Charter Schools Find Gold in Federal Government Aid to Small Businesses While Black-Owned Firms Get the Shaft

Yves here. While the plural of anecdote is not data, I was struck by the fact that a successful mid-range black-owned restaurant here, Grille29, shuttered very quickly after the Covid restrictions were implemented here. By happenstance, I picked up one of the very last orders the evening the state ordered restaurants to stop providing live service, and the manager was stunned by the lack of warning. I think they tried a week of carryout.

I couldn’t fathom why they didn’t try to hang on, the way pretty much all the other restaurants we frequented have, including ones that were completely closed for a few months and only recently started offering curbside service. But not getting emergency funding could explain what happened.

And since it was banks that were processing PPP loans, any de-prioritization of applications from black-owned businesses would most likely be their doing.

By Jeff Bryant, a writing fellow and chief correspondent for Our Schools, a project of the Independent Media Institute. He is a communications consultant, freelance writer, advocacy journalist, and director of the Education Opportunity Network, a strategy and messaging center for progressive education policy. His award-winning commentary and reporting routinely appear in prominent online news outlets, and he speaks frequently at national events about public education policy. Follow him on Twitter @jeffbcdm. Produced by Our Schools, a project of the Independent Media Institute

The charter school industry has done much during the COVID-19 pandemic to add to systemic inequities that afflict black communities by hijacking small business relief aid originally intended for minority-owned businesses and redirecting these funds to schools that further isolate black families.

When emergency aid for small businesses hit by the economic fallout of the coronavirus pandemic rolled out in North and South Carolina, black-owned businesses were mostly bypassed. Only 3 percent of loans worth $150,000 or more went to black-owned businesses, according to Charlotte-based WCNC, which analyzed loans awarded to small businesses that included race on their applications. Of the 2,026 small business owners and nonprofits who got the loans, only 64 of them were black, and 1,791 were white.

In Tennessee, the story was much the same. When a Nashville Fox News affiliate compared the amounts of small business emergency aid given out to businesses in black communities in the city to those in whiter, wealthier parts of town, it found “a huge [negative] discrepancy when it comes to historically black neighborhoods.”

This pattern held true on the other side of the country where San Diego public media station KPBS reported, “Storefronts in underserved communities south of I-8 couldn’t get any money.”

In heartland Kansas City, KCTV reported, out of 4,677 emergency loans given to small businesses in the region, less than 5 percent went to minority-owned small businesses, and only 24—less than 0.5 percent—went to black-owned firms.

In Milwaukee, Wisconsin, NBC affiliate WTMJ-TV reported, “Only 17 business owners identified as African American, representing 0.62 percent” of small businesses, were loan recipients.

According to a nationwide survey conducted by Color of Change and UnidosUS, only 12 percent of black and Latinx business owners who applied for federal small business loans received the full amount of their requested relief.

As a summary of that survey states, “Almost two-thirds… [of black and Latinx small business owners surveyed] report they have either received no assistance (41 percent) or are still waiting to hear whether they will receive any federal help (21 percent).”

While local news stories spun an emerging narrative of small black-owned businesses as losers in the federal aid program, other reports, often from the same cities and regions, clarified who a surprising winner was.

“At least 22 San Diego County charter schools or charter school organizations have collected at least $23 million” in federal aid to small businesses hit by the pandemic, the San Diego Union-Tribune reported.

According to Tennessee Lookout, at least eight Nashville charter school organizations received between $9.05 million and $22 million in small business aid. (The loan amounts have been reported in dollar ranges, not exact values.)

In Wisconsin, Urban Milwaukee reported, “A large number of voucher and charter schools that describe themselves as public schools, and receive public money, have also received millions of dollars” from the federal government’s small-business loan program.

In North Carolina, NC Policy Watch found that at least 50 charter schools in the state received between $21.1 million and $53.6 million.

NC Policy Watch’s findings were drawn from a report by the Network for Public Education that found, nationwide, “charter schools and their nonprofit or for-profit management companies secured between $926 million and $2.2 billion in funding” from the small business loan program.

Another analysis of the small business loan program by Good Jobs First found that “approximately 1,200 charter schools… received an estimated $1.3 billion” from the program. (In its analysis, Good Jobs First used a midpoint to estimate each loan amount rather than the range.)

There is “a concern here,” said Good Jobs First research analyst Mellissa Chang in a phone call, because of the question of whether charter schools are public schools or private businesses. “They walk a fine line between the two,” she said.

“There is justifiable unease,” wrote Network for Public Education’s Carol Burris and Marla Kilfoyle in the Washington Post, “about [charter schools] taking from a fund intended to keep the paychecks of parents coming.” It’s even more disconcerting when those paychecks were from black families the charter industry purports to serve.

‘An Uneven Playing Field’

It’s far from clear whether charter schools actually needed the funding.

When Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, it provided over $30 billion in an Education Stabilization Fund for governors, state and local education agencies, and institutions of higher education. Within CARES, $13.5 billion was directed to K-12 schools. All public and charter schools were eligible to apply for these funds.

Another pot of money in CARES was for the Small Business Administration (SBA) to provide loans to small businesses and nonprofits, including Economic Injury Disaster Loans (EIDL), which provided loans to businesses and nonprofits experiencing revenue losses due to the pandemic, and the Paycheck Protection Program (PPP) to cover payroll costs and overhead, including mortgages, rent, and utilities.

EIDL emergency aid included an opportunity to receive a $10,000 loan that did not have to be repaid. PPP loans were 100 percent forgivable, essentially making them grants.

Public schools were not eligible to apply for EIDL or PPP loans.

According to a May 2020 report by the SBA inspector general, the original intent of PPP was “to prioritize borrowers in underserved markets,” “including rural, minority and women-owned businesses” and nonprofits.

That guidance was not adhered to, and lobbyists for the charter school industry successfully influenced lawmakers to ensure their schools would have access to loans for small businesses.

“While SBA authorities are focused on small businesses,” wrote Nina Rees, president and CEO of the National Alliance for Public Charter Schools, “we worked with federal lawmakers to ensure that the loan funding for this crisis is offered to charter schools.” The National Alliance for Public Charter Schools received a PPP loan of $350,000–$1 million, CNN reported.

According to Education Week, charter lobbying groups including Rees’s “urged charter schools… to consider applying for the $349 billion Paycheck Protection Program.”

In an interview with NC Policy Watch, Burris charged the charter industry with “double-dipping.” She also wrotein the Washington Post that charter schools, which never saw an interruption in their per-pupil funding, could take from both federal CARES Act funding and the Paycheck Protection Program.

“It’s an unfair playing field,” said Good Jobs First communications director Arlene Martinez.

Her organization’s analysis points out that the CARES Act allocation of $13.2 billion to all 98,158 public schools in the country averages out to $134,500 per school. In comparison, if 1,200 charter schools received an estimated $1.3 billion, as Good Jobs First found, that’s an average loan of $1,083,333 per school—eight times more per school than what public schools received.

“This gap will likely widen,” Good Jobs First concludes, as more research unearths how much charters drew from CARES Act funding and Economic Injury Disaster Loans.

Isolating Black Communities

The harm charter schools may have inflicted by sopping up relief funds that could have gone to Black-owned small businesses is in addition to the industry’s already troubling track record of isolating Black communities.

“Nationwide, low-income black children’s isolation has increased,” warned the economist and author Richard Rothstein in 2014. Rothstein pointed to evidence that “The share of black students attending schools that are more than 90 percent minority” was growing rapidly. He wrote, “It is inconceivable that significant gains can be made in the achievement of black children who are so severely isolated.”

Numerous studies over the years have shown charter schools have contributed to this growing racial isolation of black students.

A 2017 analysis of the racial composition of charter school enrollments as of 2014–2015 conducted by the Associated Press found, “Charter schools put growing numbers in racial isolation.” According to the analysis, the presence of charters added to segregation, and “those levels of segregation correspond with low achievement levels at schools of all kinds.”

Similarly, a 2012 study by the Civil Rights Project of the University of California, Los Angeles, found, “Charter schools are more racially isolated than traditional public schools in virtually every state and large metropolitan area in the nation.”

There is ample evidence that small business relief funds went to charter schools that contribute to the growing isolation of black students.

Contributing to Racial Segregation

In the Charlotte-Mecklenburg school district in North Carolina, the racial composition of students is 36 percent black, 26.6 percent Hispanic, and 26.8 percent white, but many of the charter schools located in and around the district that received Paycheck Protection Program funds have student enrollments that differ greatly from the diversity of the district.

Pioneer Springs Community School in Charlotte received $350,000–$1 million, and the school is nearly three-quarters white. Charlotte Lab School received $350,000–$1 million, and nearly half of its students are white.

Small business relief funds also went to many of the charter schools in suburban and exurban communities that ring the district, adding to the flight of white students that already affects the district.

Socrates Academy in the suburb of Matthews received $350,000–$1 million. The school is over 62 percent white. Lake Norman Charter School in Huntersville received $1 million–$2 million. The school is over 65 percent white. Pine Lake Preparatory in Mooresville received $350,000–$1 million. The school is over 83 percent white.

Conversely, many Charlotte-area charter schools that received PPP aid contribute to racial isolation by concentrating black students in their schools.

Sugar Creek Charter School, which received $2 million–$5 million in small business aid, says on its website it “believes in embracing diversity,” but of the school’s 1,724 students, 1,451 are black and only eight are white.

Invest Collegiate, also in Charlotte, received $350,000–$1 million in small business relief. Of the 367 studentsenrolled in the school, more than 300 are black and 11 are white.

