’t), it seems reasonable to look at what can happen when schools are opened without enough regulation.

The St. Petersburg Times has an instructive story about a fight that the Pinellas County School District is having with Virginia-based Imagine Schools, the nation’s largest commercial charter operator, with 71 schools in 11 states (including Maryland) and Washington, D.C.

What you should know first is that in Florida, for-profit companies can run charter schools, even though charter schools are publicly funded and are, by state law, supposed to be run according to the federal rules for non-profits. Imagine is a for-profit management company, with a real estate arm, Schoolhouse Finance.

The current trouble in Pinellas is over the Central Avenue School in St. Petersburg, one of 17 charter schools Imagine runs in Florida. In 2008-09, it earned the grade of F from state accountability officials for student achievement.

The Times says that auditors discovered that the school was almost $1 million in debt last spring, though it pays $881,179 to lease a half-empty building from--can you guess?--Schoolhouse Finance.

The question now being raised by the county, as well as other school districts in the state, is whether Imagine runs its schools as federal non-profit organizations, as it says it does. Imagine doesn’t actually have non-profit status from the Internal Revenue Service, thought it has sought that designation for five years; it just promises to operate the schools as if it were. Imagine says that it can run schools less expensively and more effectively than public districts do.

With some school districts starting to question the way Imagine operates, the company asked Florida state officials to clarify the rules about how they must operate.

According to the Times story, Imagine says it's already running 17 Florida charter schools as nonprofits, even as it seeks clarification.

"What Imagine brings is financial security," development director Karl Huber told the Times, describing the company's intent to possibly forgive some debts in St. Petersburg.

The Department of Education went ahead and wrote new proposed rules that would, the Times wrote, solidify Imagine’s standing in the state.

But some school districts in the state, including Pinellas and Miami-Dade, are crying foul, concerned that the new rules will attract more for-profit companies into the state to open charter schools.

In fact, districts in other states are concerned about how Imagine runs its charter schools as well.

For example, a story last year in the Dallas Morning News said that when Imagine-managed charter schools open in the state, the company’s real estate affiliate, Schoolhouse Finance, buys a campus and then charges the school rent. In one case, a school spent nearly 40 percent of its budget--all from public money--to two for-profit companies.

The New York Times recently wrote about Imagine, explaining how, when the company comes in to manage a school, it winds up with the power to make all school-based decisions, sometimes leaving out of the loop the original holders of the charter.

Imagine, not surprisingly, didn’t like the Times story, and on its website you can see an open letter with all of its complaints.

(The organization operates three charter schools in Maryland: Imagine Discovery Public Charter School in Woodlawn, Imagine Foundations Public Charter School in Upper Marlboro and Imagine Lincoln Public Charter School in Marlow Heights. It also operates two campuses of the Imagine Hope Community Charter School in Washington, D.C., as well as the city's Imagine Southeast Public Charter School.)

Is this, do you suppose, what the charter school pioneers had in mind when they launched the movement to give parents in troubled urban school systems a choice for their children?

How much consideration do you think Duncan has given to these issues, even as he makes expansion of charter schools in states a requirement for federal funding in his $4 billion Race to the Top competition?

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By Valerie Strauss  | May 9, 2010; 5:02 PM ET
Categories:  Charter schools, Education Secretary Duncan  | Tags:  Arne Duncan, Central Avenue School, Duncan and charter schools, Education Secretary Duncan, Florida and charter schools, Imagine Schools, New York Times and charter schools, St. Petersburg Times and charter schools, charter schools  
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Follow the links at this website for more on Imagine:

Posted by: edlharris | May 9, 2010 6:38 PM | Report abuse

Check out the Perspective/ITT charter school across the expressway from Sox Park in Chicago. It is a big mess.

Posted by: aby1 | May 9, 2010 7:29 PM | Report abuse

In Pensylvania, we've learned our lesson. A very expensive lesson about charters. Some are good, many are mediocre, and a few are simply avenues for skimming cash for oneself and family members. We currently have an investigation into 18 charters in the city of Philadelphia. We have former charter admins cooling their heels in prison for fraud and other financial misdeeds. One administrator took his own life as charges were coming down against him. But Arne Duncan is leading the full-scale charge for charters. Why? Is money lying so thick on the ground that we can just afford to flush it down the toilet?

Posted by: Nikki1231 | May 10, 2010 6:01 AM | Report abuse

By definition, generating profit trumps the common good for the for-profit enterprise. Creating conditions to make profits is what they do best; and promises to attend to the common good are not the same as contracts that bind. State and Federal departments of education and IRS auditors should hold Imagine and other for-profit operators of charter schools to both the rules for non-profits and increasing student performance gains in exchange for their unique opportunity to make money.

Posted by: greggsinner | May 10, 2010 7:07 AM | Report abuse

edharris, thanks for the informative link.
Within that story, the connection between the Bakkes and The Family, a very secretive Christian group need to be examined by the media. This group has no interest in genuinely educating children.

