Cyber-Charter Applicants Face Tougher Times in Pa.
Governance is a concern
In rejecting a recent group of applications to open cyber charter schools in Pennsylvania, state officials cited a litany of shortcomings, and one overriding concern: Who, ultimately, would be running the show?
All six plans to open new online schools were denied, and, in five of those cases, the state raised concerns that the schools' governing boards would not act independently of the organizations they planned to hire to provide services to students. Those organizations in some cases were identified as for-profit companies.
The issues raised by the Pennsylvania education department last month underscore a long-standing worry about charter schools, voiced most often by their strongest critics: that the nonprofit boards charged with overseeing them are often too quick to cede control over their finances and operations to third parties whose primary focus is profitability.
In Pennsylvania, cyber charters have come under a wave of scrutiny, following lackluster academic showings and much-publicized instances of fraud and mismanagement. They have also met strong resistance from school district officials who have seen their funding dwindle as students exit to pursue online options.
Perhaps not surprisingly, opening cyber charters in the state has become more difficult: The most recent rejections marked the second straight year the state has turned down all prospective cyber charters.
Some supporters of charter schools say that if state and local officials set policies making it clear that companies answer to those schools' governing boards—not vice-versa—it will improve confidence in the independent public school sector.
The National Association of Charter School Authorizers recommends several standards related to ensuring that school governing boards operate with sufficient independence of companies hired to provide services or help run the schools. It says that arrangements to open charters should include:
• Contracts that spell out clearly the roles/responsibilities of the governing board, school employees, and service provider, and the compensation to be paid to the provider;
• Disclosures and explanations of any existing/potential conflicts of interest between school governing boards, service providers, and related entities;
• Contracts that identify the governing board as ultimately responsible for the success or failure of the school;
• Prohibitions against third-party service providers from selecting, approving, or compensating school governing board members, or serving as board members themselves;
• Assurances that payments from the charter school’s authorizer go into accounts controlled by the school governing board, not the third party;
• Policies making it clear that all instructional materials, equipment, and other purchased items with public funds belong to the school, not the third party;
• Disclosures of the compensation paid to the service provider, including all fees and bonuses, and what that money pays for;
• Assurances that the school governing board has independent control over the school’s budget;
• Disclosures of agreements regarding school facilities, or loans or investments, that pertain to the relationship between the school and the provider; and
• Provisions for the school to terminate the contract without “poison pills,” financial penalties, or other barriers that make contract termination difficult.
Greg Richmond, the president and CEO of the National Association of Charter School Authorizers, said that while he believes problems with charter boards' giving up too much power to for-profit operators are relatively uncommon, "it is a significant problem in terms of perception."
"Perhaps the most common perception by critics of charters is that they're controlled by companies out to make a buck," said Mr. Richmond, whose Chicago-based group, known as NACSA, advocates high standards for charter schools.
Good governing boards are "critical to the success of charter schools," he added, and need to have a "well-articulated" separation from the companies involved.
Because board members of cyber charters don't have brick-and-mortar campuses they can visit in providing oversight, it's especially important, Mr. Richmond said, that they be able to evaluate virtual schools objectively, without relying on the companies that operate the schools.
In Pennsylvania, a number of the applicants to open cyber charters disputed the state's rationale for the rejections, arguing that their boards could act independently while also entrusting important day-to-day duties to the companies they planned to hire.
"The role of a school board is not to act as the school's teachers and administrators, but to provide strong and independent oversight and governance," said the board of one spurned applicant, the Insight PA Cyber Charter School, in a statement. "That is true for all charter schools and school districts."
The school's board, the letter said, was "actively involved in every step of the application process, and school vision."
Chain of Command
Pennsylvania has 14 cyber charter schools, which enroll 35,000 students, according to the state. Launching such online programs has become harder recently.
Not only did state officials reject all six cyber charter proposals from the most recent cycle, they also denied all eight the year before. By contrast, from 2002 to 2004, the early years of state reviews of cyber charters, Pennsylvania officials approved eight of nine applications, and others were cleared to open after that.
