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Limiting Charter Growth by Any Means Necessary

Teachers unions in Chicago and Massachusetts are doing their darndest to stop the spread of charter schools.

Amazingly, the Chicago teachers’ strike didn’t come off.  Less than 10 minutes before a midnight strike deadline on October 10th, the district and union cobbled together a deal, pending approval by the rank-and-file. One of the more contentious issues was the so called “pension pick-up.” Teachers in the Windy City are obligated by law to contribute 9 percent of their salaries to their retirement. But in fact, for 35 years the Chicago Public School district has been picking up 7 of the 9 percent. Existing teachers will continue to receive this taxpayer-hosing perk, but teachers hired in 2017 and beyond will have to pay the full 9 percent. (But then again, the newbies will get a salary bump and won’t feel the pinch.) No one yet really knows what the fiscal ramifications of the pension pick-up – or any of the other contract particulars – will be.

One thing that jumped out in the agreement is a stipulation that there will be no new charter schools opened for the duration of the new 4-year contact. You would think that in a city where just 25 percent of 8th graders are proficient in math and 24 percent are in English, that charters would be welcome. According to the Illinois State Board of Ed, attendance in the public schools of choice has doubled in the last five years – primarily in low-income areas – and now has almost 59,000 kids enrolled. The University of Chicago Consortium for School Research reports, “charter school students account for 25 percent of the city’s high school graduates but account for almost half of the students who will enroll in college.” But educating kids, you see, is not a priority for the Chicago Teachers Union.

And then there’s Massachusetts, where on Election Day, Question 2 will ask voters if they support giving the state the authority to lift the cap on charter schools. As it stands, no more than 120 charter schools are allowed to operate in the Bay State. The referendum, if successful, would give the Massachusetts Department of Education the authority to lift the cap, allowing up to 12 new charter schools or expansions of existing charters each year.

Most of us would not consider 12 new charter schools a year a radical move, but then again, most of us are not members of the Massachusetts Teachers Association. With an assist from some local school boards and 275 district superintendents, the union’s main arguments against the proposition are their usual ones – charters drain money from traditional public schools, charters cherry-pick their students, yada, yada, yada.

The union’s blather is not going unchallenged, however. According to a Manhattan Institute study, while charter-school enrollment does reduce the net amount of state aid school districts receive in Massachusetts, “it increases per-pupil spending in the 10 districts with the largest number of charter-school students.” The report’s author, Max Eden, explains that while charter enrollments cost district schools over $400 million a year, after the state’s “unique reimbursement” – which he claims is one of the most generous reimbursement plans in the nation – districts are getting paid a significant amount of money for students they no longer teach. In other words, the traditional public schools have fewer students, but more money to spend on those students.

Regarding the union’s cherry-picking mantra – bad idea to use this talking point in Massachusetts. Boston is acknowledged to have the best charter schools in the country. Many use lotteries to determine which students can attend. As researcher Thomas Kane writes, “Oversubscribed charter schools in the Boston area are closing roughly one-third of the black-white achievement gap in math and about one-fifth of the achievement gap in English—in a single school year!”

The good news for the pro-charter forces in Massachusetts is that they have money flowing into the campaign, including $240,000 from former New York City Mayor Michael Bloomberg and $1.8 million from Wal-Mart heirs Jim and Alice Walton. As a result, the unions and their fellow travelers, which are being outspent, are forced to dredge up their time-honored whine about the evils of “outside money” and “dark money.”

The outside money line is amusing because the National Education Association, parent of the Massachusetts Teachers Association and headquartered in Washington, D.C., has sent $4.9 million in “outside money” to the Bay State to oppose Question 2.

The “dark money objection” is even more two-faced. In 2014, the American Federation of Teachers was outed after making an illegal $480,000 ad buy that helped propel Martin Walsh to a Boston mayoral victory over John Connolly, a longtime adversary of the teachers unions. AFT’s dark (and illegal) money groups got dinged to the tune of $30,000 for “failure to organize as a PAC, failure to disclose finance activity accurately, contributions made in a manner intended to disguise the true source of the contributions, receipt of contributions not raised in accordance with campaign law, and use of wire transfers.” (After illegally and successfully spending almost a half-million dollars, a measly $30K fine barely qualifies as a slap on the wrist.) And this “dark money” gambit was hardly a one-off for the unions.

