In an appropriations bill released last month, House Democrats proposed a $40 million cut in federal funding for charter schools. Another provision in the bill could prove even worse for these schools. Under the bill, no federal funds can go to “any charter school that contracts with a for-profit entity to operate, oversee or manage the activities of the school.”

Charter school advocates find the regulation wrongheaded. Nina Rees, president and CEO of the National Alliance for Public Charter Schools, calls the language “pretty sloppy.” Others note that such a restriction could prevent charters from providing critical services—including educational technology, transportation, and food service—for which district schools also need contractors. State education departments and districts routinely contract with private firms and often enter lease arrangements for their own schools’ real estate (particularly when enrollment is growing).

The restrictions would limit the services these schools could provide. They would be prohibited, for example, from hiring contractors with specific expertise in serving special-needs students. And according to Anne Williams-Isom, the former CEO of the Harlem Children’s Zone and Promise Academy charter schools, charter schools often gain resources from private fundraising to hire college-preparatory, after-school sports, and other contractors that “give children access to things we could never have expertise in.” If the proposed provisions became law, the Department of Education could withhold critical federal support for schools that provide students with such opportunities—even if they aren’t funded by public money.

The legislation appears to be motivated by concerns that charters can be used to funnel money to corrupt for-profit entities. Critics point to a few high-profile cases of charter school corruption—scammers in Ohio and California, for instance, created online charter schools that were never attended, then used contracting companies to make a profit. But such scandals are rare. If anything, more transparency in major contracts would serve to discourage fraud.

Aside from alleging criminal schemes, critics demonize real-estate companies that reach lucrative leasing deals with charters. But state-imposed restrictions on charter schools and decisions by school districts often create the demand for these arrangements. Unlike school districts, charters cannot issue general-obligation bonds for building costs, and they are often banned from using the annual tuition payments they receive as security for bonds they issue themselves. If districts want to reduce the role of Wall Street in education, they could remove limits on charter school borrowing or share the proceeds of their bonds with charters.

Critics pursuing the corruption argument also point to high salaries for some school CEOs. According to Williams-Isom, this is a common misconception about charters. Eva Moskowitz, for example, founder and CEO of Success Academies, which has a remarkable record of academic excellence, takes home roughly $890,000 a year—but her salary is paid by charitable donors. Who could oppose more private money flowing into children’s education to help schools hire the best people?

The main villains of the corrupt-charter narrative, however—and the putative targets of the legislation—are the 10 percent of charter schools fully operated and managed by for-profit companies. These schools may find a profit somewhere, but they also often manage to provide an education that parents prefer over public education for their children. One study found that one of the largest such companies, National Heritage Academies, produced significant gains in math compared with district schools.

Not all charter schools operated by for-profit companies succeed, of course, and some charter schools mismanage their funds badly. But if schools fail to deliver a good education, parents won’t enroll their kids, and the state will shut them down. Charter school critics focus on financial accountability, but these schools offer better accountability for student outcomes. Unfortunately, lawmakers don’t always put students first.

Photo: FatCamera/iStock


City Journal is a publication of the Manhattan Institute for Policy Research (MI), a leading free-market think tank. Are you interested in supporting the magazine? As a 501(c)(3) nonprofit, donations in support of MI and City Journal are fully tax-deductible as provided by law (EIN #13-2912529).

Further Reading

Up Next