Balancing the Mission Checkbook

I am so glad that I’m not the director of a Minnesota charter school. Imagine working in a small segment of the nonprofit sector, comprised of 150 organizations, and opening the paper to regularly find a headline announcing that your field is “out of control” or in “rough waters.” Meanwhile, you go to work every day to lead the teachers at your school and together work to educate the students whose families have chosen to enroll at your school. I wouldn’t appreciate, much less enjoy, the attention. Every report brings with it questions about whether our hypothetical school director is among those with the problems described in the news. Whatever the current condition of this individual school, they end up tainted a bit by the sheer volume of news.

In just the past week, our hypothetical charter school director has seen these reports:

• State charter schools program is ‘out of control’, reports the Star Tribune in an investigative article about the use of bonds for financing of 18 buildings for charter schools.
• The Pioneer Press reported Strapped St. Paul charter school to close midyear on the decision by the board of directors of Skills for Tomorrow school to close at the semester break because of declining enrollment.
• Last week, in Payment shift makes rough waters for charter schools Minnesota Public Radio provided background and examples of the impact on charter schools of the state’s new deferred payment schedule for all public school payments.

While each news story is accurate, it does not paint an accurate overall picture. The individual schools don’t have the chance to explain all of their plans, budgets, and curriculum philosophy to the community. I have a deep enough understanding of charter schools to respond to each with the comment that “it’s more complicated than that.” I don’t want to gloss over some very real issues with finance, leadership and governance at some charter schools, but I am trying to figure out why this small group of nonprofits is such a magnet for news, investigation, and opinion.

As some background, Minnesota was the first state in the nation to create “charter schools.” Today Minnesota has about 150 operating charter schools, with roughly half in the Twin Cities Metro area, and the remainder in Greater Minnesota. Together, these schools serve about 33,000 students. Charter schools are true public schools. They are created by state law, are funded by government, and are subject to most state laws governing public education. They cannot charge tuition and they cannot discriminate in admissions. They are subject to state graduation requirements and the mandates of the federal No Child Left Behind legislation. Structurally, charter schools are both nonprofit corporations and independent school districts.

This structure presents complexities that affect both governance and financial management. As I detailed in a previous entry, Charter school myths and realities, the reality is that the management quality of most charter schools in Minnesota is on par with the management of nonprofit organizations overall. The vast majority of charter school directors and teachers are hardworking, mission-focused, committed educators, and I thank them for their work.

For such a small group of organizations, charter schools attract an awful lot of attention, scrutiny, and criticism. As a community, we feel strongly about education and about the use of taxes and public funds. Charter schools are right in the middle of both.  The field needs to find a way to communicate their value to the community – unless they like opening the paper every day to read another report about problems.

We passed a milestone this week at Nonprofits Assistance Fund when we approved our 50th loan to a Minnesota charter school. We work with nonprofits in every field of service, but when I tell people that we work with charter schools I often get responses like, “Isn’t that really risky?” or “I’ve heard that charter schools have really weak financial management. Can they pay the loan back?”

Our experience with charter schools has been interesting, and largely positive. We have made 50 loans totaling $5.7 million to charter schools in the last eight years. So far, we have written off $5,000. That’s all we’ve lost. I say that our experience has been interesting, though, because at least half of the schools we’ve worked with were facing pretty serious financial problems when we made the loan. That would suggest that I might agree with the comments that schools aren’t well managed. But I don’t agree – I think that’s the myth. Nonprofits Assistance Fund’s mission is to build financially healthy nonprofits and we often work with organizations at a time when a bank is not able to approve a loan within bank lending policies. We take some extra risk and then work closely with the nonprofit, schools in this case, to help them improve. I attribute our success in lending to schools to the combination of the school leaders’ commitment and determination to make the school succeed and Nonprofits Assistance Fund’s expertise in school finance and financial management. The fact that most of the schools have emerged from their financial problems is the positive part of our experience and the reality of charter school management.

The reality is that the management quality of most charter schools in Minnesota is on par with the management of nonprofit organizations overall. It’s hard work to start a new enterprise, and charter schools tend to start and grow pretty quickly. Ask a small business owner what it’s like to manage rapid growth – they’ll tell you that it’s challenging. Most of the serious problems with schools have been in the first few years of operation, and charter schools are a new industry. Minnesota was the first state to authorize charter schools, and the first schools opened just 15 years ago. There has been an unusual amount of attention given to financial problems in charter schools because they operate with public money (since they are public schools). You can learn all about Minnesota’s charter schools from the Minnesota Association of Charter Schools. Minnesota has 131 charter schools in operation and at least another 19 approved to open in the next year or two. Combined, they serve 23,500 students by offering a variety of approaches to curriculum and teaching and learning environments. Since each child has individual needs, charter schools offer an option for families. There has been positive news about schools as well, highlighting the educational innovations for which these schools were created. A bigger question for charter schools will be the long-term measure of their success in raising student achievement and engaging with families and communities. Reports are a mix so far, but this is a young field with a very big job.

You can also read about Metro Deaf School, one of the charter schools we’ve had the pleasure of working with.