Following the Charter Dollars by Don Whittinghill

This cogent analysis is cross posted from the website of the Louisiana School Boards Association. Don Whittinghill has been a LSBA consultant since 2000, responsible for production of the quarterly journal, The Louisiana Boardmember, for editorial content of the LSBA web site, and is a former reporter for the Times-Picayune.

Who benefits financially from the pro-market charter school movement?

The charter school reform emerged in part out of a progressive effort to promote innovation that could be used to improve all public schools, and to open up discus­sion on the relationship between school and community, particularly in urban areas. It was a movement initiated by Ray Budde, a professor at the University of Massachusetts and envisioned as a school that would gain freedom to try different methods of teaching that could be transferred to all public schools.

However, a funny thing happened along the way. Free-market zealots (with riches) realized that over $600 billion is spent in the U.S. on public schools. A whole new frontier leading to stable profits was recognized. Everyone knows “it takes money to make money,” and the faces behind the voucher/charter “reform” movement are not bashful in stepping up to the bar.

The economic and political consequences of abandoning public education in the US are grave. Education has always been the gateway of opportunity for working people in America, and that gate is slamming shut. With market-based schools, children from wealthy families are being educated, while those from poorer families are being denied the opportunity. While affluent customers may be satisfied with the outcome for their children, rebuilding the economy in post-imperial America will depend on a large, well-educated labor force that can only be supplied by a free and universal public education system.

But in basing schooling on consumerism the free-market zealots overlook the cultural role of schools in communities. Essential services such as the military, police protection, and schooling have been accepted for many generations of Americans as too essential to be subject to the whims of corporate interests distant from the community.

Most education stakeholders see business oriented political figures and tycoons as being the instruments for converting classrooms into profit centers. Few are aware that there are faces unseen manipulating the movement. More importantly, the reality of the interlocking directorships of the front organizations is difficult to illustrate.

Names such as Dick and Betsy DeVos of the Amway founding family are large contributors to All Children Matter a group of non-profit organizations behind the pro-market charter school initiatives. They have contributed millions to the Republican National Committee and a wide variety of groups that back pro-market charter school expansion.

The DeVos are joined in the outspoken group of billionaires who proclaim publicly that they favor ending government involvement in education. Among the biggest contributors are Richard Mellon Scaife (owner of the Pittsburg Tribune Review), and the Koch family foundations. Other foundations include Olin, Bradley, Smith Richardson and the Walton family who join in the drive to eliminate public education.

The DeVos family also helps finance Family Research Council, and Focus on Family. Betsy DeVos is sister to the founder (Erik Prince) of Blackwater (now Xe Corp.) the private security firm that has become one of the largest supplier of mercenary soldiers in the world.

Much of the research supportive of vouchers and charter schools stems from the Foundation for Education Choice, a think-tank founded by the late Milton and Rose Friedman.

Betsy DeVos, who heads the Alliance for School Choice, founded All Children Matter in 2003, and the American Federation for Children Action Fund in 2010. These groups include Kevin P. Chavous, a former Washington D.C. council member who reportedly helped foster the D.C. and New Orleans charter school programs. Betsy’s All Children Matter in Ohio was fined $5.2 million for campaign money violations in 2006. The organization was also fined in Wisconsin. Due to such legal difficulties the All Children Matter marquee may now be changed to American Federation for Children.

Other DeVos advocates for charters include John F. Kirtley (a venture capitalist of Tampa), Boykin Curry (wealthy hedge fund investor), Joel Greenbers, and Carrie Penner. These folks are linked to Cato Institute, The Center for Education Reform, Heartland Institute, Heritage Institute, Institute for Justice, and State Policy Network. Ed Crane, founder and president of Cato, is also involved in the Alliance for Separation of School and State.

In 2002, Dick DeVos addressed the Heritage Foundation in D.C. His talk contained the following quotation: “…And so while those of us on the national level can give support, we need to encourage the development of these organizations on a state-by-state basis, in order to be able to offer a political consequence, for opposition, and political reward for support of education reform issues.

“That has got to be the battle. It will not be as visible. And, in fact, to the extent that we on the right, those of us on the conservative side of the aisle, appropriate education choice as our idea, we need to be a little bit cautious about doing that, because we have here an issue that cuts in a very interesting way across our community and can cut, properly communicated, properly constructed, can cut across a lot of historic boundaries, be they partisan, ethnic, or otherwise.

