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$750,000 check forestalls charter schools’ pain

The founder of Harvest Prep and Best Academy schools has been tapped by MPS to open four new “Mastery” schools over the next 10 years.

Eric & Ella Mahmoud

In December, Eric Mahmoud got what would ordinarily be the charter school founder’s equivalent of a visit from the Publisher’s Clearinghouse Prize Patrol: A $750,000 check from the Robins, Kaplan, Miller & Ciresi Foundation for Children.

The founder of the odds-beating Harvest Prep and Best Academy schools, Mahmoud has been tapped by Minneapolis Public Schools to open four new “Mastery” schools over the next 10 years. The first is expected to begin operations in fewer than five months.

In short, Mahmoud’s wish list is so long he easily could have spent the donation in minutes. Instead, he used the foundation money — actually structured as a very low-interest loan — to forestall some of the borrowing the schools were forced to do by last year’s state school aid shift.

“Incredibly generous” as it was, Mahmoud said yesterday, the contribution was just one plank of a crazy quilt of $3.2 million in stop-gap financing that’s keeping the doors of his two existing schools open. Funding of $1.25 million over the next three years from St. Paul’s I.A. O’Shaughnessy Foundation and a loan from the Nonprofits Assistance Fund (NAF) will forestall some of the pain.

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Further softening the blow, the education-reform-oriented RKMC came up with another $200,000 to support professional development at the schools, and O’Shaughnessy will contribute $300,000 over the next three years. Still, the schools will spend hundreds of thousands of dollars on interest payments and not on new teachers, textbooks or extra-curricular activities — or next fall’s new school.

Other charter leaders with less enviable track records? Without the state as guarantor like their mainline public school counterparts, they are forced to borrow at loan costs of up to 23 percent, according to a report released last year by NAF, Charter School Partners and the Minnesota Association of Charter Schools. Some will not be able to stay open, the survey suggested.

Dayton veto

Cash-strapped as they are, most educators yesterday applauded Gov. Mark Dayton’s veto of legislation that would have tapped the state’s newly replenished reserve fund to accelerate the repayment of last year’s school aid shift. No matter what type of school they run, none is satisfied with Minnesota’s broken school funding system, which repaying some of the shift early would not begin to address.

And for mainline public schools, it’s not even that much money. After February forecast of a surplus, the withholding was reduced to 35.7 percent. The bill vetoed would have brought the delay to 30 percent.

But the veto was bittersweet for charter schools, for whom the burden is truly disproportionate. St. Last year, Paul Public Schools, the state’s largest district, anticipated having to borrow $30 million because of the 60-40 shift, at a cost of about $450,000 over the course of the biennium. That half-a-million dollars will be made up by the $50-per-pupil increase in state aid negotiated by Dayton, even if it is money most taxpayers would rather not be handing to the bonds issuers.

Adding insult to injury, this is the third year running that charter schools have had to borrow to cope with a state holdback; the last two were 27 percent and 30 percent. And because they traffic mostly in human potential and don’t have a lot of assets to pledge as collateral, they get hosed, to use the technical term.

The cumulative pain of ’09 and ’10 was great enough that last March the Nonprofits Assistance Fund, Minnesota Association of Charter Schools and Charter School Partners (CSP) issued a joint report detailing the impact the shifts had had on the state’s 149 charters.

Requests got no traction

During last year’s legislative session, the groups asked lawmakers to either allow them access to the state guarantees that give other districts favorable credit terms or to reduce their shift to a more manageable 15 percent. Neither request gained traction.

Nor did lawmakers take up the problem this year, focused as the GOP leadership was on pushing through the repayment package, which offered the twin political advantages of allowing those campaigning for re-election to try to assuage voter anger over education cuts and denounce Dayton as the real penny-pincher behind schools’ woes.

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Making debt repayment the first priority when there’s a surplus is simply prudent financial management, House Education Finance Committee Chair Pat Garofalo (R-Farmington) insisted in an opinion piece published today on MinnPost.

“That tactic is superficially appealing,” Dayton countered in his veto letter to House Speaker Kurt Zellers yesterday. “However, the same people must pay off either the school debt or state debt: the people of Minnesota.”

Better, he said, to shore up the budget by closing a loophole that allows corporations to avoid paying taxes on their foreign operations.

‘Bumper-sticker thinking’

For his part, Education Minnesota President Tom Dooher called the repayment plan “bumper-sticker thinking.”

“We need to find long-term solutions for our inconsistent and insufficient school funding system,” Dooher said. “This bill would raid the state’s reserves to pay down a slice of the $2.4 billion owed to our schools, but has no plan for repaying the rest.”

In reality, according to the Association of Metropolitan School Districts and others, the vetoed bill would not have provided new money and thus would not have allowed districts to recall laid-off teachers, reduce class sizes or bolster programming that has been stripped to bare bones. And it wouldn’t do anything to address the funding system, which a state task force last year said needed a wholesale overhaul.

The bottom line, in Mahmoud’s view: “The financial struggle is going to hamstring schools that have had a proven effect on the achievement gap.”