Publicly funded, independently operated charter schools entered the public sector three decades ago with the promise of innovating public education to better serve students in underperforming schools. Despite limited evidence of improved educational outcomes, charter schools are now an established part of the education system, with around 7,800 charter schools serving more than seven percent of public school students.
Although charter schools have long been associated with the controversial school choice movement, a recent entrant into the charter school arena has created new and urgent concerns. Hillsdale College, through its affiliate Barney Charter School Initiative, has been making escalating inroads into public education, capped most recently by an invitation by the Tennessee governor to establish fifty to one hundred new charter schools in the state (an increase of more than forty percent). Hillsdale is a conservative Christian college that declines federal and state funding, leaving it free from laws that prohibit discrimination by recipients of public funding. Its supporters and donors openly express that their mission is to destroy traditional public schools and replace them with publicly funded charter schools and vouchers to be used at private schools.
Federal and state laws and policies implemented in support of charter school expansion over the three decades of charter school history provide little protection against unchecked expansion of the Hillsdale agenda. This leaves our country in the position of publicly funding a political mission to overturn the public education system. Although charter schools are subject to the same laws governing all public schools, there is little oversight and substantial evidence of violations ranging from discrimination against students in protected classes to outright fraud. Existing recommendations to limit the number of charter schools or to hold charter schools accountable are inadequate or infeasible. Our proposal is to activate private incentives to litigate as a means of holding charter schools accountable to serving the public interest. We identify three areas in which litigation may provide an enforcement incentive for compliance with federal laws: employment discrimination liability under Title VII, liability of boards of directors of charter schools, and liability of third-party affiliates of charter schools.
Introduction
Nearly 100 years after Tennessee made education history in the Scopes trial, the state is again poised to revolutionize public school education. In January 2022, Governor Bill Lee announced that he had invited Hillsdale College, widely known as a conservative Christian college, to establish fifty to one hundred new publicly funded, privately operated charter schools in the state, a move that would increase the number of charter schools in the state by at least forty percent.1 Governor Lee praised Hillsdale’s curricular focus on “informed patriotism” in support of his charter school expansion plans.2 If successful, Governor Lee’s ambitions would transform public education by introducing the largest number of Hillsdale charter schools in any state and more than tripling the existing number of Hillsdale charter schools nationwide.3 Governor Lee’s agenda would also establish a blueprint for further expansion nationwide by a charter school network that has been vocal about its ambitions to advance its deeply conservative political and social values through publicly funded charter schools.4 This unusual move by a governor to expand charter schools in partnership with Hillsdale College received extensive media coverage.5 Reactions ranged from stunned to appalled.6
Charter schools are public schools operated independently of the school district by a private organization.7 The term “charter” refers to the contract between the management of the school and the authorizer. Authorization to open a charter school within a state is based on the state’s legislative requirements and varies substantially among states.8 Charter schools are tuition-free and financed by public funds, where the funding is related to the per-student education cost that would have otherwise been provided to the charter student’s non-charter public school alternative.9 Charter schools must abide by the same federal and state laws that pertain to any public school. For instance, they cannot discriminate in admissions of students on the basis of race, religion, or disability status, and they cannot discriminate in hiring on the basis of race, religion, national origin, disability status, or sexual orientation.10 Most charter management organizations are nonprofits, although some states permit for-profit education management organizations.11 Federal law prohibits religious charter schools.12
Since the charter school movement took root in the early 1990s, charter schools have been promoted as a means to improve student performance in underserved and mainly urban communities.13 Charter schools initially enjoyed strong bipartisan support,14 and there has been rapid growth since the first charter school began operations in St. Paul, Minnesota, in 1992.15 Now, forty-five states and the District of Columbia have charter school laws,16 and about 7,800 charter schools operate, serving over seven percent of public school students.17 Although many charter schools enjoy a favorable reputation,18 charter schools have also received substantial criticism. Vast research shows that charter schools have largely failed to provide the anticipated educational benefits and have engaged in discriminatory treatment of students and exacerbated racial segregation.19 Still, others have engaged in financial crimes.20
Charter schools have long been associated with the controversial school choice movement. But the ideologically motivated incursion of Hillsdale into the charter school landscape has generated new controversies and opposition from corners that traditionally would support the school choice agenda. Hillsdale-affiliated charter schools are based on a “classical education” model that focuses on “the centrality of the Western tradition,”21 with a curriculum drawing on the report from the Trump-appointed Advisory 1776 Commission led by the president of Hillsdale College.22 Educators and historians have criticized Hillsdale’s “1776 Curriculum” for its ideological bias and distorted portrayal of U.S. history.23
Furthermore, the ultimate goal of some supporters of Hillsdale’s agenda is not improvement of public schools but is instead a wholesale policy to privatize the public school system. Promoters of Hillsdale-sponsored schools in Florida have publicly announced that their agenda is to lure students away from traditional public schools until they collapse.24 Charter school replacement of traditional public schools is not a hollow threat. As we show in Part II, more than half of the states—including Tennessee—have no limit on the number of charter schools that can be authorized.25 At the extreme, school choice is not a “choice” in New Orleans, a city in which nearly every public school is a charter school.26
Although the original promise of charter schools was to improve education through market competition that would be responsive to local needs, Governor Lee’s partnership with Hillsdale—backed by a $32 million budget to support charter facilities27—is the antithesis of market competition and responsiveness to local communities. Market competition should mean that multiple charter schools would compete for students with each other and with other educational options as they seek authorization to form a charter school in a specific locale. Instead, by announcing a partnership with Hillsdale and with considerable influence over the authorization process,28 Governor Lee has championed one specific provider with ambitions to create a highly conservative nationwide network of charter schools. Hillsdale charter schools have been controversial, and their efforts to introduce schools have been met with vehement, and sometimes successful, opposition from local communities. Responsiveness to the needs of the local community would mean a curriculum tailored to the community. In contrast, Hillsdale-affiliated charter schools use a standardized curriculum, and staff receive the same training.29 Furthermore, a specific target of fifty to one hundred new charter schools would necessarily reallocate a substantial number of students away from district public schools and into newly formed Hillsdale charter schools, thereby guaranteeing a reduction in resources for district public schools.30
Because Hillsdale College declines federal and state funding,31 it is not required to follow laws such as Title IX of the Education Amendments Act of 1972, which prohibits discrimination by recipients of public funding.32 Hillsdale College has created an organizational structure that preserves its control over the curriculum but allows it to bypass state regulations preventing a religious institution from operating a charter school. Hillsdale does not own or manage its affiliated charter schools.33 Instead, independent, Hillsdale-created charter management organizations operate the schools, while the college provides curriculum and staff training without charge and leads principal and teacher recruitment.34 The New York Times characterizes Hillsdale’s charter school model as “trying to thread a needle—creating a vast K-12 network that embraces its pedagogy and conservative philosophy, in many cases taught by its graduates, while tapping into government money to run the schools.”35
Concerns over discriminatory treatment and practices have been publicly aired. For example, Hillsdale charter schools have been called out for their racial imbalance,36 allegations of discriminatory treatment of Black students,37 and one principal’s racist social media posts.38 In terms of following state public school education requirements, Hillsdale schools in Colorado have received waivers allowing them to bypass state laws with respect to teaching topics related to health and sexuality, as well as allowing bans on materials otherwise used in district schools.39
But under the current charter school structure, there are limited mechanisms to prevent or sanction discrimination, leaving little incentive for Hillsdale charter schools to comply with federal and state laws. Problems with charter schools are manifest, and a number of proposals have been made to prevent abuses, including transparency in financial reporting,40 greater accountability,41 caps on the number of charter schools,42 and use of the False Claims Act to reduce fraud.43 However, existing proposals suffer from limitations, and no proposals address the possibility of discrimination against students or charter school employees.