“And so we’ve got a wonderful issue that can work for Americans. But to the extent that it is appropriated or viewed as only a conservative idea it will risk not getting a clear and a fair hearing in the court of public opinion. So we do need to be cautious about that.

“We need to be cautious about talking too much about these activities. Many of the activities and the political work that needs to go on will go on at the grass roots. It will go on quietly and it will go on in the form that often politics is done – one person at a time, speaking to another person in privacy. And so these issues will not be, maybe, as visible or as noteworthy, but they will set a framework within states for the possibility of action on education reform issues.”

A September 15, 2010 Philadelphia Inquirer article described how a trio of wealthy Bala Cynwyd businessmen with a passion for school choice gave a combined $5 million to Senator Anthony Williams, then one of three Democrats running against Dan Onorato in the Democratic primary. The three – Joel Greenberg, Jaffrey Yass, and Arthur Dantchick, all of the Susquehanna Investment Group – funneled most of their contributions through the Students First PAC

According to the Pennsylvania Department of State’s Campaign Finance Reports, during 2010 the Students First PAC, a voucher advocacy PAC, contributed $5,956,913.07 to Pennsylvania candidates, including 6 members of the Senate Education Committee.

In idaho, Superintendent of Public Instruction Tom Luna held a re-election fundraiser in the Capitol Hill offices of Dutko Worldwide, one of America’s top lobbying firms. Sponsors included two leading voices in the Republican education re-form movement: former U.S. Education secretaries William Bennett and Rod Paige.

Among Luna’s contributors in October 2008:

· K-12 Inc of Virginia, an online company with 81,000 students and operator of the Idaho Virtual Academy. In Idaho, IVA enrolls 2,930 students and received $12.8 million from the state in fiscal 2010. K12, its employees and major stockholders spent about $44,000 supporting Luna; $25,000 of that was funneled to an Idaho interest group for independent advertising on Luna’s behalf.

· Apollo Group of Phoenix, the parent of the University of Phoenix, the on-line university with more than 400,000 students. Luna’s plan would allow high school students to earn college credits at state expense once they complete high school requirements. Apollo Group gave Luna $5,600.

· Executives of Scantron Corp, a Minnesota-based leader in testing technology that is aggressively expanding into online education gave $7,450.

· Former Education Secretary William Bennett is a founder of K-12.

The Madison Education Group, a Washington DC consulting group founded by Bill Hansen and family gave $5,100. Hansen was deputy secretary under Rod Paige when he was Secretary of Education in the Bush administration. Michael Milken is the largest shareholder of K12 with 24% of the company. Thomas Wilford, CEO of the Albertson Foundation was on the board of K12 for eight years. He is president of Alscott Investments, a long time major shareholder in K12.

Rupert Murdoch, chairman and CEO of News Corp, is also into education reform. He paid $350 million for Wireless Generation, a Brooklyn—based education reform company. Murdoch is quoted as follows: “When it comes to k-12 education, we see a $500 billion sector in the U.S. alone that is waiting desperately to be transformed by big breakthroughs that extend the reach of great teaching.”(Idaho Popkey- 2/20/2011)

The world renowned consultant company McKinsey & Company (one of Pastorek’s key consultants on reform) suggested April 28, 2011 that the New York City educational reforms under Mayor Bloomberg have not produced the impressive outcomes that have been claimed.

McKinsey & Company began an intensive involvement in education issues more than a decade ago. Their consultants played critical roles in planning the restructuring of the New York City schools under Chancellor Klein. In 2007, McKinsey published a report on the commonalities of what the firm considered excellent school system. NYC reform was lauded in that report. Now, following an intensive study of NAEP scores and state testing, McKinsey concludes that “the city school system had not demonstrated the scale of improvement necessary.” (EDVOX-Carol Boyd).

If we follow the money all of this fits. Pastorek hired Vallas on Arne Duncan’s recommendation. Pastorek gained LaTapp money from Milken, and RTTT prep grants from Gates. Now, he is larding up the Louisiana staff with Teach for America people (Chris Meyer, Jacob Landry, the new BESE exec, and now White).

