Competition For K-12 Tough

March 25, 2005
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GRAND RAPIDS — Competition isn't exclusive to the business world.

With recent legislation regarding student movement from district to district and the emergence of charter schools and demographic changes over the past decade, the ability to attract and retain K-12 students is at a critical point, especially for the region's largest school district, Grand Rapids Public Schools.

Approximately $6,700 per student is at stake, and that money follows a student to a new school regardless of where it's located.

"In the past, public education has been a monopoly," said J.C. Huizenga, founder and chairman of National Heritage Academies, which builds and operates charter schools for grades K-8. "And with any monopoly, it begins to atrophy."

Michigan's charter school law changed in 1994, and the following year Huizenga opened ExcelCharterAcademy, the first of what is now 51 schools serving nearly 27,000 students.

Last year, the youngest of Excel's initial 174 students graduated the system and National Heritage Academies had matured into a $200 million privatized, public-funded school system. It now employs 1,500 people in five states.

"In competition, only the greatest-value provider succeeds," Huizenga said. "So we've focused on what we can do to provide the greatest value to the child, the parent and the taxpayer.

"The taxpayer hasn't especially received a good value from public education."

NHA has provided over a quarter of a billion dollars' worth of value to the taxpayer, he said. Not only was its $219 million worth of construction not borne by taxpayers, it has paid over $70 million worth of taxes and fees.

Like any business, it is liable for personal property and real estate taxes, sales tax, income tax and in Michigan, the Single Business Tax. The real estate tax alone for each building averages $50,000 to $75,000 a year, he said.

Like traditional public schools, charter schools are funded by per-pupil grant dollars, which follow each student into the school. They can't levy millages, nor can they charge tuition.

"We have to be fiscally responsible with the way we run these schools," Huizenga said.

School buildings are built with the classroom in mind and little else. At an average cost of $5 million, there are no skylights or alcoves, no architectural frills and no cafeteria (students eat in the classroom.)

With franchise precision, NHA has built 19 schools in the past two years.

By comparison, none of the first three schools in the current GRPS bond construction will cost less than $8.2 million. As a whole, the three-year project will cost taxpayers $150 million. The actual construction need is nearly $500 million.

NHA does not bear the burden of a user-friendly health-care plan or collective bargaining agreement, as most of the public districts do. Employee compensation packages are determined on an individual basis. GRPS spends 11.6 percent of its per-pupil funding on health insurance. With retirement costs, employee benefits ate one-fifth of its budget in 2005, or $43 million.

But NHA's greatest advantage, Huizenga said, is that it is a business.

"And when it comes to utilization, we fill up every last desk," he said. "You have the school whether classrooms are full and you're going to have a teacher whether each desk in that classroom is taken."

Attorney and 12-year GRPS board trustee James Rinck is an outspoken critic of charter schools and NHA. He called their brand of education "Christian education on the cheap," a statement partly supported by a 1999 ACLU lawsuit.

Rinck compared public school competition to that of the airline industry. There, the legacy carriers struggle to fix systemic problems as low cost and boutique providers move into the market, cherry picking the most profitable routes without the burden of unions or reinvestment costs.

"You have an allegedly parallel school system that doesn't offer high school, which is more expensive, (has) very little special ed and doesn't offer a lot of services, which cost money, making a lot of money and ultimately destroying the other system," he said.

The buildings are basically pole barns, Rinck said. Without tenure or a union, teachers are at the mercy of parent and administrator whims.

After eighth grade, students leave the NHA system, returning to a district or a parochial school. Most do not transfer to other charter schools.

Plus, like the new airlines, nothing stops a charter school from pulling up stakes in an underperforming market.

A public school, however, can't.

"They say that charter schools take students out of public schools," Huizenga said. "Well, first of all, charter schools are public schools, and if the district schools were providing what parents were looking for, they wouldn't be leaving.

"We're just an opportunity for choice."

GRPS Superintendent Bert Bleke doesn't share Rinck's disdain, but he does agree with the airline metaphor. His concern isn't as much about NHA and charters, however, as it is neighboring districts.

"(Huizenga) has put together a heck of a business model," he said. "It's designed to educate children and make money, and he's doing a pretty good job of both. But I don't think what they're doing has really hurt us; our problem is the suburban schools."