Posted by: sanderling5 | May 10, 2010 10:29 AM | Report abuse

You are correct to shine a light on the practices of Imagine Schools, but tarring 5000 other charter schools because of the practices of Imagine is not right. My organization, the National Association of Charter School Authorizers, works to improve the quality of charter schools by improving the quality of charter school oversight. These authorizing agencies - school districts, state ed departments, universities and others - have a responsibility to maintain high standards for charter schools and safeguard student and public interests while also ensuring the schools have the autonomy needed to innovate and excel. This is a balancing act that happens well in some places, with terrific results for students, and not very well in other places. We know far more today about how to do this work than we did a decade ago. We need to do more of the things that work as well as some clean up on some past mistakes. One last note, I have not heard Arne Duncan describe charter schools as a silver bullet for school reform. He has put forward many reform solutions, only one of which is charter schools. It's not appropriate to put words in his mouth, and then criticize him for something he hasn't said.

Posted by: GregRichmond | May 10, 2010 1:16 PM | Report abuse


What is your organization doing to reign in some of the corrupt practices of groups like Imagine? Imagine is a major, major charter chain - I believe they're the biggest for-profit chain, and they're likely only second to KIPP in terms of the number of schools they run (for-profit or non-profit).

You're entirely correct that it's inappropriate to compare Imagine to the other 5,000 charter schools, particularly those that are locally controlled and not run by for-profit entities.

It may not be NAPCS' responsibility to monitor Imagine; but are states or local districts capable of keeping tabs on groups like Imagine to prevent this kind of stuff from happening?

What do you think should be done about Imagine?


Posted by: KennethLibby | May 10, 2010 1:54 PM | Report abuse

This sounds like a bad operator. We have those in business and they do not make it. I am sure parents and kids are unhappy. Imagine well be gone or it well make the necessary changes to survive. That is the beauty behind private enterprise. The safety net is always pulled and you are vulnerable and accountable.

Posted by: plharris1 | May 11, 2010 3:19 PM | Report abuse

The author says Imagine purchases the building though Schoolhouse Finance and leases it to the school. What exactly is wrong with that? Should the school receive the building for free? If someone in the community had a school building they wanted to give to the school for free, I'm sure they would be glad to accept it. Until then, they have to acquire real estate the same way every other non-profit, for-profit and family does - they buy it at FMV.

The real story here would be if Imagine School charged a lease rate that was far above the actual cost to finance the property, making an exorbitant profit in the lease. But you will find that is NOT the case; the buildings are leased back to the schools basically at cost.

With charter schools, I believe the real issues are 1) are they providing a better educational alternative than the surrounding schools? And 2) are they making proper use of public funds to do so?

The answer to the first question is given by the parents - if the school was worse than the others in their community, they wouldn't keep them enrolled there. The one school mentioned above did have some enrollment issues, and if they can’t turn things around well enough to attract enough students then it should close. But the author cited that they have 16 others in Florida that are doing far better, and I remember a saying about one bad apple not spoiling the bunch.

On the second question of proper use of funds, each school has an external financial audit submitted to the board and district to provide transparency & accountability. The one school mentioned here has a very high rent, which could just mean that they made a poor real estate choice when developing that campus. But that is a management issue, not one of ethics or legality which what we should be most concerned with.

The real focus should be this - the NY Times says the Bakkes made a fortune in the energy business, then invested $155 million of their own funds into Imagine Schools - which they will not get back, making it a charitable donation. Any 'profit' that the company makes is reinvested in the company to open new schools in the community. They are experienced & successful leaders with no apparent financial motive to mismanage or profit from Imagine Schools. Although there may be a few struggling campuses, they fact that they have grown into the largest operator means the vast majority of schools are academically successful and economically sustainable.

We need to continue the debate on the issues of how to best educate our students. But I just ask that we stay away from terms like 'corrupt' unless there is evidence of true illegality or immorality. There is enough mud-slinging in politics today, so can we keep the debate civilized and centered on the facts? This debate centers on educating our children, so let’s model good passionate yet respectful discussion.

Posted by: srva05 | May 13, 2010 1:15 PM | Report abuse

I should add this, which touches on the take offered by srva05....

What I find galling is the implication of the Open Letter to Strom's Times article posted on Imagine's website (yes, I was quoted in the article) and the letter from the Bakke's printed in the Times that they - or any management organization - can pick and chose the areas of charter law they will comply with or ignore.

Charter school laws are not voucher laws - charter holders are providers are responsible for student performance, but they are also accountable for control, governance and contracting requirements specified in the law, or incorporated from elsewhere in statutory law (i.e. nonprofit law.)

Strom's article was about these latter requirements, and the questions she raised for example regarding the total value of the lease financing transaction to Imagine and the school noted by srva05 - have never been addressed by Imagine or the Bakkes. The letters serve only to divert attention.

(srva05 owes it to him/herself to read memo from Dennis Bakke to Imagine staff on Board relationships that blew this wide open, and then follow up on the legal issues raised across the nation. Start here: One need not b e a die-hard opponent of charter schools to see there's a real problem here.)

Several years ago Boeing Aircraft supplied the US Air Force with a perfectly good fleet of tanker aircraft. Problem is, to do so they violated a great deal of federal procurement law. Boeing's chairman resigned; several executives went to federal prison; and a slew of high ranking Air Force officials careers were ended.

Even assuming a great educational service, Imagine has no more right to justify its behavior than Boeing. What's so hard to understand about this?

Posted by: deanmillot | May 16, 2010 1:25 PM | Report abuse

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