Friday, December 16, 2011

Academica: A Case Study In The Privatization of Public Education

Huck/Konopacki Labor Cartoons
Academica is Florida’s largest and richest Educational Management Organization (EMO), with over 60 schools, 20,000 students, and $158 million in annual revenue, the Miami Herald reported this week. It is also one of the largest in the country. The EMO is so successful, in fact, that their CEO, Fernando Zulueta, sends his principals to weekend “professional development” retreats at an exclusive resort in the Bahamas, complete with champagne and a casino.

According to the Herald, Academica receives more than $9 million a year in management fees just from its South Florida charter schools, all coming from public tax dollars. However, through two dozen other companies, Zulueta and his brother control more than $115 million in South Florida real estate which is leased to public schools at a profit (nearly $20 million per year), but which is exempt from property taxes. (Zulueta and his brother were both real estate developers prior to jumping on board the school privatization gravy train).

While it might seem extravagant to wine and dine public school principals as if they were CEOs or venture capitalists, some of Academica’s principals are also board members at other Academica schools, overseeing management contracts and real estate leases. Thus, they are important human assets in the management of Academica’s financial resources and, like bankers, are often rewarded for doing this well in the form of bonuses and perks that do not exist for traditional public school administrators.

Blurring The Lines Between For-Profit and Non-Profit
Proponents of school choice and charter schools often make the claim that there cannot be a profit motive when charter schools are run as non-profits. However, “non-profit” charter schools are often run by for-profit EMOs, as are many of Academica’s schools. In Florida, for example, Academica has four networks of schools that are each run by a nonprofit corporation. However, they lease from Zulueta’s companies and Academic routinely vets and recommends principals and other personnel, according to the Herald article. This has even included placing a lobbyist for the Florida Consortium of Public Charter Schools, a pro-charter association for which Zulueta serves as an officer, at the helm of one of Zulueta’s nonprofit school boards.

Squeezing Blood From Turnips
One might reasonably wonder how a private company can make so much money running public schools financed through tax dollars when school districts across the country are firing teachers, closing schools and shortening the school year due to shrinking budgets. For Academica (and many others), one source of profits is inflated rents and leases. Several Academica schools, for example, were paying rents for their facilities to Academica at a rate equal to 23% of their total revenue, when the average for Miami-Dade charter schools was only 13.5%. All this extra cash went directly into Academica profits, but it also meant less revenue was available for other expenses like teachers’ salaries, books, teaching supplies and equipment. In other words, less resources and services for the students means more profits for Zulueta.

Occupy the EMOs: The Wall Street Connection
Zulueta has built many of his schools through bonds sold to Wall Street investors, using the schools’ mortgages as collateral, including a $54 million bond in 2004. However, in 2009, Standard & Poor rescinded its rating of Academica bonds for “lack of information” on the company.

Zulueta also relies on a network of cronies to secure many of his land deals. For example, virtually all of his school construction and real estate deals have utilized the same “independent” appraiser to review the deals and the same “independent” attorney to negotiate them with the “independent” nonprofit districts, which calls into question their independence and credibility. The attorney, Charles Gibson, is on the board of the Theodore R. and Thelma A. Gibson Charter School, an Academica-run school founded by Gibson’s grandparents. In what could be seen as kickbacks, the school has received $415,000 in grants and loans from Academica.

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