The Management Company Dilemma, Part I

I am going to start a new series, discussing the "hot topics" in charter land. Recently the subject of management companies has dominated many conversations; popping up in discussions about charter denials, charter revocations, contract issues, funding and authorizer oversight.

Management companies are routinely called "education management organizations" (EMOs) or "charter management organizations" (CMOs). But the type of service an EMO provides varies; i.e., some have a central office for almost all business services, while others expect each school to have their own business services.

One gray area is the fact that some EMOs consider the principal and teachers their own employees, which makes them eligible for private retirement accounts instead of PERA. The question then arises, if these are considered "private" employees, are they still covered under governmental immunity laws? I would bet that many of the teachers enjoying their private retirement accounts have never considered the liability possibilities. It's very common for the principal to be an EMO employee, but we're beginning to see more staff members included in this policy. This will probably remain a gray area until there's litigation to bring clarity to these laws.

In Colorado, an authorizer cannot enter into a charter contract with a management company. This means that several EMOs have come into the state and recruited board members. This has proven to be both very effective and very problematic. The charter contract is executed between the authorizer and the charter board. In effect, the board employs the EMO by executing a performance agreement with them.

This gets tricky if the charter board believes the EMO has not fulfilled its obligations under the performance agreement. For example, if the students are not making sufficient academic gains, and the charter school wants to utilize a different piece of curriculum that is not acceptable to the EMO, who makes that final decision? What if making the decision to change curriculum is a deal-breaker and the EMO pulls out? With the provisions in many EMO contracts, that means the charter board would be holding a charter on paper only -- the school's assets, curriculum and facility usually belong to the EMO.

Related to this dilemma, since the EMO employs the principal, what happens if the board and the EMO disagree on whether or not that principal should be retained or fired? There's typically mutual collaboration in the decision of who is hired, but what happens when the situation turns sour?

The degree of autonomy or authority a charter board have at an EMO-operated charter school also varies greatly. I know boards that have never seen a financial accounting of the full per student amount for their school. When one school couldn't hire a specific position, they didn't have the authority to reallocate the money saved from that delayed hire. In fact, the board had never seen any financial accounting other than the 5% under their discretion.

How does a charter board implement the school's vision and mission without control over the finances? Typically, the situation works well when everything is going smoothly and the EMO is doing a good job of operating the school. It's when there are problems, that they seem to exacerbate by a strained relationship between the charter board, the EMO and the authorizer.

I'll conclude this discussion in Part II.