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State glitch gives some schools too much federal money, underfunds others

Hundreds of charter schools and traditional school districts in Arizona have been receiving more federal funding for low-income students than they were entitled to while others were left with far less for at least the past four fiscal years.

Those dollars, known as Title I funds, are intended to be used to fuel academic programs for the state’s most economically disadvantaged children.

School Superintendent John Huppenthal (Photo by Ryan Cook/RJ Cook Photography)

Former Superintendent John Huppenthal (Photo by Ryan Cook/RJ Cook Photography)

Errors identified in the Arizona Department of Education’s handling of Title I allocations began in fiscal year 2014 under former Superintendent of Public Instruction John Huppenthal, and carried over into fiscal years 2015, 2016 and 2017.

The issue was initially believed to be limited to just 23 school districts and charter schools, to the tune of about $435,000 for fiscal-year 2014, according to an audit by the U.S. Department of Education.

That’s what the state agency shared with districts and charters when they were first alerted in April. At the time, they only knew part of the story.

There are 200-plus traditional school districts with some 1,700 schools in Arizona and more than 400 charter schools.

A third-party auditor, Afton Partners, hired by the Arizona Department of Education, found the misallocations had actually reached more than 400 charters and school districts that receive Title I funds, and over-allocated dollars reached into the millions.

And while that much is now clear, the affected districts and charters have been left to wonder just how much they might have been over- or underpaid.

The beginning

According to Afton, the over-allocated funds totaled about $33.6 million when schools that have since closed are excluded. For schools that are still in existence, the figure is $31.8 million.

But according to the department, the net total is closer to $9 million because the School Improvement Fund was also shorted. That $9 million figure is what is left when you take the total over-allocated funds minus the more than $20 million by which this fund was shorted.

School improvement funds are Title I dollars set aside for the lowest performing schools, the bottom 5 percent.

Rather than going through the School Improvement Fund, as is normally the case, Stefan Swiat, spokesman for the state Department of Education, said that money went directly to the schools instead.

Still, 10 school districts and charters were identified by Afton as having received more than $1 million in over-allocations.

On October 13, the department issued a press release announcing that an audit by the U.S. Department of Education and the state auditor general found an unspecified number of schools received the wrong amount of Title I funding. Before that statement, this finding had not been shared publicly.

The fiscal year 2018 allocations, which were released on October 19, are believed to be accurate after the department worked with Afton to update its procedures and replace “the parties responsible.”

Afton also identified and assisted in correcting calculation errors like the incorrect order of mathematical operations and policy violations like improper records retention.

In response to a public records request, the department sent the Arizona Capitol Times a spreadsheet comparing the original Title I allocations to Afton’s recalculations of the funds each school should have received in the past.

[The spreadsheet with Afton’s recalculations can be downloaded HERE.]

But those numbers have not yet been verified by the U.S. Department of Education, nor has the department’s “formal response” been sent to the feds, Swiat said.

He said more details would come in the next 30 days, but according to the press release “the misallocation may result in how future funds are allocated.”

That could mean reductions in future allocations to make up for excess funds beginning in fiscal year 2019.

Tim Hogan (Photo by Rachel Leingang, Arizona Capitol Times)

Tim Hogan (Photo by Rachel Leingang, Arizona Capitol Times)

But Tim Hogan, executive director of the Arizona Center for Law in the Public Interest, said the idea of recouping the over-allocations makes no sense.

“You’re going to penalize today’s kids because you overfunded yesterday’s kids?” he said. “Is that what they’ve got in mind?”

Current students, he said, are still entitled to federal dollars, and if the department does not meet that obligation, it could leave itself open to litigation.

Hogan said he could see the same logic applied to underfunded schools, though that could be more difficult. Those schools would first need to take a closer look at the impact the shortage had on their budgets.

If the impact to a district or charter carried forward in a noticeable way, that could be grounds for legal action.

But the possibility of lawsuits did not concern Swiat.

