Skip to: Content
Skip to: Site Navigation
Skip to: Search


US charter schools: Investment magnet for visa-needy foreigners?

Cash-starved charter schools meet cash-flush Chinese, Pakistani, and other foreigners looking for US investments that will get them a visa.

(Page 2 of 3)



Charter schools are publicly funded but privately run, sometimes by for-profit companies. They receive taxpayer dollars to educate each child who enrolls. Yet in most states, they get little or no public money to build classrooms, libraries and other facilities.

Skip to next paragraph

Well-established and successful chains of charter schools, such as KIPP, Green Dot or Achievement First, receive hefty support from philanthropic foundations and private donors. The chains can also tap into financing provided by an array of for-profit and non-profit investment funds created for that purpose.

But the charter school movement also includes hundreds of small, one-of-a-kind schools, often started by parents seeking a different educational environment for their children. Those mom-and-pop startups have always had a hard time securing funding to build their schools. Many have had to make do with makeshift classrooms in strip malls or church basements.

And lately, experts say, the credit crunch has worsened.

"It's a hard go," said Eric Hall, an attorney in Colorado Springs who advises charter school boards.

Last month, Fitch Ratings warned it was likely to downgrade bonds backed by charter schools because the sector is volatile and the schools are highly leveraged. Such risks mean charter-school debt is typically considered speculative, rather than investment grade, said Eric Kim, a director at Fitch Ratings.

Meanwhile, the IRS has signaled it plans closer scrutiny of charter schools' tax-exempt status if they rely on for-profit management companies to provide their classroom space and run their academic programs, Mr. Hall said. He sent his clients a long memo this summer warning that the stepped-up IRS oversight could put some at "significant risk."

If that weren't enough to make investors wary, several well-known charter schools have run into significant legal and fiscal hurdles in recent months.

Missouri regulators shut down six campuses run by Imagine Schools, one of the nation's largest for-profit charter chains, because of poor academic performance. A judge in California ruled that Aspire Public Schools, a large non-profit chain, hadn't secured the proper approval for six of its schools and would have to get permission from local boards of education to continue running them. Local officials yanked the charter of a high-achieving middle school in Georgia over concerns about mismanagement.

All told, about 15 percent of the 6,700 charter schools that have been launched in the United States in the past two decades have since closed, primarily because of financial troubles, according to the Center for Education Reform, which supports charter schools.

This fall alone, more than 150 established charter schools didn't open their doors to students.

Such volatility "will spook people, no doubt about it," said David Brain, chief executive officer of Entertainment Properties Trust, which has historically owned movie theaters but branched out to invest in charter schools, including the six that were shuttered in St. Louis.

Permissions

  • Weekly review of global news and ideas
  • Balanced, insightful and trustworthy
  • Subscribe in print or digital

Special Offer

 

Doing Good

 

What happens when ordinary people decide to pay it forward? Extraordinary change...

Endeavor Global, cofounded by Linda Rottenberg (here at the nonprofit’s headquarters in New York), helps entrepreneurs in emerging markets.

Linda Rottenberg helps people pursue dreams – and create thousands of jobs

She's chief executive of Endeavor Global, a nonprofit group that gives a leg up to budding entrepreneurs.

 
 
Become a fan! Follow us! Google+ YouTube See our feeds!