The most frequently recommended proposals for holding public schools accountable are to improve oversight and set caps on the number of charters. But states set their charter school laws, and there are many incentives to expand charter schools without limit.44 Furthermore, limits can be breached, and Hillsdale has been especially creative in circumventing opposition to expansion. In Wisconsin, Hillsdale exploited the ability of tribal colleges to authorize charter schools after its proposed charter school to be located in suburban Milwaukee was declined by every other authorizer in the state.45 In Colorado, a political action committee (PAC) called the 1776 Project PAC intervened in local school board elections, helping fill the board with charter school supporters in two counties where Hillsdale-affiliated charter schools operate and are applying to operate.46 Tennessee created an easier path for the entry of Hillsdale charters. With the support of the state legislature, Governor Lee created a state educational board that could overrule any local denial of charter school applications.47
Our proposal is to activate private incentives to litigate as a means of holding charter schools accountable to serving the public interest. We identify three areas in which litigation may provide an enforcement incentive for compliance with federal laws: employment discrimination liability under Title VII, liability of boards of directors of charter schools, and liability of third-party affiliates of charter schools.
This Article provides the first legal analysis of the new risks from mission-driven charter schools exemplified by Hillsdale College’s politicized agenda. Part I recounts the history of the school choice movement and summarizes research on charter school performance. To understand the paths used by Hillsdale in its attempt to expand its reach and influence, we describe in Part II the complicated landscape of charter school authorization and management. There is substantial variation by state—and even within states—regarding the authorizing entity, requirements for a school to be granted a charter, whether for-profit organizations can manage schools, and limits on charter school expansion, including caps on the number of charter schools that can exist within a state or locale. In this Part, we also address how variation in legal requirements and in oversight and monitoring at the state level has allowed corruption and fraud to proliferate. Part III provides an overview of the federal role in advancing charter schools, including the timeline and role of federal education funding and accompanying oversight. We also discuss recent regulations intended to curb the abuse of public funds. Within the context of state and federal laws regulating charter schools, Part IV examines the mechanisms Hillsdale College uses to overcome restrictions to establish charter schools in order to expand its political reach. Hillsdale College’s standardized curriculum and political agenda is directly contradictory to the original mission of charter schools to provide educational opportunities that meet the needs of students in underperforming schools. However, the presence of legal loopholes and political support within some states indicates that legal grounds for preventing Hillsdale expansion may be weak. In Part V, we provide our recommendations to mobilize regulation and litigation to enforce compliance with federal and state laws.
I. Background on the School Choice Movement
A. The Market for Charter Schools
Students face an extensive set of educational options beyond the simple public versus private school dichotomy. Public schools, all of which are supported by public funds, include traditional public schools, magnet schools, charter schools, and open enrollment schools. Private schools are not primarily supported by public funds and include schools with a religious affiliation as well as nonsectarian schools. Homeschooling is also an available private schooling option.
Alternative public schooling options emerged from the public school choice movement in the 1960s and took on additional salience following desegregation orders in the 1970s.48 In addition to traditional public schools, public schools of choice include open enrollment schools, magnet schools, and charter schools. It is important to focus on the “choice” dimension. For traditional public schools, the choice is largely made by choice of residence, and public schools are required to enroll and provide appropriate educational services to all eligible students. By contrast, schools of choice require active engagement on the part of parents to seek out and apply to schools.49
Charter schools emerged from a proposal by University of Massachusetts Amherst education professor Ray Budde, who suggested that states grant charters to introduce experimental programs in public schools.50 In the late 1980s, this proposal was championed by Albert Shanker, president of the American Federation of Teachers, as a means to improve education for the plethora of students who were not well-served by their public schools.51 The original mission of charter schools was innovation. Ember Reichgott Junge, the Minnesota legislator who wrote the nation’s first charter school law, described charter schools as “the ‘research and development’ sector of public education.”52 Progressive educators in Minnesota embraced the concept of school innovation, and in 1991, the state passed the nation’s first charter law.53 St. Paul’s City Academy opened in 1992 as the first charter school in the United States and is still in existence today.54 Early charter school proponents “envisioned small-scale, autonomous schools run by independent mom-and-pop operators who would be best positioned to respond to local community needs.”55
The agreement that drove their emergence and growth was that charter schools would be free to innovate in exchange for greater accountability.56 But operating charter schools can be highly profitable, and accountability and monitoring have been lax.57 The perils of profit-driven charter schools are well-documented in the legal literature.58
Tennessee provides an example of how charter schools can be embraced by their community. The first charter school in Nashville was created by two sisters, Sandra Smithson and Mary Smithson-Craighead.59 In 2003, concerned by the condition of schools in their native North Nashville neighborhood, the seventy-seven and eighty-seven-year-old sisters opened Smithson Craighead Academy, which still operates today.60 The sisters were lifelong teachers and advocates with a genuine desire to bring educational opportunities to disadvantaged students, and Craighead recognized that community involvement was crucial to the school’s success.61 Twenty years later, efforts to create Hillsdale charter schools, by contrast, are accompanied by overwhelming community resistance in Tennessee.62
B. Educational Performance of Charter Schools
The forces of the competitive market have been key to the argument in favor of charter schools since their creation.63 Because charter schools would compete on a per-student basis for public funds otherwise allocated to students in traditional public schools, the expectation was that charter schools would be incentivized to innovate in response to the needs of the local community in order to attract students, and traditional public schools would be incentivized to improve their performance in order to retain students.64
There is extensive literature examining the educational performance of charter schools.65 Although initially promoted as a means to improve outcomes for students in underperforming schools, evidence of efficacy is decidedly mixed and varies substantially by state and school district. It is worthwhile to flag the challenges in making appropriate comparisons between charter schools and traditional public schools. Because charter schools are schools of choice, a simple comparison of performance, such as test scores and graduation rates, would be inappropriate, as charter schools could be attracting and retaining the most motivated and high-performing students and those with the most motivated parents. In addition, some charter schools, such as KIPP, that have favorable reputations have strict disciplinary requirements that are not permitted at traditional public schools.66 Indeed, one of the criticisms of charter schools is that they have the incentive to push out low-performing students and recruit high-performing students (known as “cream skimming”) because renewal of their charter will be based on student performance.67
The most promising approach to comparing the performance of charter schools relative to traditional public schools draws on students assigned into a school type by lottery.68 Most charter schools are not oversubscribed, but those that are oversubscribed are required to select students by lottery. The lottery assignment allows for a comparison of outcomes of students, all of whom applied to a charter school but are by chance either admitted and enrolled in the charter school or not. In this way, those who are not selected by the lottery provide a reasonable comparison group to those who are admitted to the charter school. There are a number of influential articles in the economics literature that compare student outcomes using data from lottery assignments.69
Although random assignment provides a rigorous experimental design, this approach also has numerous limitations. Because only the most successful charter schools are likely to be oversubscribed, evidence on performance from the most successful schools may not generalize to charter schools overall.70 Furthermore, placement into charter schools is not entirely random because of preferential admission of siblings and children of staff.71 Finally, students not admitted via the lottery, as well as students admitted but who leave the original school, may attend another charter school, a private school, or drop out of school entirely, resulting in an absence of follow-up data necessary for comparing performance.72
The main takeaway from the lottery assignment papers is that despite the rigor of the experimental design and bias toward retention of the most motivated students in the most desirable charter schools, there is little evidence that charter schools produce superior academic outcomes relative to traditional public schools.73 But it bears emphasizing that at the individual school level, there is wide variation in charter school quality and performance, and some charter schools are highly ranked by U.S. News.74
To date, charter schools have been concentrated in urban and metropolitan areas and have enrolled a high percentage of minority students and students from low-income households.75 Evidence indicates that charter schools do not improve racial or socioeconomic diversity. Studies show an increase in racial and socioeconomic segregation.76 As we show in Part IV, existing Hillsdale schools have a lower minority population than their traditional public school counterparts, a demographic that is likely related to their mission and student recruiting practices.