John Walton, who died in a 2005 plane crash, bequeathed $4.1 million to All Children Matter (ACM). His and other contributions to various states (including Louisiana) are obscured by movement from a Political Action Committee (PAC) in one state to a non-profit or PAC in another state. ACM reportedly spent $750,000 in eight Louisiana Board of Elementary and Secondary Education races four years ago. Alice Walton recorded a $173,247 contribution in 2010 to an Indiana PAC involved in a pro voucher campaign. Other Walton’s involved in financially supporting the movement to eliminate public schools include Jim, Christy, and Lynne, all of whom are heirs of the Wal-Mart founder.

In 2010, Walton gave out $157 million for K-12 education, about $5 million of it in New Orleans.

About $52 million went toward shaping public policy, $64 million went to creating quality schools and $39 million went to improving existing schools. Another $2 million went to research grants.

Some of the biggest individual recipients have a major presence in the city: Teach for America, which has more than 200 instructors in local classrooms, received almost $17 million; and the KIPP Foundation, a charter school operator that will be running nine schools in New Orleans this fall, received about $9 million.

The Recovery School District received $667,000.

Among other local recipients: The Louisiana Association of Public Charter Schools, which counts most New Orleans charter schools as members, got about $375,000; the Urban League of Greater New Orleans got $200,000; John Dibert Community School got $250,000; charter operator ReNew got a total of $500,000 for two schools that it runs; and the UNO Charter School Network got $230,000.

The now defunct All Children Matter, in 2003-04 elections spent $8 million nationwide.

J.C. Huizenga, of the Michigan billionaire family and operator of a Baton Rouge Charter school (one of 53 nationally), is an influential supporter of the non-governmental school initiatives. Huizenga is founder and chairman of one of the nation’s fastest growing education providers and a leading advocate of school choice. His National Heritage Academies now claims enrollment of 32,000 students nation-wide. Huizenga has been associated with the political campaigns of Presidential Candidate Mitt Romney. His family owns the Miami Dolphins of the NFL.

Patrick Byrne, CEO of, joins the list of large donors to the American Federation for Children campaign.

Passionately as these philanthropists are in pursuing the Milton Friedman free enterprise model, the movers and shakers of the charters are the people who manage hedge funds for their wealthy clients. Charters are the type of entrepreneurial initiate that warms the cockles of hedge fund managers hearts. Their business is answerable to almost no one…certainly not the government. According to Whitney Tilson, a finance capitalist, founding member of Teach for America and board member of Knowledge Is Power Program (KIPP), “With the state providing so much of the money, outside contributions are insanely well leveraged,” he openly told the New York Times.

Ravenel Boykin Curry IV of the Eagle Capital Management hedge told the Times that charter schools are “exactly the kind of investment people in our industry spend out days trying to stumble on, with incredible cash flow, even if in this case we don’t ourselves get any of it.”

The Robin Hood Foundation annual meeting brings these captains of rich people’s money together annually. Founded in 1988 by hedge fund manager Paul Tudor Jones the gathering last year brought together 3,000 people who raised more than $88 million in one night.

What’s in it for these high rollers?

The best known charter and star of the “Waiting for Superman” flick, The Harlem Chldren’s zone has $128 million in savings and investments invested in a hedge fund. The hedge funds charge 2% management fees and a 20% take of any profit earned.

Hand-picked charter boards of directors pay their charter managers very well. Village Academies Network pays its manager $442,000 annually according to its 2008 tax form 990. Kathy Reidlinger, manages New Orleans Lusher Charter Schools and is paid $270.000.

Western Michigan University studied school spending across the country and found that charters spend less on teacher salaries and instruction and more on management and administration than traditional public schools. The RSD spends more than $13 million on central office administration to educate almost half as many kids as East Baton Rouge Public Schools which devotes $10 million.

Education Reform Now is overseen by five board managers, all hedge fund executives, Sidney Hawkins Gargiulo of Hawkshaw Capital; John Petry, chairman at Gotham Capital; John Sabat of SAC Capital; Joe Williams, head of Democrats for Education Reform; and Brian Zied of Maverick Capital.

Many charter boards and philanthropic foundations are interlocked, trading board members when it is desired.

