Camino Montessori — which closed earlier this month — is hardly unique in the challenges it faced as a charter school in Arizona.
Of the 427 charter schools to have closed since charters were first granted by the state in 1994, 66 shut on short notice during the school year, according to data from Curtis Cardine, a fellow with the Grand Canyon Institute and a retired educator with 45 years of experience in public and charter schools.
“I worked for two charter groups out here and left them both in disgust because of what’s allowed financially,” Cardine said. “They’re paying so much debt they can’t meet their obligations. That’s what’s happening to your company that’s down there.”
Proceeds from the sale of the school’s assets, including a 3.06-acre property purchased on March 3, 2017, for $445,400, will first go to pay back the school’s debts. The primary debt holder is the Community Investment Corporation (CIC), which provided the loan for the property’s purchase.
Initial attempts to finance the purchase through a bond ended unsuccessfully, which led the school to taking out the loan and incurring additional costs related to escrow payments during the several month delay, according to Judy Webster, CEO and board president of the school.
“My whole motive and vision was to bring Montessori education to people who couldn’t ordinarily afford it,” Webster said. “I just wanted to make it work, and it didn’t.”
Located near the intersection of Smith-Enke and Porter roads, the property is currently listed for sale at $700,000 by NAI Horizon. No potential purchasers had contacted the company as of Oct. 25, according to Logan Crum, an associate with NAI Horizon.
Webster said that she and her husband, Kevin, are also debt holders, having extended roughly $120,000 to the school. She said the school had defaulted on the repayment. This was corroborated by the school’s tax filings. She does not anticipate ever recouping this debt, as she believes there will not be enough money left over once CIC and other debts are paid off.
If there are any remaining assets after creditors are paid, they would need to be transferred to another nonprofit, according to Anne Byrne, professional-in-residence with ASU Lodestar Center for Philanthropy and Nonprofit Innovation.
By reviewing Cardine’s data and speaking with Webster, a more complete picture of the events leading to the school’s sudden closure is possible. As stated in previous articles, the school had been losing money for several years. The school was losing $308 dollars per student for the 2016-17 fiscal year.
Cardine said some of the larger networks of charter school providers were losing equal or larger amounts per student, such as BASIS losing as much as $330 per student. Due to their greater financial resources, growing enrollment and multiple campuses, they were more able to weather these costs and shift money around.
Cardine noted other problems indicated by Camino Montessori’s tax filings, such as taking out short-term loans and using credit cards to deal with cash-flow problems. Between 2013 and 2017, the school did not meet the Arizona State Board of Charter Schools (ASBCS) financial performance expectations for three of the four years.
Webster also confirmed, as reported in a previous article, that the school had reached an out-of-court settlement with the family of a student, though she disputed that this was an admission of guilt regarding accusations she delayed the evaluation and provision of services for the disabled student.
“I think small charter schools like us face similar challenges in a system as regulated as this,” Webster said.
Cardine said for small charters, the costs for implementing individualized education plans for even a few students could make the difference between profitability. District schools spend 12 percent on special education overall, while charters spend just 5 percent, despite receiving the same amount for special education students. Charter schools are not allowed to discriminate based on whether students have special education needs or not, though he noted that many do attempt to avoid having too many of the students enrolled through informal means.
Cardine said as many as 20 other charter schools around the state could be in danger of closing on short notice, though none of these are located within Maricopa. He further noted the charter industry throughout the state as a whole had more debt than money coming in currently, which he said would be explained in more detail in an upcoming report from GCI.
Due to a change in the law passed last legislative session, the ASBCS is now able to close charter schools it oversees for financial reasons. Cardine believes they should have shut down the school earlier based on its financial difficulties. He reported when he initially approached the ASBCS about the problems with charter schools throughout the state, they responded that the charters’ practices were legal.
“This is going to burn you guys, you better get ahead of it,” Cardine said he told the ASBCS. “I’m not trying to sandbag you; I’m just trying to say, ‘danger, Will Robinson, if you don’t take care of it, you’re going to have these closures,’ and they were shocked. They didn’t even have a handle on how many had been closed.”
Cardine did note that newer leadership in ASBCS is taking the problem more seriously. The ASBCS did not respond before the publication of this article.
Both candidates for state superintendent of public instruction stressed the need to improve oversight of Arizona’s charter schools.
“First, we need to do everything possible to ensure that our schools, charter and traditional, do not close,” said Kathy Hoffman, the Democratic candidate. “We need to eliminate the corruption found in Arizona’s charter school policies. It’s unconscionable that there are elected officials and private interests that are making millions of dollars off of public dollars via charter schools.”
Hoffman also argued for the need to ensure students’ academic data follows them to their new school. She said policies need be enacted to require more notice before a school shuts its doors.
Frank Riggs, her Republican opponent, echoed many of her sentiments, but also argued that the majority of Arizona’s charter schools were doing good work, especially in serving predominately minority and low-income students.
Riggs argued the ASBCS, in concert with the superintendent and the Arizona Department of Education, should have receivership over charter schools for worst-case scenarios such as the closure of Camino Montessori. He also argued for reforming standards for charter school boards to ensure all members have the necessary training and that there aren’t potential conflicts of interest that could impact their oversight function.
“The State Board for charter schools on which the superintendent of public instruction sits needs to be more proactive in interceding with poor performing charter schools or charter schools that are putting up red flags,” Riggs said.