In response to the charter school legislation came the Schools of Choice program, legislated in 1996. Through this, students can freely move among any school district within a participating county's Intermediate School District, space permitting.

Of the over 100,000 public school students in the Kent ISD, only about 1,200 move via Schools of Choice each year, said KISD Assistant Superintendent of Organization and Community Initiatives Ron Koehler.

"The vast majority of families are satisfied with local schools," Koehler said. "And in the global sense, for virtually every district it balances itself out. There is very little gain or loss in the transfer of students from one district to another, relatively speaking, with the lone exception of Grand Rapids Public Schools, which has lost students precipitously since the introduction of Schools of Choice and charter schools."

"There are maybe four or five school districts around Grand Rapids that are balancing their budgets on the backs of Grand Rapids Public Schools," Bleke said. "We've got $15 million out in the suburbs on an annual basis."

For each student GRPS lost to Schools of Choice or charter schools this year, $6,700 followed from its budget into that competing district. GRPS lost over 800 students — over $5 million — with the total number of GRPS residents attending school in another district now at 2,272.

With per-pupil funding already inequitable, this has made a bad situation worse.

For each student a suburban district picks up from GRPS, there is a $6,700 bonus in its budget. The district incurs no additional expense; no teacher is hired or class added.

Meanwhile, GRPS loses that revenue without eliminating any expenses.

"I can't cut a bus run, I can't cut a teacher or a class," he said. "If I consolidate, it's even more of a problem."

Instead, GRPS has reduced programs and services by $45 million over the last six years. It has closed buildings, laid off teachers, increased class sizes and postponed buying new textbooks.

Bleke suggests that at minimum, legislators should consider adopting a scale that would allow schools to absorb losses over a number of years.

"I don't think we're opposed to choice. In some ways, it has made us more competitive and that's good," Bleke said. "But for urban systems, choice bears a big burden, in that many people choose for reasons we can't control."

These are the issues of poverty and race unique to the urban community. A third of the GRPS budget is devoted to special education. For over 5,000 GRPS students, English is a second language. There are 50 different dialects spoken, and some, like Haitian Creole, have no written component.

Yet, looking at Standard and Poor's evaluation of Michigan districts, GRPS performs just as well as some of the districts drawing its students. Its MEAP scores are comparable to all but the vanguard districts, and its graduation rates top those of Godwin Heights, Godfrey Lee and Wyoming.

"I can't look into people's hearts, but I think it's a matter of perception, and probably race," Bleke said.

There are three rings in the KISD, Bleke said. There is the outer ring of the suburban schools, then another ring along the exterior of the city, which is mostly white and where, historically, students attend Catholic and Christian schools. In the core of the city lies the majority of GRPS's 23,000-plus students.

With charters and Schools of Choice, the 82 percent Caucasian Kent County becomes more segregated. Grand Rapids is 67 percent Caucasian, yet GRPS is 73 percent minority students and growing.

Only 9 percent of Grand Rapids families live below the poverty line, but 79 percent of GRPS students qualify for free and reduced lunches.

For these students, charter schools and Schools of Choice offer few options. NHA doesn't serve lunch. The buses don't run to Northview or Forest Hills.

"Looking at the financial health of the community and its ability to draw business, at some point, families bringing their kids out of the urban core are going to wonder why they haul that kid all the way over there," Koehler said. "If they can afford it, they'll move."

While it would seem that the urban parochial schools would be hurt most by charter schools, Grand Rapids Christian Schools Superintendent Tom DeJonge said that is not the case.

Families choose Christian schools for the faith-based curriculum not available at public schools, charter or district, he said. While GR Christian is losing students at an average of 3 percent a year, they are not going to charter schools. The district lost only seven students to charter schools this year, while gaining 14 from them.

"Our decline in enrollment now is because of families moving out of the central city to suburban areas," he said.

These students enroll in other Christian schools or suburban schools. Many return to Grand Rapids Christian High School, which has not lost students.

Like GRPS, Christian has been hurt by Schools of Choice; it lost 10 students to Forest Hills this year, none of whom were residents of that district. 

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