Ignoring The $1 Billion Elephant In The Budget Room

[Ed. Note: On September 16, the DC Council heard testimony on a revision of the Schools First In Budgeting act. Introduced back in December 2021, the bill had a public hearing in January 2022–after which followed months of silence. The bill was one of a pair that council chair Phil Mendelson had introduced to address perennial DCPS budget woes (see here for a run-down on both bills as they existed then). In early September, a revised draft bill of one of the bills was posted publicly for the first time–without anything to indicate who suggested the changes nor why. That revised bill was the subject of the September 16 hearing–and no public or government witness had much, if anything, good to say about it. Like its prior incarnation, the bill seeks to change DCPS budgeting by first basing each school’s budget on the prior year’s budget and then dividing the remainder of funds to DCPS between school supports and administration. Aside from ignoring the reality that this could bake in tremendous fiscal upheavals and inequities, the guiding tenet of this version of the bill appears identical to that of its prior version, which is that all publicly funded schools are essentially equivalent and interchangeable. This is not merely a tremendous disservice to DCPS, as a citywide system of schools of right, but it also suggests the chair of the council has no interest in real equity in DCPS—the kind that the UPSFF (uniform per student funding formula) cannot by any means guarantee in DCPS. Instead, like its predecessors, this bill appears to be part of an excellent adventure to fix DCPS budgets without actually fixing, much less acknowledging, the root causes of problems in DCPS budgets. Below is my submitted testimony (which I presented a shorter version of at the hearing) highlighting those root causes.]

I am Valerie Jablow, a DCPS parent for the last 17 years. In that time, my kids have often experienced school budget problems, including instability and losing beloved teachers and programming due to cuts.

I appreciate that this bill attempts to address those issues.

Unfortunately, the bill does not address the root causes of our school budget woes, and its fixes for a vast and complex process were crafted in an opaque manner (i.e., who was guiding the revisions? when? why?) that could seriously change—for the worse—DCPS operations by, for instance,

–defunding needed central office programming;
–not addressing mis-use of at risk funds;
–ignoring rank inequities in programming and staffing between schools in what is supposed to be a SYSTEM;
–channeling yet more money to charters by a. equating 1-time funds with permanent funding; b. ignoring the need for money to follow students; and c. ignoring the reality that a system of schools of right with robust staffing and programming is ill-served by per pupil funding models; and
–making DCPS closures an easy and convenient way to balance DCPS budgets, while allowing education leaders to take money out of individual school budgets to support what had been in central office funding.

Worse, even if one corrected for everything in that list above, this bill would still not succeed because ignoring the root causes of DCPS budget problems supersedes any and all attempts to tweak DCPS’s budgeting!

So let me outline for a moment the root causes of DCPS budget problems:

1. DC’s student population is not growing–but our school seats are.

Analyses from the deputy mayor for education (DME) show that kindergarten enrollment may soon be as low as it was 10 years ago. (See here and here.) This is truly nothing new: I submitted testimony on the comprehensive plan to this body 2 YEARS ago, noting the decrease of students. [FOOTNOTE ONE]

Yet just in the last 4 years (since fall 2018), 8 new charter schools have been approved—with more on the way. Last school year those charters enrolled 1016 students–1016 students who did NOT enroll in existing schools. [FOOTNOTE TWO]

That number doesn’t count students who enrolled in that time in expanding charters or in increased DCPS seats of choice like Bard or an expanded Banneker. And that’s not even mentioning the new Ward 3 high school with up to 50% of its students from out of bounds; that out of boundary enrollment is actually a necessity because the ward it’s in not only has some of the *fewest* students in DC but also doesn’t have enough students RIGHT NOW to fill all its schools. (Yes, really: See here.) [FOOTNOTE THREE]

There is nothing anywhere saying that we needed all those new schools and seats; they are almost entirely seats of choice and thus optional. For instance, all lottery seats are 100% optional—and in the case of the new Ward 3 high school, no one in the Wilson Building thought to revisit boundaries, out of bounds slots, and feeder patterns to alleviate overcrowding in Ward 3 schools for $0, as opposed to the $100 MILLION set aside for a new high school that will inevitably depopulate existing schools.

Please: Do not say this is school “choice”:

The only choice represented in ANY of this was that of charter school operators and the mayor’s people. As a DCPS parent, I can safely assert that NONE of my fellow DCPS parents likes having poor HVAC repairs; shoddy renovations; and delayed modernizations—yet, we endure all of those things every year because of budget choices made by people who are NOT parents, teachers, or students.

As it is, each new school requires a facility and administrative staff, which are increases in fixed costs borne by DC taxpayers. Each new school also requires students from a not-growing pool. That means that existing schools WILL lose students.

