Millions Missing Texas Public Schools

TEXAS — At a time when Texas public schools are facing huge budget deficits and drastic cuts, Spectrum News has discovered that millions of dollars in Texas public school taxes are being diverted out of state. The man believed to be responsible is Houston Independent School District Superintendent Mike Miles, whose Colorado charter school network needs money.

In Texas schools, dedicated teachers and panicked parents are speaking out with passion and frustration.

“The state of public education in Texas is dire,” said Ovidia Molina, president of the Texas State Teachers Association. “We have educators leaving the profession. We have schools talking about closing in every region of our state.

One of the state’s largest budget shortfalls is in the Houston Independent School District.

That’s where new Superintendent Mike Miles called for drastic cuts to make up for a $450 million budget deficit. Miles was appointed by Texas Education Agency Commissioner Mike Morath last summer to take over and turn around the struggling school district.

Ten years before taking office at Houston ISD, Miles spent three years as superintendent of the Dallas Independent School District. When he left Dallas in 2015, Miles started three charter schools in Colorado called Third Future Schools.

According to internal school records and the nationally recognized school rating agency, School Digger, all three schools have since struggled with performance, enrollment and finances.

Records provided to us by TFS through open records requests reveal that Miles was forced to close one of his schools, Coperni 2, last summer. The K-8 school in Colorado Springs has been plagued by declining enrollment. The closure left the school with $5 million in unpaid bond debt.

The financial constraint of Coperni 2 was discussed at a Third Future School Board meeting via Zoom last summer after Miles took over as head of Houston ISD, but Miles was still present at the meeting as a consultant.

According to payment records, Miles earned $40,000 in consulting for TFS last year.

During the meeting, Miles urged his former board of directors to find the money and pay the debt.

“This is now becoming untenable,” Miles said at the meeting. “We have to subsidize to the tune of maybe $500,000 a year if there are only about 180 kids. So I think now is the time to do what the administration is asking us to do.

In 2020, just as his financial problems were beginning in Colorado, Miles began expanding his charter school network in Texas. First, Midland Sam Houston Elementary, then Ector College Prep in Odessa, then Austin Mendez Middle School. But at the end of the 2023 school year, as he took over at Houston, Miles’ three Texas schools were in deficit by nearly $2.7 million.

So why were Miles’ new Texas schools losing money? Third Future Schools’ 2023 audit shows that of the $25 million in state taxes spent at Miles’ three Texas schools, $15 million was spent on teachers and supplies. The remaining $10 million, or about 40 percent of the budget, was spent on administrative costs and unspecified services.

Spectrum News repeatedly requested, over several months, a detailed accounting of these administrative expenses. The Third Schools of the Future never responded. However, publicly available financial audit files contained auditor’s notes revealing that the deficit was “caused by the debts of other Third Future Network schools” outside of Texas and “Third Future Schools Corporate” in Colorado.

Once again, TFS Colorado officials refused to explain to us why so many Texas public school dollars were being transferred to operate schools in another state. Spectrum News requested and received from TFS an audio recording of the investor call. In the recording, a TFS official confirmed that Colorado charter school deficits were offset, in part, by money coming from their Texas charter schools.

“We supplemented this school with the general fund,” said Renea Ostermiller, then TFS finance manager. “Whether they’re in Colorado or Texas or whatever state they’re in, (a network fee) is assessed and then if the specific school needs funding, the network tops it up.”

Spectrum News obtained copies of two checks for more than $1 million each, sent from Miles Charter School in Odessa, paid and addressed to Third Future Schools in Aurora, Colorado.

Our attempts over the past five months to reach Miles for an explanation of the payments and a response to our findings have been unsuccessful. Miles referred us to Third Future Schools Executive Director Zach Craddock. We sent Craddock a list of 23 questions detailing our findings. Craddock refused to answer.

After our report aired, Miles spoke to the Houston Chronicle and he denied any wrongdoing.

“How Third Future Schools operates is the same as many other charter networks,” Miles said. “And if you operate in more than one location and in more than one state, then, of course, money is legitimately going from the schools to the network. »

Following our report, education advocates and a Texas state lawmaker called for an investigation. Miles said he welcomed it.

We also shared our findings with school finance expert and former Texas State Representative Paul Colbert. Colbert says Texas public schools shouldn’t spend more money than they take in. He also says TFS operators should not send Texas taxpayer dollars out of state.

“I was education budget chair for eight years and research director on the Senate Education Committee for five years,” Colbert said. “It is my understanding that it is not legal in Texas to request money from a Texas school district to educate students in other districts in the state, much less in other states.”

Ovidia Molina of the Texas State Teachers Association also reviewed Spectrum News’ findings and believes the evidence is alarming. Molina is calling on state lawmakers to conduct a formal investigation.

“I don’t know where it says we can take money from our public schools and move it to another state,” Molina said. “But if it’s legal, it’s wrong and needs to be changed.”

Spectrum News also contacted the Texas Education Agency several times.

We specifically requested a response from TEA Commissioner Mike Morath, who nominated Miles to serve as superintendent of Houston ISD in 2023. We offered Morath detailed evidence of the diversion of taxpayer dollars to Mike Miles schools in Colorado. We have not yet received a response.

EDITOR’S NOTE: The original story has been updated to include comments from Mike Miles. He denies any wrongdoing. (May 15, 2024)