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Why Charter School Scandals Resemble the Subprime Mortgage Crisis

7/16/2014

 
by Professor Mark Naison, originally published July 8, 2014 at With A Brooklyn Accent
To understand why we may be approaching a charter school crisis that resembles the one that developed around subprime mortgages, you need to understand how investment banks and credit rating agencies seized upon an instrument to make homeownership available to people with limited resources as a vehicle to make fortunes and advance careers, leaving the tax payers with a large bill. I think something similar is happening today with charter schools, once seen as an opportunity to provide better educational opportunities for families in low and moderate income neighborhoods. In each instance,  an institution initially aimed at expanding opportunity for those with limited resources became, because of government favoritism and lack of oversight, a vehicle for profit taking on a grand scale by the very privileged that sometimes left those the institution was designed to help in very bad shape
 
The subprime mortgage was a loan offered by banks and financial institutions to people whose credit rating and financial position was too weak to qualify for a normal 20 to 30 year mortgage at the prevailing interest rate.  To protect the lender, this was done by making the interest rate much higher, with the penalty, in the case of default, being repossession of the home that was purchased. This was obviously a high risk endeavor for the borrower. But because the nation was becoming more economically polarized, with working class incomes plunging and middle class incomes stagnant, the Clinton administration and federal lending agencies started pushing this instrument as a way of keeping the dream of homeownership alive in the nation, especially among working class people and people of color.  Banks, savings and loans, and mortgage companies rose to the challenge, writing millions of these mortgages to people whose incomes and collateral did not qualify them for a conventional mortgage.

At times, they aggressively marketed these mortgages, pushing them on people who never dreamed they could purchase a home, triggering a wave of new residential construction in many parts of the nation.  It seemed like a democratic moment in the nation’s history- millions of new home owners, many of them people of color, a boom in residential construction, work for lawyers and bankers specializing in residential loans.
 But underlying this boom were shady practices that elected officials chose to ignore. Many of the mortgages were written in ways that hid the risks borrowers were taking with variable rates that rose sharply after the first few years.   There was no way borrowers were going to be able to pay their mortgages with the rates they would have five or ten years after they were initially written and many  would lose the homes they had purchased.

Worse yet, investment banks began to bundle these mortgages into bond offerings, and sell them as a safe investments to insurance companies, pension funds, government institutions, and high end investors around the world, raking in huge commissions as they did so.  And here, corruption on a grand scale turned a risky lending practice into a destabilizing force of deadly proportions in the global economy.  Rating agencies, seeing huge profits being made by their best customers, the large investment banks, started giving triple A ratings to bonds based on the bundling of individual mortgages which, were they rated, would have been giving a rating of “F.” This practice ended up spreading the risk into every corner of the global economy, as investors rushed to gobble up the bonds, more mortgages were written and sold to meet the demand. And for a while it all seemed to work. Millions of people who never had homes how had them, while fortunes were being made in the writing, bundling and marketing of these mortgages.
 
But inevitably, the boom turned to bust.  When the high rates on the mortgages started kicking in, millions of people defaulted on their loans, not only losing their homes but setting in motion a chain reaction which destabilized not only the banks which had written the mortgages, but the financial institutions which had bundled them, along with their customers. Some of the largest banks and insurance companies in the nation failed and went under, and others had to be rescued through an injection of funds from the federal government at huge expense to tax payers.  And as the economy plunged into near Depression, the residential housing market was shattered, and along with it the dream of widespread home ownership among the poor. Today, there are 13 million abandoned homes and commercial properties in the US, while large numbers of families live doubled and tripled up in properties which were designed to be private homes
 
While the comparison is not exact, there are some powerful similarities between what happened to subprime mortgages and what is currently taking place with charter schools, another “short cut” to opportunity which has been seized upon by elites for financial and political gain, to the detriment of those for whom the charter school was initially designed to help.
 
Charter schools, which are public funded schools which have their own boards of directors and can set their own hiring policies, curricula, and patterns of student recruitment and discipline independent of the regulations governing public schools, were initially created to promote greater experimentation and innovation in public education.  Many early charter schools were created by teachers and parents and promoted innovative pedagogies. Some still do.
 
But somewhere along the line, public officials began to see charter schools as a way of circumventing expensive labor contracts with teachers unions and of providing an alternative to public schools in inner city communities which had been battered by disinvestment, job losses and drug epidemics. They invited foundations and the private sector to come in and create charter schools on a far larger scale and with a very different model than parent/teacher cooperatives, using private money as well as public money.  The professed goal was to give inner city parents and students safe alternatives to battered, underfunded and often troubled public schools, something many parents welcomed, but inviting powerful interests to help shape what was essentially an alternate school system free from public regulation and oversight proved to be as dangerous as it was tantalizing.
 
