HR-8606-119
Referred to the House Committee on Education and Workforce.
Sponsored by Rosa DeLauro (D-CT)
What it does
This bill would amend the Elementary and Secondary Education Act (ESEA) and the Individuals with Disabilities Education Act (IDEA) to prohibit charter schools and their charter management organizations from contracting with for-profit entities to operate, oversee, or manage the school — including curriculum development, budget management, and faculty hiring. Charter schools that enter such contracts would become ineligible for federal funding under both laws. The bill would still allow charter schools to contract with for-profit companies for limited services such as food, transportation, payroll, facilities maintenance, classroom supplies, and other ancillary services. The restrictions would take effect three years after enactment and would apply to contracts entered into, renewed, or extended on or after the date of enactment.
Who benefits
Students at charter schools currently managed by for-profit operators, who supporters argue would see more public dollars directed to instruction rather than profit. Nonprofit charter management organizations that do not use for-profit operators, who would face less competition. Traditional public school districts, which do not use for-profit management structures and would compete on more equal footing for students and funding. Taxpayers who believe public education dollars should not generate private profit. Teachers and school staff at affected schools, who may gain more direct employment relationships with nonprofit governing boards.
Who is hurt
For-profit education management organizations (EMOs) that currently hold management contracts with charter schools, which would lose those contracts or the associated federal funding. Charter schools currently managed by for-profit operators that may face operational disruption or closure if they cannot restructure within the three-year window. Students and families enrolled in those schools, who could face school closures or transitions. Investors and shareholders in publicly traded or private for-profit education companies. States with large for-profit-managed charter sectors — such as Arizona, Michigan, and Ohio — that would face the most significant disruption. Charter school authorizers and state education agencies that would need to oversee compliance with the new contracting rules.
Supporters argue
Supporters argue that existing federal law already defines eligible schools as nonprofit institutions, and that for-profit management contracts are a structural workaround that diverts public education dollars to private shareholders rather than students. They point to a 2003 Department of Education Inspector General audit finding that Arizona improperly distributed ESEA and IDEA funds to for-profit charter schools, and to the Ninth Circuit's 2006 ruling in Arizona State Bd. v. U.S. Dept. of Educ. confirming that for-profit schools are ineligible for these funds. Supporters contend the bill closes a loophole created when those for-profit operators simply reorganized as nonprofit shells while retaining operational control and profit extraction — restoring the original congressional intent of the law.
Opponents argue
Opponents argue that for-profit management companies bring operational efficiency, economies of scale, and private capital investment that many nonprofit charter boards lack the capacity to replicate, and that abrupt contract terminations could destabilize schools serving hundreds of thousands of students. They contend that the bill conflates the legal structure of a school's governing entity with the management arrangements it uses, and that nonprofit charter boards already bear legal accountability for how funds are spent regardless of who manages operations. Opponents further argue that states, not the federal government, are the appropriate regulators of charter school governance structures under the Tenth Amendment, and that attaching these conditions to ESEA and IDEA funding may approach the coercion line identified in South Dakota v. Dole (1987).
Constitutional context
Congress uses its Spending Clause authority (Art. I, §8, cl. 1) to attach conditions to federal education funding under ESEA and IDEA. Under South Dakota v. Dole (1987), such conditions are permissible if they are unambiguous, related to the federal interest in the program, and do not cross the line from incentive to coercion. Because education is traditionally a state function under the Tenth Amendment, courts may scrutinize whether conditioning all ESEA and IDEA funding on compliance with specific management contracting rules constitutes impermissible coercion, though no directly controlling precedent resolves this question in the charter school context.
Checks and balances
Congress would gain authority to define permissible charter school governance structures as a condition of federal funding; states and charter authorizers retain authority to structure their charter laws, but would lose federal funding for noncompliant schools, with courts serving as a check through potential Spending Clause or Tenth Amendment challenges.
Historical precedent
The Ninth Circuit held in Arizona State Bd. v. U.S. Dept. of Educ. (2006) that for-profit charter schools are ineligible for ESEA and IDEA funds, a ruling that prompted for-profit operators to restructure as nonprofit shells — the precise arrangement this bill targets.