At Basis charter schools, another way to boost teacher pay: Parent donations

Long before the groundswell of demands for higher teacher pay that led to a school walkout in Arizona, one of the state's high-profile charter schools found a novel way to boost teachers' income: Push parents to pay.

Basis Charter Schools Inc., one of the state's fast-growing charter organizations, gets tax money to run its Arizona campuses as public schools. They're open to any family, tuition-free.

Basis schools have a longstanding reputation for educational excellence, and the schools credit the quality to the commitment of their teachers. Yet even though Basis gets more in basic per-pupil funding than traditional public schools, its teachers' salaries are, on average, thousands of dollars less than those of traditional public school teachers.

It subsidizes those salaries by asking parents to make donations.

The requests can be sizable.

Basis Scottsdale, for example, asks for at least $1,500 per child each year, according to records obtained by The Arizona Republic. A pledge card noted the money "represents a fraction of the annual cost of a top private school education."

The charter chain's pleas last year yielded $5 million in donations, according to its records — even as the private company behind Basis kept about $10 million in Arizona tax money as a management fee, rather than directing it toward teacher pay.

Julie Erfle, a former Basis parent, said the school calls the giving "voluntary," but makes "a big push for parents to donate."

As a public school, Basis is prohibited from charging tuition. But there is nothing illegal in requesting parents subsidize teacher pay.

It is, a state Department of Education official said, highly unusual.

YOUR TURN: Let's clarify why Basis charter schools asks parents for donations

Private company pays teachers

There are 20 Basis schools in Arizona with more than 900 teachers. They all are part of Basis Charter Schools, a tax-exempt non-profit corporation.

But none of the teachers actually work for Basis Schools.

Instead, all teachers work for Basis.ed — a private company that Arizona Corporation Commission records show is owned and controlled by Basis founders Michael and Olga Block.

Arizona gave about $84 million in state money to Basis Schools last year. As a charter school operator, Basis is running public schools. It gets a set amount of public funds to educate each student.

Basis Charter Schools employs only two administrative staffers. For everything else it employs contractors.

Basis contracts with Basis.ed to provide the educational services at its schools. The public school company gives 71 percent of its tax dollars to the private company, according to a Basis audit filed with the state Charter Board.

Basis.ed then pays its teachers. But it doesn't use all the Arizona money for teacher pay.

According to an agreement between Basis Schools and Basis.ed, the Blocks' private firm keeps 11.75 percent of all school revenues — state, federal and local tax dollars — for management fees.

Bonuses of up to $10,000

Basis teacher salaries range from $34,287 to $50,404, depending on the campus. The overall average salary is $41,055, according to Arizona Department of Education records provided to the state by Basis.ed.

That means salaries for teachers on all of the Arizona Basis campuses except for one — Chandler — are less than the statewide average for traditional public school teachers, state records reviewed by The Republic show. Average pay for Arizona public school teachers is $48,372, according to the Arizona auditor general.

MORE: How much are Arizona teachers paid?

Basis teachers can get paid more than their base salaries. Parents' donations can add to teachers' pay, on top of what the for-profit company pays them.

Peter Bezanson, chief executive of Basis.ed, said teachers are eligible for merit bonuses of up to $10,000. When that performance pay is included, he said, their overall compensation is competitive with Arizona public districts.

"Basis pays bonuses large enough to motivate our teachers to perform at a level that has made our best-in-the-nation rankings possible," Basis Executive Director DeAnna Rowe said.

Basis and Basis.ed declined repeated requests to confirm information about teacher pay.

However, Rowe said any kind of salary comparison would be "inaccurate and misleading." She said teachers statewide have an average of 11 years of experience, presumably making them better paid than Basis teachers, most of whom have 2 to 5 years of experience.

"It is to be expected that teachers with 11 years of experience will be higher on the pay scale than those with fewer years experience," Rowe said.

Basis does offer elite academics. Five of its Arizona schools last year ranked among the top 10 high schools in the country by U.S. News & World Report.

Basis students' scores on Advanced Placement exams are a key factor in determining bonuses.

Basis teachers are paid $200 for each student who earns the highest score — 5 — on the AP exam. They receive $100 for each student who scores a 4, according to Rowe. Typically, a score of 3 is required to receive college credit. The average Basis graduate takes a dozen AP exams, and passes nearly 11.

Rowe declined to disclose the average bonus.

Average donation is $600

Basis' magazine, Outcomes, reported more than 6,000 donors contributed last year, with some giving more than $10,000.

An average gift is less than $600, said Bezanson, the Basis.ed chief executive.

Parents can fulfill Basis' request in monthly installments. And the giving is tax deductible because Basis is a tax-exempt organization.

Rowe said parent donations stay at the school where the giving occurs. She added the Basis board has the authority to supplement bonuses at new schools or schools in low-income communities.

Rowe said less than half of parents contribute.

Scottsdale parents who gave at least $2,500 this year were invited to a reception hosted by Basis Chairman Craig Barrett, the former Intel CEO. Barrett also is a major donor to Basis, Rowe said.

Stefan Swiat, state Department of Education spokesman, said he knew of no other public charter or district school that makes direct pleas to parents to subsidize teacher pay.

But Phoenix Collegiate Academy, a charter, tried a similar approach and raised enough last year from businesses and individuals to increase pay by $3,500 per teacher.

Ashley Berg, Arizona State Board for Charter Schools executive director, said her organization provides no oversight of donation requests from charter operators.

Joe Thomas, president of the Arizona Education Association, the teachers' union, said district schools do solicit tax-credit donations, which they use to help fund extra-curricular activities. Or they ask parents to donate supplies such as paper and pens.

