'I can't believe it's not a crime': Brnovich says lawmakers must pass charter school reforms
Craig Harris
Arizona Attorney General Mark Brnovich is calling for new legislation to provide more oversight of the state's charter schools in response to the latest Arizona Republic investigation into financial dealings at a major online school.
Brnovich's remarks came after the Republic reported that Primavera online charter school, which has a dropout rate that's 10 times higher than the state average, paid Chief Executive Damian Creamer an $8.8 million shareholder distribution. The investigation also found Primavera amassed a $36 million investment portfolio from its share of state education funds instead of using that money to pay teachers and lower class sizes.
"I'm not only shocked, but I'm disappointed," Brnovich told The Republic. "When you see public money go to line the pockets of someone who is supposed to help students become a millionaire, I can't believe it's not a crime."
Brnovich, a Republican running for re-election, said he's making his views public in hopes that candidates for the Arizona Legislature will join him in pursuing charter school reform.
"As a taxpayer and as the attorney general, there has to be a mechanism in place to make sure that charter schools ... operators are not enriching themselves at the expense of students," said Brnovich, who has two daughters in charter schools. "You shouldn't become rich feeding at the public trough."
A call for more transparency
Current state law impedes his office from fully investigating charter schools, Brnovich said. That's because the Legislature has exempted charter schools from procurement and conflict-of-interest laws that traditional district schools are subject to.
Brnovich said lawmakers should pass legislation that:
- Allows the state auditor general to investigate the finances of charter schools. Currently, the auditor general can investigate only traditional public schools. Charter schools receive up to $2,000 more in per-pupil state funding than district schools.
- Requires charter schools to segregate public funds from private funds in businesses related or tied to the charter school. Arizona permits for-profit businesses to own charter schools.
- Gives the Arizona State Board for Charter Schools more oversight powers.
"If the Auditor General can't get in to look at the finances, that creates obstacles," Brnovich said. "Now, once you get the check from the state, you can do what you want. At that point, there is no oversight."
Brnovich said The Republic's reporting on Primavera putting millions of dollars into investments, including the stock market, is an example of what can happen with a lack of state oversight.
"If someone can put money into an investment account, there is no benefit for the student," he said.
Regarding the Arizona State Board for Charter Schools, Brnovich said it evaluates only charter schools' financial viability, not potential financial malfeasance.
Ashley Berg, the Charter Board's executive director, called the board an "objective enforcement body" that operates "to implement the law as it exists and to ensure that all charter schools and charter operators follow those laws."
Brnovich expressed optimism that his ideas will get traction. Republican lawmakers often discuss transparency and accountability regarding public schools' use of tax dollars, and his proposals would be steps in that direction.
And Democrats in the Legislature have in the past drafted bills to require charter schools operate with the same financial transparency as district schools. Most of those bills, however, never got a hearing.
Primavera responds
Despite numerous requests for Primavera online charter school to respond to questions, school officials provided no comment on The Republic's reporting before publication.
Jason Rose, a Primavera spokesman, said last week that the $8.8 million distribution given to Creamer was used to pay current and projected state and federal income taxes associated with the company's profits.
Primavera, as a private company, is taxed as a subchapter "S" corporation, in which the stockholder — Creamer — is responsible for the school's state and federal income taxes based on its profits.
MORE: Allhands: Do charter schools cherry-pick students? AzMERIT data says no
Rose declined to disclose the profits used to calculate Creamer's tax liability, nor would he say if Creamer was using the distribution to pay taxes on income earned outside of Primavera.
Rose added that Primavera will use the state money it invested in recent years to start new charter schools in Arizona.
"I don't mean to pick on the attorney general, but you would think people would root for education enterprises to be successful," Rose said. "We should want schools and entrepreneurs to pay as much in taxes as they can because that means they are succeeding and the market is responding to them."
Brnovich said, "If you are in a situation where a charter school is paying $8.8 million in taxes, that is a problem most public or private entities would love to have. That would mean someone is making a boatload of money."
Primavera, after becoming a private company on July 1, 2015, recorded about $14.5 million in profits in fiscal 2016 and 2017, records filed with the state show. It's unknown whether the company made a profit in the most recent fiscal year, which ended June 30.
Rose said he was surprised that Brnovich, a conservative Republican with ties to the free-market Goldwater Institute, would be so critical of charter school finances.
"Where does it end on how much money someone can make?" Rose said.
Others open to changes
Brnovich said that although his office has limited powers to investigate charter schools, it is continuing a criminal investigation into Goodyear's Discovery Creemos Academy, which abruptly closed in January because of financial and academic problems.
The Charter Board, despite concerns about the school's academic and financial performance, had voted unanimously last year to allow the school to operate for at least 20 more years.
MORE: Roberts: Primavera charter CEO scores $8.8 million, kids score failing grades. Outrage?
Brnovich is the latest statewide officeholder to call for reform of the 500-plus publicly funded Arizona charter schools.
State schools Superintendent Diane Douglas, a Republican whose re-election bid was cut short in Tuesday's primary, had also said in response to the Republic's reporting on charter finances that the schools need more oversight.
Republican Gov. Doug Ducey has said he's not concerned about CEO pay at Primavera or other charter schools but rather student performance. Ducey has received campaign contributions from Creamer and his wife.
Asked about the attorney general's proposal, Daniel Ruiz, a Ducey's spokesman, said in an email that the governor is open to reforms that protect taxpayers and improve educational opportunities. He did not elaborate.
ABOUT THIS REPORT: Throughout 2018, investigative reporter Craig Harris examines the finances of some of Arizona’s most prominent charter schools to reveal how they spend the tax dollars they receive, who profits off the operations, and what those deals mean for the future of education.
Reach the reporter at craig.harris@arizonarepublic.com or 602-444-8478 or on Twitter @charrisazrep.
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