SB11-069, Charter Educational Management Organizations

SB11-069 has been introduced by Sen. Hudak (D-Arvada, Westminster). The title is "Educational Management Organizations," which in the bill, has a very broad definition to include nonprofits that replicate existing successful schools.

The bill establishes a fee-based certification process through CDE that is similar to the online certification process enacted in 2007, SB 215. The process requires CDE to evaluate an application and then provide continuing monitoring and oversight. The bill also limits the terms of contracts with EMOs to two years subject to annual review. It requires a charter school using an EMO to review the EMO's performance at least annually.

SB 69 also requires the HB 1412, charter school standards and charter school authorizer standards advisory committee, to make recommendations on EMOs. On Jan. 5th the committee held a hearing on management company issues.

In Colorado, the term Education Service Provider (ESP) is generally used for all sorts of management companies. EMOs are generally for-profit management companies and Charter Management Organizations (CMOs) are nonprofit. CMOs may include one-off replications. Hudak's bill defines EMOs to mean all types of management companies and doesn't clearly differentiate for vendors contracting with districts for specific services such as operating an online school.

The sample contract language has an attachment dealing with ESP provisions that should be considered by charter school governing boards and charter school authorizers. Further, the contract has an attachment for board members to disclose a number of things including a conflict of interest with the management company. These types of examples provide increased awareness about the issues of greatest concern for quality relationships.

Update: SB 69 will be heard in Senate Education on Thursday, Feb. 10th.

Management Company Issues Discussed at Today's HB 1412 State Advisory Committee Meeting

Today the HB 1412 State Advisory Committee for quality standards for charter schools and charter school authorizers met at the Colorado Association of School Boards meeting room. The morning began with representatives from the charter school management company community providing public testimony and participating in a general discussion about key issues.

EMOs, or education management organizations, are generally for-profit. CMOs, or Charter Management Companies, are generally nonprofit and include schools that replicate, oftentimes under a single governing board. The discussion included both types of management companies.

Since Colorado has more grassroots startup charter schools and fewer management company operated schools than other states, there has been some negative perceptions created over the years. Many of those issues were raised today with very little consensus, if any, on what could be done to mitigate the misperceptions in the future.

Some of the issues were:

* How to prevent a charter school from getting into a contract with a management company that has a "poison pill" that makes it nearly impossible to "fire" the management company and still maintain a charter school.

* Which entity should hold the assets?

* Both the charter school governing board and the management company should have separate legal counsel and negotiate an "arms length" agreement.

* There needs to be more training information available for new charter school boards and charter school authorizers so that people are aware of what needs to be discussed because oftentimes people don't even know what questions to ask.

* Relationships are important and not just for the charter school and the management company, but also the authorizer and the management company.

* A certain level of academic achievement is required by the charter school contract and it implies that the management company is responsible for producing a certain level of academic results or else it's the company's responsibility to make necessary changes.

* Transparency is vital, especially as it relates to financial arrangements.

The next committee meeting will be on Feb. 2nd and there will be a public hearing on online education issues. Today's committee also established a timeline for its work, which primarily is a report to the legislature with recommended legislation or state board of education rule changes. The committee report will also outline a proposed implementation plan for the recommendations.

The Growth of Management Company-Operated Charter Schools

In 2004, there were only 10% of charter schools operating with a contract for services provided by a management company. In 2009 that had grown to 25%. (National Charter School Resource Project)

There are two types of management companies: for profit and not-for-profit. Even the not-for-profit companies still need to be able to pay for central administrative costs, buildings and future growth from proceeds derived from the management agreement.

Colorado's charter school movement grew largely through grassroots efforts. Conversely, across the country many states have a charter school community that's operated predominantly by management companies. Only a handful of companies operate in Colorado, including Imagine, Inc., White Hat Management, Edison Schools, Mosaica Education, Inc., and National Heritage Academies.

Management companies operate public charter schools via a written performance agreement with the charter school governing board. In the past, some management companies have recruited and selected board members they believe will agree to everything proposed by the management company. Imagine's founder, Dennis Bakke, received media attention when an email he wrote about this very subject was revealed.

Colorado sample contract language has an attachment with provisions for management companies (or Education Service Providers) and charter school boards to consider before reaching a final agreement. Districts can use this list of provisions as a way to ensure transparency and fairness. For example, one of the provisions is that both the management company and charter school board have separate legal counsel representing them in negotiating the agreement.

There will continue to be an increase in the number of charter schools operated by charter schools, both nationwide and in Colorado. For companies that have found the "magic formula" and have both academic and financial success in the venture, it only makes sense. It's wise for potential charter school authorizers to do their homework before authorizing a new school that will be operated by a management company, however.