When the Walton Foundation—the ultra conservative WalMart fortune foundation which pours close to two hundred million a year into “education reform”—teams up with the Gates Foundation—Bill Gates’ reasonably apolitical foundation which believes that every problem has a business model solution and also spends hundreds of millions on education initiatives—to put on a conference about education, it’s worth taking notice. On March 10, the two groups hosted “Bonds and Blackboards: Investing in Charter Schools” in New York. The purpose of the get-together was to let investors know they can make money lending to charter schools.
With the explicit intent of helping investors “Learn and understand the value of investing in charter schools and best practices for assessing their credit,” the event featured experts on charter school investing from Standard & Poor’s, Piper Jaffray, Bank of America, and Wells Capital Management, among others.
[snip]
Hedge funds and other private businesses are particularly interested in the growth and success of charter schools. The growth of charter networks around the US offer new revenue streams for investing, and the sector is quickly growing. Funding for charter schools is further incentivized by generous tax credits for investments to charter schools in underserved areas.
“It’s a very stable business, very recession resistant, it’s a high demand product. There are 400,000 kids on waiting lists for charter schools … the industry is growing about 12-14% a year,” David Brain, former President and CEO at EPR Properties, told CNBC in 2012.
“It’s a public payer, the state is the payer on this category,” he added in support of the highly safe investing opportunities in charter schools.
As safe as an investment in charter schools may be, Ducey and the AZ Lege want to make it safer still by creating a $24 million pot of collateral, which Ducey calls the “Arizona Public School Achievement District plan,” to guarantee the loans. Details about the plan have not yet been announced, but if I read it right, it’s a win-win for charter schools and investors. The only ones at risk are Arizona taxpayers. The collateral brings down interest costs because the loans are secured. Great for charters. Investors know they’ll get their money no matter what. Great for investors. But if a charter fails, the state is left paying off the loan and holding the bag. Not so great for the state budget and the taxpayers who fund it.
This article appears in Mar 19-25, 2015.
Much safer bet that sitting here with empty TUSD schools and fending off playground lawsuits.
You have absolutely ZERO economic sense.
Profiteering.
Thanks for the link to the program for the Gates / Walton forum. It made for interesting reading.
“Although charter schools have been around since the early 1990s, the sector is still considered a relatively new market from an investment standpoint. Different market participants have different factors they believe to be most important when assessing the credit quality of a charter school (e.g. enrollment, financials, relationship with the authorizer, academic quality.) The next two sessions will explore these factors from different perspectives.”
Nice to know that what they call “academic quality” gets some consideration, but what do they think “academic quality” is, and are hedge fund managers (or charter operators for that matter) qualified to assess it or to understand the validity of the “assessments” others pitch at them ?
In another one of this organization’s documents I read “the names of one million students remain on charter school waiting lists.” No doubt potential “investors” salivate at the prospect of exploiting this “untapped market.”
Guess we’re going to have to learn the hard way that unleashing “capital in search of surplus value,” — i.e. a sector whose bottom line is profit rather than human development — in our schools will not have good results for many of our children.
And as for Ducey’s “Arizona Public School Achievement District plan,” it is beyond offensive that he proposes to use our tax dollars to secure loans for these people. Guess they like “free markets” in some respects, but when it comes right down to it they prefer government subsidized investment opportunities where taxpayers foot the bill to eliminate all risk for them.
Package up and sell those children. What if we have a bubble?