grandcanyoninstitute

Think tank warns that more than 100 charter schools in Arizona could close

Jan. 11, 2019
The Grand Canyon Institute asserts that more than 50 of the state's 544 charter schools will close in the near future.

Following the abrupt closure of at least three Arizona charter schools over the past year, a new report concludes that more than 100 of the charter schools in the state are in danger of closing because of excessive debt and other financial troubles.

The Arizona Republic says that the report by the Grand Canyon Institute, a self-described centrist think tank, asserts that It's a "near certainty" that more than 50 of the state's 544 charter schools will close in the near future.

As a whole, Arizona's 544 charter schools owe more to creditors than they're worth as businesses.

"Like any business, an over-leveraged charter is financially vulnerable and could fail if it then suffers an income loss," the report states.

"You will see a bunch of charters folding suddenly," says Curt Cardine, the study's main author and a former executive for EdKey Inc., a large Arizona charter chain.

Cardine didn't predict when the schools would close, and the names of those schools were not included in the report.

The report follows a year-long Arizona Republic investigation that examined how minimal state regulation and oversight has produced multi-millionaire charter operators — sometimes through transactions that add significantly to the schools' debt.

Kathy Senseman, chairwoman of the Arizona State Board for Charter Schools, which regulates the schools, says she believes the Grand Canyon Institute's estimates are "a little inflated."

Arizona Charter Schools Association, a non-profit that represents the industry, called the report “The Grand Canyon Institute’s latest unsubstantiated, anti-charter screed."

The report's authors examined financial records, including loan documents and school audits submitted to the state for all Arizona charter schools between fiscal 2014 to 2017. The Grand Canyon Institute found:

•Charter schools have $2.56 billion in debt; their property and assets are valued at $1.4 billion.
•The state's charter market holds 33 percent of all public school debt while educating just 16 percent of Arizona's 1.1 million public-school students.
•Arizona charter schools primarily borrow for buildings and classrooms using "junk bonds" with high-interest rates guaranteed by projected enrollment growth. If the growth does not occur, charters have to spend more on mortgage payments and less in the classroom.
•One-third of charter schools are losing enrollment. Although the charter sector has grown significantly during its quarter-century of existence, three-quarters of the growth from fiscal 2014 to 2017 was captured by 10 charter companies, with Basis Charter Schools Inc. being the biggest winner with 5,683 additional students.

The think tank recommended that charter companies not be allowed to incur new debt beyond the value of their property unless they can document years of student growth.

About the Author

Mike Kennedy | Senior Editor

Mike Kennedy, senior editor, has written for AS&U on a wide range of educational issues since 1999.

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