This fiscal REALITY has been for more than a decade at the heart of DCPS budget struggles, especially in schools of right with low or declining enrollments. Just because no DC education leader has acknowledged that reality doesn’t make it any less real or painful.

I say unto you now: Truly, there is no magic in creating new schools—it is all coming from the same pot of money and the same not-growing population of students. And it means that we the people are losing money All. The. Time.

Charmingly, when the DME talks of the perils of “unintentionally small” schools, that’s code for DCPS schools of right with low enrollment. In fact, that is the plan for our schools right now—and has been for a very long time.

In this “plan” for our schools, it’s perfectly fine for schools of choice to be small and/or prolific—not so for DCPS schools of right, which always face defunding and destabilization.

Because of that “plan,” I now fear that those DME population analyses will be used to justify DCPS closures, most likely in DC’s poorest neighborhoods, where charters have long found the magic ingredients of inexpensive and historically unprotected properties; political disempowerment; and lots of kids.

Please: do not call this unconscionably poor use of our public resources “competition.”

Low enrollment, disinvestment, and subsequent closures of schools of right are civic FAILURES to protect communities, education rights, and sound use of our money.

If you really want budget stability, you have to address enrollment pressures caused by proliferation.

2. Half our annual education expenditure goes to DCPS—while the other half, $1 BILLION, goes to a sector with largely unregulated finances, putting undue pressure on DCPS.

DC charters have more than $350 million in unrestricted cash–averaging $5.7 million per LEA. Just last year, DC charters received over $150 million in facilities fees—to be used for anything with NO public record. [FOOTNOTE FOUR]

In 2020, 38 DC charters took in more than $40 million in PPP loans while funding from DC not only never stopped, but comprised the vast majority of each school’s annual budget. [FOOTNOTE FIVE]

Recently, DC Prep solicited for an advisor to invest millions in cash. Its board characterized the haul as private money–even as the school gets more than 80% of its annual funding from DC taxpayers. [FOOTNOTE SIX]

That school has seen an extra $4 million in its coffers annually, mainly due to what a staffer called “healthy increases in per pupil funding.” It reportedly has $30 million in cash available—with about 2150 students. (That annual surplus, BTW, is more than 10% of its annual operating budget.)

Despite DC Prep’s board worrying over the “optics” of a publicly funded charter school having an investment strategy for millions, its board declined to give permanent raises to staff—even though staff is paid on average less than $70,000; the school struggles with staff retention; and the school’s top administrators got paid more than the mayor in the last 3 reported years.

Tell me: How is this hoarding of (public!) cash a public service—and without effect on other DC schools?

Even though $2 million was apparently embezzled from KIPP DC in 2020 for student distance learning devices that never appeared, there was nothing in its 2021 audit to indicate anything was wrong. In addition, the DC register had nothing about KIPP DC entering into a contract for those devices, which was apparently done between 4/3/20 and 10/27/21.

Tell me: What proof is there to show that embezzlement is unique?

Yet, while micromanaging DCPS’s budget, this bill sidesteps the steep public price of ignoring DC’s OTHER $1 billion annual education expenditure:

As our charters amass funds to do whatever and locate wherever, DCPS must be on stand-by for all comers. All schools of right are located specifically to serve the students there, in THAT place, and have NO choice when a charter moves next door or down the street.

So we rightfully invest money into our schools of right, for the legitimate and democratic purpose of securing education rights for all and then . . .

we turn around and are perfectly OK with giving money to schools of choice to locate down the street or wherever they wish, to draw from the same population of students, thereby not only duplicating services wastefully, but drawing down students and resources from the very schools whose budgets we are discussing here today!

And as we have no limit on the total number of charter seats, the destruction will continue endlessly no matter how much tweaking of DCPS’s budget you do.

Most importantly:

Every dollar charter schools bank our kids do not necessarily get directly (or maybe ever).

You can read every single audit, every single financial document on the charter board website or on pro publica’s (which appears to contain more recent data). But absolutely NONE will tell you that that unrestricted cash—hundreds of millions in DC charters right now—is going to kids.

Not one document—because no one knows.

So it is that DC not only has NO idea of the extent to which we may be OVERpaying our charters annually (except that $350 million pot of unrestricted cash is clear evidence of it), but we have no fiscal mechanism to understand it–and no political interest to find out.

In case you think it’s just “private” money sitting there as unrestricted cash, ask how it is possible for individual charters to have tens of millions in cash lying around when the vast majority of their budgets are DC taxpayer dollars.

That’s because it’s not private money—it’s OURS! And instead of going to kids, it’s treated as the profit of individual charter schools.

When you ignore this, you ignore funding DCPS appropriately—and by extension, all DC school kids.

