Amid financial pressures, REALM wants to merge with larger charter school chain

REALM Charter School, which has two campuses, could merge with an online charter school chain, a potential respite from financial trouble. Photo: Nancy Rubin

REALM is Berkeley’s only charter school, and it’s always looked a bit different than its many counterparts in nearby districts like Oakland and Richmond.

The middle and high schools both employ members of the Berkeley teachers union. And the director, Victor Diaz, who used to be a Berkeley Unified administrator, runs the small system independently, not through a larger charter chain.

The latter aspect could change this year, if the financially troubled REALM successfully merges with Compass Charter Schools. Compass, a nonprofit public benefit corporation like REALM, currently operates online home-school programs in Fresno, Los Angeles and San Diego counties. Merging with REALM would allow the system to expand the online classes throughout the Bay Area, but the Berkeley schools would retain their physical presences.

In January, REALM and Compass entered into an initial agreement to pursue a merger, which would ultimately be subject to approval from the Berkeley School Board.


“This is truly a merger of two schools into one, to support kids,” said J.J. Lewis, superintendent and CEO of Compass Charter Schools, in an interview with Berkeleyside.

Lewis is not shy about acknowledging the benefit of the potential union to the broader Compass system.

“This selfishly allows us to come into Alameda County and the adjacents,” he said. “It expands our footprint. We believe we do online learning well, and we support scholars who need that as an appropriate learning environment.”

In fact, Compass already claims on its website to operate in Alameda and several surrounding counties, with no indication that the merger is not definite. Lewis said Compass has to start recruiting now, to reach 2019-20 enrollment goals for REALM and its Bay Area online schools.

Compass’ other route into the Bay Area would be through a brand new charter. Lewis said he’s not interested in goading a school district into chartering Compass if there isn’t support for it.

REALM Middle School recently moved to the Pacific School of Religion campus, after a tense delay. Photo: Natalie Orenstein

Compass, formerly called Academy of Arts & Sciences, has experience operating brick-and-mortar schools in the past, and plans, according to Lewis, to leave REALM’s program largely intact. The leadership structure and positions are still being hashed out, through conversations between both school systems, Lewis said.

“This isn’t a hostile takeover of REALM. It’s not like a bank, where suddenly overnight all the signs are down,” he said.

“This isn’t a hostile takeover of REALM.”

Diaz did not respond to several requests for an interview about the merger plans this week and last week.

But Compass’s benefit to REALM is clear: The merger would see Compass taking on most of REALM’s significant financial obligations and issues. The school is in such a precarious position that it might otherwise need to close in middle of year, people connected to REALM and BUSD told Berkeleyside.

This month, BUSD issued REALM its third notice of violation over fiscal mismanagement in as many years. The district cited REALM for failing to pay its employee pension contributions, owing $1.5 million to various vendors, not submitting an audit report, and misrepresenting other aspects of its status to BUSD.  The district had also previously written to REALM alleging a range of other issues, from not having a maintenance staff to keeping the district in the dark regarding the potential Compass merger. Berkeleyside has not independently verified the violations listed in either document.

REALM had until February 21 to provide a written response to the notice, listing remedies for each of the violations. BUSD could pursue revocation of the charter if the response isn’t satisfactory.

The possibility of revocation was raised already this school year, when REALM Middle School was unable to move into its new North Berkeley site in time for the first day of school. The charter school ended up temporarily renting a facility outside the county, which is not legal, and didn’t notify the district. Some BUSD officials at the time said they did not want to punish REALM, but said they could be liable for the misstep, and issued REALM a notice of intent to revoke the charter.

But REALM is now settled into its building on the green, manicured Pacific School of Religion campus. The rental agreement was celebrated by both schools, whose leaders said the programs’ missions and emphases on social justice are complementary. Compass actually lent REALM $100,000 to complete construction at the Holy Hill site, according to Lewis and the merger document.

