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Public School Inc.

Charter schools are evolving into something radically different from what lawmakers intended - and they are wildly popular. Does it matter that educating Florida's children is falling to private corporations?

By KENT FISCHER, Times Staff Writer

© St. Petersburg Times, published September 15, 2002

Charter schools are evolving into something radically different from what lawmakers intended -- and they are wildly popular. Does it matter that educating Florida's children is falling to private corporations?

The profit motive drives business. More and more, it's driving Florida school reform. The vehicle: charter schools.

This was not the plan. These schools were to be "incubators of innovation," free of the rules that govern traditional districts. Local school boards would decide who gets the charters, which spell out how a school will operate and what it will teach.

To keep to this ideal, lawmakers specified that only nonprofit groups could get charters. But six years later, profit has become pivotal.

-- For-profit corporations create nonprofit foundations to obtain the charters, then hire themselves to run the schools.

-- Innovation is no longer the focus. The big companies offer standard curriculums. Critics call their schools "McCharters."

-- Developers team with the charter companies to offer home buyers an upscale amenity -- tuition-free, taxpayer-funded schools for their developments.

Quietly, lost in the shadow of headline-grabbing vouchers, charter schools have become a hit. Only 600 students planned to use vouchers this year, in which public dollars help pay private school tuition. More than 76,000 charter seats have been approved by local school boards.

From nothing a few years ago, corporate charters accounted for nearly one-third of Florida's charter enrollment last school year. This year, 75 percent of the state's newly approved charter seats went to for-profit companies.

Peter Rudy Wallace was the Democratic speaker of the House when the state first considered charters.

"It was always our intent that charter schools would be nonprofit institutions," he said, "and that their control would lie in the hands of a community-based board for which education was the motivation, not profits."

So these schools are the antithesis of what was planned. They are also wildly popular.

-- Parents adore them. Without paying tuition, they get a private school atmosphere. Class sizes are capped at 20 or 25. Students must apply for admission.

-- Cities use them to relieve overcrowded districts. Kissimmee, Coral Springs and others have hired the corporations; the city council acts as the school board, the city manager as superintendent. Charters in Pembroke Pines have a waiting list approaching 10,000 students.

-- Politicians laud their cost savings: Charters operate with about $2,000 less per student than traditional schools.

Increasingly, private businesses are educating the state's children. Alliances unimaginable for traditional public schools have become the norm.

That itself is innovation -- just not the innovation lawmakers envisioned, said the chairman of the state's charter review board.

"Markets always evolve in ways that people don't anticipate," said Lee F. Arnold, citing as an example airline deregulation in the 1970s. "Nobody at the time thought Southwest was a viable airline. Twenty years later, guess what?"

The policy guy

By his own account, Jonathan Hage is neither educator nor businessman. More political junkie.

He helped write speeches for the first President Bush, then worked for the conservative Heritage Foundation, where he researched Russia's transition to democracy.

Jeb Bush called in 1995, after he lost a razor-thin election to Lawton Chiles.

As Hage remembers it, Bush wanted to keep his education ideas alive and needed a "policy guy" for his new think tank, the Foundation for Florida's Future. Hage became its director of research.

"It was first Jeb Bush's idea, not mine, to promote charters in Florida," Hage said. ". . . Quite honestly, I wasn't that familiar with charter schools."

The foundation helped open the state's first charter school, in Liberty City, which opened Hage's eyes to an untapped market. People liked these new public schools but didn't know how to start them.

"It was a classic business opportunity," he said, "lots of demand and very little supply."

Hage borrowed $5,000 and founded Charter Schools USA in 1997. Based in Fort Lauderdale, the company had seven employees when its first school opened in 1998, in North Lauderdale.

Last spring, Charter Schools USA had 900 employees and ran four schools in Texas and 13 in Florida, with at least 20 more approved here through 2006. Revenue was $40-million, most of it taxpayer money.

Visiedo gets out

About the time Hage started Charter Schools USA, Octavio Visiedo left a 30-year career in public schools. The last six, he ran Miami-Dade County Public Schools; he was the highest-paid superintendent in the country.

"I figured that somebody who understood public policy and education could develop a good charter school business and take off with it."

Visiedo consulted his friend and personal lawyer, Al Cardenas, who has since become the chairman of the Florida Republican Party. Cardenas advised him to open his business before his Rolodex got old.

In 1997, Visiedo joined with one of the nation's largest builders, the Haskell Co. of Jacksonville, to create Haskell Educational Services.

