Michigan charter school reforms near finish line in state Legislature

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Michigan Senate Democrats moved forward charter school reform bills Friday during a marathon session that began Thursday.

The four bills would put restrictions on the use of taxpayer money to buy and lease private property and require more financial transparency for charter schools.

The reforms are among the biggest remaining education policy changes Democrats vowed to make during their time of unified control of state government. The clock is ticking to pass the bills before the end of the year, when Democrats will lose control of the House.

The Senate bills will now proceed to votes in the House. There are two remaining scheduled House sessions, but legislators may ignore rules and add session days beyond that.

There are also two House bills that would require charter schools to publicly list average teacher salaries as well as the names of their authorizers and management companies.

Those bills already passed the House and are awaiting final approval in the Senate before heading to Gov. Gretchen Whitmer’s desk. It is likely the Democratic governor will sign them into law.

Republicans and charter advocates have long opposed such legislation, saying it hampers school choice due to the costs associated with additional regulations.

Buddy Moorehouse, vice president of the advocacy group Michigan Association of Public School Academies, said in a prepared statement about the bills that charter schools are “already the most accountable and transparent of all public schools.”

Charter schools, or public school academies, are publicly funded and must follow state and federal law. An outside body, usually a university or college, must authorize charters. The boards that oversee charter schools are appointed by authorizers.

Most Michigan charter schools are managed by private for-profit companies, known as educational management organizations, or EMOs. They can handle key functions, like payroll or balancing books, or provide full service management.

Those companies are not legally required to publicly disclose how they spend money on behalf of the schools they run or how much money they make.

Unlike traditional public schools, charter schools often aggregate all expenditures into single line items for “purchased services” on required transparency reports. This makes it difficult for the public to determine how the schools spend taxpayer money.

Lawmakers change some provisions of charter school bills

As initially introduced, Senate Bill 947 would have prohibited EMOs — or anyone affiliated with them — from selling or leasing property to the schools they run. The amended version of the bill passed by the Senate leaves out that part of the original legislation.

The bill would still require charter school boards of directors to make sure all property agreements are at or below market value.

The bill’s intention was to fix a problem proponents of reform have long sounded alarm bells over: taxpayer money being used to buy private property for the financial benefit of EMOs.

In some cases, the EMOs front money to build or renovate school buildings and recoup their investment by charging rent to the schools they run.

“Those rents paid with our taxpayer dollars generally don’t come down or go away, even after the company has recovered or recouped its initial investment,” said state Sen. Dayna Polehanki, a Democrat from Livonia, during a hearing on the bills.

The amended bill won’t prevent EMOs from owning all of the property and contents inside the buildings of the schools they manage. Critics say this practice leaves boards of directors with little power to cut ties with their schools’ EMOs.

The Senate bills would also:

• Require boards of directors to approve all new property agreements made starting one year after the bill becomes law.
• Require an appraisal of the property by a licensed independent real estate appraiser.
• Require authorizers to review all property agreements.
• Mandate authorizers to notify the Michigan Department of Education if there is reason to suspect the terms of property agreements are above market value.
• Make authorizers send a representative to at least half of their schools’ boards of directors meetings in an academic year.
• Require authorizers to prepare reports on their oversight efforts at each of their schools at least twice a year. The reports would be presented publicly.
• Make authorizers ensure the bylaws adopted by boards of directors include a requirement that all board acts are approved by a majority vote.
• Require authorizers to make sure boards of directors meetings are held in at least 10 months of the year.
• Make authorizers oversee all contracts for over $100,000 their charter schools enter to ensure all terms are met.
• Require EMOs to give audited financial statements with specific disclosures of all financial expenditures to their charters schools’ boards of directors. The requirement would apply to all new or renewed management agreements after the bill becomes law.
• Make EMOs disclose benefits in compensation packages for employees, officers, or board members who make more than $100,000 a year.
• Require EMOs’ financial disclosures to be publicly available online.
• Make charter schools publicly post any notices that they are not in compliance with education standards, guidelines, or rules.

Hannah Dellinger covers K-12 education and state education policy for Chalkbeat Detroit. You can reach her at hdellinger@chalkbeat.org.