He said “leadership feels very optimistic about how this will turn out,” and the department will work with the feds to find the path of “least disruption” to the school districts and charters.

What exactly that means for each school may not be clear until the spring.

Bearer of bad news

The spreadsheet provided to the Capitol Times was the first look at the dollar difference, though Swiat said it was a draft and subject to change.

In an email, Swiat said Afton’s calculations have not yet been shared with affected schools.

Rather, he said the department has opted to share only verified numbers after working with the feds to determine exactly how they will be affected.

That reasoning did not sit well with Adrian Ruiz, executive director of Espiritu Community Development Corp., which operates charter schools in Maricopa County.

Adrian Ruiz

Adrian Ruiz

Ruiz was “dumbfounded” to learn that Afton estimated Espiritu had been shorted about $630,000 in those four fiscal years.

Epiritu is actually found twice in the spreadsheet; the second entry reflected an over-allocation of about $12,000.

Ruiz said he would have preferred waiting for all of the numbers to be finalized with the U.S. Department of Education before receiving the fiscal year 2018 amounts. Now, knowing prior years’ recalculations are still in question, he wondered whether the 2018 funds would turn out to be wrong, too.

“If there’s a level of confidence that you release some information, then utilizing the same company, utilizing their same formulas – it’s got to be pretty close,” he said.

Ruiz said the state department had communicated with him and others about the overarching problem, but representatives seemed most concerned with placing blame on the previous administration.

“To be honest, that’s neither here nor there for us,” he said. “That’s an inconsequential fact.”

Ruiz was not alone in his frustration. The Capitol Times was ultimately the bearer of bad news for several other districts whose representatives expressed similar concerns.

Kathy Scott, the grants director for Nogales Unified School District, said the department has been “very lax” about explaining exactly what went wrong and why the release of the fiscal year 2018 allocations was delayed until just last week.

Kathy Scott

Kathy Scott

And she said she was not aware that Afton had estimated her district was over-allocated more than $140,000

“We have to pay that back?” Scott asked.

The uncertain prospect of having to pay that money back is like “having this anvil hanging over your head, kind of like a Bugs Bunny cartoon.”

If the district does face reductions in the future to recoup those dollars, she said that could mean people will lose their jobs.

At a recent meeting of her counterparts, Scott said representatives from at least a dozen other districts were “devastated” by the news of widespread errors.

Scott said she could not repeat some of the things they called out, but the message was clear to her.

“The leadership at Title I right now, the highest leadership, is not held in great respect,” she said. “Look at the situation: A reporter from the Capitol Times had to let me know what our over-allocation was.”

Lara Weidinger, the supervisor of governmental grants for Mesa Unified School District, said she wouldn’t panic until she received more information, as is expected to be presented at a department conference in November.

Her district, the largest in the state, was over-allocated about $2.7 million, the largest over-allocation to any single school district or charter school, according to Afton’s findings.

Weidinger said the 2018 allocation was higher than in previous years, so she had no reason to demand answers yet. But that could soon change depending on how the department chooses to recover the lost cash.

“Hopefully, they know what they’re doing, and they can communicate to us what the plan is going forward and how that is going to impact each district,” she said. “We’re not being squeezed right now… Depending on how that works out, I may be freaking out in a month.”

The prospect of paying back thousands of dollars for any district or charter was daunting.

But for those that were underpaid, the remedy is even more uncertain.

Ruiz of Espiritu said previous students were robbed of the funding that was rightfully theirs, but if that money can be recouped now, at least current students will reap the benefits.

“I don’t think schools understand the magnitude of what was shorted or overpaid,” Ruiz said. “And I think for those schools who were overpaid, they’ll want to know what those consequences are. And for schools like us that were shorted that amount of money – is there going to be a plan in place to essentially provide the money to our schools that was rightfully ours in the first place?

“If they’re going to target and go after these other schools that were overpaid, they should do right by the schools that were shorted.”

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