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.
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“.