Charter Schools Funding New Jersey

Darcie Cimarusti: How Charters in New Jersey Double-Dipped into Federal CARES Funding

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Darcie Cimarusti is a school board member in New Jersey and Communications Director of the Network for Public Education. Her telling of charter school greed in New Jersey reminded me of the song called “On That Great Come and Get It Day” from “Finian’s Rainbow.” No “Come and Get It Day” for public schools, onLy for politically connected charter schools. And for those who believe that charters play by the same rules as public schools, take a look at those salaries for charter principal. A sweet deal.

She writes here with meticulous documentation about how some charters in New Jersey took a generous portion of Paycheck Protection Program funds, whose ostensible purpose was to help small businesses survive the economic shutdown caused by the pandemic. The charters that grabbed big bucks were never in danger of losing their funding. Thirty years ago, the original goal of charter schools was to demonstrate that they could achieve better results at less cost and be more accountable. Their new goal seems to be to scoop up as much money as they can.

New Jersey’s charter schools walk a constant tightrope. Although publicly funded by state and local tax dollars reallocated from under-funded public school districts, charters are privately managed by appointed boards and are often less accountable to the public.

In recent years, there has been no more striking example of this tenuous balancing act than the charter sector’s “double dip” into Coronavirus Aid, Relief, and Economic Security (CARES) Act funding. The charter sector flexed their lobbying muscle and ensured charter schools were eligible both for 100% forgivable loans as nonprofit entities through the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) and for grants as Local Education Agencies (LEA) through the Elementary and Secondary School Emergency Relief (ESSER) Fund that also funded local public schools. PPP forgivable loans, which were meant to help struggling small businesses pay their employees, were slyly used by charter schools and their management organizations, even though the charters had maintained their dedicated funding stream of tax dollars.

Although the Trump Administration originally refused to reveal where and how the PPP funds were distributed, once the list of recipients was released, The Network for Public Education (NPE) began working to ascertain how much funding was given to charter schools and the management organizations that run them.

NPE compared ProPublica’s database, which provides loan amounts in ranges, with lists of charter schools provided by individual states and identified between $925 million and $2.2 billion in PPP loans to charters and CMOs.

As part of NPE’s investigation, I compared New Jersey’s list of charter schools with ProPublica’s database of loans and created a list of New Jersey charter schools and charter management organizations (CMOs) that received PPP forgivable loans.

The New Jersey Double Dippers

In total, between $25.6 and $61.8 million in PPP forgivable loans were awarded to New Jersey charter schools and their CMOS. Thirty-seven New Jersey charters schools received between $27.9 and $65.1 million, and four CMOs received an additional $2.65 to $6.7 million.

Charter schools also received an additional $10,084,128 in ESSER grant funds, with amounts as low as $4,410 to Ridge and Valley Charter School and as high as $1,229,935 to Mastery Schools of Camden, a group of Renaissance charter schools.

Many of New Jersey’s CMOs Took a Triple Dip Out of CARES Funding

Four Charter Management Organizations that run nine charter schools that took PPP forgivable loans, also accessed forgivable loans for themselves.

iLearn is a CMO that operates a chain of charter schools alleged to be affiliated with the Turkish Gulen movement. The CMO received a forgivable loan of between $350,000 and $1 million and the four New Jersey schools received PPP forgivable loans totalling $6 to $14 million. Only three charter schools in New Jersey received PPP forgivable loans worth $2 to $4 million, and two were iLearn schools. With the addition of just over $1.4 million in ESSER grants, the iLearn chain brought in between $7.4 and $15.4 million in federal subsidies – more than any other chain in the state. According to the most recently available 990s, iLearn had a healthy fund balance of $1.3 million and individual iLearn schools had fund balances as high as $1.3 million as well.

KIPP New Jersey, the CMO that oversees KIPP schools in Camden and Newark, received a $2 to $5 million forgivable loan – the largest of any CMO in the state. According to their 2017 form 990, the organization had an almost $12 million fund balance and CEO Ryan Hill earned a handsome $265,341 salary. KIPP Cooper Norcross also received a $2 to $5 million PPP forgivable loan, in addition to over $1 million in ESSER grant funds.

