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Pennsylvania Schools’ Financing Fight Pits District Against Charter on Steroids

Susan Notes:

I try to provide a larger context for what's happening in Chester Upland--from the rock where William Penn landed, to billboard deals, to an entrepreneur's mega-mansions. Here you will find the news about what happened in the Chester Upland school district in January 2012. I wish everyone would read about the greed, the mismanagement, the hyper-management, the individual human struggle and tragedy. Read it and ask yourself, "What would I do if I were a public school teacher in Chester Upland?" Whatt would I do if I were a parent? A student?

Vahan Gureghian is at the center of all this. He describes himself as "an entrepreneur's entrepreneur. Here's how he characterizes his Chester operation:

Mr. Gureghian's expertise relieved the educators of the onus of managing the financial demands of the school and the results of this were twofold; excesses and inefficiencies were eliminated because the schools were run in accordance with a streamlined, business-oriented model; and teachers and administrators could direct their energies toward the students in their charge, a far better use of their experience and training. . . . Chester Community Charter School stands today as one of America's premier examples of charter school success. It is also a case study for CSMI's highly effective financial management techniques.

Gureghian is politically well-connected. He served on the transition team for Republican Gov. Tom Corbett of Pennsylvania after his election in 2010. The Post-Gazette reported on Gureghian's political donations.

The transition team member who provided the most to Mr. Corbett -- $334,286 over the past three years -- was Vahan Gureghian, a Gladwyne lawyer who operates the state's largest charter school and owns a billboard company.

Jumping to billboards at this point may seem odd, but stay tuned. When Matt Outdoor [Gureghian's company] wasn't allowed a variance to put up a billboard in an area zoned against billboards, it sued, claiming its right of free speech had been violated.
[I live in a state that has forbidden billboards--anywhere--since 1968.]

Pandora's box: for more about the politics behind Pennsylvania billboards, read this. And this. And this.

Question: Why has the New York Times published more stories on the billboard scandal than on the charter scandal? And note: Gureghian's doesn't come up in the billboard stories.

Gureghian's billboard operation should be of interest to people with an eye on charter schools. His billboard company's operating procedure isn't to erect the billboards. Philadelphia Inquirer reporters explained in 2003:

The middleman in a series of deals that netted millions of dollars in profits, Matt Outdoor did not construct a single billboard. Instead, it routinely sold its billboard sites after receiving the necessary state and local approvals - approvals that often depended on favorable government actions.

It is not a leap to conclude that the Matt Outdoor business operating procedure informs the charter school management ethos.

Read this 2001 article-- A district goes by the billboards Chester Upland stands to gain from allowing the signs on unused land-- and draw your own moral:

September 20, 2001, Philadelphia Inquirer,By Dan Hardy

Advertising pays. Just ask the Chester Upland School District, which stands to gain more than half a million dollars by allowing the placement of three billboards on 10.7 acres of undeveloped land it owns along the Chester Creek.

Last year, Philadelphia lawyer Vahan H. Gureghian, one of the owners of the billboard company Matt Outdoor, saw that a stretch of highway along Interstate 95 as it passed through Chester and Upland Borough had no billboards. He wondered who owned it, he said in a recent interview.

He found out that the low-lying land, between the Chester Creek and I-95 and across from Chester High School and the Columbus Elementary School, belonged to the school district.

School officials say they do not know how Chester Upland acquired the parcel, which until now they had regarded as completely useless. It is partly in Chester and partly in Upland and cannot be built on because it is in a flood-prone area and is cut off from adjoining land by the highway. . . .

Gureghian approached the school district, and in December 2000, they reached an agreement. Matt Outdoor would be allowed to put three 20-by-60-foot billboards facing I-95 and would pay the school district $523,479 for a 20-year lease. It would pay the expenses for getting zoning and state approval for the billboards, and after the lease expired, Matt would pay $17,500 a year per sign structure, adjusted by any increase in the cost-of-living index. . . .

"This was an undevelopable, oddball piece of ground in the middle of nowhere," Gureghian said. "Now, the school district is benefiting and I'm benefiting from its use. We're both winners in this". . . .

One more note on how ethically challenging all this can get, read the story of the Friends of the Library in Secaucus getting Matt Outdoor to broker a deal for them to raise needed funds for the library through renting billboard access.

Where's the Money?

By law, Pennsylvania taxpayers cannot get an accounting of how Gureghian spends the dollars her receives for managing Chester Community Charter School.

