Small business loan data show big payday for private schools that also get public funds

By: - July 10, 2020 4:36 pm
Milwaukee public school teachers, parents, students and supporters staged a large picket line outside MPS administration building on Vliet Street on Milwaukee's west side on April 24, 2018. (Photo by Charles Edward Miller/Creative Commons CC BY SA 2.0)

Milwaukee public school teachers, parents, students and supporters staged a large picket line outside MPS administration building on Vliet Street on Milwaukee’s west side on April 24, 2018. (Photo by Charles Edward Miller/Creative Commons CC BY SA 2.0)

When the federal government created its small-business loan program in response to the COVID-19 pandemic, it was clear from the start that public schools would not be eligible for the aid.

But data for Wisconsin released on Monday shows a large number of voucher and charter schools that describe themselves as public schools, and receive public money, have also received millions of dollars in Paycheck Protection Program (PPP) loans meant for small businesses.

Under PPP rules, they will probably not have to pay the money back.

Nonprofit organizations are eligible to apply for PPP loans (which is how Harvard University received millions of dollars it later returned after a public outcry).

Among the nonprofits with ties to voucher and charter schools that have taken advantage of the PPP program in Wisconsin are the Silver Spring Neighborhood Center ($150,000 to $350,000) the Running Rebels Community Organization, Inc. ($350,000 to $1 million) and Time of Grace Ministry ($150,000 to $350,000).

The Wisconsin Lutheran High School Conference received between $1 and $2 million, and Wisconsin Montessori Society received between $350,000 and $1 million.

The Small Business Administration (SBA) reports the loans as a range, rather than disclosing specific loan amounts because, in making the names of loan recipients public, the Trump administration is  “striking the appropriate balance”  between public transparency and protecting the privacy of payroll and personal income information of small businesses, Treasury Secretary Steven Munchin explains on the SBA website.

Some religious organizations that received loans are not listed as schools, but are using the money for school staff. These include St. Marcus Evangelical Lutheran Church Inc. which received between $1 million and $2 million that went to the St. Marcus School, according to the school’s superintendent Henry Tyson.

Between $35 million and $85 million for Milwaukee choice schools

The Milwaukee Teachers Education Association (MTEA) used a publicly available database of SBA loans to compile a list of 72 privately run (but publicly funded) Milwaukee schools that received a total of between $35.2 million and $85.2 million in PPP funds. Many are independent charters, including the Carmen High School of Science and Technology and Milwaukee College Prep which each received between $2 million and $5 million.

Milwaukee College Prep CEO Rob Rauh says the school returned its PPP loan on June 19, which he had applied for as an “insurance policy” against an economic downturn and rumored state education budget cuts in the midst of the pandemic.

“Once we were pretty certain these things were not going to occur we returned the money,” says Rauh

Milwaukee College Prep, like other independent or “non instrumentality” charter schools, are not governed by the school board, but advertise that they are public schools on their websites and receive a portion of the Title I federal funds that go to all Milwaukee Public Schools.

Yet, unlike regular public schools, they can also avail themselves of millions of dollars in small business loans, because, for the purpose of the Paycheck Protection Program, they can describe themselves as private businesses.

‘Double dipping’ by taxpayer-funded private schools

“In the midst of a health and economic crisis, the operators of private charter and voucher schools are showing their true colors,” says Amy Mizialko, president of  MTEA. “Taxpayer-funded private schools are double dipping in resources meant for struggling businesses while claiming to be public schools, and our government is letting them have their cake and eat it too.”

Rauh says that he did not know when he applied for the PPP loan that public schools were not eligible.

“It’s unfortunate that’s the way the program is designed,” he says. “My assumption was that anyone who has a payroll was eligible to apply.”

But the controversy over that issue had nothing to do with College Prep’s decision to return the money, he says, which happened last month before the PPP loans were made public.

“Some reassurances from people we talk to” that state education funding would not be cut, along with the news that schools would be receiving CARES money as well as a brightening revenue picture for the state drove the decision to return the money, says Rauh. When he applied, he adds, “there was a chance we would be facing severe cuts. It wouldn’t have been just to our students and staff not to apply.

Rauh and Tyson, superintendent of St. Marcus School (the voucher school where Education Secretary Betsy DeVos gave a speech last September praising the school and promoting school choice) were outspoken opponents of the $87 million referendum that passed in Milwaukee on April 7. Milwaukee residents voted by a margin of 78% to raise their own taxes to increase spending on the public schools. Rauh and Tyson, in an opinion piece, described the referendum as unfair, because the money will not go to privately run charter and voucher schools.

The high end number for PPP relief for those 72 privately run schools in Milwaukee is, coincidentally, close to the amount of money the Milwaukee Public School District will receive after the referendum goes into full effect in a couple of years.  Yet MPD operates 137 schools — almost twice as many schools as the private school PPP recipients.

Referendum vote versus a quick grant application

“Educators, parents and community leaders worked tirelessly and voters braved a pandemic to vote — overwhelmingly — to bring much needed revenue into our public schools,” said Mizialko. “All the government required of private schools was a quick grant application to get possibly twice what the referendum raised for public schools.”

Tyson responds that comparing the referendum to the PPP money is comparing “apples to oranges.” “They are entirely different things for different purposes,” he says.

“Accepting PPP money helped us guarantee we wouldn’t need to lay people off,” he adds. “Whereas the referendum was much more a question of does the district deserve to get this money … it was a bad use of taxpayer money.”

Public school advocates point out that Milwaukee public schools serve a population with 20% special needs children, while voucher and charter schools serve far fewer special-needs kids.

MPS speech pathologists, physical therapists and other support staff are also required by law to provide their services to students in the city’s voucher and charter schools.