Two years later, with more partners, Visiedo established Chancellor Academies. By 2001, the company ran two private schools and 14 charters in Florida, Arizona and the District of Columbia. Last January, Chancellor merged with Beacon, a Boston charter company. With headquarters in Coconut Grove, Chancellor Beacon Academies is the nation's No. 2 charter company, with 70-plus schools in eight states.

"The potential is endless," Visiedo said. "Charters will change the (public education) landscape forever. It's big business."

Chancellor's revenue last year: $100-million.

Fertile Florida

No charter company has turned a profit in Florida. Investment analysts say profits will come after the companies build more schools and streamline operations.

The state's Charter Review Panel and key politicians, including Gov. Bush, are decidedly pro-charter. Couple the politics with notoriously crowded, often-mediocre public schools and it's easy to see why the for-profits consider Florida a fertile market.

Goldman Sachs and Warburg Pincus, two of the world's biggest venture capitalists, like the prospects so much that they invested a combined $86-million in Visiedo's company.

"Florida sets the tone," said Jim McVety, an analyst at Eduventures, a Boston company that tracks the education marketplace. "It has a friendly Legislature and two significant players (Charter Schools USA and Chancellor Beacon) are based there."

The companies do everything: oversee their schools' budgets, pay the teachers, contract for lunch services, write the curriculum.

Potential profits come from management fees, typically 12 to 14 percent of a school's budget -- about $200,000 a year for a typical elementary, $400,000 for a middle or high school.

Revenue comes mostly from the state and government grants, roughly $5,300 per student, about $2,000 less than traditional public schools, which also get thousands more from local property taxes.

Charters can save money by building scaled-down libraries, gyms and cafeterias, and they can offer limited bus transportation. They hire few high-priced veteran teachers.

"We can't compete for the teacher with 15 or 20 years experience," Visiedo said. "But we do offer full benefits and stock options."

Visiedo said Chancellor Beacon could become profitable next year.

Hage said his company needs to open at least 25 schools in the next five years to break even. The company laid off 18 employees in June.

"Everything I own is leveraged into this," he said. "I hope (parents) appreciate the risks we take and the investments we make for the belief that all children can learn."

Visiedo said he earns $165,000 a year. Hage refused to reveal his salary.

Though Charter Schools USA's revenue comes mostly from the public, its lawyers said the company is not subject to the state's open records laws.

Getting around the law

"A charter school shall organize as, or be operated by, a non-profit organization."

-- Florida Statute 228.056, authorizing charter schools

* * *

The law has done little to slow the corporate charters.

In the past two years, Hage or his associates established nonprofit foundations and applied for charters in 11 counties, including Hillsborough, Miami-Dade, Broward, Orange and Leon.

Combined, the foundations applied for at least 40 schools, the Times found. The applications were copyrighted by Hage's Charter Schools USA. They listed Gov. Bush and Lt. Gov. Frank Brogan as references.

Two weeks after Hage created the nonprofit Polk Charter Foundation, it asked to open seven charters.

Hage said Charter Schools USA products are developed with community support. The Polk School Board found no evidence anyone other than Charter Schools USA wanted the schools.

"It was no secret that this was a Charter Schools USA proposal," said Wes Bridges, a School Board attorney. "We understand how this game is played, and how they're opening up cookie-cutter schools all over the state."

Two days after the School Board said Auburndale doesn't need another middle school, the company asked for a K-8 school in Winter Haven instead.

"How in the world do you get community support in two days?" said Carolyn Finch, Polk's director of charter schools. "I have a real hard time believing there was any community buy-in when all they did was type (on the application) the name of a new city."

The Polk board denied the charter applications.

School boards had final say until the law changed this year. Now the charter-friendly state Board of Education can overrule a local district.

Last year the nonprofit Hillsborough Charter Foundation asked to build eight schools in the burgeoning suburbs south of Tampa. It said the plan would create hundreds of new classrooms, the School Board could decide where to put them, and it wouldn't cost the district a dime. The School Board said no, citing the governor's advisory not to create new programs in the face of last year's budget cuts.

The foundation's board of directors consisted of Billy Buzzett, a one-time Charter Schools USA lobbyist; John Murphy of Arvida, the developer with three Charter Schools USA projects; and Rep. Frank Attkisson, who served with Hage on two state charter school committees.

A Republican from Kissimmee, Attkisson is vice chairman of the House Education Innovation Committee. He said he joined the Hillsborough foundation and five others at Hage's invitation. He receives no pay and sees no conflict in voting on charter school laws while helping a charter school company expand its business.

"If any school board is uncomfortable with it, all they have to do is ask, and I'll jump."

Hage acknowledges that he establishes nonprofit foundations so he can hire himself. It is not only legal, he said, it is a public service.

"How is it my fault that I'm responding to demand? There's a reason why (most) of the charter schools in this state have a waiting list: Parents like them. I'm responding to the demand. I'm not creating the demand."

The IRS, which granted Hage's foundations tax-exempt status, forbids them from being created solely to benefit a for-profit enterprise. Contracts between them must be negotiated "at arm's length."

"We have our antennae up," said IRS spokesman Gerald Sack. "We are looking for situations where the real (people) in control are the management companies."

The Learning Excellence foundations

Fourteen nonprofit groups have names that begin, "The Learning Excellence Foundation of ..."

Every time a Learning Excellence Foundation won a charter, it selected Visiedo's company to run its school. He said Chancellor Beacon played no role in establishing any of them.

His explanation?

"While we know some of the people, they just have an interest in starting charter schools," he said. "There was no definitive plan to set it up" so that Chancellor got the contracts.

"The real question is: What credentials do we have as individuals? I would argue that our (Chancellor Beacon's) credentials are sound."

The Learning Excellence Foundation of Tampa was awarded a charter last year for the North Tampa Alternative School.

The foundation chairman is Alex Bromir, who worked under Visiedo as a Miami-Dade school administrator. He lives in Miami Springs and said he has visited the school a few times.

How did someone from South Florida come to start a charter school in Tampa?

"I was contacted by a lawyer," said Bromir, who could not remember the lawyer's name.

As foundation chairman, Bromir signed the contract to hire Chancellor. Why did his board choose Chancellor?

"I really can't say," Bromir said. "You'll have to talk to Mr. Visiedo about that."

On Feb. 26, 2001, the Learning Excellence Foundation of West Broward and the Learning Excellence Foundation of South Palm Beach held their inaugural meetings, simultaneously, via teleconference.

Both foundations heard a sales pitch from Visiedo, who then loaned each board $15,000 for "initial working capital." Both foundations selected "a committee of one" to recommend a charter company to run their schools. For both groups, the "committee of one" was Charlie Dodge, the city manager of Pembroke Pines, where he oversees charters that Visiedo helped create.

Both boards met again, simultaneously, eight days later. Both boards hired Chancellor.

How did Dodge come to sit on the boards? He said he was recruited by a lawyer whose name he could not remember.

Why did Chancellor win the contracts? Dodge said the boards reviewed brochures of several companies.

Said Visiedo: "I'm sure we had to present our credentials just as aggressively as we have to everybody else."

Added Chancellor executive Rod Sasse: "We didn't hire ourselves."

Bush and Horne

The Times tried to talk with Gov. Bush for this story, briefing three of his press officers. Bush, who has made education a cornerstone of his re-election campaign, chose not to be interviewed. Nor did he respond to a detailed e-mail sent directly to him.

Last month, Bush and Visiedo shared a ceremonial handshake at a ribbon-cutting for a Chancellor Beacon school in Kissimmee. Bush met with reporters afterward and called for more such schools.

Does it bother him that for-profit companies are opening nonprofit charters?

"I believe that when parents are given a wide range of options, that will create a more invigorated educational environment," he said. "If cities and school districts want to team up with (companies) . . . and that brings more schools and saves money, so be it."

When Jim Horne was a Republican senator, he said he voted to authorize charters because he liked the idea of giving parents a more prominent role in running more innovative schools.

Now education secretary, Horne said he is disappointed that concept has mostly been lost: "Some are doing interesting things, but it's not what I had hoped for."

And yet . . .

"I certainly don't want to see (for-profits) proliferate solely to make a dime off the state. But as long as they're providing results and making parents happy, why should I care?"

In the classroom

Sharon Landon relocated to an upscale subdivision in Broward County last year. Her 6-year-old, Brooke, was zoned to attend Gator Run Elementary, which had gotten an "A" from the state.

But Landon shuddered at the thought of sending Brooke there for kindergarten. Enrollment tops 1,600, nearly two dozen portables are out back.

Chancellor Charter School at Weston was opening nearby. It promised an enrollment limited to 600, classes capped at 25, student uniforms, mandatory parental involvement.

The choice was a no-brainer. "Everybody knows everybody here," Landon said. "And the class size was a big deal to me."

Teddi Ackerman put 30 years in at Miami-Dade public schools. She found a different world at Charter Schools USA's Ryder Elementary, which serves parents who work at the trucking company's Miami headquarters. Instead of 35 or 40 kids to a class, she has 20.

