implosion

On June 30th, Alameda County’s FAME School (Families of Alameda for Multicultural/Multilingual Education Public Charter) closed its doors for the last time. The decision of the Alameda County Office of Education to deny the school’s request to renew its charter, a decision that was upheld when FAME then sued for a reversal in state court, brings FAME’s 15-year educational experiment and its management’s learning experience to an end. While FAME will not be teaching students when a new school year begins this fall, there are lessons here to be learned, lessons that policy makers and those responsible for chartering and overseeing charter schools can learn.

California, along with 41 other states and the District of Columbia, include charter schools in their formula for providing quality public education. First seen as laboratories where local school districts could develop new programs, charter schools have been widely adopted in response to the belief that the public school systems in many areas fail to prepare children for a successful future. Charter schools allow parents to choose their child’s school from a competitive marketplace that offers an array of options. To encourage a variety of providers to enter the market, charter operators are given significant latitude in their approaches to education and are freed from many of the rules and regulations that govern traditional public school systems.

While each state’s approach to chartering is different, all result in numerous independent organizations, for-profit and nonprofit, being given franchises to operate one or more publically funded schools, each in its own unique way. The burden of ensuring each of these schools provides an effective educational experience, uses public funds appropriately, and is a viable operation falls on the various bodies that are allowed to grant charters. FAME’s story illustrates how this process can go wrong. And since charter schools will remain a significant part of our public education system, FAME’s story can help us see where we can make improvements.

FAME was launched as the Bay Area School for Independent Study (BASIS) in an effort to support the growing number of home-schooled children. The FAME website describes how in 2001 its founders decided to begin a charter school:

“Before the enactment of the California Charter School Act in 1992, parents seeking alternative educational opportunities for their children had few options. With the establishment of charter schools, California opened the door for new and innovative schools such as ours to open. Parents and students were already learning at home and BASIS became an anchor and support for many families who were seeking validation, collaboration, and connectivity within their chosen educational model. BASIS offered two enrollment options. One allowed students to receive daily instruction through classes taught at our Oakland Resource Center. The other allowed students to work at home with their parent educators monitored by a credentialed BASIS teacher. Our method, now known as Personalized Learning, relied on the empowerment of parents to partner in the educational process and work closely with teachers and other support staff to ensure that students made appropriate academic and social progress.”

With a location in Oakland, one might think that the Oakland School Board would have responsibility for deciding upon the creation of a new school in their district. But in California, like most states permitting charters, local districts are only one of a number of potential authorizers. In fact, by 2012, more than 60 percent of charters issued nationally were coming from a body other than a local school district. The purpose of this open system is to overcome the resistance of local school districts to charters entering their turf. But there is a danger in this approach, as the FAME story well illustrates: The chartering authority may not have the competence or the resources to effectively evaluate the applicants or supervise these schools once they are in operation. And by chartering in this manner, these new schools cannot be well integrated into an overall plan for the needs of any particular population or geography.

FAME’s founders took advantage of this flexibility and sought their initial charter from the Sunol Glen (CA) USD, a district with a total enrollment of 250 K-12 students. Located more than 30 miles from the Oakland home of FAME, it was a district in which two of FAME’s founders had political clout.

With the granting of this charter, Sunol Glen’s school board and staff took on oversight responsibility for a school that in its first year would serve nearly twice as many students as they did in their own school, with a program that was introducing a new format of education and which was distant from their offices. How much support to this new organization could they provide? How much resources were they able to devote to ensuring that this startup met all of the requirements of a public charter school? Who was responsible for assessing Sunol Glen’s ability to meet its responsibilities as the issuer of a charter?

What seemed to have not troubled Sunol Glen’s reviewers was the total lack of school experience that BASIS leadership had. Over a decade later, a 2012 grand jury looking into allegations of serious management failings found the BASIS board and its founder/CEO were not competent to run the school.

But with their charter in hand, FAME was in business and the school was launched. Their charter gave them access to a level of state funding based on the number of children enrolled in their programs. With this source of funding now secured and with no limits placed on the school’s ability to grow, BASIS took advantage and let demand set their course.

