September 10, 2018; Arizona Republic
“As long as it’s legal, I don’t know how the board could stand in the way.”
With these words Kathy Senseman, chair of the Arizona State Board for Charter Schools, summed up the board’s unanimous approval of the transfer of the four campuses of the Benjamin Franklin Charter School to a newly formed nonprofit organization, a deal that illustrates so much of what is wrong with the privatization of public education. The transaction, with little concern for the welfare of children, will allow the transfer millions of public dollars into the pocket of the schools’ former owner, a current member of the state legislature. The benefit for the schools’ students is less clear.
The schools, which were opened and are currently operated by a for-profit corporation now solely owned by state representative Eddie Farnsworth, are performing well academically, rating a “B” grade from the state. The four-school system does not have financial problems; according to the Arizona Republic, they “reported a $194,241 profit in fiscal 2017 and receives about $20 million a year in state funding.” The change in ownership appears to have only one rationale—it is even more profitable for the current owner.
The business of schools may be education, but this change is about real estate. Central to the transaction is the sale of four buildings to the new nonprofit organization. Farnsworth’s company developed the buildings now used by his schools, using financing that was secured by the schools’ long-term lease agreements. This arrangement, commonly used by charter schools, results in public funds paying for property owned by private interests. Now, the newly formed nonprofit will buy these buildings using additional public funds, essentially having the state pay twice for the same property.
Documents submitted to the Charter Board indicate the plan is to borrow $65.7 million through the Arizona Industrial Development to purchase the schools. A sale for the projected loan amount would result in an $11.8 million profit for Farnsworth by retiring the outstanding lease balance.
In another analysis, the profit from this sale was projected to be as much as $30 million.
From Farnsworth’s perspective, making this organizational change will further strengthen his schools. He explained to the board that “he was requesting the change in organization to strengthen the finances of the roughly 3,000-student school chain.” Farnsworth said the new structure will “avoid property taxes and…qualify for federal education funds.”
What he didn’t explain was why in that process it was necessary for him to profit so greatly. However, as the Arizona Republic tells it, a brief interview with Farnsworth revealed his belief that “he is deserving of a big financial reward because he took the risk in 1995 to start his charter school chain and personally guaranteed millions of dollars in loans to launch Benjamin Franklin.”
The Republic points out that Farnsworth made it hard to ensure greater accountability when he “joined other Republicans at the legislature this past session in blocking Democrats’ efforts to require charter schools be more transparent about their finances. He also supported an amendment to the budget that ensured charter schools wouldn’t be subject to new, strict procurement and gift laws imposed on district schools.”
The financial details of this transaction are so troubling that they mask another part of the transfer that should be of concern. The new organization that’s now responsible for the education of 3,000 students has no experience running schools! Its three-person board, recruited by Farnsworth, does not include an educator or anyone with prior educational experience. Another organization will be hired at government expense to operate the schools, and it seems very likely that Farnsworth’s organization will be awarded the contract. From the state charter board’s vantage point, this is of no concern and was not considered before approving the transfer.
The use of public education funds should be of primary concern, particularly in a state that already struggles to fund its schools. (Arizona was among the poorest of schools in the 2017 Kids Count rankings). Whether or not market-based education reform results in better education, it should not creatively shift funding away. Yet, in Arizona and many other states, it appears this is the law of the land.—Martin Levine