Who Is In Charge

State audit faults CollegeInvest

A new state audit claims problems with how CollegeInvest manages some of its scholarship and loan forgiveness problems, along with some questionable administrative expenses and problematic financial controls.

StockCollegeInvestLogo92909CollegeInvest is an agency of the state Department of Higher Education but has its own board and operates largely autonomously in running student loan programs, 529 college savings plans and some scholarship and loan forgiveness programs.

The audit dealt only with scholarships and loan forgiveness.

“Overall, we found that CollegeInvest could significantly improve management of and participation in its scholarship and loan forgiveness programs,” the audit concluded.

Specifically, the audit found that the Early Achievers Scholarship, with assets of $67 million, didn’t follow its stated policy of giving 5 percent of its value in scholarships. In fiscal year 2009, the first year of scholarships, the program gave only $91,000 to 76 students, a distribution of .1 percent. The audit projected the program wouldn’t meet its goals through fiscal year 2013.

Auditors concluded the program lacks controls to ensure that recipients meet requirements, puts administrative burdens on colleges and has high administrative costs.

The program is designed to provide college financial aid to younger students who make a commitment to do well in high school. Students must be Pell Grant eligible (meaning lower income) and can receive up to $1,500 a year. Eligible students must have had a 2.5 GPA and have graduated from a Colorado high school.

In an interview Wednesday with EdNews, Debra DeMuth, director of CollegeInvest, said, “We were disappointed in the number of students that were eligible for the program.”

But, she said, the complexities of setting up an outreach program aimed at 8th and 9th graders and other obstacles have slowed things down. The program was created in 2005 but the first scholarships were awarded in the 2008-09 school year.

DeMuth said participation was hampered because the program initially required eligible students to meet the standardized Higher Education Admissions Requirements, which wasn’t necessary for student who attends open-admissions institutions such as community colleges. The program also originally was set up as a “last-dollar” program, meaning college financial aid officers could tap the program only after they had used all other possible aid sources for a student. Both those limitations have been removed, she said.

She said it’s also been difficult to track eligible students, particularly after they leave high school. “We struggle with effective ways to reach out to these students … to make sure they sign up and get these dollars.”

The audit also faulted CollegeInvest for investing all but $10 million of the Early Achievers trust fund trust fund in the agency’s student loans. The agency said that was done to put money in more conservative investment. But, the auditors said, “It appears the primary purpose of this decision was to bolster CollegeInvest’s student loan operations by providing liquidity,” adding the action “raises significant conflict-of-interest concerns.”

DeMuth Wednesday defended that investment strategy, saying the trust fund earned 2.9 percent a year on the loan investments while equity investments lost 41 percent and even fixed-income holdings lost 2.7 percent. “I think it was a very wise and prudent decision.”

The audit also found fault with administration of Service Scholarships and Opportunity Scholarships, which are awarded by lottery. From fiscal year 2005 to 2009 CollegeInvest failed to give out 330 of the 565 scholarships available, which made the odds of winning less than was stated in promotional materials. “The program’s advertising may have been misleading,” the audit said.

Auditors also criticized handling of some loan forgiveness programs, noting for instance that a program for nursing teachers only involved 11 recipients since 2007. The program “does not effectively target potential candidates” and in some cases “requires that applicants hold a CollegeInvest loan to participate, which presents a barrier to participation.”

DeMuth noted that loan forgiveness programs are difficult administer because her agency has to rely on outside parties, like teacher education programs, to get the word out to potentially eligible students. She also said that such programs may not have much of a future, giving changing federal requirements and lack of state funding to support them.

Finally, the audit examined more than $12 million in non-personnel administrative expenses in 2008 and 2009, criticizing donations to outside groups (the agency said they were sponsorships), meal reimbursements that didn’t fall within state guidelines, donations made to groups with which CollegeInvest board members had ties, fees paid to an outside lobbyist and promotional gifts of golf clubs (about $1,000 total) made to outside financial advisors.

The audit found that about half of some 40 administrative expenses examined didn’t have adequate documentation or approvals. “This significant error rates raise concerns about CollegeInvest’s management of administrative expenses.”

DeMuth said CollegeInvest works hard to get appropriate value for its sponsorships and that she feels the auditors were overly broad in criticizing the agency’s financial controls. She noted that annual financial audits for the last three years have found no problems with CollegeInvest procedures. She also noted that outside lobbying fees are allowed by a gubernatorial executive order, although clarification will be sought from the attorney general.

The audit made 10 recommendations, all of which are to be implemented by June 2010. The agency agreed or partially agreed with all 10.

The audit was released Monday at the monthly meeting of the Legislative Audit Committee.

According to The Associated Press, lawmakers weren’t happy. “I sense that the board is not really doing its job in monitoring how well this program is working,” said Sen. Dave Schultheis, R-Colorado Springs and committee vice chair.

“It seems like more money has been put into running the organization than getting kids in school,” said chair and state Rep. Dianne Primavera, D-Broomfield, according to AP.

CollegeInvest receives no tax funding. It has net assets in all funds of $3 billion and funds its operations with profits on student loans, fees on college savings plans and investments.