Massachusetts legislators didn’t think much of the AFT chicanery, and in 2014 tried to pass laws requiring more transparency. The Massachusetts Teachers Association balked at the legislation, and citing “technical issues,” tried to kill it. But this past August, after two years of legislative wrangling, H.543 became law, much to the consternation of the unions.

To sum up, in Massachusetts, Chicago and a host of other places around the country, the teachers unions’ mission to limit charter growth or kill them outright goes on unabated. But, please keep in mind, they are, of course, doing it for the children. (Hey – I’ll stop saying it when they do.)

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

The Teachers Unions Faux Grassroots Organizing

The Hedge Clippers, a union run and organized group, laughably pretends to be grassroots.

The Hedge Clippers, born last year, is an anti-capitalist, left-wing, purportedly grassroots organization whose focus is on exposing “the mechanisms hedge funds and billionaires use to influence government and politics in order to expand their wealth, influence and power.” The group received a mention in the Wall Street Journal a couple of weeks ago in a piece that centered around American Federation of Teachers president Randi Weingarten, who sicced them on a bunch of hedge fund managers that are involved with education and pension reform that the union finds objectionable. Perhaps #1 on the Hedge Clippers’ enemies list is Daniel Loeb, founder of the $16 billion Third Point fund. Loeb has the temerity of being a financial supporter of the wildly successful Harlem Success Academy charter school franchise, run by Weingarten’s avowed enemy, Eva Moskowitz. Weingarten has also accused Loeb of being involved with a group that is “leading the attack on defined benefit pension funds.”

The very same day the Journal piece appeared, the Los Angeles Times ran an “exposé” claiming that “activists reveal more dark-money donors to campaigns against unions and schools-funding tax.” The article centers around the Hedge Clippers outing donors who they claim made undisclosed contributions in 2012 as part of a “dark-money” scheme to defeat Prop 30, an initiative that raised income taxes on the richest Californians and sales tax on all Californians. The essential point of the article is that the Hedge Clippers have discovered that evil and greedy capitalists contributed money to an out-of-state organization, which circulated funds through a series of other groups and eventually back to California.

But just how does the Hedge Clippers enterprise do business? Is this really a “grassroots” entity, as billed? In “United Front: Teachers Unions Quietly Spend Millions on ‘Grassroots’ Groups The 74’s David Cantor reveals that the “grassroots organization” has been created, funded, and directed by two of the nation’s largest political contributors – you guessed it – the American Federation of Teachers and the National Education Association.  The group is led by a union lobbyist who is based at New York City’s United Federation of Teachers headquarters. Moreover, Cantor points out that the Hedge Clippers’ “crusade against opaque financial dealings also seems at odds with the fact that in the last election only two organizations contributed more than the AFT to 527s – less-regulated groups that, since the U.S. Supreme Court’s Citizens United decision, can raise unlimited money for or against candidates….”

But wait, there’s more.

Teacher union watchdog Mike Antonucci weighed in on the subject, pointing out that despite the contributions of those “opposing economic justice,” the Prop. 30 campaign was successful. Perhaps the fact that the alleged grassroots folks (mostly public employee unions) outspent the greedy and evil hedge-funders by almost $14 million had something to do with it.

To fully grasp the teachers unions’ “grassroots” activity, check out the following chart, plucked from the California Teachers Association website. (H/T Antonucci.)

CTA - grassroots chart

As you can see, CTA’s (like most teachers unions’) political organizing is top-down, centrally planned, bureaucratic and frequently at odds with its own rank-and-file. The unions are many things, but grassroots? Hardly. They are run more like the Politburo.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Myths the Union Organizer Tells Us

Socialist teacher union honcho’s distortions about union political spending and “labor peace” are, well, par for the course.

Shaun Richman, a former organizing director for the American Federation of Teachers, has written a bizarre piece for In These Times in which he claims that “the Friedrichs v. Calif. Teachers Association SCOTUS Case Could Actually Be a Boon for Unions.” His overarching point is more than a bit arcane, but it’s safe to say he thinks that the case – which, if successful, would make public employee union participation optional nationwide – could cause major chaos that the unions would somehow be able to use to their advantage.