College Achieve Public Schools, a small CMO managing three locations, received $150,000 to $350,000 in forgivable loans. Additionally, the Asbury Park and Paterson charter school locations each received $350,000 to $1 million, and the Plainfield location received $1 to $2 million in forgivable loans. In total, College Achieve received $1.85 to $4.35 million in PPP forgivable loans, and the three schools banked another $751,735 in ESSER grant funds. College Achieve served less than 1,300 students in the 2017-18 school year, yet CEO Mike Piscal took home over $251,000 in compensation. Two other employees made over $200,000 as well, with one earning $265,397 and the other $230,998. An NJ Advance Media analysis of state data found that in 2017-18 the average superintendent salary was $155,631 and only 30 superintendents in the state earned over $200,000.

Philip’s Education Partners, a CMO that manages two charters – one in Newark and one in Paterson – received a $150,000 to $350,000 forgivable loan. The Paterson location got $350,000 to $1 million, and another $147,251 in ESSER grant funds. The Newark location didn’t receive PPP money, but did get $187,343 in ESSER grants. In total Philip’s Education Partners and its schools took in $500,000 to $1.35 million in PPP forgivable loans and another $334,594 in ESSER grants. The two schools served just over 500 students in the 2017-18 school year but CEO Miguel Brito made a staggering $410,205, over $100,000 more than any other school leader in the state.

Philip’s Academy Newark was the first private to charter school conversion in New Jersey and in many ways seems to continue to operate more like a private school than a public school. The former St. Phillips Academy, founded by an Episcopal church, was flush with $5 million in gifts and grants when it was awarded charter status. With the new-found steady stream of tax dollars, Brito said the cash on hand would “go into capital projects rather than operating expenses.” The CMO ended the 2017-18 fiscal year with over $21 million in net assets, and employed a “Chief Philanthropy Officer” earning a six-figure salary.

Charters Have a Dedicated Funding Stream, So Why Accept PPP Loans?

The examples above demonstrate that PPP forgivable loans went to CMOs and schools with healthy fund balances and enough cash on hand to pay exorbitant salaries.

Investigations in other states have uncovered recordings of board discussions related to the acceptance of PPP loans. For example, a Utah Military Academy charter school board member stated that the PPP money could supplant funds budgeted to pay salaries, and the already allocated dollars could “go into our accounts to help flush up our funds.”

One board member objected, stating that the money was meant for businesses struggling to keep their employees, and that the charter’s “funding wasn’t cut at all,” but her colleagues shot back “We’re a business,” and, “We’re a nonprofit.”

A review of New Jersey charter school minutes led to a frustrating discovery. New Jersey regulations state that charter schools must post board minutes on their websites to comply with the Open Public Meetings Act, yet only fourteen of the thirty-seven schools that received PPP loans had up-to-date minutes that were detailed enough to contain resolutions accepting the PPP loans. Many websites have no minutes at all, and the majority of the minutes that are accessible are, by and large, sparse on details. This leaves the public mostly in the dark regarding how and why most New Jersey charter schools decided to apply for and accept PPP loans.

Minutes of the May 20 meeting of the Achieve Community Charter School show that the board of trustees voted unanimously to accept a PPP loan, and the board resolution explained that the charter would “not be able to conduct its annual gala” which could lead to a reduction in staff.

A handful of other charter schools, all under contract with School Business Office LLC, a for-profit provider of school business management services that took its own $150,000 to $350,000 forgivable loan, passed virtually identical resolutions that cited a list of “examples of economic uncertainty” impacting K-12 districts as a whole, as the reason to accept the loans.

The resolutions also cited a possible “reduction in State Charter Aid.” As a result of COVID-19 Governor Murphy reduced state aid to schools by $335 million, which will likely result in a decrease in per-pupil charter funding next year. However, charter schools suffered no uncertainty or reduction in aid that school districts didn’t also suffer, and school districts weren’t eligible for PPP loans to fill their budget gaps.

Paterson superintendent Eileen Shafer has been clear that district students “get scraps” after state funds allotted to the district are redirected to charters. The perpetually beleaguered school district, facing a $16.4 million reduction in state funding due to the coronavirus pandemic, resorted to asking the public for donations to provide students with laptops to bridge the digital divide.

It seems the simplest answer as to why charter schools and their CMOs applied for and accepted PPP loans is that they could. The national charter lobby ensured that charters were eligible both as nonprofits and as LEAs, and many of New Jersey’s charter schools were willing to take the funds meant to save small businesses and nonprofits from the ravages of the COVID-19 economy.

Now that this information is public, charters and their CMOs should return PPP loans, so that the money can be redistributed to New Jersey’s small businesses that have truly been harmed by the pandemic. For those that don’t, the state should deduct the amount they received from any future relief provided to schools through the CARES Act.

Either charters are public schools or private entities – they can’t have it both ways.

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