Monday, August 18, 2014
Four states--Michigan, Missouri, Ohio and Florida--have been particularly receptive to for-profit management companies running charter schools. In Michigan, nearly 80 percent of charters are run by for-profits. Many states prohibit for-profit companies from running charters. Many others fall in-between, neither encouraging nor discouraging for-profit management. This grey area comes from the fact that for-profit companies are generally ineligible to receive charters from states. A federal statute, for instance, heavily incentivizes states to adopt this approach, prohibiting charters owned by for-profits from receiving federal fund grants. But the non-profit charter in "grey-area" states is free to contract out services. Thus, while the non-profit receives the charter, it can pay a for-profit entity to run the school. I imagine, although I have not investigated, for-profit companies might directly set up non-profits, which can then receive the charter and pass on the work and money to the for-profit.Local papers in Florida and Michigan have sought to reign in for-profit charter operators, pointing out a stream of scandals, poor academic performance, and calling for more oversight. Michigan's former governor, John Engler, nonetheless, continues to defend the lack of oversight, arguing that the market will work to correct the problem. A serious flaw, however, permeates this thinking: that public schools can and will operate like markets. Detailed investigation and years of problems in Michigan show that public schools are not operating like a market. First, parents are not paradigmatic consumers. Their front-end options are limited; they are not paying for service directly; they have limited information; exit-options come with substantial costs; and public education is not a commodity in the traditional sense. To the extent Michigan's charters operate like a market, it is primarily in the sense that companies are making a lot of money with little restraint, which, in Michigan, seems to incentivize behavior more akin to the recent mortgage crisis.
See here for my article on how profit motive and competition are, in large part, antithetical to the concept of public education.
See here for more on the Michigan story.