Education Opinion

IRS Could Cripple Charter Schools

By Walt Gardner — September 03, 2012 2 min read
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Teachers who opt to teach in charter schools think they understand the changes and challenges they will face as a result of their decision. But I doubt anything prepares them for a proposal that the Internal Revenue Service quietly released late last year (“Charter school teachers fear IRS rules change,” The Washington Times, Feb. 12). If the change goes into effect, it would make more than 93 percent of teachers in the 5,600 charter schools operating in 40 states ineligible for state retirement plans.

That’s because only teachers in “government plans” are eligible to participate in state pension systems. Two criteria satisfy this requirement: the governing officers are appointed by state officials or are publicly elected, and a government body is responsible for all the debt a participating institution amasses. The problem is that charter schools do not necessarily meet these criteria. Elected school boards don’t have the power to hire or fire teachers there, and charter schools can go out of business.

The IRS proposed the change, which is not subject to a vote by Congress, because the trend is for charter schools to be operated by entities that are increasingly remote from government bodies. Therein lies the paradox. Charter schools were specifically established to free them from the constraints imposed on traditional public schools. But this feature is now being cited by the IRS as a justification for its proposed change in the rules. (Although a hearing on the rules was scheduled for June, I haven’t read anything more about it.) Nevertheless, the IRS’s concern is warranted. In Aug. 2004, for example, the California Charter Academy, the largest chain of publicly financed but privately run charter schools in the state, collapsed, stranding 4,500 K-12 students in 60 mostly storefront schools at the start of the school year and sticking taxpayers with a $100 million loss.

If charter schools posted better results than traditional public schools, perhaps they would stand a better chance of building public support to fight the IRS. But a growing body of research demonstrates that they perform in general no better than traditional public schools and are often worse based on test data (“Shuttering Bad Charter Schools,” The New York Times, Feb. 22). Despite this mixed record, teachers who choose to teach in charter schools deserve protection from an adverse ruling by the IRS. In many ways, they are the “innocent spouse,” whom the IRS recognizes and holds harmless. Without such immunity, fewer teachers will choose charter schools, effectively torpedoing the movement before it has a fair chance to prove its worth.

The opinions expressed in Walt Gardner’s Reality Check are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.