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State board wants to know how Michigan charter schools spend money

A student wearing a jean jacket and protective mask writes on a piece of notebook paper at her desk.

State Board of Education members want more transparency from Michigan charter schools.

Di’Amond Moore / Detroit Free Press

Michigan charter schools received $1.4 billion in state funding last year. How they spent most of it is a mystery, even to state officials overseeing the education of children who attend them.

The state Board of Education has been trying to find out, but its efforts have been stymied.

Eighty-one percent of Michigan’s 295 charter schools have contracts with private education management companies that are not subject to public disclosure laws. That allows them to skirt disclosure laws by, for example, saying they don’t have payroll records because they don’t employ teachers directly, but rather through a contractor.

MDE filed Freedom of Information Act requests for financial information from 166 charter schools in Genesee, Kent, Oakland, Saginaw, and Wayne counties. Twelve did not respond or declined to provide information even after three requests for information.

Of those responding, 92% contract with private educational management companies, which then provide or subcontract to other vendors. Because they are private companies, the individual expenditures and contracts are considered proprietary and not subject to public disclosure.

Board member Ellen Cogen Lipton, a Democrat, said the rules allow “a magical conversion of taxpayer dollars to be swept into private hands.” Democrats in the Legislature are pushing for stricter disclosure requirements.

Dan Quisenberry, president of the charter school advocacy group Michigan Association of Public School Academies, says charter school operators provide everything the law requires including budgets, audits, staff rosters, annual reports, board minutes, parent satisfaction survey results, contracts, and more.

State Board of Education members say those documents include so few details that it’s often impossible to know how much tax money is going toward education expenses and how much companies keep as profit.

That’s a problem, said board President Casandra Ulbrich.

“All of these schools that we’re talking about here are public schools. Every one of them is using our tax dollars,” said Ulbrich, a Democrat.

The management agreements and budget often aggregate all of those costs into a single line item for purchased services. Those agreements are known as sweep contracts, because they sweep all costs together.

“What you get is a lump sum,” state Superintendent Michael Rice said at a state board meeting on Tuesday. “What the management company does with that lump is what it thinks it needs to do to provide that range of services. We don’t have access to the individual line items.”

Quisenberry said the structure of management agreements is up to the board of each charter school academy.

Sweep contracts are one arrangement, he said. “Boards can and do make changes in those contracts based on their determination of what’s best for the students in their care.”

And, Quisenberry said, they are doing it well. 

Board member Tom McMillan said there’s no reason to think charter schools aren’t using the money wisely.

“If they’re able to contract out for some of their administrative staff in order to put more in the classroom for teaching … it seems to me that would be a good thing,” said McMillan, a Republican. “You couldn’t get to find out how much that company is paying its administrators. Nevertheless, the end result might be that the kids are getting better instruction.”

Most charter school boards, though, were unable to provide information MDE requested, including copies of leases and contracts for food service, custodial service, and lawn and grounds service.

“One of them responded that ‘We aren’t providing this to you because we’re not privy to that contract. We don’t hold that contract,’” Alisande Shrewsbury, a special assistant to the superintendent, told board members on Tuesday. “That’s a legal denial of the FOIA, because they don’t hold the contract.” Rather, the private management companies hold them.

Achieve Charter Academy, for example, provided copies of its management agreement with National Heritage Academies, and its lease — just over $1 million a year for a building also owned by National Heritage Academies. But the school denied the board’s request for food service, custodial, and lawn service contracts. National Heritage is the largest charter school operator in Michigan and one of the largest in the country.

“The academy contracts for the above services through a third-party management company by way of an education management agreement and, thus, the academy is not a party to the service contracts,” National Heritage FOIA officer Shane Wilson wrote in response to the information request. 

Other charter schools responded similarly.

The lack of information is concerning, said Gary Miron, a professor at Western Michigan University who has been studying the charter school industry for 25 years. It makes it impossible for the public to know how much taxpayer money is being spent on students and how much is going to private management companies.

“You can get a vague general idea of the budget, but we don’t know if that corresponds with reality, because we don’t see the details,” Miron said in a telephone interview.

State Board of Education members are powerless to change the rules regarding disclosure requirements for private companies. That’s why Ulbrich intends to turn to the Legislature for help.

“The next thing to do is a little bit of a deeper dive into the responses we received and come up with some legislative recommendations,” she said.

Some proposals already are in the pipeline. In the spring, Democrats from both chambers introduced the School Freedom, Accountability, and Transparency Act to require more transparency. Their legislation would subject all educational management organizations to the state Freedom of Information Act, which would require disclosure of most documents related to the operation of public institutions and expenditures of tax dollars. 

The proposed law would require audits of charter schools, guard against conflicts of interest, and create a process to suspend charter school authorizers that don’t provide proper oversight.

The bills stand little chance of passing this legislative session while both the state House and Senate are under control of Republicans, who largely support looser charter school regulation. There’s a chance that Democrats could regain control of one or both chambers in the November election, and that could make a difference, Miron said.

Tracie Mauriello covers state education policy for Chalkbeat Detroit and Bridge Michigan. Reach her at tmauriello@chalkbeat.org.

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