News: CJ Exclusives

Skeptics Say Charter Finance Bill Would Hinder Operations

New regulations could limit charter options in low-income areas

House Minority Leader Larry Hall’s bill imposing new financial accountability measures on charter schools is regulatory overkill that will hinder the schools’ operation, critics warn.

But one Republican lawmaker on a key education committee said he would evaluate the House Bill 96 with an open mind.

“I do think it’s natural that we spend a lot of time looking at charter school applicants on their pedagogy, curriculum, and academic plan. From what I’ve been aware of I’m not so sure we look at their finances as closely as we should,” said state Rep. Craig Horn, R-Union, a chairman of the House Education K-12 Committee.

“I recognize the need for a good hard look at accountability in charter schools,” Horn said. He expects the bill to be heard in his committee. “I’ll be anxious to not only read the bill but hear the testimony on it. … I’ll be looking forward to a healthy debate.”

Horn said he would be “very cautious” to ensure that any accountability standards are “reasonable and in line” with goals to create a school atmosphere responding to education needs with a sound alternative to traditional public schools.

“There are those folks who apply accountability measures for ensuring success, there are those that apply accountability measures for the purpose of ensuring failure,” Horn said.

While he supports charter schools, Horn also wants to avoid future problems such as those occurring in some Charlotte-area charter schools that closed during the school term, leaving students in the lurch.

Hall, a Durham Democrat, did not respond to requests for comment about House Bill 96, but wrote on his website he wants to thwart “reckless mismanagement” of charter schools with bad financial records and to increase transparency and accountability.

Deceptive enrollment

Hall’s interest was piqued by the state’s forced closure in 2013 of financially ailing Kinston Charter Academy, which became the subject of a state audit exposing deceptive enrollment practices and financial mismanagement.

“I’m a big believer that if we’re spending state money, taxpayer money, we need to know who is getting it, and whether the taxpayer is getting value, and the children are getting value for the money that’s being spent,” Hall has said.

His bill would require charter schools to maintain a name and contact registry listing all school officers and individuals authorized to keep or spend funds. They also must provide insurance and file a bond with the State Board of Education.

The bill further mandates charter schools’ written charters requiring listed individuals “to be held personally and individually liable for debts incurred by the charter school,” and for payment of outstanding bills and debts “upon the voluntary or involuntary closure of a charter school.”

Any debt would be submitted to the state Department of Revenue for collection, but also allow “an alternative means of collection” from the dissolved charter school’s officers and finance-related employees.

DPI database

If passed, the legislation would require the Office of Charter Schools at the Department of Public Instruction to maintain a database of those individuals, and prohibit their future employment in charter schools until the debt is paid off.

“The bill looks like a solution in search of a problem,” said Eddie Goodall, executive director of the North Carolina Charter Schools Association.

He said the prospective database would be added to a requirement for charter schools to do criminal background checks of employees, a regulation traditional schools do not have. “It’s just overreach,” Goodall said.

Charter schools recognize their reputation is at stake when one of them flounders, “so we would be happy to work with the State Board [of Education] and Rep. Hall to look at what’s broken before we try fixes that have potentially grave unintended consequences” Goodall said.

“If we’re trying to prevent charters from opening, the bill might work” by saddling cash-strapped startups with more costs and heavier regulatory burdens, Goodall said.

Bonding requirement

“Many current charter school operators support a bonding requirement. But first-time applicants, particularly those in low-wealth areas, may find it to be an obstacle that is difficult to overcome,” said Terry Stoops, director of research and education studies at the John Locke Foundation.

He said Democratic legislators in Florida have proposed legislation in recent years that would require charter schools to obtain a surety bond, citing many of the same concerns voiced by Hall, but have not persuaded the legislature, controlled by Republicans, to go along.

“I suspect that that will be the case in North Carolina as well,” Stoops said. Nor does he believe most lawmakers will back the “naughty list” database.

“A ‘naughty list’ has already been established for charter school employees convicted of a crime involving the misappropriation of school funds. It’s called a criminal record,” Stoops said.

“Rather than reflexively imposing additional regulations to charter schools when one or two fail, elected officials should consider how and why mismanaged schools obtained state approval in the first place,” Stoops said. “After all, the purpose of the application process is to ensure that incompetent or careless applicants do not receive a charter.”

Goodall agrees, saying the state first should explore how a small number of charters have gotten into operating difficulties, fix policy issues with professional guidance, and tighten controls where necessary before seeking statutory remedies.

He said Hall appears to be under a misconception that the state is responsible for charter school debt, and the media got that wrong in the closure case at StudentFirst Academy in Charlotte last April. The state gives charters a per-pupil allotment, but has no other monetary obligation to charters, he said.

The first step to address fiscal issues would be to open dialogue with DPI’s Business and Services Division and the State Board of Education to identify sources of financial problems and develop solutions, he said.

Greater school enrollment vigilance and tighter accountability from DPI and its Office of Charter Schools is necessary, Goodall said. That should thwart the problem faced by charter schools such as Concrete Roses STEM Academy in Charlotte, which closed last September just weeks after starting its very first school year. Enrollment was only 126 students, rather than the projected 560.

Dan Way (@danway_carolina) is an associate editor of Carolina Journal.