The agency’s future is cloudy, given legislation pending in Congress that would centralize student loans in the federal government, eventually putting agencies like CollegeInvest out of the loan business.

DeMuth noted CollegeInvest is one of only three state loan agencies that also run a 529 savings plan, which wouldn’t be affected by the legislation. “For us it [the bill] would end part of our business, but it wouldn’t put us out of business. … “I think the public partnerships [agencies like CollegeInvest] have been very positive for students. … You can’t replace that local presence and outreach from Washington, D.C.”

The study was done by state auditors with the help of Buck Consultants.

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Budget woes

In budget address, Illinois governor J.B. Pritzker proposes modest education increases

J.B. Pritzker speaks during a round table discussion with high school students at a creative workspace for women on October 1, 2018 in Chicago, Illinois.

Even while calling his proposed budget “austere” and speaking plainly about the yawning deficit he inherited, Illinois’ new governor, J.B. Pritzker, struck an optimistic chord when describing how he plans to plow more money into schools.

His fiscal year 2020 budget would allocate a total of $7.2 billion for K-12 funding, including an extra $25 million in addition to the mandated $350 million annual minimum increase under the state’s funding formula.

“There’s a focus here on trying to not only rebuild from the damage that was done over the last four years but also to set us up for growing the economy, which happens in part because of our investments in education,” Pritzker said, nodding to a nearly two-year budget stalemate under his predecessor, Republican Bruce Rauner, that left the state with billions in unpaid bills.

During Wednesday’s speech, the governor said the long-term solution to the state’s budget deficits  was a progressive income tax that would take more money from Illinois’ wealthiest residents.

In the shorter term, though, Pritzker’s budget proposal includes an additional $25 million for Illinois schools, an increase of $21 million in special education grants, and a $5 million boost for career and technical education programs for high school students.

Also in the proposal: $50 million in need-based college grants, another $35 million in university scholarships, and $2 million to cover waived fees for low-income students taking Advanced Placement tests.

Pritzker’s budget would allocate an additional $100 million to the Early Childhood Block Grant. That would bring the state investment in early childhood education to $594 million next year.

The governor Wednesday also proposed freezing a tax credit for businesses and individuals who contributed scholarships for private schools. Critics argued the program cut into state income taxes that would otherwise help fund public schools. Supporters, including Rauner, said it was one of the few ways struggling families could afford private schools.

Pritzker noted that given Illinois’ economic reality, there is a limit to how much cost-cutting alone could do. Instead, he promised to pass a budget that would include an increase in funding across the board as a way to invest in the state’s future, with a particular focus on education.

“We must stop slashing programs that build future prosperity,” Pritzker said in his budget address. “Over the long term, we must make investments in education, livable wages, innovative human service programs and job training.”

In unveiling his budget, the governor spoke plainly about the state’s dire fiscal situation: a $3.2 billion budget deficit and $15 billion in debt from unpaid bills — an amount that is equal to funding “free four-year university tuition for more than 12,000 students,” he said.

Nearly two years without a state budget under the previous governor prompted a massive backlog of funding in the K-12 education budget that the state is still struggling to fill, on top of an $8.1 billion backlog of unpaid bills across state agencies.

A 2017 overhaul in the formula Illinois uses to fund schools put the state on a 10-year path to closing the more than $6.8 billion gap between what it spends on K-12 public schools and the projected cost of adequate school funding. In January, the state board of education asked for $15 billion in public schools funding.

“It’s a very teensy step and better an increase than not,” Wendy Katten with Raise Your Hand Action, a parent group advocating for public education, said of the increased funding for K-12 schools. “But that’s nowhere near the $7 billion that’s needed for basic adequacy, let alone the $2 billion needed for [Chicago Public Schools].”   

Pritzker’s proposed additions are modest, to be sure, but unions representing teachers in Chicago and statewide, as well as disability advocates, said any additional investment in education is most welcome.

“It’s clear that he understands the importance of great public schools and higher education and is committed to fulfilling the state’s responsibility to invest in them,” the president of the Illinois Federation of Teachers, Dan Montgomery, said.

And the Chicago Teachers Union asked that Chicago Public Schools to use any extra state funding to lower class sizes and increase special education staffing.

“The increase in evidence-based funding over the statutory minimum recognizes that Illinois’ challenges with education funding equity are fundamentally rooted in the need to drive more resources to students, like those in CPS, who have suffered from decades of insufficient and unequal school funding,” Jesse Sharkey, president of the union, said.

Chris Yun, the education policy analyst with Access Living, which advocates for people with disabilities, said she was heartened to see a bump for special education funding, noting: “Students with disabilities are often forgotten because the number is much less than general education students. We have a long way to go, but this is just step one.”

Pritzker told Chalkbeat in October that contributing more money to education would require solving the state’s longstanding budget woes. At that time, Illinois was expected to enter fiscal year 2019 with a budget deficit of more than $1 billion. That figure has now more than tripled.

Its problems are compounded significantly by its pension responsibilities, making it increasingly difficult to allocate money to other needs, said Ralph Martire, director of the Center for Tax and Budget Accountability.