Earlier this month, PSR President David Vásquez-Levy told Berkeleyside he is “looking forward to years of work together” with REALM.

REALM Executive Director Victor Diaz (front) and Assistant Superintendent Pauline Follansbee address the School Board after REALM was found to have illegally moved outside the county temporarily. Photo: Natalie Orenstein

The future of REALM’s high school campus on Eighth Street is less certain. Multiple people told Berkeleyside there was an eviction notice posted on the building recently (no notice was visible when a reporter went to the site later to check).

Does REALM’s financial situation concern Compass?

“It does, yes,” said Lewis.

However, he said, Compass has the budget to take on some of REALM’s obligations, and already works with several of REALM’s partners and vendors. The initial merger agreement does require REALM to reduce its debts and liabilities by 30% before they sign the real deal —  on July 1, if possible — or else Compass can pull out, though. Compass is also permitted, according to the document signed by Lewis and Diaz, to walk away from the whole thing before April 30.

If both sides decide to go forward with the merger, REALM will have to ask the Berkeley School Board to approve a material revision of the charter, to allow it.

While school districts in California are only permitted to deny new charters in rare cases, BUSD will have much more wiggle room when handling this mid-charter change, according to a state spokesman.

“Ultimately approval of material revisions are in the discretion of the charter authorizer — which in this case would be Berkeley Unified,” said Jonathan Mendick, a spokesman with the California Department of Education, in an email. “And there isn’t any guidance specifically on why they can or can’t approve a material revision.”

If the merger goes through, it is unclear how REALM’s teaching staff will or won’t be affected. A few years after REALM’s charter was authorized, a group of its teachers advocated for unionization, which Diaz always supported, said Berkeley Federation of Teachers President Cathy Campbell. Since then, all REALM teachers have been BFT members.

A central critique of the charter school system from the left is the rarity of unionized educators.

The initial merger agreement spells out that Compass would not be required to observe REALM’s existing contract with BFT. Instead, REALM would need to enter into a new agreement with the union, subject to Compass’ approval. The intention with the new contract, said Lewis, is for REALM to be able to continue employing BFT members without the rules applying to all of Compass’ other virtual teachers elsewhere.

Campbell said her union is unsure what to think of that.

“We’re still trying to understand all this,” she said. “Compass’ position is to have to start completely over in terms of negotiating a new contract. That does concern us. We’ve worked hard over the last four years to negotiate a good contract, which is unusual in the charter world. We’re concerned about protecting working conditions, which are learning conditions.”

For example, she said, there’s a class-size cap for REALM’s advisory program, where students learn life skills and build community.

When BUSD planned not to renew REALM’s lease at a district building in 2017, the charter school’s passionate community packed a School Board meeting. The district ended up renewing a version of the lease for a year. Photo: Natalie Orenstein

To Campbell, the potential merger represents a new, not necessarily welcome, direction for BUSD.

“We understand that [REALM] has significant financial hardship and needs more resources in order to continue to provide an education to their students,” she said. When the School Board approved REALM’s original charter, “it was a grassroots, local effort to improve education for students in this area, so it was really a standalone — it was not part of a charter management organization. This would be a significant departure from that, and that’s something the board will have to weigh.”

Lewis said Compass respects REALM’s academic program, and that some of his administrators are passionate about project-based learning, the centerpiece of the charter school’s curriculum, which has drawn praise from BUSD leaders and families. While Compass does not plan to significantly alter REALM’s approach, the agreement document encourages the school to allow students to partake in Compass’ online independent study program.

“We believe REALM’s been doing a good service to the community academically,” he said. At end of day we want to ensure there’s choice for students. We believe in choice.”

The outcome of the merger could depend in part on timing, and how that process coincides with the steps following the notice of violation.

Lewis said the goal is to petition for the material revision in March.

Ed. note: This article initially said REALM’s deadline for responding to the notice of violation was March 15, as stated in a district document. The correct date is February 21, which is stated in the actual notice.