By the end of the Clinton Administration, “Charter School Fever” had started to spread through Corporate America and Wall Street, spurred on by an investment tax credit that offered huge tax breaks for those who invested in charter school construction.  Not only did the number of charter schools rise exponentially in every city in the country, but self- described “education entrepreneurs” began creating  charter school chains, some of them non profit, some of them for profit,  which attracted  private funding along with public money, headed by powerful “CEO’s” who were sometimes relatives and friends of powerful politicians, and in a few instances, politicians ( or ex-politicians) themselves. Flush with funding the chains began building new schools in inner city neighborhoods where public schools were starved of funding, or in some cases, colonizing existing public school buildings and seizing the best facilities.  Founders of the new chains eagerly embraced the corporate model of management, giving their executives far higher salaries than their counterparts in public education, and creating a climate of insecurity and fear for their teachers, along with data driven performance targets, with the expressed goal of vastly outperforming inner city public schools on the standardized tests which had become the central component of school evaluation following the passage of No Child Left Behind.   

By the middle of the Bush administration, hundreds of new charter schools had been created in cities throughout the country and charter schools were rapidly emerging as the favored strategy for inner city education among an unprecedented array of interests including Wall Street and Silicon Valley, Civil rights organizations, Hollywood and the media, and the Democratic and Republican leadership. The prospect of creating great schools in inner city communities while  offering opportunities for profitable investment, all without raising taxes or increasing school budgets proved irresistible to a broad spectrum of the nation’s leadership. Charter Schools, like subprime Mortgages, were increasingly marketed as a Win/Win proposition for all concerned, a way to help the poor while unleashing the creative power of the private sector. The power and breadth of this emerging coalition was revealed for all the nation to see when Hurricane Katrina struck the city of New Orleans in 2005.   Charter School advocates literally seized upon Katrina as the “Perfect Storm,  putting forth a plan to turn New Orleans into all Charter School district by phasing out and closing all public schools in the city. During the last three years of the Bush administration, the plan was put into effect with the full support of the city administration and the state legislature, leading to the closing of scores of New Orleans public schools and the firing of thousands of teachers, many of them teachers of color, replacing them with charter schools staffed by mostly white teachers supplied by Teach for America.
 
But in terms of Charter School Fever and Charter School Favoritism, the Bush years proved to be only a prelude to what was to transpire in the Obama Administration.  With the appointment of Arne Duncan as Secretary of Education and the launching of Race to the Top, President Obama not only made Charter School Favoritism official national policy, he put hundreds of billions   dollars of federal funds behind an effort to force municipalities to close “failing” public schools (defined as failing exclusively on the basis of student test scores) and replace them with charters.  At a time when the nation had fallen into a severe Recession, municipalities eagerly complied as a way of getting much needed federal funds, closing public schools en masse  and creating thousands of new charters, often with little oversight and only the most perfunctory investigation of the school founders and boards of directors.  Ironically, this was done even though the available research showed that charters did NOT outperform public schools in the same neighborhoods, with comparable student populations.  But data and evidence, when its results were inconvenient, did not deter the President and Secretary of Education from promoting Charter Schools as their preferred solution to problems of educational inequality, a position affirmed for all to see when the President celebrated “National Charter School Week” rather than “Teacher Appreciation Week.”

It is in the Obama years, with the financial incentives of Race to the Top sparking rapid charter school growth with little oversight, that the abuses associated with charter schools began to take on proportions akin to those associated with the subprime mortgage crisis. In the case of the charter school industry, the abuses took two forms:  mistreatment of students, teachers, and families, and fiscal issues ranging from mismanagement to outright embezzlement and fraud.
 
Many of the educational abuses of charter schools stem from their determination to make sure their test scores surpass those of neighboring public schools, thereby justifying the favorable treatment they receive, and hope to receive in the future.  These abuses include:
  • Discrimination against Special Needs students and English Language learners. In every city in the nation, charter schools enroll far lower number of such students than public schools in the same neighborhoods.
  • Expulsion or harassment of student who do not test well, sometimes right before state tests. In some cities, public school teachers have called this “The Charter School Dump” as they can expect an influx of charter schools students, who they HAVE TO accept, shortly before test time.  On one instance a famous charter school operator in NY expelled his entire 8th grade class because of their disappointing performance on tests
  • Draconian discipline policies which would never be tolerated in public schools such as putting students in closets, having them stare at walls, or wear special articles of clothing to indicate they are being punished when they violate school behavior codes.
  • Telling students, parents and teachers to avoid all contact with their counterparts in co-located or neighboring public schools lest they be “polluted” or “corrupted” by such contact.
  • Failure to hire or retain teachers of color. Charter schools have far lower proportions of such teachers than public schools with comparable student populations.

