Ohio legislation favors White Hat charter schools

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David L. Brennan’s White Hat Management, whose 46 charter schools include one in Springfield, is being sued by the boards of nine northeast Ohio schools who say the for-profit company won’t reveal how many taxpayer dollars go for educating kids and how many end up in its corporate coffers.

But if the Ohio General Assembly approves legislation pushed by Brennan, White Hat may not have to worry about the pending court case. The legislation, which passed the Ohio House of Representatives, would allow charter school operators like White Hat to do an end-run around their nonprofit governing authorities.

Critics say it’s an attempt by Brennan to use his political influence — he’s contributed millions to GOP election campaigns — to decrease oversight of his 31 Ohio schools, 20 of which are in academic emergency or on academic watch.

Earlier this month, Brennan successfully lobbied the GOP-led Ohio House for a amendment that would allow White Hat to keep secret details of how it spends the public money it receives to run its K-8 Hope Academies and its LifeSkills Center high schools, including Life Skills Center-Springfield at 1637 Selma Road. The legislation, contained in the House version of Gov. John Kasich’s two-year budget bill, is now before the Ohio Senate Finance Committee, where seven of the eight members of the Republican majority have received campaign contributions from Brennan.

Akron-based White Hat is the state’s largest charter school operator and one of the nation’s biggest for-profit charter chains.

Last year White Hat’s Ohio schools received more than $78 million from the state, records show. Officials of the left-leaning think tank Innovation Ohio estimate White Hat schools have collected $500 million in taxpayer money since 2000.

“It even makes the supporters of charter schools blush — and they’re hard to embarrass,” said think tank spokesman Dale Butland.

Innovation Ohio said Brennan and his family have made $3 million in campaign contributions, mostly to Republican candidates and GOP accounts. Public records show Brennan, a wealthy former tax lawyer and industrialist, owns a $500,000 home in Akron and a $6 million home in Naples, Fla.

White Hat operated 31 Ohio charters as of the 2009-10 school year.

Eight were in academic emergency, including LifeSkills Centers in Dayton, Middletown and Springfield; 12 were on academic watch, nine were rated continuous improvement and two were rated effective. None was rated excellent.

White Hat also manages charters in Arizona, Colorado, Florida, Michigan and Pennsylvania. And it runs an online school, the Ohio Distance & Electronic Learning Academy, or OHDELA, which is currently on academic watch. White Hat schools nationwide serve 25,000 students per year and have a staff of 1,300 full- and part-time employees.

Terry Ryan of the nonprofit Thomas B. Fordham Foundation of Dayton, which sponsors seven of its own charter schools, said of White Hat’s charters: “The best that can be said about them is they’re mediocre and not substantially better than urban public schools.”

But James Brown, school administrator at the LifeSkills Center of Dayton, said schools like his can’t be judged on test scores alone.

“We’re never going to knock the socks off the report card,” Brown said, noting that the school enrolls students who have failed elsewhere. “When we quit graduating kids is when I’ll be upset as the administrator here.”

White Hat lobbyist Thomas Needles acknowledged he was behind language in the House bill allowing operators like Brennan to keep specifics of their spending of taxpayer money private, and to fire their school boards. Instead, the schools’ authorization to operate would come directly from the Ohio Department of Education, which previously oversaw charters under a system that was abandoned a decade ago.

Brennan declined requests for an interview, but Needles said he is working with the Senate on a version of the bill that he said would strengthen taxpayer protections.

Under the proposed legislation, no operator could bypass the requirement of being overseen by a nonprofit governing sponsor and school board unless the school has been in existence for at least five years, the operator has no unresolved audit findings and runs at least one school with a state report-card rating of continuous improvement, the equivalent of a C.

White Hat meets all those criteria.

“What Brennan is doing is undermining every control (that) sponsors have over his operations,” said Stephen Dyer, an Innovation Ohio analyst and former Democratic state representative. “Now that there’s a revolt (by the school boards in court), it seems to me Brennan is trying to remove that headache of oversight and remove any pretense” of accountability.

Liberals and conservatives alike are raising concerns about the pending legislation, saying it would remove safeguards designed to assure that for-profit operators spend adequately on education, and allow operators to be fired if their schools don’t deliver academic results.

