US News Cover Story 4/27/98

The New Education Bazaar
Charter schools represent the free market in action--with all its problems

David Mackey liked the idea of running his own school. So last year he got a franchise to open a branch of Life School College Preparatory, a new kind of "public" school. The company holds a charter to educate Arizona kids with public funds outside the regular school system and offers franchises to operators for a fee of $1,000 per student. Now Mackey, who once taught public school in Utah and worked as education curator at a Phoenix firefighting museum, teaches math, science, history, and English to two dozen students, grades seven through 12, in a small room in a single-story, downtown professional building in Mesa, Ariz. He had to recruit the students himself, and if his enrollment drops, so does his $40,000 income--each student brings about $4,500 in state funding. The founder of Life School, James Alverson, a former public school teacher himself, says he borrowed the single-person franchise idea from Amway, the home-products distributor.

Until recently, the notion of maximizing profits and creating incentive schemes had little to do with running a public school. But Mackey and hundreds of other charter-school operators like him around the country are part of a bold new experiment in education reform. For over a century, local school boards have held a tight monopoly on where and how students can receive schooling at public expense. But deepening dissatisfaction with traditional public schools has changed the landscape. Conservative thinkers have long argued that public schools would do a better job if they had to compete for customers, as private firms do. Now, a hybrid "free market" system, in which students and parents exercise choice but the public pays the costs, is becoming a reality.

Since 1988, 16 states have passed "school choice" laws granting students permission to attend schools beyond the geographic borders of their local school districts tuition free. More than 4,000 "magnet" schools allow students to select schools with special teaching or curriculum themes within their school systems. And six years after the first charter school opened in Minnesota, there are nearly 800 such independent public schools educating more than 165,000 students in 23 states and the District of Columbia.

Of all these free-market reforms, charters have attracted particular interest because they represent the most dramatic departure from traditional schooling. Proponents of charter schools include both political conservatives--who view them as a step toward a more radically demonopolized system in which students would receive vouchers to attend public, private, or parochial schools--and moderates who see charters as a way of averting precisely this dramatic step. Both groups believe that charter schools, which in their purest form operate largely beyond the reach of school boards and teachers' unions, can strengthen public education by promoting competition and by liberating innovators from the shackles of tradition. President Clinton, a strong backer of the charter concept, has called for quadrupling the number of charter schools to 3,000 within the next two years.

In two states, Arizona and Michigan, the notion of a free-market school system has moved well beyond the theoretical stage. Charter laws in both states are the most permissive in the nation: Virtually any person or organization can open a charter school and enjoy wide latitude over staffing, curriculum, and spending, and the backing of the state lawmakers and regulators. Together, Arizona's 241 charters and Michigan's 107 make up nearly half the total number of charters in the United States.

Good and bad. Yet weeks of reporting in the two states, including visits to nearly three dozen charter schools, yield a picture of educational entrepreneurialism that features not only the the classic benefits of any market-based enterprise but also the classic drawbacks. Charter schools are both better and worse than ordinary public schools. Their problems are different, having more to do with those of a free-wheeling market than a state bureaucracy. The best charter schools pursue innovation and educational excellence with an enthusiasm sorely lacking in many traditional public schools. But these schools are the minority. Much more common are schools beset with problems as bad as--and in some cases worse than--those found in traditional public schools. If competition and market models are inevitable features of tomorrow's education, the operating realities of charter schools in Arizona and Michigan are reminders of perils to avoid--and guideposts for parents seeking the right schools for their children.

High-quality charter schools share one trait: They have brought new participants who care about children's welfare into public education. A dozen or so Detroit-area clergy, for instance, have started charters to help students languishing in the city's public schools. Charter schools are also generally small and safe, offering a cohesiveness hard to find in Arizona's and Michigan's often large public schools.

Charter schools in both states offer a wider variety of options for students with different learning styles. The teaching philosophies of two charters in Mesa, Ariz., for example, couldn't offer a more striking contrast: Benjamin Franklin Charter School is a throwback to Norman Rockwell schools of the 1950s, with well-scrubbed students working silently at desks in tidy rows, under the watchful eye of no-nonsense teachers. Several miles away at the Montessori Education Centre Charter School, elementary students grouped three grades to a room sprawl on the floor or bunch together at tables, learning math by grouping beads and working on sound-letter relationships, or drawing in their journals. When they need help, they call their teachers by their first names.

