the New York Daily News. Democracy Now! May 7, 2010
: Juan, before we move on to the Gulf, you
have a very interesting column in the "New York Daily
News" today, an exposé around big banks and .
JUAN GONZALEZ: Yes, Amy, one of the things I've been
trying now for a couple of years is to try to figure
out why is it that so many hedge fund managers, wealthy
Americans, and big banks, - executives
of Wall Street banks, have all lined-up supporting and
getting involved in the development of charter schools.
I think I may have come across one of the reasons.
There's a lot of money to be made in charter schools,
and I'm not talking just about the for-profit
management companies that run a lot of these charter
schools. It turns out that at the tail end of the
Clinton administration in 2000, Congress passed a new
kind of tax credit called a New Markets tax credit.
What this allows is it gives enormous to banks and equity funds that invest in
community projects in underserved communities and it's
been used heavily now for the last several years for
charter schools. I have focused on Albany, New York,
which in New York state, is the district with the
highest percentage of children in charter schools,
twenty percent of the schoolchildren in Albany attend
are now attending charter schools. I discovered that
quite a few of the charter schools there have been
built using these New Markets tax credits. What happens
is the investors who put up the money to build charter
schools get to basically or virtually double their
money in seven years through a thirty-nine percent tax
credit from the federal government. In addition, this
is a tax credit on money that their lending, so they're
also collecting interest on the loans as well as
getting the thirty-nine percent tax credit. They piggy-
back the tax credit on other kinds of like historic preservation or job creation or
The result is, you can put in ten million dollars and
in seven years double your money. The problem is, that
the charter schools end up paying in rents, the debt
service on these loans and so now, a lot fo the charter
schools in Albany are straining paying their debt
service- their rent has gone up from $170,000 to
$500,000 in a year or- huge increases in their rents as
they strain to pay off these loans, these construction
loans. The rents are eating-up huge portions of their
total cost. And, of course, the money is coming from
the state. One of the big issues is that so many of
these charter schools are not being audited. No one
knows who are the people making these huge windfall
profits as the investors. Often, there are interlocking
relationships between the and the
nonprofit groups that organize and syndicate the loans.
And, from the New York Times.
Charter schools and hedge funds
When Attorney General Andrew M. Cuomo wanted to meet certain members of the hedge fund crowd, seeking donors for his all-but-certain run for governor, what he heard was this: Talk to Joe.
That would be Joe Williams, executive director of a political action committee that advances what has become a favorite cause of many of the wealthy founders of New York hedge funds: charter schools.
Wall Street has always put its money where its interests and beliefs lie. But it is far less common that so many financial heavyweights would adopt a social cause like charter schools and advance it with a laserlike focus in the political realm.
Hedge fund executives are thus emerging as perhaps the first significant political counterweight to the powerful teachers unions, which strongly oppose expanding charter schools in their current form.
After hearing from Mr. Cuomo, Mr. Williams arranged an 8 a.m. meeting last month at the Regency Hotel, that favorite spot for power breakfasts, between Mr. Cuomo and supporters of his committee, Democrats for Education Reform, who include the founders of funds like Anchorage Capital Partners, with $8 billion under management; Greenlight Capital, with $6.8 billion; and Pershing Square Capital Management, with $5.5 billion.
Although the April 9 breakfast with Mr. Cuomo was not a formal fund-raiser, the hedge fund managers have been wielding their money to influence educational policy in Albany, particularly among Democrats, who control both the Senate and the Assembly but have historically been aligned with the teachers unions.
They have been contributing generously to lawmakers in hopes of creating a friendlier climate for charter schools. More immediately, they have raised a multimillion-dollar war chest to lobby this month for a bill to raise the maximum number of charter schools statewide to 460 from 200.
The money has paid for television and radio advertisements, phone banks and some 40 neighborhood canvassers in New York City and Buffalo — all urging voters to put pressure on their lawmakers.
Teachers unions have historically opposed charter schools — which receive taxpayer funds but are privately run, and whose teachers usually are not unionized — contending that they drain money from regular public schools.
The United Federation of Teachers, the New York City union, has taken notice. It is sending its own message over the airwaves: that fat-cat charter supporters are “spending over a million on false attacks against teachers and public schools.”
Before now, said Boykin Curry, a partner in Eagle Capital Management, who attended the breakfast with Mr. Cuomo, “A lot of hedge fund and finance people in New York had decided state politics was too dirty and focused on their philanthropy.” Mr. Curry added, “I think there’s an awakening now that we can be a force in Albany, but we’ve got to play a tougher game than before.”
Mr. Williams, a former education reporter for The Daily News, has intensified his activities, hiring Bradley Tusk, who managed Mayor Michael R. Bloomberg’s re-election campaign last year, and top Albany lobbyists including Patricia Lynch, a former aide to Sheldon Silver, the Assembly speaker, who will be crucial to the success of any charter bill in the Legislature.
Late last month, Education Reform Now, a related advocacy group also run by Mr. Williams, received a promise of $1 million from the Robin Hood Foundation, a Wall Street charity, in recognition that “this is an all-hands-on-deck moment,” said David Saltzman, its executive director.
Last week, a bill to raise the cap on charter schools passed in the State Senate by a ratio of three to one, with a number of Democrats in support. It is now in the hands of the Assembly, where charter proponents have been in the minority.
Critics of charter schools suggest that their sometimes stellar academic results are deceptive because they enroll relatively few students who do not speak English or require special education, or both.
The cap-lifting bill passed by the State Senate got through in part because it requires charter schools to take on more of those students.
But with their lobbyists, phone banks and door-to-door canvassers, the pro-charter forces are turning up the heat by invoking the June 1 deadline by which the state must apply for $700 million in education grants from the federal government in the competition known as Race to the Top, which promotes charter school growth as one of its many goals.
Mr. Silver, in a statement on Friday, said his Democratic majority conference would review issues related to the Race to the Top “in the near future.”
Meanwhile, many hedge fund managers are expected to attend a $1,000-a-ticket fund-raiser on Wednesday at the Harvard Club for Assemblyman Sam Hoyt of Buffalo. Mr. Hoyt, a Democrat and a charter school supporter, acknowledged that the money could help — but only so much.
“Compared to the resources that the teachers union has, it’s not enough,” he said. “Some big-shot millionaire is not going to go ring doorbells and get hundreds of people in a phone bank.”
The issue of charter schools in some ways crosses party lines, although there is no Republican equivalent of Mr. Williams’s Democratic political action committee. There does not have to be one: Many Republican officials readily embrace charter schools, whose ideological roots are in a free-market model of education.
Much of the policy around reforms that charter schools embody — rewarding teachers based on student gains; having longer academic years; emphasizing discipline — has been promoted by conservative research groups like the Hoover Institution and the Thomas B. Fordham Institute.
Former President George W. Bush supported charter schools, but so does President Obama — which has given political cover to many Democratic supporters to be more outspoken.