Op-Ed: 3 Huge Problems With Philly Mag’s Take on Charter Schools

Cetel: One eyebrow raising transaction shouldn't taint perceptions of all charters.

Last week, Philadelphia Magazine weighed in on String Theory Charter School’s $55 million purchase of the former GlaxoSmithKline building in Center City. In an age of austerity, such opulence deserves scrutiny. Unfortunately, Philadelphia Magazine columnist Patrick Kerkstra drew the wrong conclusion. Here’s three things he got wrong.

1. Just because there’s smoke doesn’t mean there’s fire

I admit that the String Theory bond deal has all the trappings of a story that should raise eyebrows: risky financing, high-paid consultants, and complex public-private partnerships that allow taxpayer dollars to line some people’s pockets. But everyone needs to take a deep breath in and remember that no one is accusing String Theory of breaking the law.

Nice digs for a charter school. | Photo from String Theory website.

Photo from String Theory website.

The reason that charters pursue tax-exempt financing is that public policy has made it very hard for charters to acquire property. First and foremost, unlike traditional public schools, there is no facilities funding for charter schools. They have to use their per-pupil instructional dollars for the cost of leasing and buying buildings. In addition, they have trouble accessing the traditional debt market because:

  • They have 5-year charters and are thus riskier investments.
  • Unlike traditional public schools, they can’t raise taxes and/or petition the city directly for additional revenue.
  • Districts benefit from something called a “bond-intercept” provision which means that bondholders can go directly to the state to recoup funds owed to them.

As charter critic Bruce Baker said, “who can blame them? For each of the parties involved, their behavior kind of makes sense.”

2. This isn’t a “charter” problem.

Risky financing? High-paid consultants? Taxpayer dollars going to financiers instead of classrooms?   If that story sounds familiar, it’s because it’s the story of the SRC’s fiscal behavior. Everyone knows this so I’m only going to recount a few specific mind-boggling numbers:

  • In 2012, the District borrowed $300 million. Next year, the District will spend $277.8 million (or 10% of its entire operating budget) on debt service.
  • So what kind of bond rating do they have on all that debt? Just over a year ago, Moody’s downgraded the SDP’s debt to Ba3.
  • The School District of Philadelphia lost $161 million through interest-rate derivatives, otherwise known as credit-default swaps. Who benefited from this deal that was so costly to taxpayers? Investment banks like Goldman Sachs and Morgan Stanley.

In fairness, Patrick acknowledges this and is really just criticizing charters for, well, acting like districts in this regard.

3. It’s the quality, stupid.

To talk about education finance without talking about quality is like talking about the Phillies declining attendance without mentioning that they are on track to lose 100 games.

Public school advocates like PennCAN aren’t on Team Charter. We are on Team Quality Schools.

Charter schools in Philadelphia happen to better serve the student population that has been historically most underserved by traditional public schools: low-income and minority students. According to a recent study out of Stanford, in Philadelphia charters, students receive the equivalent of approximately 40 additional days of learning in both math and reading. Added up over the span from kindergarten to 12th grade, that is the equivalent of nearly three years of additional learning.

I have no interest in defending String Theory’s financial operation. But Patrick is criticizing the entire charter movement by extrapolating from this one example. It’s fair game for a reporter to do that. But if he goes down that route, it’s only fair that he looks at where families and taxpayers are seeing better results.

In conclusion, Patrick is right to urge the reform movement to regain its moral high-ground by calling out the bad actors in the charter movement. On academic accountability, we are already doing that. Just last week, Philadelphia Charters for Excellence and Philadelphia School Advocacy Partners put out a report calling for a better authorizing system that scales-up high-performing schools and closes low performing schools. At PennCAN, we have been vocally supporting SB6, legislation that would, among many things, make it easier to close low-performing charter schools. But on financial accountability, I’m willing to admit we can do more.

Charter operators who misuse taxpayer funds to enrich themselves rather than their students deserve condemnation from charter friends and foes alike.  To prevent this, we should be able to collaborate on, in the words of Patrick Kerkstra, “something as basic as facilities financing for charter schools.” That, combined with better oversight and transparency, would make a big difference. We can’t legislate against bad decision-making in either the charter or traditional public school sector, but we can better remedy them through sound public policy.

Jonathan Cetel is the executive director of PennCAN, an education reform organization.