C. The Influence of Philanthropy and Politics
In the late 1980s and early 1990s, it became widely recognized that students in many urban schools were struggling.77 Charter schools seemingly offered an innovative opportunity to experiment with alternative education models. Wealthy philanthropists and their foundations, including Bill Gates, Eli Broad, and the Walton family, made transforming public education a priority and provided much of the funding and political impetus for introducing and expanding charter schools.78 These philanthropists have been joined by other wealthy individuals, such as Michael Bloomberg, with funding going to charter school networks and political campaigns to expand charter schools. For example, along with other unidentified donors, the Walton family and Michael Bloomberg provided substantial contributions to the failed 2016 Massachusetts ballot initiative to raise the cap on the number of charter schools in the state.79 The influence of wealthy philanthropists extends to high-level positions in government; Betsy DeVos, a prominent advocate for privatization of public education and of charter schools, served as Secretary of Education in the Trump administration.80
The Gates Foundation has made substantial financial investments in school reform since the 1990s. These investments produced rapid charter school growth in New York City.81 The Gates Foundation launched a “small schools initiative,” which statistical analysis later showed failed to improve student performance and often produced worse educational outcomes than large schools.82 This failure led to a redirection of the Gates Foundation funding together with other proponents of school choice.83 The Walton Family Foundation has been a major benefactor of the school choice movement. In 2011, the foundation made a $25 million investment in the KIPP Foundation with the goal of doubling the number of students in KIPP charter schools by 2015.84 In 2015, Philadelphia School Partnership, a philanthropic group funded by the Gates Foundation, Michael Dell, the Walton Family Foundation, and other foundations, offered to make a $35 million donation to the Philadelphia public school system, under the condition that $25 million be allocated to open new charter schools to serve an additional 15,000 students.85
Philanthropy and politics are not always easily separable. Michigan offers an instructive view on how political influence and funding from wealthy philanthropists helped advance the school choice movement. It also offers a cautionary tale, showing the extent to which the school choice movement has failed Michigan students.
Michigan has the largest proportion of for-profit charter management operators of any state.86 Founded in 1987, the Mackinac Center for Public Policy advocates for reforming schools through school choice.87 Following Minnesota’s charter school experiment initiated in 1992, Michigan began chartering schools in 1994.88 There is little regulation of schools under Michigan’s charter law. For example, the state does not cap the number of charters and allows eighty percent to be operated by for-profit management operators, substantially above the sixteen percent share of for-profit management operators nationwide.89 There is no centralized oversight, and a bill sponsored by a Republican state senator and supported by the Republican governor to increase oversight was defeated, in large part because of lobbying efforts of the DeVos family.90
Despite the claim that student performance will benefit from unfettered market competition, Michigan’s education performance has not matched its success in expanding school choice. For example, as shown in a 2017 ranking of states, Michigan has been at the bottom in student progress since 2003.91 Michigan also does not limit virtual charter schools, and these schools show especially poor performance.92
D. Risks Arising from the Charter School Profit Motive
Whether organized as a for-profit or nonprofit entity, charter school management is highly profitable. Many charter schools operate under a “sweeps” contract in which all per-student public funds allocated to the charter school are awarded to the charter school operator, who retains any funds not spent on education as profit.93 The profitability of charter management organizations has attracted investments from hedge funds.94 In some states, charter authorizers receive a fee for authorizing a school, which increases their incentive to expand the number of charters to grant and decreases the incentive to decline renewals.95 Real estate has been identified as a particularly profitable area for charter operators.96 Property is often leased to charter schools at wildly inflated prices. Financial services firms benefit from real estate deals that include schools using debt financing to purchase buildings, also at wildly inflated prices.97 With profit motives and lax oversight come opportunities for fraud, corruption, and related-party transactions that are highly lucrative for the related parties. Charter school operators have been accused of, among other crimes, appropriating public funds,98 including funds allocated to meal subsidies for students from lower-income households.99
To understand how for-profit incentives can undermine educational goals, it is instructive to consider the financing arrangements for charter school properties. In contrast to traditional public schools where the district owns and pays for building repairs, charter schools either own or lease their buildings. Building purchases or repairs will typically be financed by debt, which is expected to be repaid from the per-student fees generated from student enrollment. If student enrollment declines, revenues decline, and if the charter is not renewed, revenues go to zero. Instead of district oversight provided to traditional public schools, charter schools become accountable to their lender, who in turn is accountable to shareholders. Under this arrangement, there is little incentive for charter schools or authorizers to maintain academic standards.
II. State Laws Governing Charter Schools
A. Authorization
Charter school authorizers are entities with the power to issue charters to eligible applicants. Authorizers evaluate charter applications and often provide some degree of oversight over the schools. Table 1 below presents charter school authorizers by state. Local school boards are the most common type of authorizer. Typically, local boards have the authority to approve charter schools that will be geographically located in the board’s school district.100
Statewide authorizers are also common. Some states require approval from both the state board of education and a local school board, but in many states, applicants may bypass their local school board and apply directly to the state board of education or to a separate charter school commission.101 These commissions are typically contained in a state’s department of education and are created solely to authorize or oversee charter schools. The members of such commissions are usually chosen for their experience with charter schools, in contrast with the state board of education, whose members are based on more general education expertise. As a result, charter school commissions are sometimes viewed as “more charter friendly” than state boards of education.102
Multiple states allow nongovernmental entities to authorize public charter schools. In fifteen states, colleges and universities may become authorizers.103 State-run colleges are most frequently eligible, but some states also permit private or tribal universities to grant charters. Nonprofit organizations may apply to become authorizers in three states.104 Minnesota even permits a nonprofit to be formed for the sole purpose of serving as an authorizer.105 Finally, state or local government entities beyond boards of education may become authorizers in six states.106 The Office of the Mayor of Indianapolis, for instance, serves as the authorizer for forty-eight charter schools.107
Authorizers often have unilateral discretion to approve a charter application, but in most states, a denial by an authorizer is rarely the final word. Table 2 presents state laws governing charter appeals. In at least twenty-four states, an applicant may revise their application and resubmit it, sometimes an indefinite number of times.108 In some states that have multiple authorizers, denied applicants may “authorizer shop,” meaning they may seek approval from a different authorizer.109
The majority of states permit applicants to appeal a denial to a state official. The state board of education or commissioner of education are the most common appellate authorities, but four states cede appellate authority to a charter school commission. Thirteen states explicitly permit judicial review of denied applications.110 In Florida, for instance, applicants who have been denied by both a local school board and the state board of education may appeal the decision in state district court.111
B. Caps
Minnesota’s original charter school law, the first charter school legislation in the United States, set a limit of eight charter schools statewide.112 Caps became a common feature of charter school laws, and by 2007, over half of the states that permitted charter schools restricted the number of charters that could be granted.113 Fifteen years later, only twenty states have any form of cap.114
Charter school advocates have long targeted charter school caps,115 but perhaps the greatest impact on cap laws was a result of Race to the Top, the Obama Administration’s competitive grant program developed to incentivize education reform.116 One criterion of the Race to the Top grant competition was “[t]he extent to which . . . [t]he State has a charter school law that does not prohibit or effectively inhibit increasing the number of high-performing charter schools.”117 This provision penalized states with charter school caps, especially states where the number of charter schools was approaching the cap.118 In response, fifteen states lifted or modified their caps between the program’s inception in June 2009 and the announcement of grant recipients in August 2010.119