Richman, an acknowledged socialist who prefers to be called “Comrade” (or more informally “Cde.”), may not know where Friedrichs will lead, but he offers a treasure trove of distortions in plotting out his incoherent scenario.

First, we start with a half-truth. Comrade Richman grouses, “Currently, unions that are certified to represent a group of employees in a bargaining unit are legally compelled to represent all of the employees in that unit. That means not just bargaining on their behalf, but expending significant resources on grievances, meetings, communications and everything else that goes into running a union.” Left out is that “exclusive representation” was not something foisted on the unions; it is something that all unions have demanded for the last 80 years. So you really can’t whine about being forced to do something that you have lobbied hard to attain.

Cde. Richman then warns, “…exclusive representation is essential to labor peace.” I cringe every time I read or hear the words “labor peace.” This wretched little term was used in the U.S. Supreme Court’s Abood decision that the Friedrichs lawyers hope to overturn. To me, the words summon up an image of a mafia thug telling the new storeowner in the neighborhood, “You want peace? Here are some envelopes to use for your monthly payments. You have such a nice little store. I’d hate to see anything happen to it.” Labor peace my foot.

Another bit of propaganda from Cde. Richman regarding Friedrich’s “right-wing argument,”

But union membership, including the payment of dues, is completely voluntary. That’s why unions negotiate agency fees into contracts. These fees are calculated through complicated formulas to only represent the true cost of bargaining representation. Agency fees do not pay for things like political activity (unions usually have separate voluntary political funds.

That’s the standard narrative, but it’s far from the whole story. As Mike Antonucci points out, if a union sends a mailer advising members to vote for Candidate X, it can be chalked up as “member communication,” not political spending. The unions are also quite gifted in the phenomena of so called “dark money” – political spending by groups whose own donors are allowed to remain hidden. So again, the unionista is playing very loose with the facts.

Then comes a truly jaw-dropping whopper from Cde. Richman: “Unions are politically cautious and loath to wade into non-economic controversies for fear of alienating a segment of their bargaining unit.” What?! Is it minutely possible that Cde. Richman does not know about teacher union spending habits? Is he not aware that teacher union elites are invariably far left of center and spend heavily to advance their agenda? As RiShawn Biddle notes, the Democracy Alliance, Progress Now, Progressive Inc., Media Matters, et al are heavily funded by the National Education Association. The unions have also been involved with same-sex marriage advocacy, blocking photo ID requirements for voters, and limiting restraints on the government’s power of eminent domain.

In fact, its latest filed labor report shows that NEA spent $131 million on politics in 2014-2015 – and believe me, the Tea Party, Americans for Prosperity and Focus on the Family didn’t see a penny of the union’s largess.

Richman is on the money about one thing, though. He writes, “…if agency fee is compelled speech, then the duty of exclusive representation imposed on unions is also compelled speech.” Bingo! If I don’t want to have to be in a union, the union should have no obligation to represent me. In fact, it would be immoral for me to insist on a service that I was not willing to pay for. But Comrade Richman, once again, exclusive representation is a union-demanded convention. If unions should decide they don’t want to represent non-payers, that would be the fairest solution for all concerned.

That’s the kind of “labor peace” I could really get behind.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Pension Funds and the Ultimate Hedge, Taxpayers

“We’re trying to make these guys’ money toxic because, as we’ve seen, their money is toxic,” Jonathan Westin, the director of New York Communities for Change, told Business Insider on Thursday. “I think it’s connecting the dots that many people don’t always connect.”
–  “Activists think they found a way to convince Democrats to stay away from ‘toxic’ hedge fund money,” March 13, 2015

There’s nothing new about this talking point, courtesy of the labor funded ACORN successor “New York Communities for Change.” If you don’t like an idea, don’t attack by arguing its merits. Just attack the “dark money,” or the “toxic money,” that funded whomever had the inspiration and did the work to develop the idea.

The long list of causes whose advocates may or may not have accepted “toxic money” just got longer, since the New York Communities for Change – and their inevitable spawn in other states – are now accusing Charter Schools of being financed by “hedge fund billionaires.”