"District schools are begging for necessities," Thomas said.

No requirement of transparency

Basis operates charters in Arizona, Texas and Washington, D.C. In all, those schools paid $14 million to Basis.ed for management services — the fee the private company takes. Most of that money, about $10 million, was public money from Arizona.

That $10 million in management fees amounts to more than $10,000 per person, if it's spread across each of the 921 Basis Arizona teachers.

Donations from parents for Basis' annual teacher fund are not used for management fees.

State law on charter schools allows them to contract with private companies to provide a variety of services, and such arrangements are common.

RELATED: Dozens of charter schools are at risk of closing due to financial woes

Great Hearts Academies, for example, contracts out its accounting services, while officials of American Leadership Academy last fall created a management company similar to Basis'.

State law does not require transparency about how that money is spent.

Neither Basis nor the private company would specifically detail how Basis.ed spends the 11.75 percent management fee it keeps, other than to say the Blocks' company provides more than two dozen management, operational and financial services.

Arizona State Board for Charter Schools, which oversees Basis and 500-plus other charter schools, would not comment on "the personal finances of those employed by management companies."

'Had to watch every nickel'

Jim Hall, a former public school principal who leads Arizonans for Charter School Accountability, said the Blocks appear to have made a fortune off Arizona taxpayers. Hall has compiled financial records from numerous charter schools in the state, and contends Basis has among the highest costs per pupil for administration.

"We had to watch every nickel we spent," Hall said of his time in traditional public schools. "It's such an extreme. It's almost like Alice in Wonderland."

But Rowe said having Basis.ed manage all aspects of the charter schools has yielded major cost savings.

Last December, as Scottsdale parents were receiving yet another solicitation for donations to pay teachers, the Blocks made a $1.68 million down payment on an $8.4 million condominium in New York City, property records show.

Their Manhattan home is in a 60-story building with "breathtaking panoramas" of the city, an infinity pool, and an indoor/outdoor theater, according to a sales brochure. It is located near two private Basis schools controlled by the Blocks. Tuition at those schools is more than $30,000 a year.

Arizona property records show the Blocks also own homes in Tucson and Scottsdale, where Basis and Basis.ed are headquartered.

In a letter to Basis parents in March, Bezanson and Barrett wrote, "The Blocks have put their heart and soul — and personal money — into growing BASIS Curriculum Schools for more than twenty years. To claim that they should not profit from their life's work is unkind and, frankly, un-American."

Barrett, the Basis chairman, in response to questions from The Republic about how the company uses the management fee it takes, said it's no one's business how much the Blocks were paid or how much profit they made.

Barrett said the money paid to the Blocks' company is no different than a traditional public school using tax dollars to pay a private contractor to build classrooms. In both instances, Barrett said, a company is earning a profit.

Public schools, however, must put to bid such contracts, which are available for review under the state's Public Records Law. Basis officials acknowledged they have never sought bids for the management contract with the Blocks.

Barrett said Basis hires an outside auditing firm to make sure fees paid to the Blocks' company are reasonable and Basis is getting value for the money it spends. The last audit was done in 2015.

Barrett and other Basis officials declined to release the audit, saying it was a "trade secret" that is exempt from public records disclosure.

A U.S. Department of Education Office of Inspector General audit in September 2016 concluded charter schools that rely on management companies typically have weak internal controls and are at risk for waste, fraud and abuse. Basis was not part of the national study.

The Blocks declined to be interviewed. But in an email, Michael Block, a former University of Arizona economics professor, defended their financial arrangement with Basis.

"My wife and I have spent a lifetime working and have multiple business interests," Michael Block stated. "Our personal finances are exactly that: personal. For two decades, the state of Arizona has contracted with Basis schools to provide a service, and taxpayers have received a remarkable return on their investment.

"Students who currently attend one of the schools that Basis.ed manages receive an education that rivals not only the very best schools in the U.S., but worldwide. My wife and I take tremendous pride in the fact that a network of schools we founded and help build from nothing but an idea has had such a positive impact on the lives of so many Arizona children."

Part of #RedForEd?

As educators prepared in late April to walk out over pay and school funding, Basis announced it would close its schools on April 26, Thursday, but reopen the next day Friday even as the walkout continued.

Key Basis officials and several board members are strong supporters of Ducey, who negotiated with lawmakers to boost teacher pay by 20 percent over three years and end the six-day walkout.

Barrett and Michael Block, the Basis founder, have both been Ducey campaign donors, as well as three other Basis board members. And Barrett endorsed Ducey's 2012 campaign against Proposition 204, which would have made permanent a 1-cent sales tax for schools.

Last year, however, Basis benefited from a high-profile Ducey initiative that committed $38 million to a new program rewarding high-performing schools. Once the money was distributed, Basis was among the biggest winners, receiving $2.6 million.

Erfle said Basis officials should use their connections to the governor to press for higher pay for all public school teachers in Arizona — especially in light of their frequent requests that parents help boost teacher pay.

"If charters are feeling they don't have enough money for teacher pay, they should encourage parents to go to the state," said Erfle, who also works with AZ Schools Now, a coalition calling for additional school funding. "Why not take that message to Governor Ducey?"

In defending its teacher pay, Basis did cite state funding levels.

"Like all schools in Arizona, we are limited by the scarce resources that we are given," Rowe said. "The governor's 20 percent teacher pay-increase plan will do much to bring our Arizona teachers salaries in line with what we pay Basis charter school teachers in other states, where state funding for education is higher."

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.

READ MORE: