An earlier version of this article was published in educational Horizons Vol87, 2 (Winter 2009)

Deregulation and Charter School Swindles

by Gary K. Clabaugh Ed. D.
Professor of Education, La Salle University

edited 9/20/18

Minnesota passed the nation's first charter school law in 1991, Since then, forty states have passed charter school legislation and some seven hundred thousand youngsters now attend more than three thousand such schools.[1]

The Philadelphia Example

Charter schools also have become a central element of school "reform" in the School District of Philadelphia. This year the district is home to sixty-three charter schools enrolling more than thirty-four thousand students at a total cost of $320 million.[2]

I understand why these alternative schools are popular. I have spent years negotiating the bleak no man's land of the School District of Philadelphia while supervising student teachers. And if that doesn't leave you with a taste for change, nothing will. Too many traditional Philadelphia public schools are unsafe for teachers and students alike. They also routinely lack instructional resources such as textbooks. Physical plants are often crumbling. And the central bureaucracy is so slow in hiring teachers that each year begins in crisis.

That bureaucracy is also death on innovation. I learned the hard way not to even try to cooperate with the district on innovative programming. I've spent months painstakingly setting up cooperative arrangements only to learn that the wind had shifted at district headquarters, which was abandoning the effort. The bottom line on all this is that despite a yearly expenditure of some two billion dollars, about 50 percent of the district's youngsters fail to graduate.

Hope and Doubt

You can see why I long to be a charter school enthusiast. But in my forty-six years in education I have lived through one half-baked "reform" after another—teaching machines, competency-based education, open education, No Child Left Behind—and these experiences have left me skeptical.

Aspects of the charter school movement feed that skepticism. For one thing, the extreme claims made by charter school evangelists would make a used car salesman blush. Proponents claim, for example, that charter schools:

* "Increase opportunities for learning and access to quality education for all students"

* "Encourage community and parent involvement in public education"

* "Provide a system of accountability for results in public education"[3]

The first promise is false on its face. Charter schools provide life rafts for parents and students who want to abandon sinking urban districts. Thus charters decrease the quality of education for students who stay behind by bleeding off caring parents and motivated students. Similarly, the second promise is false because charters bleed off community and parent involvement from traditional public schools.

I'm also put off by the politics involved in the charter school movement. One unacknowledged reason that Republicans have taken the lead in promoting charters is that they weaken teachers unions, which routinely support Democratic candidates.

I also distrust the fervent free market evangelists who claim that competition will make everything better. But most important, I worry that charter schools operate with greater autonomy and less regulation than traditional public schools. That means accountability is lessened, not increased as proponents promise, and that is unwise.

The Triumph of Hope over Experience

Despite my misgivings, however, hope finally triumphed over experience when a trusted friend and colleague enthusiastically described a new charter school in Philadelphia. It sounded so promising, I decided to take a look.

The school's founder and CEO, a highly regarded former district administrator, was admirably businesslike in his approach. His minimal administrative staff seemed focused and hard working. Parent volunteers were much in evidence and actually doing useful things. This charter plainly lacked the unfortunate novelties of many Philadelphia public schools. It wasn't dilapidated or dreary, but brightly lit and well appointed. The halls smelled of floor wax, not urine. Packs of truants weren't lolling on nearby corners. Profanities weren't being screamed in the halls. The teaching staff did not manifest the attitude of Captain Bligh's crew shortly before the mutiny. There were enough textbooks and supplies for every child. And in a city where schools are often dangerous for kids and staff alike, this school seemed safe.

The CEO explained how he and the teachers had successfully integrated special education students into regular classrooms. He also recounted taking creative advantage of the relaxed regulation concerning teacher certification to hire a popular dance teacher. And he explained how he substantially supplemented the school's resources via grants and capitalistic enterprise—selling school uniforms, for example.


Despite a scarred veteran's caution, I came away impressed—so impressed, in fact, that I took my students on a field trip to the school, invited the CEO to speak to both my graduate and undergraduate classes, and advised some of my best students that they should consider teaching there. I conceded that they would make less as well as lack union representation and the protection of a detailed contract, but they might also be happier.

I even allowed myself to hope that the benefits of charter schooling might outweigh the costs. To be sure, my examination of another charter, an allegedly "Africanized" one, was disappointing. Nevertheless, I continued to hope that charter schooling might, in aggregate, prove more plus than minus.


Several years passed and the number of Philadelphia charter schools continued to grow. And with the addition of a high school my favorite charter school expanded to include some twelve hundred students. Hearing nothing but praise of the school, I continued to recommend it. I also continued to harbor hope. Then, without warning, a series of front-page stories in the Philadelphia Inquirer announced that the charter was deeply mired in scandal. The paper reported federal and school district allegations of fiscal mismanagement, nepotism, and conflicts of interest against the school's top management. It also revealed that the CEO and his handpicked successor, a former policeman with only a high school diploma, were being paid more than most area superintendents. The school's chief financial officer was said to be awaiting trial on charges of conspiracy and altering records. Concerns also were raised about the school's lack of diversity (enrollment at the school is 87 percent white) and alleged favoritism in its admission practices.[4] So much for hope triumphing over experience.

This scandal was not the beginning or end of charter school troubles in Philadelphia. For instance, in October 2008 the Inquirer announced that law enforcement agencies were investigating still another Philadelphia charter school that allegedly diverted some of its thirty-one million dollars in taxpayer funds to support other nonprofits operated by its parent group. To make matters worse, in 2006–07 this charter spent only 38.4 percent of its budget on instruction: the remainder went for niceties such as legal fees, travel, meals, and entertainment. In addition, the school's test scores lagged drastically behind state benchmarks; dozens of vendors were complaining that the school was stiffing them on payments; and the landlord was threatening the school with eviction.[5] And there have been other scandals involving other charters.


Two main ideas inform the charter school movement. The first is that competition is an essential ingredient in school improvement. Charters are said to provide that.

The trouble with this argument is that competition doesn't select the best, only the most popular. McDonald's doesn't produce the best-tasting or most-nutritious food, for instance, but its heart attack specials certainly are popular. A second-rate school might prove similarly competitive if it provides a tawdry but reassuring education to the children of the low-information crowd. Fearful your kids will discover you are an ignoramus? Send them to Alpha Charter where they will never learn to doubt.


The second main idea behind charters is that state directives are strangling public school innovations. That's why charters are exempted from many regulations restricting the operations of traditional public schools.

The trouble is that deregulation creates opportunities for mountebanks to pilfer the public purse, abuse children, and the like. As a matter of fact, to the extent that charter operators have freedom of action, the confidence tricksters and bunko artists among them find opportunities for fraud and misuse of public funds. What is more, the politicians (and/or their relatives) who push charters often end up feeding at the charter school trough themselves.

Other Scandals

We shouldn't be surprised, then, that Philadelphia's experience with charter school scandals is widely shared. A Google search for "charter school fraud" turns up 498,000 results. We read, for example, that Ohio charter schools, officially known as community schools in the Buckeye state, have become "cash repositories to be siphoned of sponsorship and management, in one case by a former Republican state legislator who wrote the legislation creating charter schools." That politician's daughter is cashing in too.[6]

Deregulation Writ Large

Charter schools are hardly the only enterprise to give deregulation a bad name. At this writing the U.S. economy may be headed for its worst crises since the Great Depression. Many commentators cite the 1999 Gramm-Leach-Bliley Act, a 1999 banking deregulation bill, as the primary cause. The act, signed by President Clinton by the way, repealed Depression-era regulations and encouraged the creation of sub-prime mortgages, including no-money-down, interest-only loans to individuals with poor credit histories. Those mortgages were subsequently packaged and sold as securities. The Bush administration, blinded by the philosophy that market forces provide all the regulation necessary, ignored numerous warnings of an impending collapse.[7] Thus did deregulation produce the conditions that triggered an economic train wreck, Deregulation similarly precipitated the savings and loan crises of the 1980s and '90s. In that case a new federal law permitted S&Ls to depart from their original mission of receiving savings and providing mortgages and venture into commercial loans and issuing credit cards instead. S&Ls soon were lending money to shaky ventures they were ill equipped to assess.[8] Eventually more than sixteen hundred banks either closed or required federal assistance at a cost to federal taxpayers of $124.6 billion.

What's the common element in both of these financial debacles? Deregulation. What is at the heart of the charter school movement? Deregulation.


Given President-elect Obama's support for charter schooling, the movement may multiply during his administration. If so, expect still more fraud and scandal, because whatever their merits, charters present as big an opportunity for swindlers and charlatans as does televangelism.[9]

Also expect to hear of more and worse non-fiduciary scandals -- high stakes test cheating and sexual abuse come to mind—as the full fruits of reduced oversight are realized. As the saying goes, "When the cat's away, the mice will play."


1. US Charter Schools, available at <>.

2. Martha Woodall, "School District Finally Tallies Up Cost Of Charters," Philadelphia Inquirer, November 13, 2008.

3. US Charter Schools.

4. Martha Woodall, "SRC Agrees to Renew Philadelphia Academy Charter School," Philadelphia Inquirer, June 19, 2008.

5. Martha Woodall, "Germantown Charter School's Use of Taxpayer Funds Being Investigated," Philadelphia Inquirer, October 12, 2008.

6. "Ohio Charter School Corruption Continues," available at <>.

7. Mat Apuzzo (Associated Press), "Mortgage-Crisis Warnings Ignored," Philadelphia Inquirer, December 2, 2008, A2.

8. It was the Garn-St. Germain Depository Institutions Act of 1982 that deregulated the savings and loan industry.

9. See "Charter school for Scandal," <>, for an interesting account of the subtleties involved.