Today, the remaining charter school caps take various forms. Table 3 summarizes cap laws by state.120 Most common are statewide limits on the number of charter schools that may operate at one time. This limit ranges from ten schools in Maine121 to 2,650 schools in California.122 Some states, including Illinois123 and New York,124 specify the number of charters that may be granted in major cities. Rhode Island sets a statewide cap at thirty-five, and at least half of the schools must be “designed to increase the educational opportunities for at-risk pupils.”125 Most state limits are fixed, but California’s limit increases by 100 annually,126 while West Virginia’s increases by ten every three years.127 Arkansas’s cap increases by five anytime the number of charter schools is within two of the statewide limit.128 Mississippi and New Mexico place limits on the number of schools that are authorized in the state each year,129 while the District of Columbia sets annual caps per authorizer rather than a statewide cap.130 In 2021, Wyoming permitted the State Loan and Investment Board to authorize charters, and the board currently has a cap during the trial period.131 Tribal colleges are the only authorizers with caps in Wisconsin.132 Ohio’s cap law is unique; authorizers typically may approve no more than 100 charter schools each, but any authorizer who maintains an “exemplary” rating by the Ohio Department of Education is not subject to caps.133
C. Sponsors and Operators
The majority of charter schools in the United States are freestanding, that is, operated by the local groups who started the charter school.134 As shown in Table 4, seven states permit for-profit charter schools.135 However, a growing number of charter schools are operated by external management organizations, many of which are for-profit.136 While nearly all states forbid granting charters directly to for-profit entities, it is permissible in most states for charter schools to contract with for-profit management organizations who either provide specific services to the school or, in many cases, run day-to-day operations.137
The for-profit management sector is concentrated among a few large organizations. In the 2019–2020 school year, more than one in ten charter school students nationwide were in schools operated by for-profit management organizations, and the ten largest for-profit organizations alone managed schools containing 87.1% of these students.138 The dominance of large firms in this market might be expected to yield economies of scale in the form of consistent training or curriculum or consolidated administrative costs that free up funds to be spent on students. Indeed, a nationwide study found slightly higher student performance at schools that are operated by a management organization compared to freestanding charter schools.139 However, these improvements were driven by nonprofit operators; for-profit operators as a whole performed no better than traditional public schools in reading—and worse in math—despite their size and resources.140
Arrangements with management organizations often result in public funds being funneled to for-profit groups. Operators have incentive to spend as little as possible on educating students in order to generate greater profits for stakeholders. Operators may increase their profits by hiring less experienced teachers141 who earn lower salaries142 or by enrolling fewer students with disabilities who may have costly educational needs.143
Another means by which management organizations profit from charter schools is by engaging in related-party transactions.144 Related-party transactions are deals between a firm and another party based on “special, preexisting relationships” between the other party and a leader in the firm,145 such as buying school uniforms from a company owned by an executive’s spouse.146 While not inherently illegal, related-party transactions often lead to costly conflicts of interest.147 In particular, these transactions may result in higher expenses since schools do business with favored parties rather than the lowest bidder. One common type of related-party transaction occurs when a charter school rents its facilities from an entity related to the management organization or from the management organization itself.148 Such arrangements are not limited to small, fly-by-night organizations. Academica is the United States’ largest for-profit management organization and has the second-greatest number of schools of any management organization, including nonprofits.149 In the 2012–2013 academic year, thirty-one of the ninety-two charter schools that Academica operated in Florida leased property from companies controlled by Academica CEO Fernando Zulueta and his brother.150 In 2010, these companies earned $19 million in lease payments, and the Zuluetas controlled over $100 million dollars in real estate exempt from property tax because they were sites of public schools.151 Crucially, rent payments to these companies were more expensive on average than schools that leased from unaffiliated companies, so Academica’s exploits came at the expense of other educational needs.152
Questionable spending practices by charter school operators take many forms. IDEA Public Schools, a nonprofit that operates 143 charter schools nationwide,153 recently faced criticism for purchasing season tickets and a luxury box for a professional basketball team and for attempting to lease a private jet.154 Then there are cases of outright fraud. In June 2022, the cofounders and former CFO of Epic Charter Schools, a virtual charter school system that serves about 37,000 students, were charged with racketeering, embezzlement, and related offenses that cost taxpayers $22 million.155 The men allegedly moved school funds into a private business account and used the money to pay off personal credit card expenses, including a political donation to the Oklahoma State Superintendent.156 This case is not an anomaly; the Network for Public Education maintains a long list of misbehavior called “Another Day Another Charter Scandal.”157
While traditional public schools also seek to reduce costs and are susceptible to abuse from bad actors, for-profit operators pose unique concerns for two reasons. First, traditional public schools have financial oversight and transparency, whereas privately held companies have far fewer disclosure requirements, making it difficult to discern how funds are spent.158 Second, the primary goal of traditional public schools is to educate students, while for-profits, by definition, seek to generate profits for their stakeholders. Given that for-profit managers, on average, fail to generate performance improvements over traditional public schools, permitting these organizations to extract money from publicly funded schools with no academic returns constitutes rent-seeking behavior.
D. Charter School Laws in Tennessee
Since Tennessee has become the focus of Hillsdale’s agenda, we summarize the landscape of the state’s charter laws. The Tennessee General Assembly authorized the creation of charter schools with the passage of the Tennessee Public Charter Schools Act of 2002.159 The act set caps on the number of charter schools that could be created160 and generally permitted schools to open only in areas where students were below set income levels or failed to meet academic benchmarks.161 Four charter schools were approved by the start of the 2003–2004 school year.162 Later amendments removed the cap on the number of charter schools163 and permitted charters open to all students to be granted in any school district, regardless of local school performance.164 As of August 2022, there are 114 charter schools operating in four counties in Tennessee, which contain the four largest and most urban cities in Tennessee.165
In order to create a new charter school, a sponsor must submit an application to the board of education of the district in which the school will be located.166 Charter school sponsors must be nonprofit entities and may not “promote the agenda of any religious denomination or religiously affiliated entity.”167 If the board denies the application, the sponsor may appeal the decision.168 Originally, the Tennessee State Board of Education heard appeals, but in 2021, the Tennessee Public Charter School Commission became the appellate body.169 The Commission, composed of nine members appointed by the governor,170 is tasked not only with hearing appeals but also serving as the local education agency for all charter schools it approves.171
Once the application has been approved, the authorizer and the sponsor will sign a charter agreement specifying how the school will be operated and managed.172 The charter is valid for ten years, after which it may be renewed every ten years with the authorizer’s approval.173 The authorizer may revoke a charter if a school violates the charter agreement, mismanages finances, or fails to meet academic standards.174 The authorizer must revoke a charter if for two consecutive years, a school’s performance is in the bottom five percent statewide or a high school fails to graduate more than one-third of its students.175
Despite being autonomously governed, charter schools must still follow some state requirements, including providing services for students with disabilities, holding public meetings, complying with state and federal antidiscrimination laws, and meeting the same performance standards as regular public schools.176 Moreover, charter school teachers must hold educator licenses.177 Charter schools are publicly funded, and when a student moves from a traditional public school to a charter school, “the money follows the child.”178 For each student in a charter school, the district in which the charter is located must distribute to the school an amount equal to the district’s total funding divided by the number of students in the district, even if the charter was authorized by the Charter School Commission rather than the local board of education.179
III. The Federal Government and Charter Schools
A. Federal Laws
