Evil Ed, inc: the Wall Street-charter school connection

by: Paul Rosenberg

Sun May 09, 2010 at 11:00


In America, conservatives couldn't kill the welfare state because it was too popular, so they decided to re-purpose it for conservative ends. These are their stories.

If you thought that Wall Street couldn't get more destructive, think again.  And if you that the charter school movement couldn't get even more removed from serving the public good, you also need to think again. On Friday, NY Daily News columnist Juan Gonzalez wrote a column about how big investors can double their money in seven years using a special tax credit to invest in charter schools, and he also discussed what he uncovered in a brief segment on Democracy Now! which he co-hosts with Amy Goodman.  Here's how he summarized it on the air:

One of the things I've been trying now for a couple of years is to try to figure out why is it that so many hedge fund managers, wealthy Americans, and big banks, Wall Street banks, executives of Wall Street banks, have all lined-up supporting and getting involved in the development of charter schools. I think I may have come across one of the reasons. There's a lot of money to be made in charter schools, and I'm not talking just about the for-profit management companies that run a lot of these charter schools.

It turns out that at the tail end of the Clinton administration in 2000, Congress passed a new kind of tax credit called a New Markets tax credit. What this allows is it gives enormous federal tax credit to banks and equity funds that invest in community projects in underserved communities and it's been used heavily now for the last several years for charter schools. I have focused on Albany, New York, which in New York state, is the district with the highest percentage of children in charter schools, twenty percent of the schoolchildren in Albany attend are now attending charter schools. I discovered that quite a few of the charter schools there have been built using these New Markets tax credits.

What happens is the investors who put up the money to build charter schools get to basically or virtually double their money in seven years through a thirty-nine percent tax credit from the federal government. In addition, this is a tax credit on money that they're lending, so they're also collecting interest on the loans as well as getting the thirty-nine percent tax credit. They piggy-back the tax credit on other kinds of federal tax credits like historic preservation or job creation or brownfields credits.

The result is, you can put in ten million dollars and in seven years double your money. The problem is, that the charter schools end up paying in rents, the debt service on these loans and so now, a lot of the charter schools in Albany are straining paying their debt service--their rent has gone up from $170,000 to $500,000 in a year or--huge increases in their rents as they strain to pay off these loans, these construction loans. The rents are eating-up huge portions of their total cost. And, of course, the money is coming from the state.

I've written before about the larger phenomena of which this is a part--the conservative's re-purposing of the welfare state for conservative ends once they realized the impossibility of destroying it outright, because of its popularity.  "What's wrong with the third 'Third Way'" provides an historical overview, and I've described examples in "Student Loan Debt--A Symptom of the Conservative Welfare State Shift", "Superbowl Sunday highlights conservative welfare state in action", and "Green grow the oil wells--oh!" (published just yesterday).  So here is yet another one.  More details from Juan's column on the flip.

Paul Rosenberg :: Evil Ed, inc: the Wall Street-charter school connection
In his column, Gonzalez gave a more detailed view of what's been going on:

In Albany, which boasts the state's highest percentage of charter school enrollments, a nonprofit called the Brighter Choice Foundation has employed the New Markets Tax Credit to arrange private financing for five of the city's nine charter schools.

But many of those same schools are now straining to pay escalating rents, which are going toward the debt service that Brighter Choice incurred during construction.

The Henry Johnson Charter School, for example, saw the rent for its 31,000-square-foot building skyrocket from $170,000 in 2008 to $560,000 last year.

The Albany Community School's rent jumped from $195,000 to $350,000.

Green Tech High Charter School rents went from $443,000 to $487,000.

Meanwhile, all the Albany charter schools haven't achieved the enrollment levels their founders expected, even after recruiting hundreds of students from suburban school districts to fill their seats.

The result has been less money in per-pupil state aid to pay operating costs, including those big rent bills.

Several charters have fallen into additional debt to the Brighter Choice Foundation.

You'd think these financial problems would raise eyebrows among state regulators - or at least worry those charter school boards.

But the powerful charter lobby has so far successfully battled to prevent independent government audits of how its schools spend their state aid.

And key officers of Albany's charter school boards are themselves board members, employees or former employees of the Brighter Choice Foundation or its affiliates.

This is obviously a very bad deal for the public.  It's even a bad deal for those who are true believers in the charter school sham. But it can be difficult to really understand what's going on--and what's fundamentally wrong with it--if you don't stand back to see the larger picture.  So, here's a quick run-down.

When Otto von Bismark created the first conservative welfare state, it was designed to co-opt the Social Democrat's most popular idea, while strengthening German industry internationally and strengthening the power of its elites internally by placing them in charge of caring for social needs.  In America, the pattern is a little messier, as it represents a convergence of different conservative interests, all the while being disavowed as conservatives repeatedly claim to be against the "nanny state".  But here we can see at least five different conservative ends being served at once:  (1) The attack on public education itself is a prime example of the attack on social democratic ideas and institutions, paralleling Bismark's co-opting of the Social Democratic Party's most popular idea. This serves to discredit public education, take money away from the public education system, and take money and jobs away from public employees and their unions.  (2) The siphoning off of certain students into separate learning environments is part of the conservative agenda for inscribing hierarchical differences in society. (3) The creation of lucrative money-making opportunities funnels public money to more wealthy members of society. (4) The creation of private governance structures further strengthens the power of unaccountable conservative elites, weakening democratic control.  (5) The private governance structures in turn empower crony networks that can also serve as organizing foundations for further consolidation of conservative power.

