MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT
The Washington Post is not known for exposing the greed, gluttony and financial exploitation of the masters of the universe who run our economy. However, last week, it did focus on an important engine for the growth in the white elite's supercharged drive to privatize public education through charter schools: hedge funds.
Yes, BuzzFlash and Truthout have extensively detailed the flaws behind the concept of charter schools somehow magically changing the urban educational landscape - without resolving the decades-old economic abandonment of large expanses of cities, as well as the incarceration-industrial complex that feeds on minority imprisonment. We've detailed studies that show a lot of money is being made off of shortchanging students in charter schools and pocketing profit (or paying high administration salaries in nonprofit charter schools, as well as their politically connected subcontracting to for-profit consultants and vendors.) We've shown that many analyses find that charter schools perform well in their first year, but then actually trail behind public schools in the Washington DC ultimate measure of education: test results.
An abundance of evidence reveals charter schools are largely a sham that benefits the white ruling elite while destroying the public education that has been the foundation of this nation.
Add a June 4 Washington Post column entitled, "Why Hedge Funds Love Charter Schools," to the journalistic case of the people vs. charter schools. Overall, the commentary adds to the larger charge that charter schools are making a lot of people a lot of money. However, it emphasizes that the radioactive sector of the runaway financial sector, hedge funds, are in on profiting from the charter school racket. Washington Post journalist Valerie Strauss cites an analysis by Alan Singer, a teacher who works with the Department of Teaching, Literacy and Leadership at Hofstra University in Long Island, New York:
Obscure laws can have a very big impact on social policy, including obscure changes in the United States federal tax code. The 2001 Consolidated Appropriations Act, passed by Congress and signed into law by President Clinton, included provisions from the Community Renewal Tax Relief Act of 2000. The law provided tax incentives for seven years to businesses that locate and hire residents in economically depressed urban and rural areas. The tax credits were reauthorized for 2008-2009, 2010-2011, and 2012-2013.
As a result of this change to the tax code, banks and equity funds that invest in charter schools in underserved areas can take advantage of a very generous tax credit. They are permitted to combine this tax credit with other tax breaks while they also collect interest on any money they lend out. According to one analyst, the credit allows them to double the money they invested in seven years.
This is part of the answer to the question that Strauss poses at the beginning of her column: "One of the features of corporate school reform is the interest that Wall Street has shown in supporting charter schools. Why?"
Well, there are more financial beneficiaries to be listed in the answer to that question:
The real estate industry, which already receives huge tax breaks as it gentrifies communities, also stands to benefit by promoting charter schools and helping them buy up property, or rent, in inner city communities. One real estate company, Eminent Properties Trust, boasts on its website:
"Our investment portfolio of nearly $3 billion includes megaplex movie theatres and adjacent retail, public charter schools, and other destination recreational and specialty investments. This portfolio includes over 160 locations spread across 34 states with over 200 tenants."
The Charter management group Charter Schools USA recommends that rental costs should not exceed 20 percent of a school’s budget. However the Miami Heraldreported that in 2011, 19 charter schools in Miami-Dade and Broward exceeded this figure and one in Miami Gardens paid 43 percent. The Herald called south Florida charter schools a “$400-million-a-year powerhouse backed by real-estate developers and promoted by politicians, but with little oversight.” Its report found charters paying exorbitant fees to management companies and that many of the highest rents were paid to landlords with ties to the management companies running the schools.
It does not take long to see a trend here: charter schools are a Trojan horse that allows the private market to turn a public education system into a large financial stream of profit - and at an increased cost to the taxpayer in many cases.
That brings us to the topic of Strauss's article – hedge funds:
Tax benefits and real estate investment may also explain why Wall Street is so hot on raising money for charter schools. On Monday night, April 28, 2014, hundreds of Wall Streeters gathered at Cipriani in Midtown Manhattan to raise funds for Success Academy Charter Schools. Former Florida governor and possible 2016 GOP presidential candidate Jeb Bush gave the keynote address. The dinner was chaired by hedge fund manager Daniel Loeb. Loeb is the founder of Third Point LLC and chairman of the board for Success Academy. The gala raised at least $7.75 million for Success Academy. Also attending were Kyle Bass of Hayman Capital Management, Joel Greenblatt of Gotham Asset Management, Boaz Weinstein of Saba Capital, John Paulson of Paulson & Co. and Erik Prince, the founder of Blackwater USA.
According to The New York Times, the 10 highest-paid hedge fund operators with close ties to charter schools also includes David Tepper (No. 1 at $3.5 billion in 2013), founder of founder of Appaloosa Management and New Jersey based “Better Education for Kids”; Steven A. Cohen (No. 2 at $2.4 billion) of SAC Capital Advisors, which was forced to pay a $1.2 billion dollar penalty for insider trading, who has given over $10 million to the Achievement First charter school network; and Paul Tudor Jones II (tied for tenth at $600 million), founder of the Tudor Investment Corporation who has supported charter schools through his Robin Hood Foundation.
The financial masters of the universe and the likes of Bill and Melinda Gates (through the Gates Foundation's support of charter schools) may have a benign PR explanation for why so many financial titans and hedge funds are betting on charter schools as an investment, but such twaddle is handily disproved by the Strauss column (which, notably, was not run in the business section of The Washington Post).
The reality is stark and ominous: the public commons (in this case the public education system) is being essentially sold off so that a few investors (who are cozy with the campaign funds of politicians) can open a new lucrative stream of profit.
Once again, the children in need of restored neighborhoods with economic opportunity and neighborhood schools - run by the public for the public good - are nothing more than pawns in the great game of the wealthy and well-connected becoming wealthier.
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