A few schools in both states are truly innovative. In Michigan, a secondary school created by the Ford Motor Co. is located in the Henry Ford Museum in Dearborn. Students study the museum's technology exhibits as part of the curriculum. A smattering of new schools have established themselves as specialized educational powerhouses, including Sankofa Shule, an Afrocentric elementary school in Lansing, Mich., that includes instruction in four languages, and the Arizona School for the Arts, a junior/senior high school in Phoenix that couples a half-day performing-arts program with a college-prep core curriculum.

Most fundamentally, the spread of charters in Ari zona and Michigan proves that competition can promote reform. So far, the Mesa school system, Arizona's largest, has lost only 1,600 of its 70,000 students to the area's many charter schools. But the mere existence of the schools seems to have motivated the mainstream bureaucracy. To stanch the flow of students to the likes of Ben Franklin and the Education Centre, the district is opening new traditional and Montessori elementary schools, building a performing-arts magnet school, and adding daylong kindergartens to many elementary schools to court working parents.

If the best of a newly marketized system is very good, however, the worst has problems rarely encountered in traditional public education. And in scores of charters in Arizona and Michigan, curricula and teaching are weak, buildings are substandard, and financial abuses are surprisingly prevalent. Nearly half Arizona's charters are high schools, the majority run by chains such as PPEP TEC High School, Excel Education Centers Inc., and the Leona Group. These companies take advantage of the fact that Arizona requires high school students to attend only four hours of school a day. They target kids on the margins of traditional public schools--low achievers, discipline problems, truants--with pledges of swift and simple routes to graduation. And many of the companies increase their revenues by running two or three four-hour sessions a day and substituting self-paced computer instruction for a regular teaching staff.

Academic standards in such "high schools"--many occupy a few rooms in commercial buildings--are often very low. Marilynn Henley, Arizona's curriculum director in the mid-'90s, who last year visited more than 100 of the state's charter schools, calls the computer coursework "work sheets on screens--mostly at a seventh- or eighth-grade level." Many "courses" last only a few weeks. There is typically no homework. And many students get credits for after-school work, including, in the case of students at the Arizona Career Academy, a nonprofit charter in Tempe, jobs in fast-food restaurants.

Standards in many of Arizona's for-profit charter high schools with conventionally taught courses aren't any higher. At the Leona Group's new Apache Trail High School in Apache Junction, where staffers are paid bonuses for raising enrollment, 30 students taking a course called "American literature through cinema" listened (with the exception of those asleep at their desks) to the soundtrack from Last of the Mohicans. Defenders of the charter high schools say the schools offer a second chance to students abandoned by traditional public education.

Hard to learn. No one would dispute that bad teaching and scarce resources plague many traditional public schools. But shortages are so severe in some charter schools in Arizona and Michigan that it's hard to see how any learning can take place. Many of the charters' teachers are low-paid neophytes; as a result, staff turnover is high. Labs and libraries are rare. Even basic classroom supplies are often lacking: The kindergarten teacher at EcoTech Agricultural Charter School in Chandler, Ariz., for example, appeared to have little more than paper and pencils available for her students. And there are plenty of charter schools housed in buildings few would deem conducive to learning: Teachers at the West Michigan Academy of Environmental Sciences spent more than a year teaching 300 students at picnic tables and old desks in the Stadium Arena in Grand Rapids, briefly vacating the building for a knife-and-gun show.

Even more disturbing is the opportunity for profiteering created by charter laws in Arizona and Michigan. When William and Mary Delaney turned Warwick Pointe Academy, a private elementary school they owned and operated in Grand Blanc, Mich., into a public charter school in 1996, they began charging the school $200,000 a year in rent for the building and furnishings--over three times the per-foot rate paid by several public schools and another charter school in the area. William Delaney declined to discuss the rent.

A study of Arizona's charters conducted last year turned up a number of instances where the enrollments schools submitted to claim state aid differed sharply from the schools' average attendance. In Michigan, the Romulus public school system sought to profit from another market reform--the state's new school-choice law. Located just west of Detroit, the Romulus system opened a school within the Detroit school district's borders. It enrolled about 2,200 students, including many dropouts, offering as one attraction a $50 "signing bonus." The school qualified for $14 million in state aid, but only about a fifth of the students continued to attend the school. (Last year, the Michigan legislature outlawed such practices in Detroit, causing the school to close.)