And they were successful in attracting students. Their program included direct support for homeschoolers, an approach they called “personalized education,” and a more traditional classroom-based school. FAME found that demand came heavily from families who desired their classroom program. And they soon added a third stream in a new multilingual/multicultural curriculum particularly focused on serving the Arabic-speaking population. This was what charter schools are supposed to do: Be flexible and innovative.

Running a school is a challenge. Running a school with two disparate curricula is even more challenging, and adding new facilities and a third curricular focus adds to that level of difficulty. But this did not stop FAME’s leadership from moving forward—and the oversight of their operation did not slow them down enough to test their competence and capability.

Sunol Glen did attempt to meet its responsibilities. When they had questions about BASIS having teachers who met state requirements, they tried to withhold funding until they received assurances that all was as it should be. BASIS went to court, and Sunol Glen was ordered to continue funding the charter. For a small school district, the cost of ensuring compliance may be more than they will choose to bear.

In 2005, their charter from Sunol Glen needed renewal. Taking a page from the entrepreneur’s handbook, BASIS created a new entity, FAME, and looked for a new chartering opportunity. The Oakland School District declined to issue a charter for this “new” operation, but the Alameda County Office of Education said yes. BASIS was no more, and FAME was ready to move forward. Same children, same leadership, new name.

If success is measured solely in sales, then FAME was a roaring success. BASIS had grown over its five years, and so FAME began its new life with 785 students. In the next decade, FAME expanded enrollment to reach 1,600 students and become among the largest charter schools in the county. One site for classroom-based instruction became five facilities in addition to the ongoing personal learning network. Its budget grew, fueled by state funding that went past the $10 million mark.

But as with many startups, it’s much easier to grow the business than to manage it, and the managerial and leadership weaknesses were further strained by increased size and complexity. By 2009, ACOE was worried about FAME’s operations. It requested California’s Fiscal Crisis Management Assistance Team to conduct a special audit looking into “possible fraud, misappropriation of funds and other illegal fiscal practices.” Among the specific complaints ACOE received were allegations that FAME was paying their CEO/founder a total compensation package close to $300,000, which included benefits and perks, an annual housing stipend of $30,000, a vacation payout of over $97,400 over a four-year period, and a $75,000 Mercedes Benz for her personal and professional use.

The auditors found an organization with weak fiscal controls and an inability to manage its cash needs effectively. Like all public schools, the flow of government funding may lag the need to pay bills; this is particularly true for a school that is rapidly growing, like FAME was. With no requirements for FAME to have specific levels of operating capital to support projected levels of enrollment, FAME needed to be adept at projecting its cash requirements and managing its expenses, two competencies which the audit demonstrated were lacking. To meet its need for cash, FAME borrowed funds at high cost from a number of closely related individuals rather than use lower cost bank and government sources. These costs diverted funds from students to friends; potentially these loans allowed public funds to go into private pockets.

The audit also found that the CEO’s compensation was indeed excessive and had been so for a number of years. It was so excessive that it made national news when the New York Times picked up the story:

“According to the audit, the five-year-old charter school, Families of Alameda for Multi-Cultural/Multi-Lingual Education, had also taken out more than $3 million in loans from private lenders including Ms. Alaiwat’s two brothers and two school board members, at an interest rate significantly higher than commercial lenders charge.”

The audit resulted in 43 specific recommendations for improving the school’s operations. FAME’s board issued a detailed response that disputed most of the auditors’ findings, but observed that they “…recognized the need for tighter management practices and an expanded administrative team to support its purpose of providing a first-class education to these students. During the past year, the FAME Board added a new member with significant additional business experience, held Board training sessions, increased its involvement with management, and sharpened its focus on strategic planning. The Board also recently hired a Chief Operating Officer…with significant experience in school district and charter school operations, to share the Executive Director’s workload.” (April 26, 2009 letter from FAME Board to ACOE)

ACOE and FAME agreed to a corrective action plan. In 2010, when ACOE next considered renewing FAME’s charter, while it did question the excessive compensation of the school’s CEO and had some concerns about academic performance, it unanimously voted to grant a renewal through 2015.