“The payments are jumping at levels our system can’t afford,” Martire said.

Pritzker on Wednesday said he would “smooth the pension ramp by modestly extending it,” which hints at a plan to push payments off further.

While Pritzker’s progressive taxation plan has a steady thrum of support from Democratic lawmakers, the measure has not yet passed the state legislature.

Pritzker acknowledged that his 2020 budget was built on a tax structure that he still considered regressive and said he hoped to change that going forward.  

“Not only is our tax system unfair, it’s also inadequate to solve our long-term financial challenges,” he said. “Make no bones about it, I choose to stand up for working families and will lead the charge to finally enact a fair tax system in Illinois.”

Cassie Creswell, a board member of public education advocacy group Raise Your Hand Action, said the budget address was a positive indicator of Pritzker’s support for revamping taxation, but feared “the rates that will be proposed to make it politically palatable won’t make it the rate we need to fund stuff in the state.”

interview time

Four candidates left make their case before commission for open Shelby County Schools board seat

PHOTO: Caroline Bauman
Interim school board candidate Aubrey Howard presents before the Shelby County Commission.

Four remaining candidates for a vacated Memphis school board seat had their chance to tell the Shelby County Commission why they are the right person for the job on Wednesday afternoon.

They were the remaining viable candidates after six applicants were disqualified for living outside of District 2, the area the interim board member will represent in Shelby County Schools. Chalkbeat reported on Monday that six of the candidates live outside of the district. The appointee will fill the seat Teresa Jones vacated following her recent appointment as a municipal court judge, and will serve until the term expires in August 2020.

The four applicants are (We’ve linked to their full applications.):

  • Erskine Gillespie, an account manager at the Lifeblood Mid-South Regional Blood Bank.
  • Althea Greene, a retired Memphis educator and pastor of Real Life Ministries.
  • Aubrey Howard, the executive director of governmental and legislative affairs in the Shelby County Trustee’s Office.
  • Charles McKinney, the Neville Frierson Bryan Chair of Africana Studies and associate professor of history at Rhodes College.

The interim member will join the school board at a crucial time, amid the search for a new superintendent to replace Dorsey Hopson, who left the district in December. Currently, Joris Ray is serving as interim superintendent.

Commissioners peppered the candidates with questions on big issues facing the district, including school choice, the budget process, managing the district’s aging buildings and underenrollment, and how they could improve the relationship between the district and the county commission, the funding body for schools.

In their pitches to commissioners, applicants touted their previous experiences with K-12 education, such as work with nonprofits and curriculum development, and their ties to Memphis schools. “I’m a product of Memphis schools,” was a phrase said again and again.

Most applicants expressed general support for charter schools, which have grown significantly in recent years in Memphis, but Gillespie said he believed “the influx of our charter school program is an issue that must be addressed.” McKinney sits on the board of a charter high school, and Greene and Howard said they had no issues with charter schools as a way to serve individual needs of students.

On the relationship with the county commission, Greene said: “I think it’s important that as a school board member, I’m at county commission meetings. And work as a bridge to educate children and give them the best education we can, and we know that costs money.”

Gillespie was asked by Commissioner Willie Brooks what he thinks of alternative schools, which serve students who have been expelled or suspended from traditional schools for behavioral reasons. There are several alternative schools in District 2.

“I think alternative schools are truly something necessary,” Gillespie said. “They can provide a trauma-informed response for our students.”

The questionnaire given to each candidate asked about TNReady, the state’s embattled testing system. Commissioner Michael Whaley, who chairs the education committee, asked Howard to expand on his answer that the test “didn’t work.”

“Those decisions about testing and teacher evaluations would be better met if they were local and not state controlled,” Howard replied. “For sure, the state wasted a huge amount of money with the companies they hired that failed us.”

Gillespie and McKinney described aging and often near-empty school buildings as a large issue facing the district. The interim board member would help analyze a massive district plan left by former superintendent Hopson that would consolidate 28 Memphis schools into 10 new buildings.

McKinney said the school board should be having regular conversations with the commission and the neighborhoods it serves on how demographic shifts have impacted the county, creating underenrollment in some schools.

“For the school board, those conversations need to be ongoing, so when it comes time to make a decision about whether or not to close a school, it’s not coming as a surprise,” McKinney said.

Three people from Memphis Lift, a parent advocacy group, spoke in support of McKinney. The group’s leader, Sarah Carpenter, said he’s been a consistent figure in her neighborhood of North Memphis.

Shelby County Commission
PHOTO: Caroline Bauman
Commissioner Willie Brooks (left) asked candidates about how they would work with the county commission.

“I’m tired of people coming to our community when they want a seat and we don’t see them anymore,” Carpenter said. “Our children’s lives are on the line.”

Commissioner Edmund Ford, himself a former teacher, said after the interviews he would like to see an educator on the board.

“There were a lot of things I saw as a teacher, when I would go to the school board to ask for their assistance, that I would not receive,” Ford said. “Personally, I would like to see someone who has been there and done that.”

After hearing from the candidates, the commission voted to move the item to its Monday meeting, where commissioners will vote on a successor.

For more details, see our Twitter thread from the hearing.