Traditional public school systems have the ability to grant charters in Arizona. Most of those that have done so, however, have been tiny, cash-strapped rural school systems out to make money by charging chartering fees of up to 10 percent of the charter schools' revenues. The Arizona charter law also let sponsoring school systems count charter students as their own for state-aid purposes, a since-rescinded double-dipping opportunity that gave the 3,300-student Window Rock school district, located on the Navajo Indian reservation in northeast Arizona, an added $200,000 to a budget of $20 million.

Nepotism is widespread in Arizona and Michigan charter schools. One example is NFL-YET Academy, a 620-student elementary school in Phoenix. The school's founder and chief executive is Armando Ruiz, a former state senator and adviser to former Gov. Fife Symington. His twin brother, Fernando, is the school's budget director; his younger brother Reyes is the school's "spiritual development" director; his mother, Estella, is an administrator; his father, Reyes Sr., is a school carpenter; his sister, Rebecca, is a teacher. While the family-run model is ideal for many small businesses, the potential for abuse in public contracting is obvious; the law in Arizona bans nepotism in regular public schools but not in charter schools.

Such problems have multiplied in the absence of rigorous oversight. "We have not found a single [state] with a well-formed plan for dealing with problem schools or outright failures," write conservative education expert Chester Finn Jr. and his coauthors in their 1997 report, "Charter Schools in Action." Local school systems have largely sidestepped the task of monitoring the 50 or so charter schools they sponsor in Arizona. Window Rock, for instance, hasn't assigned any staff to keep tabs on the dozen schools it has chartered, the closest of which is 400 miles away. Window Rock's new school superintendent, Paul Hanley, did move to close four schools last fall, including two run by Reed Gaddie, who in 1989 was sentenced to jail on a drug paraphernalia charge. One of Gaddie's schools, Community Campus, had no building and was conducting classes in a park; the other, the Arizona Career and Technology High School, on one occasion last fall resorted to "locking down" students in their classrooms with custodians and construction workers patrolling the halls to keep order.

State chartering boards haven't been eager to crack down on abuses, either. Last year's evaluation of Arizona's charter schools was conducted by the staff of Lisa Graham Keegan, Arizona's elected state superintendent of schools, after Keegan's office began receiving many complaints about the schools. But Keegan's department didn't make the evaluation's troubling findings public until nearly a year later--after the state school board association lawyer filed a freedom-of-information request, and after Keegan's top charter-school aide removed evaluators' handwritten notes on their school visits, as allowed by law. Says Keegan about the evaluators' report: "I would prefer that everything [the monitors] saw was wonderful. But if it wasn't, OK. In the main, I'm pleased, far and away, with the quality of the public charter schools. . . . How much monitoring do you think is going on in the traditional system?"

Two governor-appointed boards that grant charters in Arizona, the State Board of Education and the State Board for Charter Schools, also declined to take action against many schools discovered during the evaluation to have serious educational problems. The boards, dominated by free-market advocates, revoked two charters in the wake of the evaluation, including that of Alan Wright, a past superintendent of education at the Arizona Department of Juvenile Corrections, who recruited many students from the state's youth justice system to his 12 Success charter schools. The state said Wright failed to serve special-education students and committed other transgressions, which he denied. (A state court recently reinstated Wright's charter on due-process grounds, though the Success schools have shut down.)

But over three dozen schools in last year's evaluation of Arizona's charters that were identified as having education programs bad enough to close were left alone on the grounds that they weren't physically endangering students or defrauding taxpayers. The systematic evaluation of the charter schools by Keegan's staff ended last fall, halted by the heads of the two charter boards and Keegan, a former speech pathologist who entered the Arizona legislature at age 30 and coauthored the state's charter law after failing to push through voucher legislation. Through a spokesperson, they say that the Arizona Department of Education is not required by law to conduct charter-school evaluations.