Not all charter schools practice these forms of discrimination. But enough do, with the number growing every day, that the issue cries out for investigation at the city, state and federal level.
 
The same is true of fiscal abuse and political favoritism, which, if anything, may even be more prevalent. These include:
  • Inflated salaries for Charter School CEO’s and founders of charter school chains. One charter school operator in Washington DC is under investigation for drawing more than 3 million dollars in compensation a year.
  • Putting public officials, and relatives of public officials on the boards of charter schools seeking public funding. Instances of this have been uncovered in Indiana, Florida, California, and Tennessee and can probably be found in most other states.
  • Outright embezzlement of funds by charter school operators, instances of which have been uncovered in New York, Illinois, Michigan, Ohio and Connecticut.
  • Involvement of charter school operators in real estate fraud with the intention of inflating the value of properties in neighborhoods where new charter schools are being built.\
  • The creation of on line and for profit charter schools, without serious oversight, even though such entities have no track record of effective instruction.
  • The granting of charter school franchises, in some states, to religious institutions which teach creationism and biblical literalism, and exclude students who do not share those beliefs.

What we have here, to put it bluntly, is a pattern of discrimination and fraud that hurts the very families the charter schools were intended to help, allows ambitious individuals to enrich themselves at public expense, and ultimately undermines the quality of public education in cities throughout the nation.
 The entire charter industry, riddled with fraud, corruption and discrimination, is poised to slowly build to a public education collapse if the trends of cherry picking the best students, dumping the high needs kids into public schools then closing them for under performing continues.
 
It is time that all forms of Charter School Favoritism come to an end, that Charter Schools be subject to the same level of oversight that public schools are, that closing of public schools to make way for Charters stop immediately and that there be no further expansion of charter schools until their patterns of governance and operation fully investigated.
Professor Mark Naison speaks about Charter Schools
on Education News on YouTube:

 
For Mark's Research follow these links:
  http://bit.ly/ChartersSubprime
  http://bit.ly/ChartersSubprime
For the Bibliography follow this link:
  http://bit.ly/CharterCorrupt

Watch out Tennessee!
A horde of out-of-state big-money interests are swarming like mosquitoes to Nashville, TN next week to convince people that our state needs more charter schools and vouchers. (Click HERE for the article)  Their event is inappropriately called a "Well-Being Initiative," but they won't tell you that the only ones to achieve "well-being" from their "advocacy" is themselves.  They won't tell you the truth of how their initiative is failing in other states.  They certainly won't tell you how much money they are personally getting from their initiative, either.  Follow the money and the motives.  Tennessee parents sure are.

Blatant error on 4th grade Math TCAP test in TN

5/7/2014

 
Last week, 4th grade children across Tennessee complained to their parents about a question on their high-stakes TCAP test that was clearly very wrong.  What was wrong?  Well, we can't tell you exactly because we parents are never allowed to see the test, but we have good reason to believe our kids are telling us the truth based on the fact that many different students from different parts of the state, who don't even know each other, told their parents the same story about that question.  Undeniably, where there is smoke, there is fire.  

We asked some 4th grade teachers about it, and they confirmed the error (without using words, of course), but no teacher would let us use her name or even her district for fear of losing her job.  See, the high-stakes TCAP test is so secret that teachers are forbidden from discussing it.  They will lose their job if they do.  Teachers are forbidden to look at the test questions on TCAP.  Administrators know of this error, too, but filing a complaint with the state over the error is a sure-fire way to get their district in hot water for tattling.  

Even though teachers are not supposed to look at the test questions, every single 4th grade teacher in TN saw this particular test question, and in fact was required to see this question, because it was a SAMPLE question for the Math TCAP.  

The way TCAP works:
Before students begin the actual TCAP test, teachers have a script of directions to read aloud.  The teacher reads a sample test question from the test booklet, and students then go through the process of bubbling in the correct answer so they get the hang of the test.  The teacher waits as each student bubbles in an answer to the SAMPLE question, and then the teacher reads aloud the correct answer from the script.  (Last week, some bright students raised their hand and told their teacher the answer was wrong, and their teachers agreed, and told their class to bubble in the correct answer).  After that moment of questioning and confusion for students, the teachers started the timer and told students to begin the real test.  

From several students' memories, the test question was something like this:
It was a multiplication problem. Something like 4x60. The answer choices were:
F) 240
G) 160
H) 260
J) 140
The teacher read from the script that the correct answer was "G". Several kids in his class told the teacher the answer was wrong, the teacher agreed, and they all changed the answer to the correct answer: "F". (Some students also told us that the letter choices did not correspond to the A,B,C,D bubbles on their student answer sheet)

Again, we aren't really sure that our kids remember the exact question and choices after nearly 8 hours of testing last week, but all do clearly remember the teachers realizing that the test booklet, sample question, and scripted answer given were obviously wrong.