DeVos sends more money to private schools 

Chris Thiel, a legislative policy specialist for MPS, points to four pools of money voucher and charter schools can access: “One, they continue to get state money; two, it looks like the vast majority, if not all of them, received the PPP money; three, I believe that they are eligible for family and sick leave tax credits that public schools were excluded from. And now, Secretary DeVos, has created a rule that goes against long-established Title I law — and everybody, including Sen. [Lamar] Alexander, the Republican chair of the Education Committee, knows that this is not how it is supposed to work.”

Alexander has publicly disagreed with DeVos over her plan to change the way Title I funds, which the federal government distributes to schools that serve low-income students, are allocated, so that more money flows to private institutions. Under DeVos’ rule change $13.2 billion in CARES Act aid to K-12 schools nationwide (including an estimated $174.8 million for Wisconsin schools) would go to private schools based on population instead of income. This could open the door for high-tuition private institutions that serve wealthy families to deplete the emergency funds.

“Financing two systems of education in the same city — public schools and a privately operated, ​publicly funded system of education is one of the reasons MPS was forced to go to referendum,” says Mizialko.

“Private voucher and charter schools always maintain they are running schools, not profit-making businesses,” she adds. “But it’s clear that private vouchers and charters play both sides of the street to benefit financially while public school students go without basic learning resources. I think it’s certainly a questionable policy decision to give out these kinds of very broad sweeping “small business” loans to entities that are not small businesses.”

On the question of whether it is unfair for private schools to get a share of public-school funding, while also representing themselves as private businesses for the purpose of applying for PPP loans, Tyson says, “We are in every way a private organization. The state has chosen to give parents a voucher. Those parents choose to bring the voucher to us. That in no way makes us a public entity.”

St. Marcus raises about $2 million each year in private donations, Tyson says. “We receive $7,500 in [public school] revenue for each kid. You simply can’t educate predominantly low-income, African American kids on $7,500 a year.”

“We raise a lot of money to educate those kids. That’s why we’re a five-star school,” Tyson adds.

Data from the Department of Public Instruction shows that in October 2019 there were 130 private schools operating in the Milwaukee Parental Choice Program (MPCP) with a total enrollment of 28,978 and 28,147 full-time equivalent students (Some children, including those in four-year-old kindergarten count as less than one full-time student for state funding purposes). The 2019-20 state aid payment for children enrolled full-time in MCPC school in kindergarten through eighth grade is $8,046 and $8,692 for a student enrolled full-time in grades nine through twelve.

‘Irresponsible’ not to accept the loan

In the COVID-19 crisis, “it would have been irresponsible not to accept the PPP loan,” Tyson says. New expenses, including for adjusting staffing, ventilation and quarantine space, “plus the real possibility of decreased funding made it necessary to accept the PPP money.”.

Jim Bender of School Choice Wisconsin also defends the idea that voucher and charter schools deserve help through both the PPP and CARES Act programs.

“MPS and MTEA struck a full pay/no work deal that shut down formal education for the district for the entire fourth quarter while private and charter schools all over the city were still providing formal, virtual education, incurring new expenses to support their kids academically,” Bender writes in an email to Wisconsin Examiner. “How about we leave the discussion over PPP and CARES Act funding to those who actually educated kids?”

Meanwhile, the scramble for school funding continues.

Attorney General Josh Kaul has joined a coalition of six attorneys general from other states in a lawsuit against DeVos for her “ unlawful attempt to siphon pandemic relief funds away from K-12 public schools.”

As a result of a rule change pushed by the Department of Education, “an estimated $4,184,515.64 in Wisconsin alone could be diverted away from taxpayer-funded public schools in our poorest school districts to private institutions — in violation of the requirements established by Congress, the Administrative Procedure Act, and the U.S. Constitution,” the Wisconsin Department of Justice states in a press release.

The Wisconsin Public Education Network (WPEN) sent out an appeal on Friday urging Wisconsinites to call their senators and express their support for the HEROES Act. It would offer $60 billion for public education, but has been stalled in the Senate after passing the House of Representatives.

“This grotesque exploitation of a crisis that should have brought us together to support all kids reveals the extent to which privateers are willing to force the vast majority of students to pay the price of their greed,” says Heather DuBois Bourenane, director of WPEN. “If this shameless pursuit of public funds with little transparency, and even less accountability, doesn’t force folks to recognize that the voucher scam was never about helping all students succeed, I don’t know what will.”

This piece has been updated to add DPI data on enrollment and state funding for Milwaukee Parental Choice Schools, and the table of 72 Milwaukee schools and nonprofits that run choice schools that received PPP loans (below).

Correction: an earlier version of this piece mentioned the Bradley Family Foundation as a nonprofit with ties to voucher and charter schools. The Bradley Foundation, which supports the arts, is separate from the Bradley Foundation, which supports voucher and charter schools. The Examiner regrets the error.

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Ruth Conniff
Ruth Conniff

Ruth Conniff is Editor-in-chief of the Wisconsin Examiner. She formerly served as Editor-in-chief of The Progressive Magazine where she worked for many years from both Madison and Washington, DC. Shortly after Donald Trump took office she moved with her family to Oaxaca, Mexico, and covered U.S./Mexico relations, the migrant caravan, and Mexico’s efforts to grapple with Trump. Conniff is the author of "Milked: How an American Crisis Brought Together Midwestern Dairy Farmers and Mexican Workers" which won the 2022 Studs and Ida Terkel award from The New Press. She is a frequent guest on MSNBC and has appeared on Good Morning America, Democracy Now!, Wisconsin Public Radio, CNN, Fox News and many other radio and television outlets. She has also written for The Nation, The New York Times, The Washington Post, and The Los Angeles Times, among other publications. She lives in Madison, Wisconsin with her husband and three daughters.