Charter schools are typically eligible for the same forms of federal support as are traditional public schools,180 including free or reduced meals under the National School Lunch Program,181 funds allocated under the Individuals with Disabilities Education Act,182 and Title I grants, which are designed to support low-income students.183 Allocating funding to charter schools is often complicated since enrollment is determined by students’ choices rather than their location. For instance, Title I funding for charter schools is more tenuously linked to the school’s poverty level than it is for traditional public schools, since a charter school’s students do not come from a defined geographic area and the Title I funding formula relies on census estimates for a school’s coverage area.184 Charter schools therefore receive funds based on averages for the local district or state.185
As public schools that receive federal funds, charter schools are subject to a number of laws that protect employees and ensure that all students have access to public education. Under Title VI of the Civil Rights Act of 1964, schools may not discriminate on the basis of race, color, or national origin in admissions, enrollment, or other educational activities.186 Title IX of the Education Amendments of 1972 prohibits discrimination on the basis of sex in education programs that receive federal funds.187
Charter schools are also subject to laws regarding students with disabilities. Section 504 of the Rehabilitation Act of 1973 ensures “that students with disabilities are provided an equal opportunity to participate in or benefit from the aid, benefits, services, and opportunities provided to others in federally-assisted programs” and establishes the right to a “free appropriate public education (FAPE).”188 The Individuals with Disabilities Education Act directs how states, school districts, and schools implement special education programs to ensure all students receive FAPE and provides funding to this end.189 Similarly, Title II of the Americans with Disabilities Act of 1990 prohibits discrimination on the basis of disability, but unlike Section 504, Title II applies to all public entities, even if they decline federal funding.190
Charter school employees and job applicants are protected under Title VII of the Civil Rights Act of 1964 from employment discrimination. Under Title VII, it is unlawful to discriminate in hiring, firing, or otherwise discriminating with respect to compensation, terms, conditions, or privileges of employment on the basis of race, color, national origin, sex (including pregnancy, sexual orientation, gender identity, and transgender status), or religion.191 It is also unlawful to discriminate in employment on the basis of age (for individuals forty years or older) under the Age Discrimination in Employment Act (ADEA), on the basis of disability under the Americans with Disabilities Act (ADA), or on the basis of genetic information under the Genetic Information Nondiscrimination Act (GINA).192
B. Federally Funded Charter School Grants
Through the Expanding Opportunity Through Quality Charter Schools Program (CSP), the U.S. Department of Education provides grants to support the creation of new charter schools.193 The grants were created by the Improving America’s Schools Act of 1994194 and were later extended by the No Child Left Behind Act of 2001195 and the Every Student Succeeds Act in 2015.196 The majority of grants are awarded to states, which then distribute the funds to eligible charter schools or applicants, but some grants are awarded directly to schools or to nonprofit management organizations who wish to replicate successful schools.197 From 1995 to 2017, CSP awarded a total of $3.9 billion in grants to support charter schools.198 In 2022, CSP’s budget allocation was $440 million.199
Despite the magnitude of CSP’s funding, oversight of program spending has been lacking.200 One concern is how start-up grants, which are the largest portion of CSP grants,201 are distributed and used. New charter schools, like many independent start-ups, face risks and growing pains, and these challenges may be borne by the public if CSP grants are not allocated discerningly. According to a report by the Network for Public Education, nearly a third of CSP start-up grant recipients had not opened or opened and later closed during the eight-year period studied.202 The report estimated that the grants given to the nonoperational charter schools totaled nearly $200 million.203
Another concern is that federal education funds are being funneled to for-profit entities. While for-profit charter schools are ineligible to directly receive CSP grants, nonprofit schools that are operated by for-profit management organizations are eligible.204 An audit by the Department of Education Office of Inspector General concluded that “charter school relationships with CMOs posed a significant risk to Department program objectives,” including a “lack of accountability over Federal funds” and “the risk of waste, fraud, and abuse.”205 In July 2022, the Department of Education issued new requirements for CSP grant recipients in order to “promote greater fiscal and operational transparency and accountability.”206 Under the new rules, if a charter school contracts with a for-profit management organization, the school must publish the terms of the contract including the amount paid to the organization, provide assurances that the school’s board will not be controlled by the organization, and disclose any business relationships between the charter developer and the organization or any related entities.207 State-level grant recipients must also specify a plan to monitor subgrantee schools that contract with for-profit operators.208 Moreover, to eliminate sweeps contracts where a school’s funds and control are transferred entirely to the operator, charter schools must ensure that the school “maintains control over all CSP funds, makes all programmatic decisions, and directly administers or supervises the administration of the grant or subgrant.”209
C. CARES Act
During the coronavirus pandemic, charter schools, along with traditional public schools, received grants as part of the CARES Act.210 In addition, because they are privately operated, some charter schools also accepted forgivable loans through the Paycheck Protection Program (PPP), which was intended to prevent small businesses from laying off employees during the pandemic.211 Consequently, charter schools in Nashville that received PPP funds received significantly more per-student federal coronavirus support than traditional public schools did.212
IV. Hillsdale Charter Schools
A. Background and Political Connections
Hillsdale College is a nonsectarian Christian liberal arts college in Michigan with the mission to “maintain[] ‘by precept and example’ the immemorial teachings and practices of the Christian faith.”213 The mission statement further states that it “considers itself a trustee of our Western philosophical and theological inheritance tracing to Athens and Jerusalem,” and that the college does not succumb “to the dehumanizing, discriminatory trend of so-called ‘social justice’ and ‘multicultural diversity.’”214 Hillsdale is not subject to federal laws such as Title IX of the Education Amendments Act of 1972 because the college does not accept federal funding, including loans or scholarships.215 This independence, along with the college’s focus on classical and Western thought, has drawn praise from prominent conservative leaders,216 including Justice Clarence Thomas, who referred to Hillsdale as a “shining city on a hill” in his commencement address at the college.217
Hillsdale College was founded in 1844,218 and although it has embraced ultraconservative Christian values and teachings throughout its history, as a college it largely flew under the radar until around 2015. The cataclysmic event was the surge of Donald Trump’s presidential candidacy. Despite the small size of this college, with only 1,573 undergraduate students,219 it quickly became affiliated with the Trump candidacy and subsequent administration.220 In a challenge to The New York Times Magazine’s 1619 Project, the Trump administration established the 1776 Commission,221 chaired by Hillsdale President Larry Arnn.222 The “1776 Curriculum” is the backbone of the curriculum used in Hillsdale-affiliated charter schools. The curriculum clearly shows a strong conservative bias that is at odds with academic norms of fact-based and politically neutral education.223 Critics claim that Hillsdale’s curriculum rewrites American history.224
Arnn has been vocal about the role of education in advancing a conservative Christian agenda, referring to education as a “weapon” in the war to reclaim America.225 In the context of education policy, Betsy DeVos is among the most visible connections. An ardent supporter of charter schools, DeVos advocated for the expansion of charter school funding as Secretary of Education in the Trump administration.226 Betsy DeVos has close ties with Hillsdale College, which include family contributions to the college and an appearance as a campus speaker.227
In reviewing the materials in light of Hillsdale’s proposed entry into Tennessee, historian David Ewing identified a distorted and inaccurate position on the civil rights movement and, in particular, the teachings of Dr. Martin Luther King Jr.228 Dr. King was assassinated in Memphis, Tennessee, in 1968; for Governor Lee to deliberately invite publicly funded charter schools to teach an ahistorical and biased view of Dr. King’s teachings in the state in which he was assassinated seems especially troubling.
B. Hillsdale’s Entry into the Charter School Market
As described in Part III, charter schools are typically operated either as small-scale autonomous schools or as part of a larger chain of charter schools under a management company. Under either structure, the revenue that follows the students flows to the charter school operator. Hillsdale has developed an alternative administrative structure that allows it to maintain control over the curriculum but avoid the oversight and chartering restrictions that apply to charter school operators.
