Marc Winger | Charter Schools and PPP: Classic Double Dipping

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Over the last eight years I’ve written a number of columns about charter schools. I exposed the darker side of charters because Santa Clarita was witness to the exploitation of loopholes in the charter school laws. We saw firsthand the fiscal mismanagement of a notorious local charter. And, across the state, we’ve seen criminal and unethical acts by leaders of charter schools, resulting in headline stories in the media. Thankfully, last year major charter reform legislation was approved to provide the public with greater transparency, local control and the ability to rein in abuses. 

Let me start this column with my now standard statement. Charter schools are part of the public school landscape. Most studies have shown that the achievement level of students in charters is no better, or worse, than those in traditional public schools – some are good, some are bad, and most sit in the middle when judged by state assessments. When properly approved and monitored by local school districts, charter schools have the right to serve students whose parents believe the school can provide better education for their children.   

Despite recent legislative reform, some charter operators continue to find ways to exploit loopholes and avoid full transparency about their use of taxpayer dollars. The latest example is charter school claims for loans from the Paycheck Protection Program (PPP) for small businesses and nonprofits that were affected by COVID-19 closure. The intent of the federal government was to provide these forgivable loans to help small businesses and nonprofits stay in business through the COVID recession.   

Enter the charter school loopholers. The intent of PPP was to pay salaries so people would not be fired and businesses would not go under. Charter schools have received full state funding, applicable federal funds and COVID-related emergency funds, just like traditional public schools.  Charters had no reason to lay off, fire or furlough staff. Did they need the PPP money? Unlike small businesses, their revenue continued to flow. Yet many are also organized as nonprofit entities and that loophole allowed them to claim PPP funding. So off they went, double dipping, with no valid reason. 

The Network for Public Education analyzed the Small Business Administration’s (SBA) list of PPP funds and found that more than 1,300 charter schools and their management companies took between $925 million and $2.2 billion through the PPP.  Remember the infamous stories of large corporations like Shake Shack and Ruth’s Chris Steak House that have since returned the PPP money? Most of the PPP money claimed by charter schools went to Charter Management Organizations (CMOs) that, in many cases, employ more than the PPP upper threshold of 500 people, across numerous schools. But these CMOs didn’t feel the guilt that the corporations did – they took their normal state and federal revenue and, at the same time, took PPP. They didn’t look back.  

One of the California PPP recipients is Inspire Schools. This charter is so badly managed that none other than the California Charter Schools Association has disassociated itself from the organization. It’s a home schooling network that’s currently the subject of an “extraordinary audit” by the state’s Fiscal Crisis Management Assistance Team (FCMAT) – never a good sign. Its outgoing director was recently paid more than $1 million upon departure. They have more than 1,300 employees – hardly a small business as the PPP envisioned.

Another was Learn4Life. This is a CMO with 80 schools in California serving 40,000 students. They reaped in up to $51.7 million.  They recently were ordered to close sites in San Diego because they were operating outside the boundaries of the districts that had approved them. The decision is being appealed. And their executive vice president owned a for-profit company that leased corporate office space and loaned money to the CMO when he served as EVP of the charter organization, a blatant conflict of interest.  

Here’s a list of charters across the country that took PPP money.  I encourage readers to click and scroll through to the check out the California charters that took this funding. https://networkforpubliceducation.org/wp-content/uploads/2020/07/National-List-of-Charter-Schools_CMOs_EMOs-That-Received-Small-Business-Administration-PPP-Funding-National-List-.pdf

The PPP money taken by these and other California charters could have been better spent on local small businesses and minority-owned small businesses that got shut out of PPP funding. Or how about using it to support child care providers? That would have helped parents get back to work. 

Should there be a consequence of this loophole-exploiting double dipping?  The state and federal governments have two opportunities to make this right.  

On the federal level, charters that took PPP money should have their PPP amounts deducted from whatever they may be entitled to receive from the stimulus act that’s currently being debated in Congress.

On the state level, there’s an interesting opportunity. As part of the state budget deal this summer, school districts and charter schools, whose funding is based on attendance, were frozen at 2019-2020 revenue levels.  This “held harmless” schools that may lose students due to COVID-19 attrition. Districts and charters are equally treated if they were expecting increases. But some charter schools and some growing school districts claim they are being punished because they expect an increase in 2020-2021 enrollment due to COVID-19 shifts in school settings. Some charter operators have filed a lawsuit over the issue. Prior to the suit the governor stated that he would be looking at this issue in August. So, when that deliberation rolls around, if the decision is made to allow charters to claim increased enrollment, it should be a choice – claim the increase in enrollment and return the PPP money to the SBA so it can be redistributed to small businesses that really need it, or keep the money and don’t expect to get the enrollment money.   

You can’t have it both ways.

Marc Winger is the former superintendent of the Newhall School District who serves as treasurer for the congressional campaign of Assemblywoman Christy Smith.

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