Charter executive pay: How much is too much?

by Wendy Harris

Although Philadelphia’s charter schools are widely popular among the District’s parents and students, recent ethical lapses in the finances of a few, including lavish executive salaries, have cast a critical eye on them all.

The 10 charters up for renewal next month in Philadelphia are the first to be evaluated since new ground rules for executive compensation were put in place via amendments to the state’s charter law last summer. And a charter school association is encouraging schools to sign onto a new set of ethical standards.

But what level of compensation is appropriate for the top executives of charters remains a gray area.

Last year the Inquirer reported that one charter executive, Dorothy June Brown, was drawing salaries totaling more than $500,000 from three Philadelphia charters and a private school. Brown has stepped down from her position at Ad Prima Charter School, one of the charters now up for renewal. Before she left, she was earning $150,000 from that one school alone, for a reported 26-hour work week.

A Notebook examination of the recent tax returns available online for the 10 charters up for renewal found that most, in contrast, were unremarkable.

But two of these charter schools now pay CEO salaries of $190,000 or more, far higher than principals and regional superintendents in the School District. Until recently, one of these was being paid as a consultant through her management company, obscuring her actual earnings.

Nothing in the current crop of charters compares with last year’s Inquirer revelations of financial impropriety and nepotism at the Philadelphia Academy Charter School, where former CEOs Brien Gardiner and Kevin O’Shea were at one point earning annually $224,500 and $206,137 respectively, and hiring relatives at six-figure salaries.

Those reports drew attention to loose guidelines in the 1997 charter school law that did not limit charter administrators’ salaries, bar charter officials from hiring relatives, or prevent founders from forming companies that do business with their charters.  

In response, last July the Rendell administration successfully amended the state school code to state that, “a person who serves as an administrator for a charter school shall not receive compensation from another charter school or from a company that provides management or other services to another charter school.” This applies to the charter’s CEO and any other employee of the school who is responsible for management and oversight. The law also regards charter administrators as public figures, requiring them to file financial disclosure statements and adhere to state ethical standards.  

But the law is silent on how much a charter administrator can earn. Charters operate as independent local education agencies with a board that is responsible for managing the school and setting employees’ salaries. Neither the state nor the District has control over how much a charter official is paid.

“The School District is the authorizer of charter schools in Philadelphia and once charter schools are authorized, they are autonomous, so in the case of setting salaries, that’s a decision that should be made by the school, and they should do that responsibly and within what’s appropriate,” said Benjamin Rayer, the District’s associate superintendent overseeing charter schools. “But every five years the School District reviews charters and organizations to make decisions about whether to authorize them to continue to operate,” Rayer added.

The state Charter Appeal Board just upheld the School Reform Commission’s (SRC) decision to close Renaissance Charter School in June, and in February gave the District the go-ahead to close Germantown Settlement Charter School. Both schools were cited for financial mismanagement and having a history of low student test scores.    

In May the SRC is expected to vote on the renewal of charters for Nueva Esperanza, New Media Technology, Performing Arts, Marianna Bracetti, Philadelphia Montessori, Khepera, New Foundations, Franklin Towne, Global Leadership Academy, and Ad Prima schools.

Of the 10 schools, three have CEOs earning considerably more than the District’s average principal salary of $106,046, while the rest earn less than that figure. The three schools that are paying above average salaries are Franklin Towne Charter High School, New Media Technology Charter, and Global Leadership Academy Charter School.

According to federal tax records, in 2007 Franklin Towne Charter CEO Joseph Venditti made $193,510, nearly $56,000 more than the average base salary of $137,917 for a District regional superintendent, who is responsible for overseeing several schools as opposed to just one. That figure was up from $169,881 he earned the year before. Ina Walker, CEO of New Media Technology, was paid $123,952 in 2006, the most recent tax return available.

And as of January 2009, Naomi Booker now earns $190,000 as CEO of Global Leadership Academy Charter School, after working in that role on a consultant basis for the two prior school years, according to that school’s board chair.

In contrast, Nueva Esperanza Executive Director David Rossi made $88,507 in 2007, and Kathleen Dzura, CEO of Philadelphia Montessori, earned $73,870, salaries which are comparable or below District averages for principals.

Michael Lerner, president of the Commonwealth Association of School Administrators, said there are four tiers of pay for School District principals. At the lowest end, principals of small elementary schools only earn $84,600 to $101,600 a year “and it takes them seven years to go from the $84,600 to $101,600 because it’s a graduated scale with regular yearly increments.”

