Profiting Billions from Failing Kids: Ohio’s Charter Funding Model

^{Sen. Rand Paul, R-Kentucky, right, speaks with the media following a round table discussion on school choice with Sen. Rob Portman, R-Ohio, left, at Carpe Diem-Aiken, a tuition-free public charter school, Friday, May 16, 2014, in Cincinnati. (AP Photo/Al Behrman)}

RCEd Commentary

Charter schools –alternative schools meant to provide better educational options for parents and children while creating healthy competition for local public schools – have been hijacked in Ohio by profiteers and huge campaign contributors whose great talent is making money and winning elections, not educating kids. The results have been the poorest performing charter school sector outside Nevada.

How bad is it? Some charter schools in Ohio can remain open even though they only graduate 2 out of 155 children. Meanwhile, more than half a billion state dollars that were meant for districts went instead to charters that performed the same or worse than the district last year.

However, there is great hope that meaningful charter school reform is coming to Ohio. This could mean that my home state’s well documented status as the country’s most notorious charter sector could soon change.

Senate Bill 148, currently being merged in the Ohio Senate with another reform bill, takes meaningful and significant steps toward fixing many of the most obvious transparency and accountability issues with Ohio law. Despite its shortcomings on funding and tightening closure standards (due to how far behind Ohio is than any bill weakness), this is without a doubt the most comprehensive and courageous charter school reform effort offered by Ohio Republicans in three decades.

But I would caution against assuming this effort a fait accompli. That’s because Ohio’s charter school lobby – Ohio’s most powerful thanks to White Hat Management’s David Brennan and the Electronic Classroom of Tomorrow’s William Lager -- lurks in the darkened background. Brennan and Lager have given more than $6 million to politicians (mostly to Republicans, hence the earlier courage reference) since the program began. They’ve collected more than $1.7 billion – about one out of every four state charter dollars ever spent.

And the kids of Ohio have not been well served by their schools. Of 81 possible grades their schools received on last year’s report card, only 1 was an A and 5 were Bs – more than 70 percent were Ds or Fs.

But their poor performance has historically meant little to legislators. When the state adopted dropout recovery standards a few years ago that allowed a school to stay open with as low as a 7.2 percent four-year graduation rate, it still wasn't low enough for Brennan (whose Life Skills schools are always among the state's worst performing, but rake in the money). So there's a loophole: if the school improves its graduation and test passage rate 10 percent a year for two years, they can stay open.

Brennan has a Life Skills school (Life Skills of Northeast Ohio) that graduated two out of 155 kids last year. That's a 1.3 percent graduation rate. Like six of Life Skills’ 13 schools that received graduation rates last year, that’s below the state's minimum threshold. (In fact, of the 20 lowest graduation rates among the state’s 90 dropout recovery schools, 11 are Life Skills schools.)

However, the loophole allows Life Skills of Northeast Ohio to stay open as long as the school improves to 1.53 percent in two years. That's right. Brennan’s school can stay open without graduating a single additional kid … two years later.

Loopholes, grandfathering and exceptions are where these guys live. You're already seeing it in some testimony. Their greatest push will come in conference committee, where the public light is most dim.

During my two terms in the Ohio House of Representatives, I saw lots of powerful political players. But public utilities, big oil and gas companies, and nursing homes never got everything they wanted.

Ohio's charter schools got everything they wanted. Always. 

These guys' legislative power cannot be overestimated. 

The best way to address all these issues, including political, is a free market solution. Right now, charters are paid based on the cost of educating kids where they aren’t actually being educated -- local public schools.

My proposal is to base the funding amount on the cost of educating kids in charters, like other states. This new formula would kick in after a school’s first two years. Dropout recovery and special education schools would be exempted at first.

After two years, if the charter is successful, the state would provide substantial bonuses – up to double the base amount. One iteration I tried would provide an average 26 percent increase to the state’s best performing charter group – the Breakthrough Schools in Cleveland – and about 15 percent cuts to the worst performers. By contrast, every charter today gets about the same increase, assuming no enrollment increases.

This new funding system would make it tough to profit from failing kids. It would use the free market to drive success because student achievement would define the profit motive, not lobbying power. 

While this idea is unlikely to happen in Ohio, I think it would drive more reform quicker than any. And the beauty is it's creating a market that rewards success and punishes failure. That's how the market for charters – the definitive market-based reform measure – should work. But as CREDO Director Macke Raymond said last year, that's not how the charter market currently works. 

The long and short is this: Ohio’s making real progress toward charter school reform. But do not assume that outside pressure will work.

To quote a wizard, the hope for Ohio charter school reform has usually been “just a fool’s hope.” The state’s current legislation poses the best opportunity, so far, to turn that hope real.

But it cannot happen unless we make it so.