This test is high-stakes. It is an albatross around students' necks.  For students as young as 8 years old, the score is mandated by the State of TN to count as 15-25% of their report card grade.  Their score can determine whether they pass to the next grade or not.  Their score can also strangle a teacher's rating, dropping a teacher's 1-5 level through the mysterious TVAAS evaluation formula that nobody can explain.  These test scores are even used to punish and close schools.  "High-stakes" is an understatement!

Are there more errors like this on TCAP?
It is entirely possible.  We will never know if there are because the test security is so tight.  Parents and teachers never get to see the questions or correct answers.

What if there are errors?
Maybe the Pearson Corporation will come clean and tell us.  (If you believe that, TN Parents would like to sell you some stock in our new Gullible Company.)  The fact is, Pearson has had many, many, many problems with its testing in the U.S.A.  It is in the best interest for Pearson to keep their test security tight, to prevent parents from seeing the questions, and to require teachers & administrators to sign gag-orders preventing any discussion over the test.  Teachers have also told TN Parents about the many errors in Pearson's textbooks and test prep workbooks.  For the millions of American tax dollars we pay Pearson, our students should be getting error-free learning products and assessments.  

Wouldn't PARCC test be better?
Um, hello??? Pearson does the PARCC test, too!  That's like buying a different flavor potato chip.  Same company, same potatoes, same quality control, same profit motive for their company.  Besides, the reports from other states that gave the PARCC test this school year are horrendous.  They tell of vague, confusing PARCC questions with no legitimate answer choices... frustrated students, even the brightest, advanced students in the class who weren't able to finish and who shed tears of frustration...  and they mention many questions that contain advertising for brand-name products such as Nike, Apple iPod, Mug Root Beer, LEGO, and IBM.  These tests and test-prep products have become a Common Core Cash Cow for Pearson, with Pearson owning the only ranch in town.

Politicians: many of you insist that we must hold teachers "accountable".  Why don't you hold Pearson "accountable"?  

*The $40-50 million that TN spent on TCAP expenses last year would have given teachers that 2% raise they were promised and deserve.  The $150 million spent on testing in TN could have hired more teachers, which would truly help our children succeed more than any test ever will.

The Elephant/Donkey in the Room:
Why does the British corporation, Pearson, have so much power and control over our American education system and over our children?

ANSWER: $$$ to political campaigns; $$$ to lobbyists; $$$ to faux-student organizations; lavish trips for politicians and education leaders to exotic places such as Brazil, London, Singapore, and Finland; and the best tax attorneys money can buy to keep it all above-the-law.

Smart Governor! 

1/10/2014

 
Why did a Governor return a campaign contribution from StudentsFirst, an out-of-state group who seeks to privatize and profitize schools?  Alabama Governor Robert Bentley said, "We felt like there were some people that could misinterpret that donation, and we wanted to be clear."  That is why Governor Bentley returned the $5,000 donation to StudentsFirst. (Click HERE to read the full article)

NOTE:  For his last election, Tennessee Governor Bill Haslam received twice as much as Alabama's Governor did.  (Tennessee parents do not yet know how much Gov. Haslam may or may not have received for his upcoming election this year).



StudentsFirst spent more than $100,000 to help Rep. John DeBerry, D-Memphis defeat a Democratic primary opponent (the most money StudentsFirst spent on any campaign nation-wide!).  Hmmm... DeBerry now has a critical role in the legislature.  He was appointed to the committee that will first act on the legislation StudentsFirst is pushing by House Speaker Beth Harwell, whose PAC received $5,000 from StudentsFirst.  Lt. Gov. Ron Ramsey's PAC also got $5,000 from StudentsFirst.

"Tennessee Ethics Commission records show the group had nine lobbyists registered to lobby the General Assembly in 2012 -- including Rhee -- with payments to lobbyists of between $50,000 and $100,000 and related lobbying expenses of $300,000 to $350,000."  (click HERE to read that recent article)

NINE lobbyists?!? Who are paid DOUBLE what most TN teachers earn!  Volunteer parents are organizing across the state and will be present at the capital to lobby as volunteers for free.  We are doing it for our children.



*Tennessee parents commend Alabama's Governor for his very wise decision to return the money to StudentsFirst.  That shows integrity and leadership!  We urge our Tennessee elected officials to do the same.

*If you are a legislator who refuses or returns money from StudentsFirst, please reply and let us know so we can tell our followers.  Thank you!

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