The House bill “removed some of the very few barriers to mediocrity there are” in the system, said Chester Finn Jr., an assistant education secretary in the Reagan administration and president of the Fordham Foundation.

“Where does the money go and whose pocket does it end up in? There’s sort of a veil over that in Ohio,” Finn said. “I don’t think that’s the way to run a railroad.”

Brennan an early charter pioneer

Brennan, now 79, has been steering public policy in Ohio ever since the state’s school choice movement got under way in the early 1990s.

Brennan got into the education business after he found that people he hired to work in his factories were “functionally illiterate, despite having attended public schools,” according to White Hat’s website. He has said he successfully educated employees with a computer-based curriculum that was the forerunner of his current curriculum.

In a 2003 interview with the Cincinnati Enquirer, Brennan said he became active in fundraising for conservative political candidates to counter the efforts of teachers’ unions.

“There was no one able to oppose their viewpoint, no one putting up either money or candidates who felt differently,” Brennan said. “This wasn’t unique to Ohio. Around the country, legislators became dominated by public education monopoly viewpoints because those people put money behind elections of people who felt that was a good idea. What was lacking was the funding for other viewpoints.”

Brennan was a heavy backer of former Cleveland Mayor George V. Voinovich in his successful 1990 gubernatorial bid, and that year he hosted a fundraising party at his Akron home attended by President George H.W. Bush.

“Hundreds of thousands of dollars rolled into Republican campaign funds that day in Akron, thanks to Brennan,” according to a Dec. 13, 1999, article in the Akron Beacon Journal.

In 1992, Voinovich appointed Brennan to chair a new Governor’s Commission on Education Choice. On the panel Brennan worked with Needles, then Voinovich’s top education adviser.

Brennan, a former trustee for his alma maters, Ohio State University and Case Western Reserve University, dabbled in the experiment with for-profit voucher schools that was recommended by his commission and approved by the legislature.

But he soon abandoned them for more lucrative charter schools.

Charter schools were launched by a 1997 state law. The premise was that they would be taxpayer-funded, but subject to less regulation than traditional schools so operators could try innovative educational strategies.

Charter teachers, for example, need not be certified in their area of instruction.

The concept was that “it’s not as difficult to re-steer a small ship as opposed to an ocean liner,” said state school board member Jeffrey J. Mims Jr., a former president of the Dayton school board and, before that, the Dayton Education Association union.

Mims said he supports good charter schools, but said, “There’s something seriously wrong” with White Hat operations receiving 11.5 percent of the state’s $680 million in funding to charter schools.

“Ohio already has an unconstitutional system for funding schools,” Mims said. “You shouldn’t have profiteers like that draining the dollars from an already bankrupt system.”

Under the initial charter school rules, the Ohio Department of Education authorized charter schools. But the department didn’t have the staffing needed to oversee them, and officials at the time said they were prohibited from turning down any operators who met requirements of state legislation.

“They rarely rejected anyone,” Dyer said. “They were approving charters that didn’t have bathrooms, for crying out loud.”

In 2001, then-state Rep. Jon Husted, R-Kettering, sponsored a bill that ultimately allowed for the establishment of charter schools in every Ohio school district and also eliminated the state school board’s authorizing role. Instead, the schools had to have a nonprofit sponsor.

Brennan incorporated White Hat in 1998, establishing a corporate system that grew to involve management agreements giving the company control over all but about 3 percent of the state revenues the schools receive.

Because it is private, the specifics on how the money is spent is not public record. According to a 2006 report by the Ohio Federation of Teachers, his schools received nominal oversight by “servile trustee boards” with paid members hand-picked by Brennan.

“Local citizens did not independently create the Hope Academies and then later hire White Hat,” the report said. “In fact, the opposite occurred; this was a top-down, corporate endeavor.”

The report called the original slate of board members for White Hat’s initial schools in northeast Ohio “front men ... selected to rubber stamp all of White Hat’s decisions” about running the schools. Members often sat on the boards of multiple White Hat schools, receiving stipends for each.

Needles, however, said that argument is upside-down, at least in the case of the board members suing White Hat. “We’ve reached out to qualified board members, but, unfortunately, what we’ve seen is board members who seem more interested in their own self-enrichment. For instance, we’ve had members who have served on the boards of 19 different schools. It’s one of the things that has led to this direct (state) sponsorship idea.”

