Controversy follows receipt of Paycheck Protection Program funds by public charter schools

By: - July 24, 2020 5:30 am

At least 50 North Carolina charter schools received money from the federal Paycheck Protection Program. (Image: Adobe Stock)

At least 50 North Carolina charter schools received money from the federal Paycheck Protection Program, created to help small businesses and nonprofits stay afloat during the COVID-19 pandemic.

Because some charter schools also received COVID-19 relief money through the Coronavirus Aid, Relief, and Economic Security Act, critics have accused them of inappropriate “double-dipping.”

“PPP funding was intended to keep the employees on the payroll of small businesses whose revenue dried up due to COVID closures,” said Carol Burris, executive director of the Network for Public Education (NPE), a New York City-based nonprofit advocacy group. “Charter schools have been fully funded by the taxpayers throughout the epidemic with no interruption in revenue flow. What some charters did was use their nonprofit status as a loophole to unethically secure funding meant to keep moms and dads receiving salaries when they could not work. This is double-dipping at its worst.”

NPE estimates that North Carolina charter schools and/or their management organizations have received between $21.1 million and $53.6 million in PPP funds.

“We believe that exorbitant funding should trigger a reduction of COVID-19 aid to those schools who took PPP with those savings equitably dispersed among all North Carolina public schools,” Burris said.

At least three charters received PPP loans of between $2 million and $5 million. And another five received loans of between $1 million and $2 million. Dozens more received loans of between $150,000 and $1 million.

There could be more, but some loans are difficult to detect in databases showing where PPP loans went (like the one maintained by the journalism nonprofit Pro Publica) because they were secured in the names of various operators that manage many of the state’s charter schools.

Burris and her colleague at NPE, Marla Kilfoyle, wrote a commentary about Pine Springs Preparatory Academy in Holly Springs to illustrate their argument against charters taking PPP money. The post was shared by national media.

Pine Springs is managed by Triangle Education Organization, which received more than $550,000 in PPP money despite having what Burris and Kilfoyle described as a “healthy fund balance of $1.3 million.”

“At Pine Spring’s Prep, there was not a penny in revenue lost other than the inability to run a modest fundraiser. But the [Board of Director’s] minutes reflected no hesitation as the board took more than a half-million dollars, even as businesses all over North Carolina collapsed,” they wrote.

Natalie Beyer

Natalie Beyer, a member of the Durham school board and outspoken critic of the manner of in which charter schools are funded in North Carolina, voiced similar concerns about charters receiving PPP.

“Charter schools in North Carolina continued to receive their full federal, state and local funding and never needed PPP funding in order to pay their employees or budgeted expenses,” Beyer said. “Applying for and taking these funds was clearly ‘double-dipping’ at the taxpayer’s expense and hurt small businesses and struggling workers.”

Beyer said charters should return the PPP money. “I hope North Carolina charter school leaders will return these funds much like Ruth’s Chris Steak House, Shake Shack and other businesses did,” she said. “That would be the honorable thing to do for taxpayers and public accountability.”

Charters are public schools funded primarily by local and state governments, but some were eligible for PPP because the nonprofits that manage them are small businesses.

In response to Policy Watch questions about the school’s decision to take PPP funds, Pine Springs Head of School Bruce Friend submitted answers on behalf of the school’s board of directors.

The board answered “Yes” when asked if it thought taking the money was appropriate. PSPA followed the law and obeyed the rules governing PPP, the board said.

Bruce Friend

“Pine Springs Preparatory Academy applied because of uncertainty in per pupil state and local funding and uncertainty in enrollment due to the real and unknown impact of the pandemic,” the board said. “Pine Springs Preparatory Academy applied for and received a PPP loan. Funding was used for payroll purposes.”

Asked if traditional public schools should receive PPP, the board said that’s a question for Congress, which wrote the law.

“Public charter schools do not receive some funding that is available to traditional public schools,” the board said. “The biggest example of this is capital funding for school facilities. Charter schools do not receive capital dollars for school facilities and have to use operating dollars that are intended for teacher salaries, health benefits and retirement. Public charter school board members are volunteers and give unselfishly of their time without compensation. Traditional public school board members do receive compensation.”

Some charters received PPP loans as well as grants from the first round of CARES money allocated to North Carolina; Pine Springs did not. It was among approximately 56 North Carolina charters deemed ineligible for initial COVID-19 relief aid. That’s because the schools did not receive Title I funding the previous year or they requested waivers from that program. Title I awards money to districts that enroll a high number of children from low-income families. Funding is based on student enrollment, the percentage of students receiving free or reduced-priced lunches and other such data.

State officials reported that 147 public charter schools did receive allocations via the Title I formula distribution.

The non-Title I schools, however, did qualify for a slice of $39 million in Elementary and Secondary School Emergency Relief Funds the state received. According to the U.S. Department of Education, the money may be used to provide “equitable services” to charter schools that were ineligible for aid during the first round of COVID-19 relief money due to their Title I status.

Dave Machado, director of the state Office of Charter Schools, told the State Board of Education earlier this month that the charters that did not receive aid initially also had expenses related to the pandemic that their budgets were not equipped to handle.

“I’ve heard from many leaders talking about how difficult it was to transition [to remote learning], the expenses they had to take out of their regular operating budget,” Machado said. “Many, almost all, of these schools had to buy devices for their students who could not afford devices. They had to buy some devices for teachers. They had to provide hotspots for families, and believe it or not, there were some teachers who did not have internet access. All schools had to do a very deep cleaning so their families would be comfortable if they did have to return to buildings. And they had to buy PPE (personal protective equipment).”

Congress set aside approximately $13.2 billion of the $30.75 billion allotted to the Education Stabilization Fund through the CARES Act for the ESSER fund.

The fund has been the source of much controversy and the subject of a lawsuit filed by the NAACP against U.S. Secretary of Education Betsy DeVos.

The secretary is under intense scrutiny for enacting policies her critics complain siphon away emergency COVID-19 relief funds from economically disadvantaged public schools to give to wealthy private schools.

The NAACP charges that DeVos changed the aid rules to allow K-12 schools in wealthy districts to benefit from money intended for schools in economically disadvantaged communities.

“Amid a national health crisis, Education Secretary Betsy DeVos is robbing public school children of desperately needed relief and diverting it to private schools,” Derrick Johnson, president and CEO, NAACP, said in a news release. “This is a new low, even for an administration intent on promoting inequality in education.”

Similar lawsuits have been filled in cities and states across the country.

DeVos, through the Department of Education, offered guidance to states in an “interim final rule” the department issued regarding the use of federal relief funds. “The pandemic has harmed all our Nation’s students by disrupting their education. Nothing in the CARES Act suggests Congress intended to differentiate between students based upon the public or non-public nature of their school with respect to eligibility for relief,” the document said.

[Disclosure: The North Carolina Justice Center, a private nonprofit and parent organization of NC Policy Watch, applied for and received PPP funds.]

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Greg Childress
Greg Childress

Education Reporter Greg Childress covers all aspects of public education in North Carolina, including debates over school funding, curricula, privatization, and teacher pay and licensing.