DC has more than enough money right now to have robustly staffed schools of right with robust programming in every corner, without any closures or budget shortfalls.

But we don’t—because we ignore that OTHER $1 billion, as if it’s inevitable that we must spend it in that manner!

Consider that we know charter proliferation, enabled by such excess public money, is dire for DCPS schools of right.

Yet, while micromanaging DCPS’s budget, this bill sidesteps that reality as well as the fact that we do not know how or even if such excess cash in charters ever gets to kids.

Indeed, ignoring all of that may very well be the wish of those literally banking on that charter school cash:

This spring, charter advocate and heiress Katherine Bradley gave $15,000 to a political action committee that appeared to be taking in money from, and on behalf of, DFER DC, without actually saying so—and then donated only to charter-friendly politicians.

Bradley donated as chair of the KIPP Foundation.

At the same time, charter advocacy organizations spent millions in DC’s primary, all the while there is no required disclosure of donors to charter schools on their 990s and to political action committees in DC.

(And that’s not mentioning there is no required disclosure of disaggregated independent expenditure committee spending; no requirement for PACs to use their money specifically for their stated purpose in all directions; and the fact that this hearing’s witness list has the head of one of those charter advocacy organizations that donated heavily to both Mayor Bowser as well as council chair Phil Mendelson. Gosh, wonder what they could possibly want from this DCPS budget bill?)

Oh, and lest I forget:

There are also no visitor logs in the Wilson Building.

We all know the problems of DCPS budgets: lack of stability, lack of resources, lack of equity, lack of clarity.

While this bill attempts to address those things, it does so without acknowledging other things that MUST be acknowledged to get true stability, resources, equity, and clarity.

Now, I worry about what happens after this hearing.

Namely, if the council passes this bill in some form, the council can say it did its job and walk away, hands clean.

And when DCPS schools subsequently lose funds or are closed, we the people cannot complain because we each had our 4 minutes to testify.

DCPS is such low-hanging fruit—easy to criticize and tear down because so much is in fact dysfunctional.

But this bill works hard to not pay attention to the man behind the curtain of the OTHER $1 billion we give to education annually–as if that’s all cool and unworthy of comment and UNrelated to DCPS’s budget struggles.

Unfortunately, that’s not how our school budgets (or frankly democracy) work. And in this case, it represents a terrible misuse of public resources.

Thus, I urge you now to stop right here and work with community advocates on a rational fiscal plan that takes all of these root causes of DCPS budget problems into account. Thank you.

FOOTNOTES

1. One need not even look at kindergarten enrollments as the DME did to see the coming enrollment slump. For instance, here are recent birth data for DC, showing a large percentage drop from 2016, which was—not coincidentally!—the last time kindergarten enrollment in our publicly funded schools didn’t drop:

Sources of the numbers are from CDC reports, including these for the last 3 years:

2019: https://www.cdc.gov/nchs/data/nvsr/nvsr70/nvsr70-02-508.pdf
2020: https://www.cdc.gov/nchs/data/nvsr/nvsr70/nvsr70-17.pdf
2021: https://www.cdc.gov/nchs/data/vsrr/vsrr020.pdf

2. Here are the audited enrollments SY21-22 for the 8 new charter schools approved in and since SY2018-19:

Capitol Village: 89
Girls Global: 155
Sojourner Truth: 157
I Dream: 68
Social Justice: 102
Statesman: 221
Global Citizens: 60
Learn DC: 164

I got some of this list from PCSB’s Charters to open 20-21: https://dcpcsb.org/new-public-charter-schools-open-2020-21

I got other schools from the PCSB annual reports from 2019 to the present, which are available here: https://dcpcsb.org/about-us/dc-pcsb-annual-reports

3. If you don’t wish to wade through the prose outlining the looming disaster of the new Ward 3 high school on overall DCPS high school enrollment, just take a gander at this table, which was included in that outline:

Bottom line: It is fiscally UNCONSCIONABLE that changing feeder patterns, out of bounds slot, and boundaries was not considered for Ward 3 schools before investing in capacity expansion in Ward 3. But politically, it is a different matter, isn’t it?

4. Total of unrestricted cash is from the most recent PCSB financial analysis report, available here: https://dcpcsb.org/financial-analysis-reports [NB for blog readers: The most recent FY21 report was not available when I prepared and presented this testimony, but is now posted at that site–and shows yet MORE unrestricted cash, to the tune of more than $419 million.]

I calculated the facility fee total from the amount allotted per student multiplied by the audited charter school enrollment for SY21-22. Per DC code, the facilities fees can be used for anything—literally—without any requirement for reporting.

That’s not good fiscal policy on any level—but it’s great political policy, isn’t it?

