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Report: More than 100 Arizona charter schools are in danger of closing

Posted at 4:47 AM, Jan 10, 2019
and last updated 2019-01-10 06:47:47-05

PHOENIX — More than 100 charter schools in Arizona are in danger of closing, due to financial mismanagement, declining enrollment, and mounting debt.

That's the finding of a new report from the centrist think-tank, The Grand Canyon Institute.

GCI examined charter school finances between 2014 and 2017, and found 105 charter schools were losing more than $400 per student, per year. That's the metric the state uses for takeover in a public school district.

The study's authors say dozens of charter school operators were allowed to borrow money against projected future enrollments to finance construction of new facilities, but students didn't show up as anticipated.

The study says more than a third of charter schools in the state saw declining student populations during the four-year period.

State funding is determined by enrollment, leaving some charter operators with fewer dollars to pay off big loans or bonds, resulting in deficits.

Of those 105 charters in jeopardy, GCI says 40 are almost certain to close, possibly before the end of the school year, potentially leaving hundreds of students and parents scrambling.

The institute has published three reports detailing questionable financial practices in charter schools, from windfalls to charter operators, to the practice of "self-dealing."

That's a financial practice of contracting with companies owned by the charter holder. It's illegal in district schools, but charter schools are largely exempt from the same financial rules.

GCI has advocated more aggressive oversight of charter schools to prevent financial problems.

"We're trying to help them be more pro-active. They have an interest in being pro-active," said Dave Wells, the study's co-author. "We're trying to make more transparency in our recommendations so this kind of problem can be contained and we can improve it in the future."

The report sheds new light on charter school finances, and comes on the heels of multiple news reports, showing charter school owners manipulating rules to create enormous paydays for themselves.

In September, State Rep. Eddie Farnsworth sold the Benjamin Franklin Charter Schools he owns, to a non-profit he created, earning an estimated $14 million in profit.

State lawmakers are expected to take up the issue of charter school reform when the legislature convenes on Monday.

Republican state Senator Kate Brophy McGee has proposed a series of ideas to bring tighter controls to charter school finances, an idea which has gained a tacit endorsement from Governor Doug Ducey.

Public education advocates remain skeptical of the plans.

Joe Thomas, president of the Arizona Education Association, predicted the effort will lead to "meaningless" reform.