There is no way to effectively deal with these problems (conservative goals) in isolation.  They need to be seen and combatted as a whole.  If not, then one bad conservative idea will just be replaced by another, and another.

Of course this is easier said than done.  But doing it begins with recognizing the nature of what needs to be done.


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None dare call them parasites (4.00 / 5)
Well, none above the rank of private, anyway. Whatever Matt Taibbi's other virtues, we'll be forever in his debt for identifying vampiresquidism, and for giving it a nice, catchy name. And, of course, once you start looking for it, you find it everywhere. You might say that it's the defining economic -- and social -- relationship of our age. Gordon Gecko is only the commedia del arte version. The real ones would need the talents of an Arthur Miller to do them justice, or maybe even Shakespeare. (Robert Rubin as Iago...now there's a thought. And what, or who, does that make our president, I wonder....)

Sorry. I just can't help thinking, when I read the bad news in diaries like this, that only literature can capture the stunning idiocies of our age.


Yeah, also Solzenitsyn's "We Never Make Mistakes" (0.00 / 0)


"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly." -Woody Allen, My Speech to the Graduates

[ Parent ]
This should be tatooed in the forehead (4.00 / 9)
of every progressive, because so many people seem to have bought the neoliberal hype:

In America, conservatives couldn't kill the welfare state because it was too popular, so they decided to re-purpose it for conservative ends. These are their stories.

It reminds me of this quote from Steven Biko:

The most potent weapon of the oppressor is the mind of the oppressed.

I understand why conservatives believe in their own vast popularity, or that various elements of the welfare state are indefensible.  I simply am baffled by progressives who believe, despite all the evidence, that Americans oppose government (except the military, police and prisons) and taxes.  Conservatives have come at Social Security, Medicare, progressive taxation, and public education sideways, because they know they could never do it directly.

Americans don't support the use of government to enrich the already wealthy at the expense of public purposes. If Democrats cared to make an issue of it, they would enjoy an unprecedented electoral hegemony (as they did for decades the last time they made an issue of it.)

The problem is not the public, it is the elites. Painting the public as rubes is a social control mechanism, not an attempt to accurately describe the world.

Politics is the art of the possible, but that means you have to think about changing what is possible, not that you have to accept it in perpetuity.


Precisely So (4.00 / 3)
Elites just love to preen, but when it actually comes to earning their keep, by preventing their own perch in history from going down the tubes, they're so cluelessly indifferent that they make your average preening pop star look like a consciencous workaholic.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
It started when Clinton astonishingly lost Congress. (0.00 / 0)
It must not happen again. We must be undeterred & undistracted - inveterate opposition to Republicanism in all its heinous and subversive forms.

By plot and plan, it has been exported - now seen in Greece and in Italy - but it is everywhere: misprision of fraud on the citizens of every nation perpetrated by the political executives.

It is the stuff of modern entertainment:

Bet Against the American Dream from Alexander Hotz on Vimeo.



They only call it class war when we fight back.

Tax simplification (4.00 / 4)
At some point, especially with the tea partiers forcing the GOP away from their monied base, someone's going to push this hard. It would be much better for the Dems to do it in a reasonably progressive way when they have the chance. The GOP in charge and pushing this will start with a flat tax and probably get regressive from there. Alternatively, the Dems could use this as a way to make the tax system fairer and more progressive.

Pushed properly, tax simplification as a front burner agenda item should be very popular and would be difficult to oppose/obstruct -- which is why it's dangerous to let the GOP be the party that pushes it.

Self-refuting Christine O'Donnell is proof monkeys are still evolving into humans


Simplication should be framed within (4.00 / 4)
the context of fairness.  We don't need to smuggle in the ideas of making the system fairer and more progressive, because these things are already political winners (despite the almost total lack of Dems talking about it.)  

But your larger point is dead on - we need to take it to Republicans on taxes, both because it could be an effective political move and because the alternative is disastrous.

Politics is the art of the possible, but that means you have to think about changing what is possible, not that you have to accept it in perpetuity.


[ Parent ]
It's Disastrous Either Way! (0.00 / 0)
Only a madman would hope that in the political current climate ANY new "tax bill" would emerge from the corporate whores in Congress (and our Presidency) as anything other than a massive and invariably fatal giveaway to the same corporate elites who got Bush's tax benefits back in 2001, which, along with his wars, cost us $5 trillion!

In short, all progressive ideas would be instantly weeded out or "off the table" while we'd get "compromises" like further lowering capital gains tax rates and eliminating the estate tax!

IN short any new tax bill will inevitably wing up being totally regressive.

