CPS Wants Federal ‘Small Business’ Loans For Charter Schools Investigated

About a dozen charter schools received federal payroll protection loans, prompting some to accuse them of double dipping into federal coronavirus rescue coffers. Marc Monaghan / WBEZ
About a dozen charter schools received federal payroll protection loans, prompting some to accuse them of double dipping into federal coronavirus rescue coffers. Marc Monaghan / WBEZ

CPS Wants Federal ‘Small Business’ Loans For Charter Schools Investigated

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Chicago Public Schools has asked the school district’s inspector general to investigate whether more than a dozen charter schools should have received millions of dollars through federal Paycheck Protection Plan loans designed to help small businesses deal with the financial fallout of the coronavirus pandemic.

“CPS did not endorse the Paycheck Protection Plan loan applications submitted by charter school operators, and the district is seeking additional information on the claims that were made to the federal government,” CPS said in a statement.

The district asked its inspector general to investigate the legitimacy of charter school applications for the forgivable loans. PPP applicants were required to demonstrate that conditions related to the pandemic made continued operations uncertain.

The inspector general said his office is reviewing the issue.

The federal government on Monday released the names of the companies and organizations approved for loans to prevent layoffs and weather the economic challenges caused by the coronavirus pandemic. About a dozen charter schools and at least 100 independent schools, including early childhood education centers, in Chicago applied for and received loans, which convert into grants if layoffs are avoided.

The district argues the charter schools were fully funded for the duration of the 2019-2020 school year, which is the time period covered by the PPP application. In addition, the state is distributing $570 million in relief funds from the federal CARES coronavirus relief package to Illinois districts. Chicago is getting $206 million of that.

But charter school advocates say charters, which receive public funds but are run by private groups, are nonprofits and face unique challenges.

“All nonprofits in Illinois were eligible to apply if they could meet the criteria of the federal guidelines … so that’s how we are differently situated than other public schools,” said Andrew Broy, president of the Illinois Network of Charter Schools.

He added charter schools have not received any additional funding through the CARES Act so far to help cover new costs associated with the pandemic.

Broy argues that when schools transitioned to remote learning in March, many charters faced unforeseen costs “to cover things like buying Chromebooks, connectivity, providing lunches and so they were looking at doing furloughs or layoffs to accommodate those costs.”

He also said charter schools have substantial facilities costs that traditional public schools do not face. “By leasing a building or paying off debt taken to buy a building, that diverts money that’s otherwise meant for the classroom.”

Are charter schools double dipping?

PPP loans for charter schools in Chicago and across the country has sparked heated conversations about whether charter schools are using their unique status as private organizations to get additional funding. School districts are not eligible for PPP loans.

Charter school officials argue the funds given to them by CPS last year to cover this academic year were based on calculations that didn’t take into account new expenses brought by the pandemic.

“I don’t think it is double dipping,” said Carlos Perez, executive director of Erie Elementary Charter School, which is located in Humboldt Park on the Northwest Side. Erie got between $350,000 and 1 million to retain 66 jobs. The federal government didn’t release exact loan amounts.

In addition to funding from Chicago Public Schools, Erie relies on philanthropic and corporate dollars, which has decreased substantially during the pandemic.

“We are not building up a reserve here,” Perez said. Despite getting 90 Chromebooks from CPS, Erie had to fundraise and use existing funds to make sure its 419 students could take computers home.

Perez said he doesn’t understand why the CPS inspector general would need to investigate. “We followed Congress’ guidelines, we followed the Small Business Administration guidelines, our application was written to the letter of the law.”

School officials with The Catalyst Schools, a network of two campuses and more than 1,600 students said they received $767,965 in PPP loans. “We thought it was wise, prudent and responsible to accept a low-interest loan for which we qualified, given the current economic uncertainty,” a school official said in an email.

Other charter school networks received between $2 and $5 million, including Distinctive Schools, KIPP Chicago and Perspective Charter Schools. The LEARN Charter School Network, which manages seven campuses in Chicago, received between $5 and $10 million. LEARN school officials didn’t respond to WBEZ’s request for comment.

At least about 100 private and some Catholic schools also received PPP loans. This includes Bernard Zell Anshe Emet Day School, Chicago Waldorf School and Cristo Rey Jesuit High School. Earlier this year, the Latin School of Chicago, a prestigious private school on the North Side, was criticized for going after the loan aimed for small business, according to Crain’s Chicago Business. The school’s board decided to return the money.

But officials at other private schools like Cristo Rey, a catholic school in the Pilsen neighborhood, said they really needed the loan. Cristo Rey received a little more than $1 million to retain 80 employees. The school relies heavily on corporate support to provide financial aid or scholarships to 90% of students.

“It allowed us some time to work through our financial model and take a look at what our revenue streams are going to be for the coming year,” said Morgan Collier, executive vice president at Cristo Rey.

Adriana Cardona-Maguigad covers education for WBEZ. Follow her on Twitter @WBEZeducation and @AdrianaCardMag.