The wild west produces a judgment

Solution:  Eliminate the middle man.  Keep all of the rent!  Open a virtual school.  (It works, see K-12, Ohio Connections or ECOT)

Columbus Dispatch is getting on board.

 

$1 million judgment against charter school operator

By: Catherine Candisky

The Columbus Dispatch - January 21, 2015 01:00 PM

A federal judge in Missouri ordered Imagine Schools, one of the nation’s largest charter-school operators, to pay nearly $1 million for forcing a lucrative lease agreement on a school it operated.
Under the complex deal, Imagine Schools negotiated the pricey lease with SchoolHouse Finance and presented it to the school board of the Renaissance Academy for Math and Science for approval. Imagine Schools owns SchoolHouse Finance and directly benefited by the agreement.
“This clearly constituted self-dealing,” U.S. District Judge Judge Nanette K. Laughrey wrote in a blistering 29-page ruling.

Sound familiar? The Dispatch in October reported about a North Side charter school spending more than half of the tax dollars it receives on rent in a very similar lease deal with Imagine Schools and SchoolHouse Finance. The board of the Imagine Columbus Primary Academy asked Imagine to renegotiate the lease but that has not happened.

Other Ohio charter-school operators use similar lease deals, and while apparently legal, supporters and opponents complained that they wasted tax dollars and lawmakers pledged to take a look.
"Legislators who are working on charter school reforms should make prevention of these types of abuses a top priority," said ProgressOhio Executive Director Sandy Theis.

Charter schools are privately operated with public tax dollars and many contract with management companies to handle day-to-day operations.

ProgressOhio recommended placing a cap on state money used for rent, requiring the Ohio Board of Education to sign-off on leases, requring charter-school boards to have independent attorneys and financial officers and other changes.

In the Missouri case, the school board of the now-closed Kansas City school sued its former management company, claiming it had manipulated the board and failed to act in the school’s best interest. “While the Renaissance Board theoretically had authority to act independently on some limited issues, it was in fact a captive of Imagine Schools by both design and by operation,” Laughrey wrote. “While this changed over time with the assistance of the sponsor, the University of Missouri, intervention came too late to save the school, which operated consistently with too few expenditures for instruction and low student performance.”

Laughrey found no evidence that Imagine Schools discussed the market rate for similar leases with the Renaissance board or informed members that SchoolHouse calculated the rental rate based on a 12 percent return on investment regardless of the market rate. They also neglected to mention that the higher-than average rent would result in lower-than average expenditures on books, supplies and teacher salaries.

“For example, in 2007-2008, Renaissance spent 27.9 percent of its funds on instructional costs while the national average was 65.8 percent and Missouri was 64.6 percent,” the judge noted.
Laughrey also had some interesting findings about how Imagine gets board members to go along with these not-so-sweet deals. Imagine recruited inexperienced school board members and one who had received political contributions from the companies and had family members working there.

Editorial Voices

The worm is turning...

ECOT

More online fun.  $112 million this year!

ECOT received $19 million more in state funding than Cincinnati received, despite having fewer than half as many students.

Most of the publicity, including comments from governor, have been quite negative. The worm is turning....

In 2006, the Columbus-based online charter school Electronic Classroom of Tomorrow was under fire.

The state disputed its attendance numbers, and the Newark schools superintendent accused it of committing fraud by “failing to meet even minimum standards of operation.”

Since then, ECOT — whose founder, William Lager, has been a major contributor to Ohio politicians over the past five years — has continued to grow rapidly, in both enrollment and budget. Last school year, ECOT enrolled 14,561 students, more than twice the number it did in 2006.

ECOT, whose students take classes from home on a computer, grew by 122 percent during Ohio’s eight-year moratorium on new online charter schools. Some of its strongest growth was in elementary grades, including kindergarten.

ECOT now has more students than Canton, Dayton, Dublin or Westerville schools. It is the state’s 10th-largest district. And growth came for ECOT despite its consistently low state report-card results: It ranks among the worst-performing schools in the state.

“The growth has been huge,” said Aaron Churchill, who is Ohio research director for the Thomas B. Fordham Institute. It has offices in Columbus and Dayton and sponsors charters but criticizes weak oversight and poor-quality schools. “There are clearly a lot of questions about the quality of the education they’re putting out. I’d be curious to know why parents are selecting it.”

ECOT’s tax revenue grew in step with its enrollment, to $112.7 million, 90 percent of which is funded by the state. Charter schools are funded with tax dollars but often are privately run.

According to a state financial audit made public last week, ECOT paid $21.4 million last year to the two for-profit companies Lager formed to serve the school — nearly one-fifth of the school’s total revenue.

