Public school districts earlier this year sought to exclude vendors from contracts based on a company’s work for charter schools, according to emails and documents obtained by The Texas Monitor.
In one case, the districts swayed one of the state’s larger financial services firms to swear off business with charters. The districts targeted lawyers and bond underwriters, who are responsible for selling bonds approved by voters for school upgrades, new schools, sports facilities and other improvements.
“I am aware that there have been some conversations among our Supt.’s regarding using vendors – Underwriters, FA’s, Attorney’s, etc. who also do business with charters who compete with us as ISD’s,” Mark Youngs, chief financial officer in the Keller ISD, wrote in a January email to six finance director colleagues.
“There has been a clear desire to move to vendors who do not assist charters in competing with us. All this caused me to review a number of our vendor relationships…”
“Something about a line in the sand,” Jon Graswich, finance director in the Northwest ISD, chimed into the email conversation. “I do feel that public education is besieged.”
The CEO of Hilltop Securities, one of the state’s top servicers of bonds for public school districts, sent Youngs a missive on Jan. 24.
“It has come to my attention that you have serious concerns with our prior financial advisory representation of charter school in Texas, “ CEO Hill Feinberg wrote. He promised that Hilltop would no longer represent charters. Feinberg did not respond to an email seeking an interview.
Some districts had begun to vet financial contractors when seeking bids, asking if they had performed work for charter schools.
In an 11-page questionnaire for potential bond underwriters, Lewisville ISD asked: “If your firm, or any of its affiliates, have been involved in the financing of Charter Schools in Texas, please describe the involvement with any and all such transactions to date.”
The movement to exclude such firms from participating in public school financing was supposedly halted when the Texas Association of School Boards, or TASB, sent out a notice that the practice was a violation of state law.
“We are writing to let you know that TEA has informally indicated that the exclusion of vendors from consideration in RFPs or RFQs based on the vendor’s doing business with charter schools would violate the state’s education code,” wrote Sarah Orman, an attorney with TASB.
“We commonly send out messages to keep our members informed on issues,” Orman said in an interview. “I’m not sure what has happened after that was sent out.”
Youngs, the Keller ISD financial officer, said the move to exclude any service provider based on their prior work with charters “is dead.”
“The conversation has ended with the [TASB] notice,” Youngs said. Ditto the question on the Lewisville RFQ: “The original RFQ was amended to exclude that question, and none of the 24 responding firms responded to it,” Amanda Brim, a district spokeswoman said in an email.
“While districts have been warned that precluding firms with charter experience is unlawful, the idea that it ever took root shows bad faith on the part of public schools,” said Seth Winick, a spokesman for the Texas Charter Schools Association.
It would have limited public school districts in its choice of underwriters, potentially costing taxpayers more money in bond fees. In a field of limited competition, underwriters can increase their fees, leaving less money for school projects, while lining the pockets of the financial firms.
“We are disappointed to become aware of this communication,” Winick said. “This is not the proper way to do business.”
Charter schools had 273,000 students at the end of the 2016-17 school year compared to 5.4 million in public schools. Public district financial officers, however, say that laws allow charter schools to open within a short time frame, 90-120 days in some cases, giving them budgeting headaches that are difficult to overcome.
“We can compete very nicely with charter schools, academically “ said Youngs, the Keller ISD CFO. “But we can’t compete with someone who can open a school so quickly. I am doing the budget for the 2018-19 school year right now, and if someone comes in and takes 500 kids, that’s $2.5 million that I lose.”
Tracy Ginsburg saw students leaving Fort Bend Independent School District when she was the district’s chief financial officer there from 2009 to 2013.
“It was hard to bear – school funding is predicated in a large part of enrollment. But cutting out professionals for doing business with charters is the wrong way to go,” said Ginsburg now executive director of the Texas Association of School Business Officials..
“We don’t condone this. Charters are here to stay and [the Texas Association of School Business Officials] is here to make sure they are working.”
Public school districts, both statewide and nationally, have for years battled with charters, which have played a role in reduced annual allotments, diminishing enrollment and financial headaches.
That conflict, though, has never bled into the task of maximizing the amount of a bond sale that can be kept and used by a school district. Bonds are approved by voters with the hopes of new schools, better security and flashier sports facilities.
“No matter what, these districts need to be good stewards of resources, so you want to find the best provider to ensure value,” said Sean Gill, a research analyst at the University of Washington’s Center on Reinventing Public Education, a research group that supports school choice both within and outside the public model.
Gill understands that public schools feel the competition from charters, “but that competition should make the education experience better, not make it into a financial equation.”
“Besides,” he said, “if they start doing this with bond underwriting, which is a significant amount of money, what’s to say they won’t do that with furniture or textbooks?”
Steve Miller can be reached at [email protected]