Here in California, charter school advocacy, and, more significantly, charter schools themselves, are indeed supported by many wealthy individuals, but the vast majority of them are self-made entrepreneurs who earned their riches by actually creating something of value to society, from high-tech innovations to office parks and housing developments. Others earned their money in the entertainment business, or through providing legitimate financial services including managing investments on behalf of clients. The idea that “hedge fund billionaires” are the primary force behind the charter school movement is a convenient myth.

With that out of the way, let’s “connect the dots that many people don’t always connect.”

When union activists accuse the financial industry of being overbuilt and riddled with corruption, they’re right. But they are unable to distinguish between honest advisers who manage investments for their clients with integrity and prudence, and rapacious predators whose unchecked greed and insatiable appetite for risk literally threatens to crash the global economy. And the most salient method to distinguish between good and bad investment managers? The good ones are personally accountable for their losses, and the bad ones depend on government bailouts.

There’s no defense for investment managers who use supposedly risk free, low yield consumer deposits as collateral to make high risk investments, and then collect taxpayer bailouts to restore solvency to their client accounts when their schemes fail. Financial bailouts are bad. Financial firms that take risks because they know they will get bailed out are bad. We agree. So why are the pension funds for government workers not included? Why aren’t they at the top of the list? Why aren’t the unions who pay for reinvented former ACORN activists to identify “toxic money” not including pension funds among their targets?

Why aren’t those dots being connected?

Back in 1999, California’s pension funds lobbied California’s politicians to increase pension benefits. California’s all-powerful government unions were quick to hop on that bandwagon. Pension benefits weren’t just enhanced, they were enhanced retroactively. And since the market was roaring, nobody thought it would cost a penny more to fund all of this.

Fast forward to 2015, after years of market volatility, pension funds in California, collectively, are only about 75% funded. With the debt fueled bull market of the past few years beginning to sputter, pension funds are midway through imposing a roughly 100% increase in required contributions by cities and counties. That is, by taxpayers.

Pension funds, which control over $4.0 trillion in assets on behalf of state and local government employees in the United States, are the biggest players in American finance. They invest in anything that will get them a rate of return, after inflation, that averages 4.5% per year – that’s currently 7.5% before taking inflation into account. They invest in hedge funds, they invest in private equity, along with real estate and public equities. And when they don’t hit their numbers, taxpayers bail them out.

Why aren’t those dots being connected? Pension funds rely on taxpayers to hedge their bets. They can make whatever promises they want, take whatever risks they wish, indulge in optimistic projections and lobby for excessive benefit formulas, because taxpayers will bail them out. How deep is the hole? We’re talking trillions, not billions.

Connect the dots. Government pension funds and “hedge fund billionaires” are cut of the same toxic cloth. Perhaps taking money from taxpayers to fund government unions and their activist “volunteers,” and taking money from taxpayers to bail out government pensions are the bigger “toxic” threats to our democracy and our economy.

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Ed Ring is the executive director of the California Policy Center.

Government Unions Attack Free-Market Nonprofits via Pension Funds

“The AFT [American Federation of Teachers] will be looking more closely at those who are supporting the dismantling of defined benefit plans at the state and municipal level.”
–  Ranking Asset Managers, A Retirement Security Report on Money Managers for Pension Fund Trustees, March 5, 2014

As reported in a Washington Examiner editorial on April 4th, the American Federation of Teachers – that’s “teachers union” in plain English – has circulated a pamphlet that:

“Calls on pension fund trustees to drop any investment managers that are tainted by connection to free-market nonprofits. They also want those same trustees to force any potential new managers to have to disclose any donations they may have made to the groups on AFT’s blacklist.”

That the AFT can circulate a document like this without generating an uproar in the media reflects a monstrous and tragic double-standard. Money supporting “free-market non-profits” is tainted, which – not entirely logically – also taints any analysis they may produce, or policies they may advocate. But the money supporting public sector unions, involuntarily and automatically taken from their paychecks, ultimately funded by taxpayers, is pristine. Whatever analysis or policies they come up with, including “blacklists,” are beyond criticism.

What the AFT just did may be more explicit than usual, but it’s nothing new. In states like California, politically dominated by public sector unions, almost no businessperson or financial professional is going to identify themselves as supporting a free-market candidate or free-market nonprofit that dares criticize public sector unions or question the sustainability of public sector pensions. They risk retaliatory legislation, official harassment, strikes or “slowdowns,” character assassination, sit-ins and other orchestrated protests, shareholder revolts and boycotts. And if they represent a sufficient threat, their partners, customers, investors and vendors will get similar treatment.

