John Locke Update / Research Brief

Three Cheers for Charter Management Companies

posted on in Education, Education (PreK-12)
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The education establishment and their left-wing political allies frequently condemn companies that are contracted to operate public charter schools.  As part of his Thurgood Marshall Plan for Public Education, Democratic candidate for president Bernie Sanders proposes a radical plan that includes, “Ban for-profit charter schools and support the NAACP’s moratorium on public funds for charter school expansion until a national audit has been completed to determine the impact of charter growth in each state.”  Predictably, teacher unions and public school advocates cheered the plan, despite the popularity of charter schools and the likelihood that such a plan would harm the urban poor, among others.

Management company contracts are one way that charter schools compensate for the absence of an existing physical and administrative infrastructure.  Unlike districts, new charter schools do not have access to a central office or auxiliary services staff, so they outsource those functions to an experienced provider. The resources and expertise provided by a management company may ease some of the difficulty and reduce the risk inherent in opening a charter school, as well as help those schools improve, expand, and solve problems that arise.

In the charter school universe, charters that contract with for-profit companies for management services are the exception, rather than the rule.  The National Alliance for Public Charter Schools reports that less than 15 percent of the nation’s charter schools have this kind of arrangement.  A handful of North Carolina’s 184 charter schools have contracts with for-profit management companies or service providers. National Heritage Academies oversees 13 schools, Charter Schools USA manages six schools (with two on the way), Roger Bacon Academy supervises four schools, and the Romine Group supports one school.  K12 Inc. operates a statewide virtual charter school.  Charter One works with one school and has applied to open another.  KIPP and TeamCFA charter schools are nonprofit networks that have multiple schools in the state, including the school I co-founded, Carolina Charter Academy: A Challenge Foundation Academy.

State law requires charter applicants to be nonprofit corporations, and the nonprofit board ultimately determines the trajectory of the school. And when a management company does not deliver, the board can take action.  Recently, the board of NC Connections Academy formally requested permission to terminate its relationship with Pearson OBL, the massive for-profit management company that had operated the school since its inception.  Last week, the State Board of Education granted their request, so long as they met certain requirements during the transition to a new provider.  It is a welcome reminder that management companies work for the board, and no relationship between the two is permanent.

Despite the advantages that management companies bring to charters, teacher unions and others contend that for-profit providers place the desire for profit over the needs of charter school students.  This is an absurd charge.  The company has little incentive to cut corners when academic failure or insolvency may lead to the permanent closure of their schools and the loss of their revenue stream.  In fact, charter school networks are keeping pace with district schools and independent charters. A 2017 report by the Center for Research on Education Outcomes (CREDO) concluded, “Students attending a charter school which is part of a network have stronger growth than they would in TPS or an independent charter school.” CREDO researchers found that charter school networks and independent charters in North Carolina had comparable growth on reading and math tests, except for certain charter networks that had slightly lower growth in reading.  To that point, generalizations about academic performance or financial health do not account for meaningful differences in the performance of charter school networks and schools within those networks.

Certainly, it is healthy to question the performance of for-profit management companies sector, so long as it is an earnest search for answers.  Those who reject management companies based simply on their pursuit of profit would be wise consider both the costs and the benefits that management companies bring to the charter school sector.  They should also be mindful that the corporate profits produced from the sale of goods and services to district schools dwarf what management companies realize through their contracts with charters.  If the pursuit of profit in public education is their sincere concern, they would be wise to start there.

As Vice President for Research, Terry oversees the research team’s writing and analysis across the spectrum of public policy issues. He specializes in pre-K-12 education. Before joining the Locke Foundation, he worked as the program assistant for the Child Welfare… ...

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