Think about some public school children living in poverty in the Chester Upland school district:

Stetser Elementary: Students eligible for free and reduced lunch = 94%

Main Street School: Students eligible for free and reduced lunch = 92%

Columbus Elementary: Students eligible for free and reduced lunch = 82%

Consider the 30,600 square feet of Gureghian's French-style mega-mansion nearby. It features 10 bedrooms, 11 bathrooms, four wood-burning fireplaces, a two-lane bowling alley, a wine room, a media room, several bars, a "great hall" that can hold 200 guests, and a moat. . . . "The guy has lived out the American dream. I think it's fantastic," said Shanin Specter, a neighbor and son of Republican U.S. Sen. Arlen Specter.

Now, in Palm Beach, Gureghian has purchased 1071 N. Ocean Blvd. and the lot next door for a combined $28.9 million-- with the plan of building a 20,000-square-foot mansion, complete with a two-lane bowling alley in the basement. Here is a picture.

Maybe the money for all this came from billboard management.

Maybe not.

Taxpayers aren't allowed to see an accounting of how their tax dollars collected for public schools were spent.

The Notebook [Independent Voice of Parents, Educators, Students and Friends of Philadelphia Public Schools] reported on investigations called for about the charters' test scores, also offering this quote: "If you were to ask around Harrisburg as to who is setting education policy in the state of Pennsylvania, the short answer would [include] Mr. Gureghian," said Feinberg.

State education spokesperson Eller did not respond to several requests to discuss Gureghian's current influence on Gov. Corbett's education policy."

The Notebook also reported that "In all, 10 Pennsylvania charters were found to have 2009 test scores warranting further inquiry, according to a recently revealed state report meant to identify "potential test results that may have been earned unfairly." Charters are instructed to investigate themselves.

And the money? According to Philadelphia Magazine, Gureghian's charter school in Chester is public in that it receives taxpayer money. But Gureghian's private, for-profit company--Gureghian's Charter School Management Inc.--manages the school's finances. It owns the buildings, leases them to the school, pays the teachers. In 2005, The Philadelphia Inquirer reported on Gureghian's management and rent fees.

In 2008, eight days after the Philadelphia Inquirer ran a two-part series and an editorial that focused on Gureghian's role in founding and operating Pennsylvania's largest charter school, Chester Community Charter, and raised questions about the propriety of the school's financing, Gureghian and his charter management outfit filed a defamation lawsuit against The Inquirer. Read all about it at Philebrity. On February 21, 2009, Philadelphia Newspapers LLC filed for Chapter 11 bankruptcy. They now publish a for-fee digital version. Many of the links to old articles don't work, including Part 2 of The Inquirer's expose.

A Little Bit of History

A poignant detail about Chester, PA. There's a rock there with a plaque indicating that this is where William Penn landed, October 28 or 29, 1682. According to Wikipedia, Penn landed near the log house of Robert Wade, which was also used as the first Quaker meetinghouse in the area. I read this and got tears in my eyes. Contrast the Quaker meeting with Gureghian's entrepreneurship. Researchers need to put their reports of student test scores and charter management into context. . .real, tangible context. Look at those children living in poverty. Look at that rock where William Penn landed. Look at Gureghian's mega-mansion. Attend a Quaker meeting. . . .

Ask yourself how we have allowed this to happen.

Interesting that Sabrina Tavernise has reported for the New York Times from Iraq, Lebanon, and Russia. Now she's reporting on another war zone.

By Sabrina Tavernise

CHESTER, Pa. -- The Chester Upland School District is more than $20 million in debt, its bank account is almost empty and it cannot afford to pay teachers past the end of this month.

To make matters worse, the local charter school, with which the district must divide its financing, is suing the district over unpaid bills.

The district's fiscal woes are the product of a toxic brew of budget cuts, mismanagement and the area's poverty. Its problems are compounded by the Chester Community Charter School, a nonprofit institution that is managed by a for-profit company and that now educates nearly half of the district's students.

The district sees the charter as a vampire, sucking up more than its fair share of scarce resources. The state, it says, is giving the charter priority over the district.

"It's not competition, it's just draining resources from the district," said Catherine Smith, a principal at Columbus Elementary, a district school. "It's a charter school on steroids."

The charter says that it is also part of the public school system and that the district, its primary source of financing, has not paid it anything since last spring. The state has taken over payments, but even those are late, it says.