5. Out of a total of more than $40 million, 18 DC charters were awarded more than $1 million each in PPP loans. Most of the loans (if not all) have been forgiven. Below is a list of DC charters and the PPP amounts they received, compiled from the sources linked immediately below. Incredibly, the mayor awarded DC charters more than $10 MILLION on top of this, to assist with re-opening in the pandemic: https://mayor.dc.gov/release/mayor-bowser-announces-10-million-grants-support-public-charter-school-reopening-efforts

Is anyone in DC keeping track of all this? (The answer is NO.)

DC charter schools receiving PPP loans, per

https://www.federalpay.org/paycheck-protection-program/dc/400
https://www.washingtonpost.com/graphics/2020/business/sba-ppp-data/

Center City 3.7 M
St. Coletta 3.4 M
Eagle 2.6 M
Paul 2 M
Appletree 1.9 M
LAYC 1.8 M
Chavez 1.7 M
Meridian 1.7 M
Mundo Verde 1.5 M
SEED 1.4 M
Stokes 1.4 M
Achievement Prep 1.4 M
LAMB 1.3 M
Creative Minds 1.3 M
Bridges 1.2 M
Thurgood Marshall 1.1 M
DC Scholars 1.1 M
Mary McLeod Bethune 1.1 M
IDEA 978K
Monument 898K
WLA 877K
Academy of Hope 857K
Kingsman 834K
Howard middle school 733K
Lee 657K
Richard Wright 643K
Shining Stars 625K
SELA 516K
Washington Global 463K
Digital Pioneers 440K
National Collegiate 429K
Breakthrough 377K
Harmony 254 K
Roots 205K
Perry Street 200K
Briya 91K
Girls Global 59K
Capital Village 43K

6. At its May 2022 meeting, DC Prep’s board discussed investing millions in cash; since then, it has advertised for an investment manager (see the notice in the charter school section of the DC register, 69/26, dated 7/1/22).

At the 56 minute mark of the board meeting video, a board member worried about the “optics” of a publicly funded charter school having an investment strategy for millions.

But housing developer and board member Terry Eakin had a different view.

At 58 minutes in the video, Eakin noted that “donors have given us over $36 million since the beginning. If we were investing in the stock market monies from the taxpayers, I think it would be different.”

The school started in 2003.

Recent fiscal audits (also, see here for the 2021 audit) show that between 2014 and 2021, DC Prep got an average of 82% of its revenues directly from DC taxpayers.

In fact, each of those fiscal audits makes this statement: “DC Prep receives a substantial portion of its revenue from DC.”

2014: 80% of revenues from DC taxpayers
2015: 77%
2016: 81%
2017: 79%
2018: 85%
2019: 85%
2020: 84%
2021: 89%

At the May board meeting, Eakin noted that “in the unlikely event we were to make a major investment and lose all of [the extra cash], it wouldn’t be monies we had gotten from DC. I would earmark it as monies we received from donors. . . . the way I look at it, we’re just trying to get a better return for our kids.”

Another board member at the 1 hour 3 minute mark expressed a need for a communications strategy, worrying about criticism “as this becomes more public.” Most of that same board mtg was taken up discussing the school’s struggles with staff retention.

The staff retention discussion lasted for >30 min out of a total 70 min. of open board meeting. At minute 31, a board member asked if the school offered a “substantial bonus” or “money” to try and retain staff to discourage mid-year staff departures.

The answer seemed to be not really.

DC Prep’s annual reports on the PCSB website outline its average teacher salaries:

17-18: Declined to report
18-19: $66K
19-20: $66K
20-21: $67K

Here from those same annual reports are the school’s reported top 5 salaries for those years:

17-18: Declined to report
18-19: $225,000, $200,000, $171,000, $154,000, $151,000
19-20: $235,000, $205,000, $182,000, $167,000, $157,000
20-21: $234,000, $204,000, $185,000, $164,000, $162,000

SO, take a look at all the UNanswered fiscal questions around just this one charter school’s finances:

–Is a publicly funded nonprofit really nonprofit if it banks every year cash that represents 10% or more of its operating budget & the costs of the public service it is obliged to provide?

–Is infinite growth of our publicly funded charters an acceptable business practice even as we have a decreasing student population?

–What is appropriate cash on hand & net assets for DC charters? Investment like this inevitably mean locking away public and/or donated resources that could be used for direct educational purposes *now*.

–Why is the school not paying down its (considerable) debt with this cash—nor giving permanent raises to improve retention problems?

–Is it equitable that this publicly funded school gets the same per pupil funding as another with fewer, or less generous, charitable contributions?

–Whose interest is served when DC’s leaders do not have the answers to those questions?

–More importantly, how much money is on the line here being used to literally line the pockets of private operators and not go directly to DC kids?

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