In Durham, North Carolina, where the student population of the district in 2017–18 was 45 percent black, 31 percent Hispanic, and 19 percent white, there is a similar pattern of small business aid going to charter schools that isolate black students.

Central Park School for Children received a PPP loan of $1 million–$2 million. The school is 47 percent white.

At Reaching All Minds Academy, which got $350,000–$1 million, there are no white students at all out of 344 total students enrolled, and Maureen Joy Charter School, which received a loan in the same range, has only one white student out of 640 total students enrolled.

North Carolina is not the only state where small business aid during the pandemic went to charter schools that contribute to racially isolating black students.

In the Twin Cities area of Minnesota, Minneapolis public schools have a highly diverse mix of students who are 38.1 percent black, 34.7 percent white, 17.7 percent Hispanic, 5.9 percent Asian, and 3.5 percent Native American. Across the river in Saint Paul, 21 percent of students are white, 26 percent are black, 31 percent are Asian, and 14 percent are Hispanic.

Yet many of the charter schools that received checks from the Paycheck Protection Program do not reflect this diversity.

Minnesota Transitions Charter School, which operates eight schools in Minneapolis and Saint Paul, received a loan of $2 million–$5 million. The enrollment of its combined schools is 60.8 percent white, 19 percent black, 9 percent Hispanic, and 1.8 percent Asian.

Minneapolis charter Prairie Seeds Academy received a loan of $1 million–$2 million. The combined enrollmentof its elementary, middle, and secondary schools is 73.2 percent Asian, 13.4 percent black, 10.4 percent Hispanic, and 1 percent white.

Best Academy in Minneapolis got $1 million–$2 million. Of the 731 students who attend the school, 711 are black and only one is white.

In Saint Paul, Nova Classical Academy, which operates an elementary and a secondary school at the same address, received $1 million–$2 million in Paycheck Protection Program funds. The enrollment of its combined schools is 67.2 percent white, 9.9 percent Asian, 6.7 percent black, and 8 percent Hispanic. Another Saint Paul charter, the German Immersion School, was awarded $350,000–$1 million and is 86.3 percent white.

Taking the Higher Road

In defense of charter schools taking the small business emergency funds, Greg Richmond, founder of the National Association of Charter School Authorizers, wrote in the pro-charter media outlet the 74, “The reality is that the law clearly states that all 501(c)3 organizations are eligible to apply for paycheck protection, and charter schools are 501(c)3 organizations.”

Richmond now works for a nonprofit called Bluum Inc., which received a nearly $9 million grant from the federal Charter Schools Program to start more charters in Idaho.

Another “reality” is that some charter schools, rather than taking the money, took the higher road of foregoing economic privilege when the needs of chronically underserved people should come first.

To their credit, some charter schools in Rhode Island, according to the Boston Globe, recognized the “ethical dilemma” of taking relief funds meant for small businesses and nonprofits, especially when their income stream had not been interrupted at all, and chose not to apply for the aid.

But it’s apparent many charter schools and their industry lobbyists and supporters had no ethical struggle at all.

When Nina Rees of the National Alliance for Public Charter Schools informed charter school operators of her organization’s success at making sure charters would be eligible for federal small business aid, she stated, “Challenging times bring out the best in Americans.” Well, maybe not always.

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9 comments

  1. DSB

    Public schools receive funding from taxes. Why should they be eligible for a loan from the Small Business Administration? They are not qualified businesses under the SBA guidelines used to administer PPP loans.

    Reply
      1. DSB

        The author said this, “Public schools were not eligible to apply for EIDL or PPP loans.” The point is only intended to bias the reader. A non sequitor. That was my point.

        Reply
    1. BrianM

      Charter schools receive funding from taxes. Why should they be eligible for a loan from the Small Business Administration?

      Reply
      1. Bea

        Good question. Why should they get more funding than public schools, fewer restrictions and lack of certification as they slyly re-integrate education with tricks including that their classrooms are full or by providing no transportation, knowing poor families can’t work and drive their kids long distances to school. They can close their doors if they aren’t making enough profit while public schools beg for funding when they are not allowed to close their doors no matter how poorly they are funded. These schools even get a higher dollar-for-dollar tax credit and can actually use it for tuition in private and religious schools which should NEVER be allowed.

        Reply
  2. LowellHighlander

    For those who are lawyers or otherwise knowledgeable about incorporation, I’d like to ask what prevents a 501 (c) 3 organization from re-incorporating as some kind of for-profit organization? The reason why I ask is that I fear that charter schools are, at this point of their history, in a similar position to that of joint-stock companies in the early American Republic: they are not yet bought and sold in markets. But now joint-stock companies effectively are bought and sold that way, and I wonder whether that is the ultimate fate of charter schools. (If this comes to pass, I fear that accountability will prove all but impossible.)

    Reply
  3. Matthew Saroff

    Charter schools are an example of the adage (Was it from William Black?) that if fraud can occur, fraud will occur.

    Reply

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