The business side of charter schools

00:17, Nov 25 2012

The business case for setting up a "for-profit" charter school is strong, but private business won't be among those opening schools in the first wave of the education revolution National and ACT are planning.

Legislation is being developed to create fully state-funded charter schools run by private bodies able to set curriculums, hire staff - including unregistered teachers, and operate with freedoms not granted to ordinary state schools.

The move is decried by some, including Labour, the Greens and some academics as the start of a neo-liberal privatisation of the state school system allowing business to turn a profit from Kiwi kids.

But Catherine Isaac, a former ACT party candidate now on the government working party tasked with introducing charter schools, says there won't be a single for-profit among the first wave of applicants to establish schools in 2014.

"There aren't any for-profit proposals coming through as far as I am aware. They are all community groups, or existing schools or Iwi," Isaac said.

She said Sweden is a good example of how charter schools develop. For-profit companies are allowed to operate charter schools there and they make up a substantial proportion of the school system.


"They came in a later wave," Isaac said.

The first private interests likely to make a buck from charter schools would be landlords, entrepreneur Tony Falkenstein believes, as the first charter schools look for premises.

Falkenstein, who is on the working group with Isaac, said this could include premises unlike state school campuses, such as commercial offices.

That does not come as a surprise to Auckland University associate professor and charter school critic Peter O'Connor, who says the business model is clear: Spend less than you get in state funding and pay the difference as dividends to owners.

Essentially, New Zealand charter schools - comfortingly branded as "partnership schools" - will be funded on similar lines to state schools, so a for-profit owner would need to create profit by spending less per child following a pattern developed overseas.

"Every child brings a pot of money with them," he said. "Because of the deregulated environment, a profit can be made by driving down teacher costs by employing unregistered teachers. You drive down that cost by de-unionising the workforce, and employing on individual, not collective contracts."

Money can be saved on facilities too, O'Connor said.

He gives the example of one group of charter schools in the United States where state funding equals US$18,491 (NZ$22,000) per child compared with $11,991 for ordinary state schools, while the particular chartered schools spend just US$457 more per child.

Though they will be prevented from charging fees, they will be able to ask for voluntary donations.

Isaac points to a London Institute of Economic Affairs paper from December 2010, which concluded there has been a beneficial effect on education standards from the introduction of independent schools, and nothing to justify antipathy to for-profit school operators.

It said for-profit schools are as powerful as not-for-profit schools in promoting beneficial competition. Ruling out for-profit charter schools, as Britain has done, "produces fewer incentives for entering the market, leading to smaller increases in competition and quality", it said.

The Swedish model means companies are able to pay dividends to shareholders. About 65 per cent of Swedish independent schools take this form, the report says, suggesting that precluding for-profit companies from the system would reduce new entrants.

"There is a reason why the majority of Swedish independent schools are for-profit: The idealism and drive of those running non-profit schools cannot serve as an incentive to start schools for many people otherwise perfectly capable of doing so. The simple reason is that idealism is scarce and local."

But charter school critics point to an August report from the London-based Institute for Public Policy Research which concluded that while competition can play a role in public services, evidence of benefits of increasing competition between schools was weak.

"Systems that have introduced market oriented reforms are not sitting at the top of the international performance league tables. Instead, more competition-oriented systems tend to produce higher levels of educational segregation with richer and poorer children more likely to attend different schools," the report said.

"In order to encourage innovation, there is a strong case for allowing new providers to set up or take over schools. But we already have a flourishing not-for-profit school sector in England: There are no competition or innovation grounds for allowing for-profit schools."

Cuttingly, it added: "Looked at in the long term, it is much cheaper for the government to raise this capital funding itself than for the private sector to do so at the taxpayer's expense."

Isaac says the charter school policy is not business-driven, but an experiment aimed at lifting education outcomes for the bottom 20 per cent of pupils.

"These schools should be looked on as the R&D arm of the education system," she said.

Sunday Star Times