Skeptics who question the role of Pennsylvania's cyber charters have applauded the state's recent decisions, and the attention paid to the schools' governing boards. They say there are clear perils for charters whose boards do not act independently.
There have been numerous instances around the country of for-profit companies having contracts with charter schools that essentially let them dictate how much they would be paid and let them set other conditions favorable to them, with scant board oversight, said Gary Miron, a professor of education at Western Michigan University.
Some contracts can make it nearly impossible for boards to fire companies, or for the public to get information about the company's compensation and other practices, said Mr. Miron, who has studied for-profit and nonprofit charter operators.
Most state laws set few, if any, specific requirements for charter schoolboards' independence and authority, Mr. Richmond said, leaving those decisions to authorizers—the entities that approve schools.
His organization would like to see more legislation that directs authorizers to adhere to sound practices. NACSA has published model standards on the different responsibilities of boards and third-party providers. Those standards say charter school contracts should make it clear that boards are responsible for overseeing the school and its finances; prohibit the third parties from controlling the board's makeup and decisions; and require that instructional materials and other resources bought with public funds belong to the school, not the third party, among other guidelines.
A spokesman for the Pennsylvania education department said the state's decisions on the cyber schools speak for themselves, and declined further comment.
The state cited a host of shortcomings in denying the most recent cyber applications, from their failure to show how they would improve students' academic performance to concerns about the adequacy of their technology.
But for most applicants, state officials specifically raised concerns about a lack of independence by the boards charged with overseeing the schools, and their relationships to companies providing management or services.
One of the rejected applicants, Insight PA, had planned to hire K12 Inc., a major for-profit online education company based in Herndon, Va., to provide curriculum and management services, the state said.
The state found that Insight PA's application "demonstrated significant dependence" on the company that "evidences ultimate control of the school with K12 and not Insight PA."
The state said it was also not clear that Insight PA's school would be able to continue if its agreement with K12 ended. And it said that Insight PA board members who took part in a public hearing were unable to answer questions about the school's programs, or deferred them to K12.
A K12 spokesman directed questions to Insight PA.
Alan Kessler, a lawyer representing the proposed school, said board members had demonstrated knowledge and hands-on involvement in the school throughout the application process. Insight PA will make changes to its proposal, and reapply, he said.
While the state is correct "to set a high threshold," Mr. Kessler said, it should recognize that "there are boards out there that are going to go out of their way to get this right," and Insight PA is one of them.
Mr. Kessler also said it was important to make clear K12's essential role in managing the school's day-to-day operations, which the board could not do.
In Pennsylvania and other states, K12 and other online education providers have aggressively pushed to expand their presence, by lobbying state lawmakers and supporting parent groups and charter organizations friendly to their cause. Pennsylvania's state budget secretary, Charles Zogby, is a former K12 executive.
The state pointed to similar worries about an application to open Provost Academy Cyber Charter School, which was planning to contract with for-profit EdisonLearning to provide curriculum and management services to the school.
State officials questioned Provost's viability, if its agreement with EdisonLearning ended, and noted that the school would be required to change its name if its agreement with the Knoxville, Tenn.-based company was terminated.
A spokesman for EdisonLearning, Michael Serpe, said many schools served by the company had continued to operate, regardless of what name they used, after ending agreements with the provider. The company has a record of adhering to the wishes of governing boards of charter schools where it provides services, he said.
Some charter school advocates argue that it can be hard for such schools to recruit and keep board members, including parents, who have the backgrounds—in education, law, and finance—to help those schools succeed. As a result, they say, a board member enlisted to serve may lack the expertise to challenge provisions of an unfavorable contract with a private company or to question other aspects of the operator's role.
Mr. Richmond, of NACSA, said he agrees that finding the right board members can be difficult. But he said there are solutions, such as recruiting qualified board members to govern several schools at once, as a means of sharing their expertise.
Setting standards for strong-minded, independent boards is not "unique to charters," he said. "It's a part of good governance across the board."
Vol. 33, Issue 21, Pages 1, 20Published in Print: February 19, 2014, as Pa. Approvals for E-Charters Getting Tougher