Hillsdale College began its push into public education by establishing the Barney Charter School Initiative (BCSI) in 2010 with funding from the Barney Family Foundation.229 BCSI is billed as “an outreach program of Hillsdale College devoted to the revitalization of public education through the launch and support of classical K-12 charter schools.”230 Hillsdale emphasizes that the college simply supports charter schools and “does not own, govern, manage, or profit from any affiliated school.”231 The initiative guides, at no cost, groups who wish to start classical charter schools and provides successfully chartered schools with curriculum curated by Hillsdale,232 including material from the controversial 1776 Curriculum.233
Under the umbrella of “Hillsdale K-12 Education,” there are Member Schools, which “receive curriculum, consultation, and training from the Hillsdale K-12 Education Office,” and Curriculum Schools, which license the K-12 Program Guide developed by Hillsdale College; Curriculum Schools may apply for Member School status after two years.234 Certified Schools have been certified by the Hillsdale K-12 Education Office. With only twenty-three member schools as of 2022, Hillsdale-affiliated charter schools currently represent only a small share of the charter school market.235
Like other schools of choice, admission to Hillsdale charter schools requires that parents apply to the schools, with applicants to oversubscribed schools selected by lottery. As in their expansion plans in Tennessee, Hillsdale charter schools depart from the nationwide norm of locating in urban areas and instead locate in predominantly white and affluent areas. Such locations act as a deterrent to applicants from minority populations, due to barriers as simple as lack of transportation.236 The student demographic composition of Hillsdale schools is the opposite of that in charter schools nationwide.237
Another benefit Hillsdale attains by not owning or managing the affiliated charter schools is that it can deflect any responsibility for the actions of school employees or administrators. For example, social media posts by the principal of the Hillsdale charter school Naples Classical Academy in Naples, Florida, received scrutiny for anti-Muslim posts, such as language about Muslim “gang rape marathons.”238 Hillsdale’s response was that it “does not own, govern, or manage any of its affiliated schools.”239
In the remainder of this Part, we provide examples of Hillsdale’s entry into different states.
1. Florida
Like Governor Lee of Tennessee, Florida’s Governor Ron DeSantis has embraced a relationship with Hillsdale.240 With considerable political support from numerous parties, in particular Governor DeSantis and Richard Corcoran, former commissioner of the Florida Board of Education, Florida is the home of seven Hillsdale charter schools.241
The ties between Governor DeSantis and Hillsdale College extend well beyond a handful of charter schools, with an impact on Florida public education among many dimensions. Hillsdale is one of four groups that partnered with the Florida Department of Education to develop a civics training program for public schools.242 The training includes explicitly religious content. For example, the training includes a slide reading, “Founders expected religion to be promoted because they believed it was essential to civic virtue.”243
As another example of Hillsdale’s influence on public education in Florida, Hillsdale-affiliated reviewers were instrumental in the Florida Department of Education’s rejection of dozens of math textbooks over perceived references to critical race theory.244 Notably, out of 125 reviewers of math textbooks, only three reviewers raised objections. One was a Hillsdale College sophomore and the second was a Hillsdale civics education specialist.245
Florida has an openly conservative education agenda to privatize public education.246 In expressing admiration for Tennessee’s mission of increasing Hillsdale charter schools in the state by at least fifty, Corcoran urged that the move happen quickly, noting that once students are lured to charter schools from traditional public schools—what he called getting them “across [the] Rubicon”—the resulting “loss of funding and forced consolidation” of public schools will cause them to collapse and prevent future Democratic governors from changing the educational landscape back.247
2. California
In an effort to open the first Hillsdale-affiliated charter school in California, supporters deployed controversial tactics aimed at both the authorizing board and local families. In its initial application, proposed charter school Orange County Classical Academy (OCCA) touted a partnership with both Hillsdale and nearby Chapman University, and marketing materials stated that “academy students would be given ‘priority for admittance and scholarships to Chapman.’”248 Despite Chapman clarifying that no formal relationship with OCCA exists, OCCA supporters continued to assert the claim, leading members of the Orange Unified School District (OUSD) Board of Trustees to suspect that the alleged affiliation misled minority families who signed a petition in support of the charter school.249
In addition, a pro-charter school PAC mounted a well-funded and successful campaign to place two charter-friendly members on the local authorizing school board. In the 2016 election, ninety-six percent and ninety-seven percent, respectively, of OUSD Board of Trustees members John Ortega’s and Brenda Lebsack’s campaign contributions came from the California Charter Schools Association’s PAC.250 The charter was narrowly approved by a four-to-three vote, with Ortega and Lebsack voting in favor of the application.251
3. Wisconsin
Lac Courte Oreilles Ojibwe University (Lac Courte) is a public tribal university in northwestern Wisconsin. As stated on its website, its mission is “to provide Anishinaabe communities with post-secondary and continuing education while advancing the language, culture, and history of the Ojibwe.”252 In 2021, while it was a community college, Lac Courte became the charter school authorizer of the Lake County Classical Academy (LCCA), an independent charter school located in suburban Milwaukee and a Hillsdale College Member School.253
It may seem surprising that Lac Courte ever was the charter authorizer of LCCA for several reasons. Geographically and with respect to mission, there is no evident synergy. Lac Courte is located a nearly five-hour drive away from LCCA.254 The missions of Hillsdale-affiliated schools and Lac Courte seem diametrically opposed, with Lac Courte advancing the “language, culture, and history of the Ojibwe,”255 and the Hillsdale K-12 curriculum dedicated to teaching Western history, traditions, and values based on a curriculum designed by an ultraconservative Christian college.256 There is minimal overlap in the constituency served by Lac Courte and LCCA, as LCCA has few to no tribal members among its students, all of whom are drawn from the local community.257
So how did Lac Courte become the authorizer? Like many states, Wisconsin permits schools to be chartered by any of a number of potential authorizers, including the chancellor of the University of Wisconsin, school district authorizers, and technical college boards, as well as the state’s two tribal colleges.258 The interim principal of LCCA was refreshingly honest when explaining why Lac Courte was LCCA’s charter authorizer: “The other authorizers all declined.”259
Although the tribe’s agreement to charter the LCCA school had been rationalized by appealing to high-minded shared values of “educational sovereignty,”260 financial motives may have provided even more of an inducement. The college received three percent of the school’s per-pupil school aid for serving as the authorizer.261 In addition to the ongoing revenue stream, Lac Courte received an implementation grant from the state of $750,625.262
Although Wisconsin largely does not cap the number of charter schools that can be authorized,263 the two tribal colleges in the state face a combined cap of six charters they are permitted to authorize.264 A bill to remove the cap on the number of charters that tribal colleges can authorize was vetoed in April 2022 by Wisconsin governor Tony Evers.265 Removal of this cap, if implemented at some future date, would provide an attractive opportunity for expanding the reach of charter schools, especially among those that, like LCCA, are declined by every other authorizer. The potential for charter school expansion through tribal authorizers is evident in Michigan. Tribally controlled Bay Mills Community College in Michigan is the authorizer of forty-six charter schools in the state, making it one of the top three authorizers in the state.266
4. Tennessee
In his 2022 State of the State Address, Tennessee Governor Bill Lee announced that his administration is partnering with Hillsdale College “to expand their approach to civics education and K-12 education,” describing the college as “champions of American exceptionalism,” and stating that “[f]or decades, Hillsdale College has been the standard bearer in quality curriculum and the responsibility of preserving American liberty.”267 In a speech in Franklin, Tennessee, four months earlier, Hillsdale College President Larry Arnn elaborated that he and Governor Lee had agreed to open fifty to one hundred charter schools in Tennessee.268 To operate these schools, the charter management organization American Classical Education Inc. (ACE) was launched with Hillsdale’s support.269 Although formally a separate entity from Hillsdale, ACE’s CEO is a former Hillsdale student, and the board for one of ACE’s proposed schools included “the Hillsdale chief of staff, the Hillsdale vice president of finance, the Hillsdale vice president of admissions, a member of the Hillsdale board of directors, the former superintendent of the college’s own private Hillsdale Academy and two Hillsdale graduates.”270
ACE submitted applications to local school boards in three counties in Tennessee, but in the summer of 2022, the boards rejected all three applications.271 In July 2022, ACE appealed the denials to the Tennessee Public Charter School Commission.272 The commission was created by a 2019 law supported by Governor Lee that revoked appeals authority from the state board of education.273 Unlike the board of education, whose duty is to oversee numerous facets of public education in Tennessee,274 the charter school commission has the sole “purpose of serving as an appellate public charter school authorizer and the [local education agency] for any public charter school it authorizes.”275 Governor Lee appointed all nine commission members,276 including the board chairman of KIPP Memphis277 and the CEO of a CMO who also develops real estate projects “anchored by high-performing schools.”278 With such a “charter friendly” appeals board, “[h]aving the school board there as a step is relatively meaningless.”279
In 2022, lawmakers introduced a new bill that would allow applicants to bypass a local school board and apply directly to the commission for five years if the commission overruled the local board’s rejections three times in three years.280 The new rule would enable the commission to grant itself exclusive authorizing authority over a school district and would create a five-year window for charter school operators to enter a community without local input. The sponsor removed the bill from the calendar in March 2022 but left open the possibility of reintroducing it in later sessions.281 Even if the bill does not pass, the lack of a cap on charter schools and the ability to appeal to a governor-appointed board provide a clear path to approval for an applicant with political support.