At traditional schools, she said, students got away with too much. Not at Ryder. Parents of disruptive children are called and called until their children straighten up or leave.

"We have ways of asking people not to come back," Ackerman said. "We really operate like a private school."

At Chancellor Charter School at North Lauderdale, a student threw chairs and hit teachers. Principal Terri Thelmas repeatedly called the mother at work.

"The mom finally said, "You can't keep calling me.' I said, "My teacher can't teach.' The mom withdrew the child."

Charters are exempt from collective bargaining agreements, so it's easy to fire a lousy teacher.

"When I'm faced with either firing a teacher or losing 5 percent of my enrollment (because parents aren't satisfied), that's an easy decision," said Arnold, the Charter Review Panel chairman. "Parents will give you an earful and then vote with their feet.

"Ultimately, if (charter schools) don't look out for the children, they're not going to make it," Arnold said. "The "bottom line' ensures that you deliver on your promise."

A new amenity

At SouthWood, an Arvida development near Tallahassee, $180,000 buys a three-bedroom home with nearby amenities, including hiking trails, a golf course and the neighborhood's own charter school.

To run Arvida's education division, the state's biggest residential developer hired John Murphy, a former superintendent of schools in Charlotte, N.C.

Arvida has teamed with Chancellor Beacon and with Charter Schools USA to open two schools in Weston and one in Panama City.

"We want education to be one of our major amenities," Murphy said. "When they move into our communities, they'll have quality opportunities. Charters are one way we'll look at that."

A charter school advocate opposes using the schools as an amenity for suburban home buyers.

Robert Haag (not to be confused with Hage, of Charter Schools USA) heads the Florida Consortium of Charter Schools. He worries that the for-profits and developers will "cream off" affluent children, setting back public school integration.

"Charters were created to improve public education, not for . . . putting brand new schools in subdivisions with $250,000 homes," he said. "Are the public schools going to be left with only minority kids with no political power?"

Forty percent of elementary charter school students in 2000-01 were new to public schools, a state study found. Critics say these students previously were private- or home-schooled, which would offset the per-pupil savings at charter schools.

Of 39 states with charter schools, Florida is one of only three that gives charter schools construction money -- $27.7-million each of the last two years.

For more help, Rep. Attkisson sponsored a law this year that allows developers to build charter schools using "community development districts," which they already use to pay for neighborhood fitness centers, swimming pools and the like.

Nobody can say how good a job the schools are doing. A state audit last spring concluded:

"Although required by law since 1996, (Florida) still has not published a report that analyzes and compares the overall performance of charter school students. School districts and the Department of Education still cannot demonstrate whether charter schools improve student performance."

On the one hand...

Rozan McDaniel experienced two sides of Chancellor Charter School at Lantana.

For 10 years, her children attended a traditional school with teachers she cherished. Last year the Palm Beach school district changed enrollment boundaries, putting her son Josh in an elementary she didn't like.

Chancellor was opening a school that offered pre-K through fifth grade, classes capped at 25 and six computers to a classroom.

"I was very impressed with the curriculum and that it was going to be run by former Dade County administrators," McDaniel said.

Josh was accepted to fourth grade. McDaniel enlisted, too. She organized skating parties and spearheaded the school's holiday gift wrap and candle sale.

"They gave us a product, and we liked it so much that we wanted more," she said. "We wanted a sixth grade."

The principal told the parents it was up to the school's governing board. They turned out for the May 20 board meeting.

So did teachers -- for a different reason. Why hadn't they received their full bonuses? Why weren't they being offered contracts for the fall term?

The board said the school was $241,000 in debt, and Chancellor Beacon was demanding cuts. Three teachers and seven classroom aides had to go.

The parents learned that the school's charter entitled them to three seats on the governing board, but the board said they could serve only an "advisory" role. The school district warned Chancellor Beacon that excluding the parents violated the charter.

Visiedo said the parents and the school board misread the charter, but last month, Chancellor agreed to seat the three parents after Jan. 1.

Final budget figures show that Chancellor spent nearly $3-million running the school, about $6,300 per student. The company received $5,300 per student from the government, leaving it $506,369 in debt. The company received none of its $275,000 management fee for running the school.

"We are the last ones to get paid," Visiedo said. "We only get paid if all of the school's other expenses get paid."

Conversely, he said, any Chancellor school with a surplus gets to keep it. "We do that consciously so that nobody can say we're making money on the backs of kids."

McDaniel is of two minds. She feels betrayed by the businessmen behind the school. Then again, she's sending Josh back for fifth grade.

"What they do in the classroom, I can't argue with. What they did, they did right."

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