No furniture. In Michigan, the majority of charter schools are sponsored by state universities: Central Michigan University, Grand Valley State, Saginaw Valley State, and a few others, all of whose boards of trustees were appointed by Republican Gov. John Engler. Engler is a staunch advocate of charters who readily acknowledges that he pressed trustees to promote charter schools. Instead of closing down a severely troubled school in Muskegon, the head of the charter-school office at Grand Valley served as the school's interim principal for several weeks. Harry Ross, director of oversight at Central Michigan's charter-school office, says the university had nearly 30 charter schools in operation before it hired oversight staff.

Keegan and other market-reform advocates argue that it is consumers--parents and students--who should determine the fate of charter schools. "If the education in charter schools isn't good, people leave, and the schools don't stay in business. It's a better way to run a system," she says. Yet neither Arizona nor Michigan incorporates testing systems to measure whether charter students are learning any more than their counterparts in regular public schools--making it difficult for parents and students to make smart choices.

In fact, the choices may be fewer than many consumers realize: Though funded with tax revenues, many charters have proved less welcoming than truly "public" schools. To be eligible for federal start-up grants, the schools must be open to any student who applies and must use a lottery if they are oversubscribed. But Arizona doesn't require charters to use a lottery, and some schools that have received federal funds don't. The well-regarded New School for the Arts in Scottsdale, for example, has a lengthy waiting list. Yet it considers applicants on a first-to-apply basis and then counsels out students not suited to its advanced arts program.

Some charter schools discourage special-needs students from applying. Lyle Voskuil, director of special education at eight Grand Rapids area charters run by National Heritage Academies, a for-profit company, says that for financial reasons his schools offer no more than three hours of special-ed services to a student a week and that they urge the parents of students who need more help not to attend the schools. "We tell them upfront that they may be better off elsewhere," says Voskuil. Traditional public schools don't have that luxury.

Bad apples. Arizona's charter high school chains may recruit troubled students, but other charter operators work to keep such students out. Many have "zero tolerance" discipline policies that they discuss in long, preadmission interviews with parents and students as a way to discourage potential bad apples. "We're trying to get our share of good kids," says Japen Hollist of Life School in Mesa. "We've raised the dress code to scare off a few, and we have frank conversations with others."

Twenty percent of Arizona's charter schools and nearly half the charters in Michigan are former private schools that converted to charter status--frequently as a way to raise their revenues. Many of these "conversion" schools--including some 20 Montessori schools in Arizona and two prestigious private schools in Detroit, Nataki Talibah Schoolhouse and Aisha Shule--have created more options for families who couldn't otherwise afford private schooling. But to the extent that such schools don't open their doors to "outsiders," charter laws are simply creating public subsidies for private schooling, and encouraging social balkanization. The A.G.B.U. Alex and Marie Manoogian School in Southfield, Mich., for example, was a private Armenian church school before it became a charter two years ago (tripling its revenue in the process). As a charter school, its board, faculty, and student body are still almost entirely Armenian. "Not a lot of new kids apply," acknowledges principal Nadya Sarafian, who keeps small U.S. and Armenian flags side by side on her desk.

Nowhere are the separatist tendencies of some charter schools more strongly reflected than at Sankofa Shule, one of half a dozen African-centered charters in Michigan. While its students clearly thrive in a setting celebrating their heritage, Sankofa deliberately places itself outside the cultural mainstream. Rather than Labor Day, Memorial Day, and Presidents' Day, it observes holidays such as African Independence Day and Malcolm X Remembrance Day. "The traditional concept of Thanksgiving, like the Fourth of July, really has nothing to do with us," writes a teacher in the school newsletter. And a daily "affirmation" spoken by the entire school begins, "I pledge to my African nation . . . ."

The segregation of many charter schools along ethnic, racial, and religious lines has also created church-state conflicts. A year after Heritage Academy Inc., a privately run Mesa high school, converted to charter status, the Arizona Republic reported that the school was teaching creationism in its science classes--and violating the law in the process. The school's headmaster at first defended the practice. Later, faced with the loss of state funding, he vowed instead to teach neither creationism nor evolution.

Keegan and other charter backers contend that charter schools shouldn't be held to higher standards than traditional public schools. Yet charter schools offer a chance to introduce a level of accountability absent from public education in the past. For decades, public schools have been at the mercy of central-office edicts and teacher-union contracts--and thus not responsible for their own performance. They were told what to spend money on, whom to hire, and what to teach. Many charter schools, in contrast, are largely free of such bureaucracy. In exchange for that freedom, it would make sense to allow public authorities to scrutinize charters' financial practices and educational results--and to crack down on laggards. Such a trade-off could in turn inspire a similarly rigorous system of accountability in traditional public schools. What is clear from the Arizona and Michigan experiences with charters is that, without rigorous accountability, both students and taxpayers suffer.