However, Hillsdale may be their own greatest threat in Tennessee. In a two-hour speech in June 2022 in Williamson County, Hillsdale President Arnn claimed that American teachers “are trained in the dumbest parts of the dumbest colleges in the country.”282 At Arnn’s side during the speech was Governor Lee, whose silence was aggressively condemned from all sides, including his Republican allies.283 No Lee-appointed members of the appeals commission indicated that Arnn’s remarks would impact their decision, but spectators characterized the commission’s decision whether to grant a charter to an applicant facing near-universal scorn from the state they represent as “the first major test” for the legitimacy and autonomy of the board.284
However, in September 2022, one week before the Commission was scheduled to vote on the appeals, ACE withdrew all three charter school applications, citing a need for more time to “address concerns and clarify confusion and misconceptions raised by Commission staff.”285 In December 2022, ACE renewed its efforts by filing letters of intent to open charter schools in five school districts across Tennessee, including the three districts to which ACE had previously applied.286 If ACE submits formal applications, each district’s board of education must approve or deny the application; if denied, ACE may again appeal to the statewide Commission.287
5. Colorado
Colorado has generally embraced charter schools. Nationwide, Colorado has the third highest proportion of students in charter schools, with over fifteen percent of students attending charters.288 The National Alliance for Public Charter Schools, a pro-charter advocacy group, ranks Colorado’s charter school laws as the second best in the nation.289 Supporters of Hillsdale-affiliated charter schools in Colorado have made use of the state’s existing charter support and generous laws. For instance, since Colorado permits for-profit corporations to manage charter schools, American Legacy Academy, a Hillsdale curriculum school that has been approved to open in Weld County, will be operated by the for-profit CMO Academica, melding the profit- and mission-driven goals of these out-of-state actors.290
A hallmark of charter school governance is the ability to operate independently, free from some requirements placed on traditional public schools. In Colorado, laws that give school boards authority over employment, training, and curriculum are automatically waived for charter schools, and charters may request waivers for other laws.291 All Hillsdale affiliates avail themselves of waivers for at least thirty-five state laws.292 Two Hillsdale-affiliated charter schools are exempt from a statute that prohibits human sexuality education from emphasizing abstinence as the primary pregnancy prevention method or excluding LGBT health needs.293 In addition, two schools have removed the local school board’s ability to determine which “books, magazines, papers, or other publications . . . are of immoral or pernicious nature,”294 allowing the school to decide what materials are available to students.
Hillsdale allies have been active in local government campaigns in Colorado communities where Hillsdale-affiliated charters operate or plan to operate. In the November 2021 elections, eleven candidates in school board races across the state were endorsed by the 1776 Project PAC,295 a PAC that wants to abolish critical race theory because it is “incredibly hostile to white people, Western civilization, classical liberalism, the enlightenment, the founding of America, and capitalism.”296 In Grand Junction, the three PAC-supported winning candidates formed a majority on the local board.297 The following year, the board approved Hillsdale-affiliated Ascent Classical Academy’s request to apply to the Colorado Charter School Institute in hopes of starting a charter school in Grand Junction.298
In 2019, the Douglas County school board clashed with Ascent Classical Academy of Douglas County over the school’s decision to allow teachers to carry concealed handguns in the building.299 In 2021, conservative political groups poured money into the school board race, ostensibly citing “parent power” and distaste toward unions.300 All four candidates endorsed by the 1776 Project PAC won their seats, ousting incumbents and forming a majority of the seven-member school board.301
6. Failed Hillsdale Charters
Despite political support and the promise of superior education, not all of Hillsdale’s efforts have been successful. Hillsdale-affiliated Metropolitan Philadelphia Classical Charter School withdrew its application after critics “raised several serious concerns, including its founders’ lack of any connection to Philadelphia and its quasi-religious approach to education.”302
In Florida, Tallahassee Classical School was approved by the state despite local opposition, but has since ended its relationship with Hillsdale, with teachers voicing concerns that Black students were disproportionately dismissed shortly before state assessment tests were administered.303 Livingston Classical Academy in Michigan also faced opposition before being granted a charter and has likewise severed its ties with Hillsdale.304
Other charter schools have failed to launch. In 2017, Chicago Classical Academy (CCA), part of Hillsdale’s BCSI, applied to open in Chicago’s South Loop neighborhood.305 However, CCA faced steep competition; that year, Chicago Public Schools received nineteen other charter school applications,306 and state law permits no more than seventy charter schools to operate in the city at one time.307 School leaders acknowledged that “[o]pening a charter school in Chicago is no easy task,”308 and decided not to appeal their denial.309
Texas offers a striking example of how a charter school can be pushed through the authorization process by using political connections despite repeated denials and overwhelming opposition. The Hillsdale affiliate Heritage Classical Academy (HCA)’s application for a charter has been denied three years in a row.310 Texas law requires charter schools to receive approval from the state board of education.311 During the most recent vote, the board expressed frustration with school leadership over perennial shortcomings of their application and voted to veto the application in a bipartisan vote.312 The board’s disunity regarding HCA compared to the other proposed charter schools debated during the meeting is typical of the reaction to Hillsdale-backed schools; while votes concerning the other schools at the same meeting saw “near-unanimous agreement among the members, Heritage nearly split the fifteen-member board down the middle.”313
This experience in Texas demonstrates the advantage of having an elected state board of education as the authorizer rather than, for instance, a governor-appointed charter school commission. However, the board is not immune from manipulation by outside forces. Two Republican board members who previously voted against HCA lost reelections to opponents who were funded by a PAC that received donations from the family of HCA’s chairman of the board. Another Republican who voted to deny HCA lost his position after the Texas Senate drew new state board districts.314 If HCA applies a fourth time when the new board members take office, “its future—and that of other charter schools like it in Texas—looks bright.”315
V. Recommendations
In this Article, we identified a series of unique areas of concern that arise from Hillsdale’s charter school incursion into the public school arena that were not anticipated, and were thereby hard to constrain, under the current charter school regulatory and administrative structure. In this Part, we identify how prior proposals to improve charter school accountability are unlikely to constrain charter school growth and practices. We then propose recommendations to mitigate unintended consequences of charter school expansion by use of regulation and litigation to ensure that charter schools serve the public interest.
