After spending a year investigating an online charter school network called A3, in 2019 San Diego prosecutors proved how two men got $400 million of state money to run fraudulent schools in what has become one of the largest fraud scandals in the 31-year history of California’s charter system.
Since then the prosecutors have traveled across the state, outlining to legislators and education leaders how A3’s operators exploited California’s school system for profit. They pointed out gaps in state law and education systems that they believe allowed the men to carry out their scheme, hoping somebody would listen and make changes to prevent a case like A3 from happening again.
Deputy District Attorney Leon Schorr said he was surprised, then, to see how much pushback there was against his report to the legislature two years ago. And now, four and a half years after the A3 indictment, he is still waiting to see reforms.
“My frustration is that we just really haven’t seen many changes at all,” Schorr said.
California has seen multiple other controversies in recent years, not just A3, involving people accused of misspending public dollars through charter schools, which are publicly funded but independently run.
But state leaders have been unable to agree on how to implement legislative reforms, while some charter school leaders have questioned the extent to which any are needed.
Now at least three state-level task forces are working on crafting policy recommendations, each with a different focus; by June all three are expected to release their guidance. One of those task forces, which will focus on school auditing, was ordered by a San Diego judge in the A3 case.
One week before that task force held its first meeting, the state’s education auditing agency published a report following a years-long investigation into Inspire, another statewide non-classroom-based charter school network.
The auditors found, among other things, that tens of millions of dollars worth of transactions orchestrated by Inspire schools’ charter management organization were missing records to justify them and that Inspire had collected more state funding than it was supposed to, through one of the same attendance methods A3 used.
“We share the frustration,” said Michael Fine, CEO of the Fiscal Crisis and Management Assistance Team, which audited Inspire. “There’s no lack of understanding that we’ve got some problems, and there’s no lack of ideas on how to address many of those problems … It really is time for the Legislature to revisit it.”
Challenging changes to charters
Several experts and policymakers who have called for legislative action said it seems particularly difficult in California, compared to other states, to address charter school issues.
Some aspects of charter schools are not mentioned in the state laws that govern them, some policymakers have said, partly because California was an early adopter of charters — in 1992 it became the second state to allow them.
Because California charter law was set so early, it was not informed by best practices that were decided later for charter schools and the districts that authorize them, said Tom Hutton, executive director of California Charter Authorizing Professionals. State charter law also wasn’t informed by later scandals that showed how some charter schools could be manipulated for profit.
The state’s 1,300 charter schools are supposed to be held accountable by their authorizers, usually school districts, which let them open. But that oversight has in some cases been found nonexistent.
What’s more, California’s approach to K-12 education is about local control rather than state or centralized control. That’s reflected, for example, in the fact that any of California’s roughly 1,000 school districts may become a charter authorizer if somebody comes to them asking for a charter, and in how state law largely leaves it up to authorizers to decide how they conduct ongoing oversight.
Charter laws have also been difficult to change in California because the issue is so polarizing, experts said.
Fine called it a “tough topic” for the governor and state lawmakers politically. “They’re not going to make everybody happy in talking about it,” he said.
Since the A3 indictment there have been two main legislative bills to respond to those charters’ problems. Both were introduced in February 2021 and died four months later with a deal with the governor’s office.
Senate Bill 593 was the more limited bill. It would have mandated new requirements for auditors of non-classroom-based charter schools, including that they choose their own audit samples and identify large fund transfers. The bill also instituted regulations of home school enrichment vendors and increased teacher oversight for independent study students.
Assembly Bill 1316 was far more extensive and would have, among other things, limited enrollment for non-classroom-based charters, increased how much authorizers could charge charter schools for oversight costs, introduced a state education inspector general, limited how much per-student funding non-classroom based charters could receive, and more.
Instead, Gov. Gavin Newsom extended an existing moratorium on new non-classroom-based charters in exchange for the legislators tabling AB 1316. SB 593 was also held.
AB 1316 had quickly generated outrage from charter school leaders and parents who said it would go too far to restrict charter schools and hurt them financially.
The California Charter Schools Association supported the narrower SB 593 bill but led a campaign against AB 1316. In a recent interview, Myrna Castrejón, the association’s president and CEO, accused that bill’s authors of using A3 as “blanket justification for really significant overreach” and said she sees A3 as a purely criminal enterprise that could happen anywhere, not as an issue with charter schools.
“We are and always have been continuing to engage with these agencies to ensure … we’re not overreacting prematurely to issues and end up curbing innovation and autonomy,” Castrejón said. “We will absolutely ensure that we don’t use these instances … as reasons to over-regulate everybody thinking that it will solve all of the issues.”
On top of facing opposition, AB 1316 was inherently a complicated and massive bill. Authors weren’t willing to lose aspects of it they saw as necessary to prevent future fraud. But topics in the bill were technically complicated and tricky in some cases, in that they have different applications for districts compared to charters.
The timing may have made other would-be supporters reluctant to attempt sweeping changes, too.
A compromise deal to reform several aspects of charter schools had just been signed into law in 2019, just a few months apart from the A3 indictment. That deal, the said to be largest overhaul ever made to California charter law, included three bills dealing with charter school transparency, location of centers and allowing districts to consider a charter school’s potential impact on existing schools during the petition process.
It had taken a lot of work and difficulty to get key players — including Newsom’s office and the charter schools association — to agree and compromise on those bills. To some, that package was enough.
But proponents of additional legislation argue that many new problems have since been uncovered with A3, Inspire and other charter schools that were not addressed in the compromise package. The package did not discuss charter school enrichment vendors, auditing requirements or attendance accounting, for instance.
“Initially the thought was, ‘We have this compromise, let’s see how this will work.’ I don’t think it’s been enough,” said Cristina Garcia, a former state Assembly member who co-authored AB 1316. “We have enough anecdotal evidence that it’s not enough. We need to do more.”
It’s unclear what action, if any, the legislature will make in the new year, the last year before the moratorium on new non-classroom-based charters expires in January 2025.
Need for oversight
One thing many stakeholders agree on, including Castrejón, is that oversight of charter schools needs to improve.
California has more than 330 charter authorizers, which are supposed to hold charter schools accountable and detect potential wrongdoing.
But many authorizers are small school districts that have little to no dedicated staffing to conduct oversight. The state prescribes few such duties of authorizers, and in some cases, authorizers have conducted virtually no oversight of their charters.
“It didn’t take A3 to call attention to the fact that authorizing is uneven in California,” Hutton said.
Schorr, the San Diego County prosecutor, pointed to two oversight changes that he believes are particularly important.
One of those would be integrating the state’s enrollment data system with its funding data system, so the state can know how much money it’s paying for each student.
A3 and Inspire both received more state funds than they were supposed to by enrolling students into a summer-only attendance track, so the state was paying for a summer program for those students on top of paying for a full regular school year’s worth of education for them. This violated state law, which does not assign funding specifically for summer programs.
If the state had a system to track how much it was paying out for each student’s education, even if a student changed schools, it could know which students it is paying more money for than others, Schorr said.
Another change he wants to see is the creation of some kind of resource or agency, such as an inspector general, that would enforce the law and help prosecute fraud.
The San Diego District Attorney’s Office was lucky, he said, in that it is larger than most district attorneys’ offices and happened to have an expert in education law at the time.
But he said it would be far more difficult for smaller district attorneys’ offices to prosecute school fraud cases. And it’s in rural counties with such offices, he said, that may be at highest risk of bad actors eager to take advantage of a small school district authorizer’s inability to conduct oversight.