BUYING A REVOLUTION

Sugar daddies for charters

Foundations created by wealthy, industrial-era families like the Fords and the Carnegies have been the traditional benefactors of public school reform. But today's market-driven experiments are drawing a new generation of underwriters. They include:

Donald and Doris Fisher. The billionaire founders of the Gap Inc. have pledged $25 million through a new foundation to help the San Francisco area public schools hire the Edison Project, a for-profit operator of both traditional and charter public schools, and one of nearly two dozen new companies drawn to the business of public education by the chance to compete for students. "Edison has a good [education] model and we want to give Bay-area schools a chance to use it," says Donald Fisher, 69, himself a product of San Francisco's public schools. Bringing in an outside firm like Edison, Fisher says, gives public school systems a catalyst for reform "without getting caught up in the voucher debate." (The Fishers' son John independently owns about 4 percent of the Edison Project.)

A. Alfred Taubman. A shopping-mall developer and chairman of Sotheby's, the New York auction house, Taubman, 73, is using his vast wealth--pegged at $680 million--to launch the Leona Group, a Michigan-based, for-profit operator of charter schools. Leona already has won contracts to run 16 charters in Michigan and Arizona by helping charter-school founders secure start-up loans backed by Taubman's millions. The company expects to have three dozen charter schools open by September and hopes to expand nationally.

J. C. Huizenga. This wealthy manufacturer and evangelical Christian founded his own for-profit charter school company--National Heritage Academies--which runs eight charter schools in the Grand Rapids, Mich., area stressing traditional values (each school has a "moral focus" committee). Huizenga, cousin of entrepreneur Wayne Huizenga, also plans to expand.

The Walton family. The heirs of Wal-Mart founder Sam Walton are using part of their $28 billion fortune to encourage the shift of students from traditional public schools to both charters and private schools. The family foundation has donated $350,000 over the past two years to a national group that helps launch charter schools, for example, and John Walton, 51, has contributed $3 million to help District of Columbia students attend private schools, one of three dozen such efforts begun nationally in the 1990s.--T.T.

DO THEY WORK?

Vouchers for good and ill

Cleveland's 3,000-student voucher program is in its second year, and it is wildly popular: 5,000 students who applied couldn't get in. The enthusiasm isn't surprising, given that only 16 percent of ninth graders in Cleveland's regular public schools pass Ohio's proficiency tests, and only 33 percent of the city's students graduate on time. Voucher schools tend to be smaller and safer than the public schools; 60 percent of voucher students attend Catholic schools, which have a reputation for strong academics.

Yet in other ways the pilot program, advanced as a market-based remedy for public school ills, falls short of its promises. In theory, vouchers encourage public schools to improve by giving their students the option to leave. But in Cleveland, the program seems more a form of educational triage than a catalyst for reform. With only 3 percent of Cleveland's public school students participating, the voucher program hasn't to date had a reforming effect on the whole system.

Yet expanding the voucher program significantly would be hard, in part because it's proved far more costly than expected. The law requires Cleveland to transport voucher students to private schools, but the city was short on buses and drivers, so a third of students took taxis--at a yearly cost of $1,300 per student, nearly as much as the vouchers themselves.

Full up. Even if costs could be brought under control, Cleveland doesn't have enough private schools to provide voucher seats for all 77,000 public school students. Already, 33 of the city's 39 Catholic schools--by far the city's largest source of private education--participate in the voucher program, and many are at or near capacity. Although Cleveland's vouchers are publicly funded, voucher schools can select their students and need not accommodate all comers. The private school with the most voucher students, Hope Central Academy, offers no services for learning-disabled students. Meanwhile, the fact that a majority of the city's voucher schools include religion in the school day has triggered lawsuits challenging the program's constitutionality.

Perhaps of biggest concern, there is as yet no evidence that Cleveland's voucher schools educate kids any better than public schools do. A recent independent study of the city's public and parochial voucher-school students found that third graders in voucher schools last year progressed at the same pace in core subjects as did public school students.--Warren Cohen in Cleveland