In 2011, complaints about FAME’s operations were directed to the standing Alameda County Grand Jury which, which under California law, has the responsibility to look into concerns about publicly funded organizations. The grand jury found a school in serious difficulty with “an unsustainable financial situation…which jeopardizes their financial viability.” (2011-12 Alameda County Grand Jury Final Report) Fiscal management continued to be weak and unpaid bills of $650,000 were sitting on the school’s books. The grand jury recommended that the charter be revoked because of “poor management, unsophisticated controls and a broken governance model…the barriers are too great for success.”

The grand jury also found that ACOE had provided only lax oversight of the school. They noted that ACOE “has a passive interpretation of their oversight responsibilities of public charter schools, taking the position that ‘[we] are the authorizers…not the people in charge.’” (2011-12 Alameda County Grand Jury Final Report)

Both FAME and ACOE protested the grand jury’s findings. ACOE rejected the grand jury recommendation for charter suspension, and the FAME School continued on.

But in 2012, ACOE seemed to wake. As reported in the San Jose Mercury News:

“The Alameda County Board of Education…accused the charter school of violating the state Education Code, using teachers without valid credentials, failing to comply with the charter’s instructional program elements and failing to maintain a governing board of at least five members. The school board also said it is concerned about the school’s financial and operational viability.”

FAME’s board president promised that things would get better. “I don’t see any reason to punish the parents and kids. […] They should give us a chance so that these kids can thrive.”

ACOE accepted these new promises, too. Finally, after almost 15 years of problems, ACOE saw the situation differently, and when the school’s charter was again before them for renewal, they voted no. FAME asked a state court to intervene and stay ACOE’s decision, but to no avail.

With the decision to end FAME’s charter and its access to state funding, the fiscal balls being juggled through an ongoing practice of short-term borrowing to cover up cash shortfalls began to fall. Teacher salaries in excess of $300,000 remain unpaid. Vendors and contractors are owed over $800,000.

But the real problem is that FAME’s students never excelled to the degree that school officials and many parents claimed. Jim Morris and Desrie Campbell of the Oakland Tribune recently compared FAME’s academic results to the neighboring Fremont Unified School District and found FAME lagged on all measures:

  • FAME’s four-year cohort high school graduation rate of 73 percent. FUSD’s is 83 percent.
  • FAME met 15 Adequate Yearly Progress criteria. FUSD met 30.
  • FAME’s Academic Performance Index in 2013 was 781. FUSD’s was 891.

 

So what can we learn?

  1. Charters can create new approaches to education. While in operation, FAME provided support for homeschoolers and offered a unique opportunity for integrating Arabic-speaking students into the American educational mainstream. Both these efforts, unavailable in traditional public school systems, had value for parents who chose FAME programs for their children. But a novel idea may not be enough to bring a publicly funded school to life. Before a venture is launched, there must be expectations that ensure a higher level of expertise and competence. Do we want to support board and staff school leaders learning on the job at public expense?
  2. Innovation may require the easing of some of the regulations that govern traditional school systems. But that freedom cannot become a barrier to effective oversight or defense against mismanagement and worse. Can charter oversight become more than a passive process? In 2010, Greg Richmond, then-president of the National Association of Charter School Authorizers, said, “It is the job of the authorizing agency to protect students and the public’s interest. Chartering agencies should not limit themselves to oversight required by law.” But five years later, we are still seeing passive oversight and that seems not to be good enough.
  3. Are there real benefits of having multiple public bodies granting charters in each state? Charters have become so much a part of mainstream that our worries about local district bias may no longer be valid. Would it not be better to coordinate chartering authority more closely with school district planning and management?
  4. Are we funding the entities that have oversight responsibility sufficiently to do the job we ask of them? And if not, will we?

If we can learn how to do better as we grapple with these lessons, FAME may leave a lasting legacy.