A fundamental problem in the charter school sector is that there are limited incentives to monitor or hold charter schools accountable for their performance. Indeed, the rationale for charter schools is that the market, as demonstrated by enrollment, is the arbiter of success: schools that are successful will attract students, and schools that are not successful will fail to attract students and will close. In addition to the market test, some charters are not renewed for failure to meet state standards or are not financially viable, but this is relatively rare.
A. Authorizers and Caps
Improving oversight and setting caps on the number of charters are commonly offered as mechanisms for holding charter schools to performance standards. States vary greatly in their charter school policies.316 Restrictions on the number of authorizers limit the ability of charter applicants to shop for an authorizer. For example, a Hillsdale charter school in Wisconsin was ultimately granted a charter by a tribal college after being declined by every other authorizer.317 In some states, there are numerous potential authorizers; in Michigan, for instance, over forty entities currently authorize charters.318 Authorizers often benefit financially. Michigan’s authorizers collect up to three percent of school funds from the charters they authorize.319 Even where authorizers are not paid, there are still implicit costs in terms of the time to conduct reviews and evaluate existing charters. As long as student demand is high, so that the school meets the market test, there is little upside for the authorizer to revoke a charter. In these situations, the lack of incentives for authorizers to conduct serious oversight and impose sanctions is obvious.
Caps on the number of charters force authorizers to make decisions among competing applications and may create incentives to monitor performance. For instance, Chicago limits the number of charter schools, creating intense competition among applicants and likely contributing to the denial of a Hillsdale affiliate’s application in the city.320
While well-intentioned and reasonable, limiting authorizers and imposing caps on charter schools are policies under state control, and state preferences and processes vary. In Massachusetts, a ballot initiative to raise the cap on the number of charter schools failed to pass.321 In Tennessee, the governor and legislature simply created a state board that can overrule local boards as the charter school authorizer.322 With no cap on the number of charters that can be authorized in Tennessee, state board approval becomes a rubber stamp for charter schools, such as those affiliated with Hillsdale, that the governor supports. Texas similarly cedes authorization duties to a state school board.323 We do not consider proposals to enhance oversight or impose caps as providing sufficiently effective or feasible mechanisms to prevent the incursion of Hillsdale affiliates’ charter schools.
B. Financial Fraud and Financial Incentives
The guaranteed revenue from public funding that follows the students and minimal oversight almost invites grifters and con artists to open charter schools. There are numerous cases of charter school operators engaging in financial fraud.324 Financial crimes can be addressed through the existing criminal justice system, and efforts can possibly be bolstered through use of the False Claims Act.325
A subtler form of financial malfeasance is through real estate arrangements. Investors and hedge funds have found charter schools to be attractive real estate investments.326 Because buildings to house charter schools are in many cases renovated at public expense, including in Tennessee, real estate developers benefit from charter schools through rental arrangements or with the prospect of developing neighborhoods or selling off the school property later. The state board appointed by Tennessee Governor Lee includes a real estate developer whose official profile advertises that he develops neighborhoods near high-performing schools.327 Having authorizers with a financial interest in development creates a substantial conflict of interest. This includes an incentive to authorize charter schools in communities with the least need for educational improvement, such as in Buckhead, Georgia, an affluent and mostly white neighborhood of Atlanta that is home to a Hillsdale member school.328
We therefore propose that individuals with any financial conflicts of interest, no matter how seemingly minor, be prohibited from serving as either an authorizer or a board member of a charter school. Charter legislation in some states mandates disclosures of conflicts of interest. For example, Delaware requires charter school founders and boards of directors to disclose in their application “any ownership or financial interest in the charter” and to continuously disclose such interests for the duration of the charter.329 We recommend that states extend legislation to forbid such financial interests.
C. Litigation Proposals
Schools are comprised of students and infrastructure, but without teachers, administrators, and staff, the school would not exist. Our proposal is to activate private incentives to litigate as a means of holding charter schools accountable to serving the public interest. The legal environment regarding the public-private boundaries between public charter schools and their independent operators remains unsettled. Gaps that limit effective monitoring and enforcement of laws and regulations governing charter schools may become exposed through litigation and may prompt voters to demand change through legislative action or constitutional amendments.
1. Hiring Practices
Investigative reporting revealed that Hillsdale charter schools are overwhelmingly staffed by graduates of Hillsdale College.330 Because of Hillsdale’s heavy reliance on its own graduates, its employment practices may fall short in compliance with employment discrimination law or equal-opportunity obligations.
The charter school itself will bear liability in employment discrimination charges.331 Because charter school revenue is set by the number of students enrolled, litigation expenses and damages awards will reduce net revenue. The threat of litigation should therefore incentivize charter schools to maintain compliance with Title VII, even if that means hiring and retaining teachers who are unmarried, pregnant, transgender, or Muslim.
2. Board of Directors’ Responsibility and Accountability
Like teachers, Hillsdale boards of directors are overwhelmingly drawn from the Hillsdale universe.332 Most charter schools are organized as nonprofits, and nonprofit boards of directors are provided with some protection against lawsuits deriving from their roles on nonprofit boards.333 Boards of directors of for-profit charter schools have the same limited liability protection available to board members of any other for-profit organization. The protection is not comprehensive for boards of either nonprofit or for-profit charter schools if they fail to monitor and prevent illegal activities.334 Holding individual board members liable for failing to monitor and prevent illegal discrimination against staff or students, or for failing to detect financial fraud, would incentivize greater compliance with the law. This liability regime would not discourage parents, teachers, or community members who wish to improve public education from serving on a board but would deter disengaged, nonlocal actors who are not motivated by that goal.
3. Oversight Incentives
Any party that receives a financial benefit from their role in approving or sustaining a charter school should be considered potentially liable over failure to comply with laws. The analogy here is to workers’ compensation. Under the workers’ compensation system, workers injured on the job cannot sue their employers for workplace accidents and instead receive compensation payments and coverage of medical expenses according to a schedule.335 However, workers’ compensation does not protect third parties from liability. If, for example, a construction worker falls off a defective ladder, the employee may not sue their employer but may sue the manufacturer of the defective ladder.
In analogy to workers’ compensation, any third party to a charter school should not be exempt from lawsuits. This includes authorizers who receive a recurring payment for their role as authorizers. Authorizers, such as school boards, that do not receive compensation for authorizing will be exempt from lawsuits. Similarly, real estate developers, investors, or property owners who play any constructive role in a charter school’s location or continuance will not be exempt from liability.
Conclusion
Publicly funded, privately operated charter schools are an entrenched part of the educational landscape. We are not proposing that they be eliminated. But standards and regulations established for first-wave charter schools are not robust enough to withstand entry or monitor compliance with federal and state laws of charter schools that have an agenda that is in opposition to public policy. We provide a review of the wide range of state practices with respect to caps, authorizing entities, oversight, and management and financial practices. We provide examples of how easily a mission-driven charter school network, such as those affiliated with Hillsdale, can exploit loopholes and exert its substantial political and financial strength despite facing considerable opposition. Existing laws are simply insufficient to stop a charter school network on its march to destroy public education and replace it with a publicly funded version of what would otherwise be a private conservative religious education. We propose that litigation be mobilized in the public interest to enforce antidiscrimination laws and remove self-dealing conflicts of interest. Imposing liability on decisionmakers and stakeholders of mission-driven charter schools would realign these schools’ interests with the public’s interest in providing equitable education opportunities.
** See attached PDF for Article including Appendix **