IQ Innovations, Lager’s software firm, sells the IQity online-learning platform to ECOT as well as to other schools and districts elsewhere in the country. Altair Learning Management is Lager’s school-management firm, and it oversees ECOT’s day-to-day business, including hiring and firing.

Most of the money sent to the for-profit companies — $17.4 million — is for purchasing curriculum from IQ Innovations, an expense that has grown steadily each year since ECOT first paid $5 million to IQ for the 2008-09 school year.

ECOT also spent another almost $11 million on communications last year. ECOT spokesman Ryan Crawford said he couldn’t immediately say why the communications budget was so large but said it might include advertising. ECOT has used Jack Hanna, director emeritus of the Columbus Zoo and Aquarium, as a spokesman in TV spots for the school.

Just over half of ECOT’s revenue goes to employee salaries and benefits, compared with 80 percent or more in traditional districts.

Critics say that ECOT owes its existence to its lavish campaign donations, mostly to Ohio Republicans.

“These guys set up companies and pay themselves,” said William L. Phillis, the executive director of the Ohio Coalition for Equity & Adequacy of School Funding. He calls the relationship between Lager and the Ohio GOP “incestuous.”

“It’s pathetic from the standpoint of the taxpayers,” Phillis said. “This money’s being laundered, wasted, going into somebody’s pocket. It’s a crime, but, of course, it’s all legal.”

ECOT spokesman Crawford said that critics have raised questions about the relationship between the school and the two affiliated for-profit companies before. ECOT considers the debate a philosophical one, and he points out that neither state auditors nor the Ohio Department of Education has found fault with the relationship.

He said the school’s growth has been driven exclusively by enrollment gains from students choosing its program over other schools.

“We’ve heard these questions for 15 years now. We have a different feel for how it works than our critics. We feel confident that what we’re doing is correct,” Crawford said. “We do our very, very best to be good stewards of public dollars.”

Students interviewed for ECOT’s website for its graduation ceremony last summer said they enroll for lots of reasons, including the need for flexible schedules because they have jobs or children.

Although the online school boasts on its website that “over 10,000 students have graduated from ECOT” since it opened in 2000, its track record for helping students graduate on time is among the worst in Ohio. In the past four graduating classes alone, about 5,600 seniors did graduate on time. But two-thirds of ECOT seniors during that time — 10,600 — did not graduate with their classes.

With its most-recent graduation rate of 38 percent, few districts in the state rank lower. Only 35 of the roughly 700 traditional school districts and charter schools that serve high-school students have a worse outcome, and most of those are other statewide e-schools and charters that exclusively serve dropouts.

By comparison, Columbus schools’ most-recent graduation rate was 77 percent. Cleveland’s was about 64 percent.

Phillis said it’s astonishing that ECOT continues to escape the scrutiny of lawmakers despite meeting only three of the 24 possible state testing and graduation standards, receiving F grades in all but one category. ECOT got a D in the performance index, which is an index of state testing performance.

“It has to end,” Phillis said, “taking money that’s appropriated for the education of children for enormous advertising, campaign contributions and profit.”

Altair and the IQity software firm have several lobbyists who step in to protect their interests during state budget times and when charter-school issues crop up in the state legislature.

And ECOT’s founder, Lager, has spent at least $1.13 million on Ohio campaigns in the past five years alone. Lager could not be reached for comment, and his spokesman said he couldn’t reach him, either.

That’s more — on Ohio politics, anyway — than was spent by David Brennan, the well-known Akron charter entrepreneur who lobbies heavily on behalf of his White Hat schools group. During the same time period, Brennan donated about $820,000, according to campaign-donation records kept by the Ohio secretary of state.

For the past three years, Lager has funneled more than $200,000 per year to mostly Republican officeholders, including William G. Batchelder of Medina, the outgoing speaker of the Ohio House. The largest single donations went to the Ohio Republican Party.

Political contributions also were made through Lager’s two privately held companies. Since 2009, IQ Innovations has sent more than $154,000 to Ohio political candidates and groups. Altair’s contributions totaled about $38,000.

Lager is a member of former Florida Gov. Jeb Bush’s Digital Learning Now initiative, whose 10-point plan includes pushing lawmakers to require all students to take at least one online course; loosening laws on class size, student-teacher ratios and required amounts of instructional time; requiring state proficiency tests to be taken digitally; and providing digital charters with the same per-pupil public funding that other schools receive.

bbush@dispatch.com

http://www.dispatch.com/content/stories/local/2015/01/04/popular-ecot-poor-performer.html