In the financial community, as AFT’s document verifies, union critics stand to lose their biggest customers – the government agencies who come to them to underwrite bonds, and the pension funds whose investments fuel their fees and commissions. Just in California, billions are at stake every year.

Since the American Federation of Teachers fired this latest salvo against the free market, here are a few facts about CalSTRS, the California State Teachers Retirement System:

Three of the nine current CalSTRS board members are union officials:  The Chairperson of CalSTRS, Dana Dillon, “has been active in the California Teachers Association for more than 26 years… and was recently elected to the board of directors.” Their Vice Chair, Harry M. Keiley, is “chair of the California Teachers Association Political Involvement Committee.” Another board director, Sharon Hendricks, “also serves as president of the American Federation of Teachers, local 1521 chapter at Los Angeles City College.”

Most of the remaining six active CalSTRS board members are beholden to unions:  Tom Torlakson serves while also serving as California’s Superintendent of Public Instruction, an office he was elected to with substantial support from public sector unions. Two more board members come from the financial community; Paul Rosenstiel from a municipal bond investment bank, Thomas Unterman from a venture capital firm. Three other members come from government, Michael Cohen from the California Dept. of Finance, John Chiang, the State Controller, and Bill Lockyer, the State Treasurer.

Would it be more than reckless speculation to say the unions have four votes locked, and only need one of the other five in any given decision they make? And who is going to support Lockyer or Chiang if they run for another political office if they cross the unions? The financial community? Unlikely, given the pressure they’re under from the unions.

At this point the reader may be reminded that without reform, without tough, responsible decisions, public sector pension funds are going to crash, and when they do they’re going to take down with them entire cities and states, if not the global economy. The obliteration of defined benefits will be a mere footnote.

CalSTRS pays hundreds of millions each year to financial professionals:  Take a look at page 83 of CalSTRS Annual Report for the fiscal year ended June 30, 2013, under the bland heading of “Other Supplemental Information.” Here’s what’s on the table for the financial community, every year, from a fund that only represents about 30% of the public sector pension fund assets under management in California:  Administrative expenses, $139 million (page 84). Investment expenses including management fees, advisors, consultants, research services, risk management systems, trading systems, etc., $310 million (pages 85-88). Don’t forget “Global Equity Broker Commissions” whose payees include the infamous Goldman Sachs, $25 million (page 104).

CalSTRS invests in companies and financial instruments they supposedly detest:  Skip along in the CalSTRS Annual Report to page 101 and take a look at their “largest equity holdings.” They include Exxon Mobil Corp at the #1 position, and Chevron Crop at #5.  Go back to page 45 to see where CalSTRS has $22 billion in “Private Equity Investments.” How many Wall Street wolves fatten themselves on that rather substantial hunk of fresh meat?

What more does it take to make clear there is a phony war going on between public sector unions and the financial community? This isn’t an ideological battle, it’s an intramural struggle for dominance between two groups who are both elitist and privileged, who need each other far more than they need taxpayers.

“Dark money,” or money that doesn’t pass the “smell test,” seems to be a favored meme of public sector unions these days. Especially if that money is used to fund challenges to their interests, hence, a new “blacklist.” But why does public sector union money, sourced involuntarily, falling into their accounts automatically by the millions and billions, emanating directly from taxpayers, used to intimidate opponents, fund political campaigns and academic studies, organize activist groups, and feed Wall Street financiers, get a pass?

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Ed Ring is the executive director of the California Policy Center

Editor’s Note:  Since this was posted on April 8th, the list of CalSTRS board members, as posted on their website, has been updated to include Joy Higa, appointed by Gov. Brown on January 27, 2014. Here is her biography:

“Joy Higa is the vice president, regulatory affairs, for UnitedHealthcare, where she manages federal health reform policy and implementation. She previously served as deputy chief of staff to the State Controller from 2004 to 2006 and chief deputy cabinet secretary in the Office of the Governor during 2003. She received her bachelor of arts degree from Cornell University.”