Update: charter school transparency bills die as GOP boycott ends House session

Update 12/20: The charter school financial transparency bills, passed by the Michigan Senate on 13 December, were never acted upon by the House and will die at the end of this session. House GOP members, and one Democrat, boycotted the final session days, denying Democrats a quorum needed to conduct business. The House leadership scheduled one final session day on New Year's eve, at which time they are expected to adjourn "sine die," thus ending the 2023-24 session.

[Update 12/14: SB 943 and SB 947 both passed the full Senate on 13 December, and were received by the House. Last minute changes were made to both bills by the full Senate acting as a "committee of the whole."

The changes in SB 943, which deals with financial transparency for private charter management firms, specify that in addition to audited financial statements of the firms, the firm must report its net "compensation" as the difference between all funds received for operating the school and the total of actual expenditures to run the school.

SB 947 as passed by the Senate removes a key provision: the bill no longer prohibits a charter school from leasing its property from the management company or any affiliated organization. The other provisions, including those ensuring that any lease agreement is at or below market rates and requiring that the lease be specifically approved by the charter school's authorizer, remain in place.]

Dear friends,

It’s been a little while, I know, but we’re going to have to put off announcements about our new web site and programming to let you know about some very important bills that have a chance to be passed by the Legislature before the end of the year.

Key message:

We have a chance for the first time in decades to reign in the Wild West-style charter school system we have in Michigan. One of the major problems has been public money going into the pockets of private corporations with almost no accountability. These bills would address two of the worst abuses: they would require charter management companies getting millions in public funds to open their books, and they would prohibit those management companies from also owning the buildings the school uses, giving charter boards some independence. Right now, the bills are poised to pass the Senate but must still be approved by the House.

Contact your Senator and Representative now and urge them to get these bills passed before the end of the year!

Find your state Senator     |     Find your state Representative

A message you write yourself always has more impact, but here is something to get you started:

I’m asking you urgently to pass the charter school financial transparency bills (SB 943 and SB 947) before the end of the year. The private firms getting public money for managing these schools ought to have to open up their books to the public, and they shouldn’t be allowed to be the school’s landlord, too. There have been just too many abuses. Please make sure that Michigan’s charter schools serve the interests of their students and not some anonymous private investors.

Simply use the links above to find your Senator and Representative, and use the "contact" links on their pages to send your message. Your message can have a real impact on the lawmakers representing your district. You're a voter and a constituent -- and they need to hear from you.

Some background

Constant readers will remember that Michigan Parents for Schools has always worried that charter schools (public school academies) were not accountable to their communities and might not put the interests of their students first. But some of the worst problems were caused by lax regulations that allowed for-profit management companies (which run some 80% of Michigan charter schools) to prioritize making money off the public dime over educating children. While some charter operators have more open and equal relationships with the schools which hire them, it’s the largest – and most politically influential – companies that have taken advantage of these lax rules.

Bridge Michigan article on the bills  |  Overview of the Detroit Free Press’ 2014 investigation

• Michigan’s largest educational management organizations (EMOs) are private, for-profit firms that simply take the school’s entire per-pupil state funding as their fee and use that to run the school. But these firms have always insisted that the public money becomes private as soon as they get it, so these companies are not required to provide audited financial statements to the public who is funding them. (Since most are also closely held companies that don’t trade their stocks on an exchange, they can keep their financial affairs very, very private.) As a result, when they provide the required reports about how the money has been spent (salaries, maintenance, etc), we simply have to take their word for it. In the past, investigations have found hidden sweetheart deals with businesses run by friends and relatives, and in one case a Michigan EMO leader tried to use bank loans given to the school to remodel his own house (he was later convicted of wire fraud).
   
• The largest of these firms also ensure its profits by owning the buildings the schools use, charging them rents which are well above market rates. If the charter school board, trying to protect the interests of the students in their care, wanted to change management firms, all they’d be left with are the nameplates they use at board meetings, since everything else belongs to – and all employees work for – the management company. So much for independence.

MIPFS has argued for years now that allowing for-profit companies to run charter schools builds in an inherent conflict of interest. The first duty of a for-profit company's managers is to their shareholders, not their customers -- or in this case, students. This is very normal in the private sector, but it gets very problematic when we're talking about educating our children.

Charter boards are usually recruited by the EMO, rather than arising naturally from the community. Most Michigan charters exist because a private, for-profit, firm thought there might be a market, not because of community demand. They are accountable only to the authority which authorizes the school (in Michigan, usually one of the smaller state universities) which is also usually not directly accountable to the local community.

Over the years, we have urged lawmakers to require that all charter management companies be non-profits: see the discussion of the bill amendments and proposed constitutional amendments we have supported in a previous article entitled "Getting clear about 'profit' in our public schools."

Senate Bills 943 and 947, introduced by Sen. Dayna Polehanki (D-Livonia) with Sen. Rosemary Bayer (D-West Bloomfield) cosponsoring SB 943, would address these loopholes for the first time. These changes are long overdue, but the chance of getting similar bills passed next year are very low. The bills are on the floor of the Senate, ready for passage; they would then have to be sent to the House for its approval. Please contact your Senator and Representative to tell them how important it is to get these transparency reforms passed this year, before we have to wait another couple of decades.

Thanks for reading!