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When Taxpayer Money and Private Firms Intersect in Schools

In Texas, commercial entities cannot run public schools. But when a charter or virtual school’s management is contracted out to a private company, that can become an artificial distinction. It is an arrangement that can raise questions about how best to ensure financial accountability.
On a recently approved Texas charter school application, blacked-out paragraphs appear on almost 100 of its 393 pages.

Redactions on the publicly available online version of the application often extend for pages at a time. They include sections on the school’s plan to support students’ academic success, its extracurricular activities and the “extent to which any private entity, including any management company” will be involved in the school’s operation. The “shaded material,” according to footnotes, is confidential proprietary or financial information.

The school, part of an Arizona-based charter school network called Basis, opened a campus in San Antonio this year. It was technically formed under a nonprofit, but its management is handled by a private company, the Basis Educational Group, owned by the school’s founders. A spokeswoman for the Texas Education Agency said redactions appeared on the application because the information was copyrighted.

In Texas, commercial entities cannot run public schools. But when a school’s management — including accounting, marketing and hiring decisions — is contracted out to a private company, the distinction can become artificial. Such an arrangement raises questions about how to ensure financial accountability when the boundary between public and private is blurred, and the rules of public disclosure governing expenditures of taxpayer money do not apply.

Such agreements are not limited to charter schools. They can also be found in partnerships between traditional school districts and virtual course providers, particularly at schools where students receive all of their instruction online.

“The big issue is having some transparency,” said Bruce Baker, a Rutgers University professor who studies public school finance. “Then we can better evaluate the quality given the cost.”

Private companies operate in four of Texas’ six full-time virtual schools and enroll all but a fraction of the state’s more than 8,000 students who take online courses full time, which they can begin doing in the third grade. While other details of an agreement can vary, the companies generally receive funding when a student successfully completes a course.

Baker recently released a report completed with the National Education Policy Center, which is housed at the University of Colorado at Boulder, examining the financing of virtual learning. It found that “little, if any, credible peer-reviewed analysis” existed on the costs and benefits of online schools. Ambiguous disclosure requirements for privately managed public schools, Baker said, are an obstacle.

When The Texas Tribune made an open-records request for employee salary records and marketing expenses at the state’s full-time virtual schools, it received a series of responses from all but one of those connected with for-profit entities indicating either that the records were not available or that they were not subject to public information laws.

The Huntsville Independent School District, which went into partnership with K12 Inc. to open a virtual academy this year, said the district did not have documents responding to the request at the virtual campus as “it contracts with a private company to handle all employment of personnel and staffing-related data.”

In other instances, the Tribune was directed to make a request to the private company. A lawyer for Responsive Ed Solutions, a charter school that also contracts with K12 Inc., wrote that most employees of its virtual school were hired by the company and provided the email address of a K12 lawyer. A K12 Inc. spokesman then told the Tribune that “confidential information about K12’s employees” could not be disclosed.

An administrator at a virtual school overseen by the Houston ISD said that because the school bought “teaching and administrative services” through Pearson’s Connections Education, those records did not belong to district employees and were therefore not covered by public information laws. The Tribune obtained information through its initial request only from Red Oak ISD, which buys its virtual curriculum through Connections but manages its school in-house.

Baker said such obstacles were common and would not change until legislators or local officials demanded detailed disclosure in the contacts they formed with private companies.

Cassie Fulton, the principal of Red Oak’s online academy, said that was a reason her district had chosen to have its own employees in the school. But she said the state’s approach to financing virtual courses was a mechanism for ensuring accountability.

“In a regular school, you claim attendance for funding,” she said. “In a virtual school, courses are only awarded credit if they are completed. Funding is based on course completion.”

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This article originally appeared in The Texas Tribune at http://www.texastribune.org/2013/12/16/when-public-money-private-firms-intersect-schools/.

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