Needles said direct sponsorship by the state would allow operators to put more money into the classroom.

Lawsuit: Boards virtually ‘impotent’ to govern schools

A Franklin County Common Pleas judge last week gave White Hat and the northeastern Ohio school boards that sued it another 60 days to reach a new contract. The boards, which filed their lawsuit in May 2010, argue that their existing management agreements with White Hat render the boards “virtually impotent to govern the schools and truly manage and oversee (White Hat’s) operation of each school,” partly because White Hat reports only in general terms how it spends tax money.

“Despite claiming to be concerned about the education of students in Ohio,” the lawsuit alleges, “White Hat is motivated only by its own power and greed.”

Needles said “tensions between operators and sponsors are not unique to White Hat.” That is certainly true, but the corporation has clashed with its governing boards repeatedly over questions of academic success and financial transparency, and not just in Ohio.

In 2005, the Polk County, Fla., school board rejected White Hat’s bid for a LifeSkills Center there because of concerns it would be unable to get a passing grade in the state’s school grading system, even if the company met its own accountability goals. White Hat successfully appealed and opened the school in July 2008, but it will close after this school year because its governing board refused to renew White Hat’s contract when the company wouldn’t release financial information, said Polk County charter school senior director Caroline Bridges. The board is reopening the school with a new management company and under a new name.

Bridges said boards in St. Petersburg and West Palm Beach also revoked the charters of their LifeSkills Centers over similar problems.

In August, Ohio officials closed a Hope Academy in Cleveland because of poor academic performance.

Then there is the matter of the Hope Academy in Canton. Its nonprofit sponsor, St. Aloysius Orphanage of Cincinnati, didn’t renew White Hat’s contract to run the school last summer, again for academic failure. White Hat merged the closed elementary with a local LifeSkills high school and reopened both under the name Brighten Heights Charter School, using LifeSkills’ nonprofit sponsor. That sponsor, the Toledo-based Ohio Council of Community Schools, sponsors other Brennan schools and was established by the daughter of former state Rep. Sally Perz, R-Toledo, who worked with Voinovich on passing the first charter school law.

Canton school officials didn’t return calls seeking comment. But the Canton Repository quoted Superintendent Michele Evans as saying, “It’s not a shell game we, in the public schools, can play ... nor would we want to. We want to improve our schools by increasing student achievement, not simply by changing our name.”

Another Hope Academy, in Akron, is required by the state to close after this school year because of academic failure, and yet another is at risk of being closed. Because they are part of a state program to prevent high school dropouts, White Hat’s high schools can’t be closed for poor academic performance.

Needles echoed the comments by Brown, the school administrator at the LifeSkills Center of Dayton, that the caliber of students enrolled in the company’s school make academic progress challenging.

“I suspect that most of the LifeSkills Centers would possibly remain under (the state’s academic emergency) definition. These are students who have been forgotten by society. They come to us two years behind.”

Since their inception, the Ohio centers have graduated 12,000 students who may not have otherwise gotten a diploma, Needles said, helping them become productive adults. He said that saves taxpayers an estimated $500,000 per student over a lifetime, or a total for the 12,000 of $6 billion. Needles also said the Ohio Department of Education is now able to provide the oversight that was lacking a decade ago. “ODE would provide the same monitoring and oversight as any other sponsor,” he said. “A lot’s changed over the years. We have a lot more amenable (state) school board and a governor who embraces the idea of school choice, who can make sure this is done effectively.”

But Fordham’s Ryan said Ohioans have learned from bitter experience that corporate accountability is needed in charter schools.

“Choice and competition and the market aren’t enough,” he said. “If they were, Dayton would have the best schools in America.”

Brennan has done much for the school choice movement in Ohio, Ryan said.

“All of us who believe in charters owe a debt of gratitude to (Brennan) for making it possible for them to come to Ohio in the ‘90s,” Ryan said.

But, he added, “It’s also, ‘Doggone it. If you’d cared more about quality and accountability, we might have been able to do it better.’”

Contact this reporter at (937) 225-2264 or tbeyerlein@Dayton DailyNews.com. Staff Writer Margo Rutledge Kissell contributed to this report.

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