Jim Peyser is a managing partner at NewSchools Venture Fund and is on the board of several charter schools, and is also a member of the board of the National Association of Charter School Authorizers. The latter organization is paid by the Louisiana DOE in excess of $500,000 annually to review all new applications for charters coming before BESE. Leslie Jacobs, the former BESE member, is a wealthy New Orleans financial executive, who together with her brother and husband, are involved in a number of charter school organizations.

Foundations such as Gates , Walton and Broad benefit from their status as non-profits that are IRS allowed deductions from income and thus are essentially subsidized by U.S. taxpayers. But, they are allowed to leverage their investment in untaxed funds and also evade accountability for the failure of their programs. Gates’ small school movement costs local districts significantly and have failed to show any real advantages. His foundation has abandoned the movement after spending $2 billion over eight years. The Washington Post reports that Gates has spent about $650 million on education reform, mostly on teacher evaluation and performance pay.

Marshall J. Lux is managing director of Mc Kinsey & Co., the global management consulting firm with 90 offices in 51 countries. Paul Pastorek, the former Louisiana Superintendent of Education, hired Sir Michael Barber of McKinsey to help redesign the Louisiana DOE.

The NewSchools Venture Fund issued a ten-year report on its $100 million investment in nonprofit and for-profit initiatives and named the report “Investing in a Revolution.” Sidney Hawkins Gargiulo works for Ziff brothers Investments in New York. She is a director of New Leaders for New Schools and serves on the board of Success Charter Network’s Bronx Success Academy II. Joel Klein, the former chancellor of the New York City Public Schools now is CEO of the NewSchools Venture Fund. John White, now Louisiana DOE Recovery School District Superintendent, worked for Klein in New York City.

The interlocking interests of the charter movement can be glimpsed in a transaction in May of 2007 when a $5 million grant from The Broad Foundation was given to the New Schools Venture Fund. In June of 2006, the New Schools got $22 million from the Bill and Melinda Gates Foundation. These funds were distributed to nine organizations two of which have been heavily used by Pastorek: Teach for America and New Leaders for New Schools.

New Schools for New Orleans was created to aid in the conversion of public schools in the city to charters. Among its donors are the NewSchools Venture Fund, Bill and Melinda Gates Foundation and the Eli and Edythe Broad Foundation. This non-profit won a $28 million i3 grant from the U.S. Department. Two of the top aides to Arne Duncan are ex-Gates Foundation staff members. The DOE grant was matched from other sources including Gates, and Broad.

Brian Zied is founder and CEO of Charter Bridge Capital, a New York based equity hedge fund. He is a board member of KIPP Infinity Charter School in New York.

Another illustration of the interconnectedness of the charter advocates can be found in Ohio. The Ohio Community Schools Center, consisting of many small-time charter school operators, has gone from nonexistent two years ago to an influential lobbying organization.

OCSC, through board member Chester E. Finn Jr., is connected with the school-choice-oriented Thomas B. Fordham Foundation in Dayton and the Manhattan Institute in New York. Manhattan is a Libertarian-leaning organization that supports the privatization of government services. Finn Jr.’s father Chester is CEO of the Fordham Foundation.

While charter schools were sold as a way to help improve education, Finn and other OCSC participants aggressively attacked public schools.

Messages on their Internet list server show that many of them have little understanding of public-school finance but are determined to open their own schools with public money, demand services from the public schools and often employ themselves as the chief executives.

The convergence of Republican and Democrat political interests in behalf of charter school expansion is financially and socially connected, and focused on overcoming what former U.S. DOE Secretary Rod Paige described as the real strength of local school boards: The grass roots of the democracy.

It is the connection of local school districts to parents and other community members that the billionaire boys’ club fear. When DeVos told Heritage “.. these issues will not be, maybe, as visible or as noteworthy, but they will set a framework within states for the possibility of action on education reform issues…” he confessed the chief obstacle to divorcing the public from education.

Only by being aware of the aims, and the identities of the privateers, and by living up to the grass roots strengths of local governance can this powerful national movement be prevented from achieving Pastorek’s goal of ending the “100 year old monopoly.”

— Don Whittinghill, Consultant, July 2011

(Sources for this article are Philadelphia, New York, Washington D.C., and Akron Ohio news article found on the Internet.)

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