Chester may be a harbinger of fiscal decline. At least six other Pennsylvania school districts are bordering on insolvency, according to State Representative Joseph F. Markosek, the Democratic chairman of the House Appropriations Committee.

Chester's troubles also show just how deeply budget cuts bite in poor districts. With a median household income of $26,000, just half of the state median, Chester has one of the state's most meager tax bases. State financing makes up about 70 percent of its budget. For comparison, nearby Radnor Township, with a median household income of $85,000, draws just 10 percent of its school budget from state money, according to a town spokesman. The largest share is real estate taxes, at 83 percent.

"Poor schools in this state are underfunded," said Thomas Persing, acting deputy superintendent for the Chester Upland district. "Poor kids aren't going to get the same shot as wealthy kids. That's the society we are in now."

But the district has been troubled for years. The state took over its finances in 1994 but has since handed control back to the community. Five state administrations, including the current one of Gov. Tom Corbett, a Republican, have been unable to fix the district. Budget cuts may be painful, the state argues, but they are not the root of the district's problems.

In December, Mr. Corbett refused to advance the district emergency money, saying it had mismanaged its budget. The district says that the state was in charge as receiver for years and that it left the district with a large debt when it handed back control in 2010.

Whatever the case, the math was stark: the district could not afford to pay salaries.

The district's teachers tried to ease the pressure by voting to work without pay as long as they were able, a gesture that drew considerable attention. One of the district's teachers, Sara Ferguson, was invited by Michelle Obama to attend the State of the Union address last month, and she appeared on "The Ellen DeGeneres Show" on Thursday.

Ultimately, a federal judge intervened in a separate lawsuit by the district, ordering the state to pay $3.2 million, enough to cover the salaries. In the end, pay was only two days late. Still, the district has money to cover only the next two pay periods. Money to pay vendors, like insurance companies and power suppliers, runs out in the middle of the month.

"There have been money problems, but we've never been threatened like now," said Ms. Ferguson, whose school, Columbus Elementary, was decorated with a poster by students congratulating her on being invited to the State of the Union address.

On a recent Monday, students ran and shouted on the Columbus playground. In the latest round of budget cuts, the school lost its art teacher, its music teacher, its technology teacher, its staff person for the library and even the money for its fledgling band. "The children have gym, gym and gym," Ms. Ferguson said.

When Ms. Ferguson began teaching here in 1991, she was one of 11 fifth-grade teachers, she said. Now there are only two.

The charter school initially had less than 100 students in 1998, but it has grown to more than 2,600 on two campuses. At its West Campus, a gate with lions on the front and the school's initials, CCCS, on the painted black iron bars give the impression of a private school. Its wooden lockers are open shelves, and its offices have security cameras that watch every classroom. Each student in third to eighth grades was given an XO laptop, a computer designed to be used by students in developing countries.

"It's just an entirely different culture that we've created -- very structured, very respectful," said Vahan Gureghian, a lawyer and entrepreneur who founded the charter. When the school first opened, "we had zero parent involvement," he said.

He continued: "Now on any given back-to-school night, it's packed. Parents are looking at us and saying, 'I didn't get an education, but there's hope for my kid.'"

The district argues that the charter is receiving millions of dollars in extra special education funds. And money to the charter also goes toward fees to the private management company of $5,000 per student. The charter says the district has not paid its bills since last April, leaving it no other choice than to go to court. The state was also named in the lawsuit because it has also fallen behind by millions of dollars in payments, the charter said.

While budget cuts forced the district to slash its staff by about 30 percent and cut art, music and language classes, the charter has made no such reductions, Judge James Gardner Colins of Commonwealth Court wrote in a decision on Tuesday that ruled against immediately satisfying the charter's claims.

Judge Colins wrote that there was no evidence that the charter had been obliged to make any cuts or had tried to renegotiate its contract with the for-profit management company "to reduce its unusually large management fee."

There is no legal mechanism for a school district to declare bankruptcy in Pennsylvania. It is not clear whether the state would dissolve the district, which has contracts with unions that represent teachers and other support staff. There is a designation of distressed school district, but the state has said Chester Upland has not met the requirements, which include the staff's working for 90 days without pay.

Mr. Corbett pledged last month that students "will be able to finish the school year at Chester Upland."

But how that will be paid for and what happens after the school year ends are both open questions. "This is right on our doorstep now," Ms. Ferguson said. "There's a question about whether we will even exist."

— Sabrina Tavernise with Ohanian background notes
New York Times


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