Then they'll wind up paying for all this "tax fairness" with massive cuts to social security and medicare, amid a gigantic and ongoing media campaign to convince the American people that "we can't afford these un-funded entitlements!"

They've already convinced the right-wing to shoot themselves in the face over these issues -- they're all in a lather to further cut "entitlements" and Obama will be under ENORMOUS pressure come January 2011 to PROVE how "serious" he is to all the Villagers by screwing the American people.

The idea that we're REALLY going to have "tax fairness" emerge from Congress at any time in the foreseeable future is just absurd.

Our only hope is to stonewall ALL new tax legislation for the next few years, maybe do small fixes like re-establishing the estate tax at 2009 levels ($3.5 million exemption for each spouse). My biggest fear is that Obama will champion it so that the Villagers will all cheer!

Our only hope is to mobilize against those features we don't like. We don't control the media and all progressive notions about raising income tax rates on the top 1% amid tax cuts for workers are "off the table" in Congress, just like Single-Payer.


[ Parent ]
Better Framing (4.00 / 1)
I'd say we're much better off framing this in a comprehensive way, something along the lines of "Simple, Fair, Progressive, and Transparent".

If we present these as a unified package of ideas, then we're in an excellent position to respond to the GOP by saying, "Well, that may be simple, but it's hardly fair, much less progressive.  It's a transparent fraud!"

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
Offense vs. Defense (4.00 / 1)
Good framing helps, but the larger point is it would be much better to be playing offense instead of defense on this issue. No matter how good our framing is -- and let's be candid: framing/messaging is not a Dem/progressive strength -- a Club For Growth/Tea Party heavy GOP riding the issue electorally and/or driving a restructuring of the funding mechanisms for the entire federal government would be a scary proposition. It would be much better if they were fighting off our progressive proposals, than waiting until we have to fight off their regressive ones.

Self-refuting Christine O'Donnell is proof monkeys are still evolving into humans

[ Parent ]
Better Framing As I've Described It Is PART of Going On The Offense (4.00 / 1)
Putting "fair", "progressive" and "transparent" in the package is designed for enabling us to go on the offense.

People seem to have no end of funny ideas about framing.  I had a pair of diaries about framing I was working on for this weekend, but I couldn't get the second one done to my satisfaction.  So, obviously, they're a high priority for next weekend.

And from the looks of this comment, I should be adding at least one more diary to the pair.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
Framing/Messaging and Marketing 101 (4.00 / 1)
Don Hewett's basic premise for 60 Minutes (and the title of his memoir about the show) is also a simple threshold foundation for successful political and marketing efforts: "Tell me a story."

Simple, basic, easy-to-understand narratives will win more fights and elections than 100 well thought out position papers. It's not what you say but what the listener hears that matters. If the offer/benefit (or scary/horrible if you're going negative) can't be stated/understood in one simple sentence, it's too complicated. If the summary word(s)/headine/tagline doesn't convey a simple story, it fails. Too often it seems Democrats don't employ basic marketing principles.

And then, of course, you must have a disciplined messaging apparatus to deliver your stories...

Looking forward to your pieces. See you next weekend.

Self-refuting Christine O'Donnell is proof monkeys are still evolving into humans


[ Parent ]
Once again (4.00 / 3)
Paul, THANK YOU.

Your research is invaluable for so many of us for so many causes.  I have mistrusted this whole "charter school" stuff for years....since the first time our ultra conservative district started pushing it.  
Of course I am an openly proud liberal, unabashedly pro-union and pro public ed.  After over forty years in three different districts, having taught everything from K through graduate school, I feel I have some expertise.  But sadly, these days, all I hear and read are people who blame any and everything on teachers' unions.  That includes quite a few supposed progressive voices.

Our district became one of the first targets of a national campaign to destroy public education.  Fortunately enough of us remained astute enough to recall and get rid of board members financed by the right, people who wanted to destroy public ed from the inside out.

But with the likes of Arne Duncan appointed by the president, I find myself wondering if it was all for naught.


Stay Tuned! (0.00 / 0)
Jeff is on vacation this week, but we have a guest Left Ed column that focuses more attention on Duncan--specifically with regard to parental involvement, rhetoric vs. reality.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
re: albany (4.00 / 2)
Meanwhile, all the Albany charter schools haven't achieved the enrollment levels their founders expected, even after recruiting hundreds of students from suburban school districts to fill their seats.

The result has been less money in per-pupil state aid to pay operating costs, including those big rent bills.

Several charters have fallen into additional debt to the Brighter Choice Foundation.


obama & co. like to tell us how much result-oriented they are

well, since the above policies are failing, isn't time they abandon them?

or is the 'abandon' verb reserved for progressive policies?


Ah, But They Don't Tell You What "Results" They Are Oriented Toward! (4.00 / 1)
It's always about the fine print, don'tcha know!

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
"These are their stories." Dada dada - daah! :D (0.00 / 0)
Hehe, I love that hommage to "Law and Order"! I'm halfway through the box of the first season now...

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