At the highest end, principals of large comprehensive senior high schools make $94,000 to $113,100 annually.
 
At Global Leadership Academy (GLA) – whose former CEO and financial officer pleaded guilty to federal charges of trying to cover up the misuse of more than $14,000 – the board hired the outside consulting company School Support Network to reorganize and paid it $206,575 for CEO services, according to tax records for 2006. Naomi Booker, CEO of School Support Network, said she worked part-time as the charter’s CEO and was paid for her consulting services, but did not receive the entire contracting fee.  

“I received a consulting fee of approximately $4,500 a month,” Booker said in a recent phone interview, saying the contract also covered the costs of hiring more than 10 consultants.

But Booker said that after the charter law was amended, GLA terminated its contract with School Support Network in September 2008. In January 2009 she became GLA’s salaried CEO and the school principal, earning $190,000 a year. While filling two positions, Booker said she essentially acts as a CEO of a school district, having to interface with District officials and others from the city and state, while also handling the administrative and business duties of running the charter school.

“I’m like Arlene Ackerman, but on a smaller scale,” Booker said.

Board Chair Lorenzo Hough also defended the salary. “The Board believes that it has locked in the very best charter school CEO in the city of Philadelphia, if not the state of Pennsylvania,” he said. He credited Booker with successfully turning around the school’s finances and helping it achieve Adequate Yearly Progress.

He also defended the hiring of Booker’s company on a consultant basis to get the school out from under a financial and management crisis. “The arrangement was approved by the charter school office of the School District, as well as senior staff, including the chief academic officer,” he said.

Rayer said neither the District nor the state has guidelines on whether a consultant or independent contractor can be the CEO of a charter school. “In a charter, it’s the board that does the hiring and firing, and the CEO works for them, but the board makes the decisions and the structure can vary,” he said.

There are also no limitations on which major contractors a charter can use, how many it can hire, or how much the school can pay to secure the contract. In 2006, Franklin Towne Charter paid Nobel, a management company, $594,708.

At the time, the school’s operating budget was more than $10 million, so the charter only spent about 16.7 percent of its budget on administration and business, compared with the average for all charters of 17.3 percent cited in a recent Inquirer analysis. Still, some say the fee was too much.

“Do I think that half a million dollars is too much to administer a school? Yes,” Lerner said. “Two hundred thousand is probably a little on the high side too, because I know that no principal in Philadelphia makes money like that. But there has been such a lack of oversight that charters have pretty much been free to hire who they want, to do what they want, and pay them what they want,” he said.

Franklin Towne Charter CEO declined to comment about the work Nobel did for the charter, and Nobel president William Fallon failed to return multiple calls, but the charter’s 2007 tax records indicate that the company no longer contracts with the school. Omnivest Management LLC is now listed as the charter’s provider of management services and was paid a fee of $126,250.

Could financial mismanagement and bloated salaries among a few charter officials signal the need for further guidelines about pay, contracts, and other fiscal matters in the charter law? 

Pennsylvania Coalition of Charter Schools (PCCS) President Lawrence Jones said it is time to restructure the law.

“It’s been 12 years now, so it is time, but not based on what has happened at one or two or three schools, but based upon the fact that the world has changed and that charter schools have grown exponentially,” he said.

Last week the Coalition released a "code of accountability" that outlines the academic, ethical, and fiscal responsibilities of the state’s charter schools, marking for the first time since 1997 that charter schools have attempted to police themselves. The voluntary code of ethics is a seven-page document that includes several tenets related to finances. Among them are pledges to:

• Set sensible annual budgets subject to full public disclosure.
• Establish rules on salaries and benefits for employees within 100 days of pledging to the code, present the rules to the charter’s board of trustees at the meeting immediately following the 100-day period, and vote upon them within 60 days.
• Make fiscal records and annual audit reports available to the public.
• Disclose salaries and expenses to parties requiring the information.

Jones said the code is not a response to the few schools that have strayed from the ethics of finance, “but rather a statement of what we believe our charter schools are already doing. I think the vast majority of charter schools are working toward or following the law to the best of their ability.”

Because the Coalition is not a regulatory organization, Jones said that it can’t sanction charters that violate the code. Instead, the organization plans to provide support for charters to better help them meet the standards.

Lerner said he is happy that the Coalition released the document. “I think since charter schools drink at the public trough, there has to be independent oversight. That’s important because without it, you open the door for the situations that have occurred at Ad Prima and Philadelphia Academy Charter.”