Charter Schools Choke on Rulebook

Mark Satterlee spent this academic year shutting down a charter school that had never opened.

Satterlee -- a former third-grade teacher in the Los Angeles Unified School District -- and a couple of colleagues from 95th Street Elementary had dreamed of opening their own elementary school in a poor part of L.A. The school would focus on core subjects, with one instructor in math and one in English assigned to each grade. It would have its own health clinic. He planned to call it Nueva Esperanza, or New Hope. He would send his son Marcos to kindergarten there.

After two years of hard work, his school district had granted him a charter. He had even found a building -- in the Rampart area -- and had offered contracts to teachers.

But when September came, Satterlee was not presiding over a new school. He was arranging to return several thousand dollars in public and private grant money. He was apologizing to the building’s landlord and returning school supplies.

“It simply got to be too much,” Satterlee said. “There were so many rules -- laws to follow -- and more coming down the pike. To handle all of it, we would have needed very rich backers, or to be wealthy ourselves, and we didn’t have the money. I finally asked myself whether having a new charter school was more trouble than it was worth.”

A decade ago, California launched a populist experiment with charter schools. Teachers, community groups, business owners -- anyone with a worthwhile idea for a school -- could apply to a local school district for a charter. The charter would entitle them to public funds and to operate free of most state regulation.

The idea was to encourage innovation. It gained momentum after President Clinton embraced charters as “public school choice” and as an alternative to vouchers -- direct aid to parents who sent their children to non-public schools.

Enticed by the promise of freedom, some public schools converted to charters; civic-minded entrepreneurs also joined the movement.

But now, for aspiring innovators such as Satterlee, the window of opportunity is closing.

Today the charter movement looks less like an educational laboratory and more like a maturing industry. And the future of charters, leaders in the school business say, lies in creating vast networks or alliances that, in some ways, mimic the giant school districts to which charters were supposed to be an alternative.

The reasons lie in simple economics and in a wave of state regulation that individual entrepreneurs say robs charters of much of the freedom that made them so appealing in the first place.

The new regulations were adopted in part to curb abuses. Around the state, charters have been revoked at 20 of the 473 schools that have obtained them. Reasons have ranged from the teaching of religion to the funding of lavish lifestyles for founders.

But these rules have also complicated the starting and operating of charter schools. They require extensive paperwork and financial disclosure, limit where and when the schools can operate and subject them to three levels of overlapping oversight by local boards of education, counties and the state.

Although the first dozen charter-school applications approved a decade ago averaged fewer than 20 pages, nowadays they tend to run to more than 100.

Meeting new requirements costs money. Applications alone often require expensive advice from lawyers, accountants and other professionals.

But many charters are cash-poor, especially before they open and can begin collecting public funds linked to attendance. Simply to survive, operators say, they must prize size and scale. Their imperative is grow or die.

Satterlee is just one of those who worry that the state is squeezing the innovation out of charters.

In Los Angeles, TV director David Eagle has spent the last four years trying to open a charter school. He says he has been slowed by bureaucratic requirements governing matters from student admissions policies to special education insurance.

In San Francisco, Peter Thorp, founding principal of the charter Gateway High, stopped teaching Advanced Placement U.S. history this year to focus on administrative and compliance issues. “I’m looking at how we can survive,” he said.

Near Sacramento, Natomas Charter School has had to hire a chief financial officer and build up its business office to comply with rules.

California charters face more regulations than those in most other states, but efforts to oversee such schools more closely have gained in states ranging from Texas to New York. And as bureaucratic burdens have increased, start-ups have leveled off.

Of the nation’s 2,695 charters, 383 opened last fall. That is down from 472 openings in 1999, according to the Washington-based Center for Education Reform, which promotes charter schools.

In California, 79 charters opened this school year, giving the state a total of 436; that 21% growth rate over the previous year is down from 51% in 1999.

Those nervous about the trend point out that Arizona, with one-tenth the school population of California but lighter regulation, actually has more charters.

The schools that do open are increasingly linked to growing networks. Even mom-and-pop charter schools are joining alliances and networks so they can share administrative costs.

“It’s too hard to start a charter school, and nearly impossible to do it by yourself anymore,” said Howard Lappin, interim president of the Los Angeles County Alliance for Student Achievement, which is trying to start a network of 25 to 30 charter schools in the next five years.

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Glimpse of Future

As Satterlee was deciding not to go forward with Nueva Esperanza Charter Academy in Los Angeles, the Lionel Wilson College Preparatory Academy opened in one of east Oakland’s tougher neighborhoods.

Wilson, one of the seven Aspire Public Schools, offers a glimpse of the future of charter schools in California.

Aspire is a nonprofit company known as “a charter management organization.” Officials there have talked of opening 100 campuses over the next 15 years; that would make Aspire larger than all but 13 public school districts in the state.

Much of this desire to grow is missionary: Aspire officials believe that a successful large network of charter schools in the inner city will push more poor children to go to college and will provide a model for traditional public schools.

Aspire’s schools are small (Wilson has 248 students) and combine grade levels in the same classes. Students have a longer school day and year than those in regular public schools.

But part of the desire to grow is financial imperative. With the schools it has now, Aspire loses money.

Public money covers only operating expenses, not the start-up and equipment costs of about $1,000 per student. Aspire is raising money privately to cover the rest.

By growing, Aspire can achieve economies of scale while keeping administrative costs relatively low, it says.

Aspire’s founders, Reed Hastings -- who also is president of the state Board of Education -- and Don Shalvey, are unapologetic about this.

Shalvey, a former school district superintendent in Northern California, and Hastings, a Silicon Valley entrepreneur, gave the charter movement a kick-start five years ago by pushing state legislators to lift a cap on the number of charter schools. In return, charters would abide by more of the same regulations as public schools.

Since then, the pattern has persisted: Each new rule has been a compromise, with existing schools and networks receiving incentives to grow in exchange for some restrictions.For example, a major law passed last year added a slew of regulations requiring each charter school to disclose more financial information and to locate only in the county in which it is chartered. But the same bill offered a sweetener for ambitious charter management networks such as Aspire, allowing schools to apply directly to the state board for a “statewide charter.”

The law took effect only recently, but officials at Aspire and other charter networks say it may help them expand to multiple sites statewide.

And if Aspire and other charter school operators go to the state board in search of a statewide charter, they will see a familiar face: Hastings’.

The board president was appointed by Gov. Gray Davis, for whom he is an important political donor.

Hastings says there is no conflict of interest between his work on the board and his advocacy for charters.

Though he founded Aspire and gave it $1 million, he has no position in the organization.

Hastings says he supported last year’s legislation because he thinks regulation can clean up abuses that would discredit the charter movement.

“I see it as necessary inoculation and self-defense,” he said. Besides having the capacity and desire to grow, Aspire is in an advantageous position for another reason: Many of the new regulations tie funding for charters to the schools’ willingness to adopt traditional educational methods. That is an approach Aspire has embraced.

For example, funding formulas and regulations favor charters that, like Aspire, are housed in traditional school buildings, as opposed to homes and churches; offer college preparatory curriculums, as opposed to job training; or locate in poor neighborhoods.

Philanthropists also see advantages to networks such as Aspire. To fund the opening of seven schools, Aspire received a pledge of $4.74 million late last year from the educational foundation of billionaire Eli Broad. Last week, the Bill & Melinda Gates Foundation, its officials citing the importance of charter networks, announced a grant of $5.7 million to Aspire to be used in part to start six charter high schools in Los Angeles.

“Aspire is like a school district without the geographic borders,” said Tom Vander Ark, the Gates Foundation’s executive director of education.

Broad was just as impressed. “It’s efficient and can grow. And when you grow, you make more of an impact,” he said.

Business plans indicate that Aspire would be financially self-sufficient at 28 schools -- a number it could reach within five years.

“I have to admit,” Shalvey said, “there’s a little bit of Starbucks in this.”

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Constant Work

As Satterlee struggled to put together Nueva Esperanza, he thought of coffee only as a means of staying awake.

He began in 2000, working seven days a week, often with only three hours of sleep a night. He stopped going to church. He missed his family and friends.

He found himself confronting an unexpected barrier: the law.

Satterlee thought he could adequately summarize his plans in 20 pages. But that wasn’t enough space to meet the state’s application requirements.

He needed to state “what it means to be an educated person in the 21st century.” He had to describe how the school would enable students to become “self-motivated, competent and lifelong learners.”

On a more practical level, the application required him to detail health and safety procedures, methods for checking employees’ criminal records, the means by which the school would achieve a racial and ethnic balance, expulsion and suspension policies, staff pensions, employee rights, dispute resolution measures with L.A. Unified and the handling of food services.

Satterlee, his collaborators and the parents backing the effort couldn’t answer all those questions themselves. They needed lawyers, accountants and human resources people.

“This is what we do for a living,” said Paul Minney, a Sacramento attorney who represents charter schools throughout the state. “To do that on your own, as an individual trying to start a charter school, it is approaching the impossible.”

Though the government offered a grant for some start-up costs, Satterlee would have had to open the school before receiving crucial public funds for attendance.

Still determined, he persuaded a nonprofit company -- ExED, which specializes in advising charter schools -- to help him at a reduced cost.

He drafted a charter that was 163 pages long, and Los Angeles Unified approved it. But to comply with the document, Nueva Esperanza would have had to become bigger and more bureaucratic than he expected.

“There was always another form to fill out,” he said. “It was starting to look like this bureaucratic nightmare.”

The last straw was the site. He had found a 24,800-square-foot building on Westmoreland Avenue behind Virgil Middle School. Demolition work had begun to turn the site into a school. But preparing the building to comply with state requirements was more expensive and time-consuming than he had planned. With the start of school only a few weeks away, he decided not to proceed. “Charter schools were supposed to be different,” he says. “But with all the regulations and obstacles, you have to wonder: ‘What’s the point?’ ”