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The Charter School Real Estate Scam

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While claiming to be "public," charter schools are given preference over the schools that are actually operated by public entities. This is illustrated by the fact that the Payroll Protection Program (PPP) during the COVID-19 lockdown was provided to charter schools, but not their district-run public counterparts. Another example is that charter schools have exclusive access to California state facility grants that they can use to offset their facility costs, even when they own the property. While the budgets of public schools are affected by the demographic shifts resulting in fewer school-age children, charter schools continue on a publicly funded building spree even as they struggle to fill seats in their classrooms.

The Alliance Charter School Network provides a case study of how unregulated the charter school industry is in California and how this drains education funds away from students. This chain has been in operation since 2004 and currently runs 23 schools in Los Angeles.

In 2014, Los Angeles was in the 12th year of an enrollment decline, fueled in part by changing immigration patterns and a rise in the cost of living that made habitation in the city impossible for many families. The number of school-age children had also been affected by demographic shifts that had been predicted by LAUSD demographers as far back as 1997. Alliance ignored these challenges and opened a new franchise in San Pedro.

To house the Alliance - Alice M. Baxter Charter High School (Baxter), the charter chain purchased a historic former 1923 Ford Dealership building on West 9th street for $3.4 million. The title to the property was held by a separate, related LLC, which then leased it to Baxter. Under the SB740 program, which is only available to charter schools, the state will reimburse Baxter up to 75% of these lease costs. Even after the facility is paid off by the LLC, the state will continue paying this rental assistance, turning the building into a profit center for the charter-management organization.

The financial benefit to charter schools can be significant. While another Alliance school, the Alliance Cindy and Bill Simon Technology Academy High school, only paid $1 million for its facility, it has received $3,428,490 in SB 740 rental-assistance funds. Under the current law, these payments will continue as long as the charter school operates in this facility.

Alliance never had an opportunity to generate never-ending payments from the state for the Baxter property as it closed the school in 2021 after just seven years of operation. The chain is, however, expected to make a healthy profit on the sale of the property as it has been listed for $9.9 million.

Under current law, Alliance will get to keep the nearly $6.5 million profit that it is expected to get from the sale. Despite the fact that state grants helped to pay the cost of obtaining the property, taxpayers will not receive any proceeds from the sale.

Earlier this year, Assemblymember Mia Bonta authored AB 2484, which focuses on closing the loopholes that were written into SB 740. Under AB 2484, charter schools would no longer be able to continue to get reimbursed for rent payments to affiliated organizations in excess of what was paid for the property. Additionally, after January 2023 charter school operators that sell or lease a facility for any purpose other than for public education within ten years after receiving grant funds would have to reimburse the Charter School Facility Grant Program Fund for any payments that they received from the program in the preceding decade.

The passage of AB 2484 is desperately needed to protect taxpayers and ensure that limited education funds are spent for the benefit of all students. At a time when special education programs are drastically underfunded and class sizes are inflated, money should not be wasted on real estate speculation and the construction of school buildings as others sit empty. This proposed legislation would also make a fairer system. If charter schools are truly public, then their operators should not have access to programs not available to their publicly operated counterparts.

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Carl Petersen is a parent advocate for students with special education needs and public education. He was elected to the Northridge East Neighborhood Council and is the Education Chair. As a Green Party candidate in LAUSD's District 2 School Board race, he was endorsed by Network for Public Education (NPE) Action. Dr. Diane Ravitch has called him "a valiant fighter for public schools in Los Angeles." For links to his blogs, please visit www.ChangeTheLAUSD.com. Opinions are his own.

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Carl Petersen is a parent, an advocate for students with special education needs, an elected member of the Northridge East Neighborhood Council, a member of the LAUSD's CAC, and was a Green Party candidate in LAUSD's District 2 School Board race. During the campaign, the Network for Public Education (NPE) Action endorsed him, and Dr. Diane Ravitch called him a " (more...)

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