Nevada charter schools got millions in PPP loans
They’re ‘public schools when it is convenient and something else when it’s not,’ NSEA says
U.S. Secretary of Education Betsy DeVos at a visit to Pinecrest Academy Cadence in Henderson, a charter school managed by the private national management firm Academica, in December 2019. (U.S. Department of Education photo, CC by 2.0)
As state budget cuts have strained the public education system, Nevada’s publicly financed charter schools have been able to shore up operations with millions of dollars from the federal Paycheck Protection Program designed to help businesses and nonprofits.
Nevada charter schools this year accepted $31 million from the Paycheck Protection Programs. The federal funds, which were not available to school districts, allowed charter schools to weather the uncertainty of the state’s economic crisis and keep their budgets mostly whole. Their qualification for — and their acceptance of — PPP funds highlights the quasi-public-private structure of charter schools, which receive state funding but are managed privately.
The Current calculated the $31 million total using data released by the U.S. Treasury in early December. Charter schools overseen by the State Public Charter School Authority received the majority of that money — $27.3 million. However, six charters sponsored by school districts received a combined $4.5 million.
PPP awards ranged from $168,500 to the online charter Leadership Academy of Nevada to $4.6 million to Doral Academy to support its five brick-and-mortar campuses in Southern Nevada. Many of the forgivable loans were coordinated and handled by the same entity, Academica Nevada, a regional branch of the Florida-based for-profit company that manages some 200 charter schools nationwide and has a strong presence in Nevada.
The charters that qualified for PPP money did so because they are incorporated as nonprofits, something Nevada law allows them to do. Even pre-pandemic, being a nonprofit is often financially beneficial because it opens up additional funding opportunities, such as grants through the federal Charter School Program.
In addition to the PPP, charter schools were eligible to receive the same federal relief money set aside for public schools. That included millions of dollars in CARES Act dollars, some of which was distributed proportionally by student enrollment and some of which was distributed by the Department of Education through competitive grants, which were applied for by the State Charter Authority.
National charter school watchdog groups like the Network for Public Education and local education unions accuse charters of double-dipping in federal relief funds and benefitting from a legal loophole that went against the spirit of the PPP.
“As usual, charter schools are public schools when it is convenient and something else when it’s not,” said Nevada State Education Association President Brian Rippet. “Charters continuously adapt their identity to obtain a different result or benefit unavailable to traditional public schools.”
Added Rippet, “Traditional public schools were ineligible for that money and despite the CARES Act funds saw nothing but cuts last summer during the 31st Special Session.”
Those in the charter world counter with an argument that their schools aren’t equitably funded by states to begin with because they do not receive dedicated facility funding, the way district schools do.
“All these funds helped us this one year,” said Academica Nevada Chief Financial Officer Trever Goodsell, adding that charters often spend 15 to 18 percent of their per-pupil dollars on rent. “We’re still funded 20 percent less. It may have narrowed the gap for one year.”
‘Probably not best to be advertised’
One-third of charter schools did not participate in the PPP, according to the Current’s analysis. These schools were either ineligible or were brand new schools whose first year of operation was the 2020-21 school year. Most were ineligible because they are not incorporated as nonprofits. One was ineligible due to its size.
Those that could apply, did. Two-thirds of all charter schools in the state. As one financial officer explained it to a school’s board of directors in the spring, it was a low-risk proposition: a low-interest loan with a high probability of forgiveness.
Pinecrest Academy received $4.6 million to support its five campuses in Southern Nevada. At its school board meeting in May, Goodsell presented the school system’s preliminary proposed budget for the 2021-22 school year, which was due to the state the following month. He also gave a presentation on the PPP.
Goodsell told the board the $4.6 million “saves a lot of jobs” and would help the school “keep the people we need and keep the programs where we are.”
At the time, schools statewide were preparing for 6 to 14 percent budget cuts and the prospect of continued financial strain in future fiscal years.
Goodsell told the board Gov. Steve Sisolak had indicated that cuts would not be unilateral across all public agencies.
Referencing this, Pinecrest board member Craig Sieden asked: “Has there been any chatter, talk, off topic or inside conversations about entities like charter schools who are eligible for PPP and receive funds? Has there been any discussion that you’re aware of that the governor would reduce our budgets for any funds we receive through the PPP?”
Goodsell answered that he hadn’t heard anything of the sort.
“That’s something that’s probably not best to be advertised,” said Seiden, who is also the chief operating officer of Touro University Nevada, “because if I’m the governor, I’m, like, ‘Hey, you’re getting money from the feds, then you don’t need my money.’”
