Collegiate Academy of Colorado – Death Spiral?

This page was originally an answer posted on Feb 11, 2014 to a question posted on Facebook.  You can find the link to it here.  We were requested to re-post this on our site.  We have modified it a bit, both some formating and added information.

I would like to know more about the rumored “$400,000 loan” to some charter school from Jeffco tax funds?

Unfortunately the $400,000 loan is not a rumor, but the truth. The loan is to Collegiate Academy of Colorado. It was approved at the January 16th Board meeting. We covered in one of our first posts, 1-16-14 Board Meeting Summary.

Basically, Charter Schools get State and District funds based on the number of students they enroll. The District has no oversight of their finances. About two years ago the director of CAC (as they refer to themselves) went a little nuts on the budget and the school ended up $300k in the hole (see 9News Report from 2-14-2013). After changing school leadership twice, they finally went to the District, hat in hand, and asked for enough money to keep the school running. The District went ahead and gave them the loan.

In the meantime, the story apparently hit the press and parents started pulling their kids out of the school, worried it was going to fold. This reduced the State and District funds the school got, which made the finances worse, which led more parents to pull kids out, and so on. So in December, CAC came to the Board and asked for $450k line of credit. The Board asked for a business plan on how they were going to replace the 25% loss in students.

In January, CAC came out with the plan, which looks remarkably similar to Blackberry’s “recovery” plan – lots and lots of marketing. The Board approved the loan 3-2, with Witt-Newkirk-Williams voting in favor (hereafter referred to as “WNW”).

CAC is not the only charter school in trouble. At the Feb 6, 2014 meeting, in reviewing the the 2nd Quarter Audit, the auditing firm noted that three other charter schools had either outstanding loans or calls on loans. One of those schools even owes on a past-due bill from a construction contractor for $160k+! All total, the District is either out or has to reserve over $860,000 for these four schools.

They are also seriously considering a new Charter school, Cornerstone, whose current plan includes serving South Lakewood from a location either near Garrison & I-70 (almost in Arvada) or in Evergreen! Their budget plan includes receiving in over $100,000 in donations every year! That school’s overall budget comes in at about $1.7 million per year.

This is one of the big dangers of Charter Schools.  The idea is ‘free schools from the straight-jacket of District regulations’, allowing them to ‘innovate’ in their teaching methods and do it for less money because they do not have to pay their teachers the same salary scale that regular public school teachers get.  But being free from that ‘straight-jacket‘ also means no one is watching over your tax money!  No regular public school would have been allowed to develop a $300k deficit.  In effect, Charter Schools have positioned themselves just like the investment banks prior to 2008 – little or no oversight, cannot be allowed to fail, and the taxpayer (via the District) is the lender of last result.  In finance, we called these “Too Big To Fail”, or TBTF.  Maybe we ought to call these schools, TCTF – “Too Charterized To Fail“.

2 thoughts on “Collegiate Academy of Colorado – Death Spiral?

  1. I believe if you are going to blatantly go after Charter Schools you need to back your information up with actual facts. First, it would be great if you would actually contact the Colorado League of Charter Schools directly when it comes to finance and transparency. Charter Schools are in fact MORE transparent and held MORE accountable than regular public schools. Second, we do NOT receive the same funding than a regular public school in fact we receive $1, 147 less per student AND we also pay back mandatory fees to the district (these fees paid back help support the operation of the district central office and so benefit the district)
    -$324 per pupil in “administrative fee”
    -$370 per pupil for district special education services
    -$115 per pupil for district English as a Second Language services
    -$87 per pupil for “risk management” coverage
    This translates to a 14.5% fee we pay back to the district before financing our school operations which leaves us $5,753 per pupil with which to run our school compared to a non charter which receives $7,896 per pupil.

    Additionally, charter schools are typically responsible for finding their own facilities. This is paid out of operating PPR whereas most district schools have facilities expenses comvered by community bonds.

    IN spite of financial shortcomings, our school is still required to “meet the same standards” as district schools, including:
    -Serving students with Free and Reduced Eligibility
    -Serving students with special needs

    How do we do it?
    -we run extremely lean
    -we pay our employees less and rely on parent volunteers
    -we work tirelessly to fundraise for our school.

    Are we insensitive to the financial challenges of the district? NO
    -we have been impacted by the same cuts
    -like district staff, our teachers have also not received cost of living adjustments for many years.

    All the children in Jefferson County deserve the best possible education no matter what school they attend. The argument that one is more deserving over the other is absurd and lacks any sort of understanding for why charter schools with non traditional educational philosophies even exist or why parents choose them over traditional public schools. It’s time we stop dividing this district and come together for every kid in every school.

    • Thank you for your comment. As we have said many times, we are not anti-Charter, we are anti-poorly run schools and (now!) a poorly run District.

      Our concern with WNW is their seeming attitude that Charter Schools can do no wrong. This is why we have expressed our strong reservations about the two loan refinancings for Collegiate Academy and Mountain Phoenix.
      In both of these cases, the schools already had existing loans from the District that were to enable them to cope with poor financial planning and mismanagement. Instead of that being the end of it, both of these schools have now come back to the Board, needing not only an extension on the original loan payback, but significant increases in the loan amount.

      Collegiate Academy originally had a loan for $50,000, then they came back needing to expand it to $400,000. Mountain Phoenix was originally lent around $79,000 dollars, but now needed $250,000.

      In both cases, the specific budget shortfalls and cost overruns seemed to us to be items that normal good practices should have been able to anticipate and adjust for. The fact it has happened not just once but twice to both of the them is very troubling. The other Charter Schools in the District do not seem to have to be bailed out.

      All we are asking is that the Board do the same kind of due diligence any bank would do for a company in similar circumstances. This has not been done. In both cases, WNW approved the loans without insisting on greater visibility of the schools financial practices, changes in management personnel or procedures, or additional security (if any – we cannot find where any security is offered).

      Our concern over WNWs proposed reduction in the Reserve Fund comes into two forms.

      First we feel that it the height of fiscal imprudence to reduce the fund that is supposed to help the District through economic downturns, especially when the State is forecasting one in the next few years. That reserve fund is what helped keep JeffCo teachers, regular and charter, on the job when other districts were shedding teachers and staff. To not rebuild it back up to where it should be is highly irresponsible.

      Secondly, there is the fact that the funds WNW is wanting to re-purpose come from the 3A/3B mill levy override of 2012. The District specifically promised that the funds would be used to keep existing programs going and not to go to new funding initiatives. WNW is threatening to break that promise. The results of breaking that promise could be loss of faith by the JeffCo taxpayer that could make it extremely difficult to pass future mill overrides. This would make adequate future funding very difficult. We only have to look south the Douglas County to see the kind of turmoil that can result from this type of ill-faith.

      We hope this has clarified our position for you.

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