Goodsell replied: “We’re definitely not out there advertising that.”
Although PPP funds were doled out in the spring, the full list of recipients and the amounts awarded weren’t known until early this month, when the U.S. Treasury Department released the information in response to Freedom of Information Act requests and a federal lawsuit brought on by national media outlets.
So where’d the money go?
For their PPP loan to be forgiven, charter schools had to spend at least 75 percent of it on salaries or benefits for employees. The other 25 percent could be spent on expenses like rent, bond payments or utilities.
During his presentations to various schools boards, Goodsell noted that Academica was carefully documenting the spending in binders that could be quickly handed over in the event of an audit. The Small Business Administration, in an effort to deter fraud, had previously indicated it would audit any organization that received more than $2 million.
In an audio recording of the Pinecrest board’s May meeting, one unidentified male board member opines that the school’s $4.6 million loan was “not even close to the decimal point in the big picture” and that he didn’t see any way “they” (presumably meaning auditors) would come after the school for how it spent its money.
“Too many loans and not enough people on their side,” the member added.
Goodsell responded: “We’ll have the binder ready for them anyway.”
Employee costs make up the lion’s share of school budgets, and Goodsell noted to boards at several schools that it would be easy to clear the thresholds set by the PPP.
Goodsell told the Current that even with PPP money and relief funds, budgets at Academica schools weren’t made whole. Staff at schools who received PPP received lower salary bumps than were expected pre-pandemic, for example. Goodsell also said charter schools, which are as a whole newer than district schools, had additional pandemic expenses.
Academica schools altogether received $13.2 million of the $31 million in PPP funds to Nevada charter schools. All of it is expected to be forgiven, according to Goodsell.
All but one Academica Nevada charter school received money through the PPP: Somerset Academy, which operates seven schools across Clark County, did not qualify. Somerset has more than 700 employees across their seven campuses. The PPP was largely restricted to businesses and nonprofits that employ fewer than 500 people.
During their May meeting, the Somerset board reluctantly voted to increase the student-to-teacher ratio within their elementary and middle school grade levels as a way to offset some of their expected revenue losses. (At least one other charter that did not receive PPP loans did the same, according to board minutes reviewed by the Current.) Goodsell at the time explained it as an option beyond cutting hours for employees paid hourly, cutting pay for salaried employees, or layoffs.
Goodsell told the Current salaries were frozen at Somerset, some career and technical education efforts had to be shelved, and duties for programs whose funding had been cut by the legislature were divided among staff. But no jobs were lost there or at any Academica Nevada school.
“That was the number one concern,” he added.
While Academica operates the biggest share of charter schools in the state, other charters also received PPP loans, including some independent schools not part of large networks.
Coral Academy of Science Las Vegas, which operates six campuses, received $2.82 million in funding. Legacy Traditional School, which operates three campuses, received $2.86 million.
Equipo Academy, a charter school that primarily serves low-income students in east Las Vegas, received $862,900 from the PPP. Principal Ben Salkowe said the funds were primarily used to allow staff to work extended hours for community food service and maintain building operations.
“We ran an open free lunch program for any kid who showed up from any school, non-stop from March and through the fall,” he said via email, adding that their program involved partnerships with local restaurants and kitchens that were also feeling the economic strain of the pandemic. “It was one of the most exciting and impactful things we have been able to do through this crisis.”
Both the Department of Education and the State Public Charter School Authority told the Current they had no direct involvement with the PPP loans applied for or received by individual charter schools.
The Nevada Department of Education “is not involved in any way with PPP loans,” said a spokesperson for the Department of Education via email.
Charter School Authority Executive Director Rebecca Feiden said via email, “The SPCSA provided some brief information to schools on the PPP and pointed them to some public resources. However, we did not take a position or provide any specific guidance. Ultimately, it was up to each school as to whether to apply.”
Feiden did note that the Charter School Authority conducts annual assessments, during which they review the financials of schools.
Critics of charter schools believe existing oversight of charter schools isn’t thorough enough and lacks teeth to shut down poor performing schools or address larger issues like inequity in student enrollment. In advance of the 2021 legislative session in February, NSEA is calling on the state to curb the charter school growth through a moratorium, an idea briefly introduced and shelved during the 2019 legislative session.
“The purpose of the PPP was to help certain businesses, nonprofit organizations and sole proprietors stay in business,” said NSEA’s Rippet. “We do not (and should not) look at public education as a business.”
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