Poverty funds dispute shakes schools’ trust in AZ Education Department

Arizona Department of Education leaders for weeks denied the department had taken, without notice, tens of thousands of dollars in federal poverty funds from a southern Arizona school district and several charter schools this year. Now, they are reversing course and acknowledging they did move money from school budgets.

With no clear explanation from the department, some schools were left to determine whether they needed to find new funding sources to cover planned expenses.

“Our budget is our plan,” said David Dumon, superintendent of Altar Valley School District, a rural district west of Tucson. “ADE approves it, and with three months remaining in the year, they cut our budget … which significantly impacts our services to our kids.”

Department officials initially denied schools’ allegations. Those charter schools and districts lacked the expertise to properly account for their money, they said, and changes were not nearly as pronounced as schools claimed.

The money wasn’t taken back, they said. The schools screwed up, they said. It’s complicated, they said.

Superintendent of Public Instruction Tom Horne said the fact that schools were disputing the Education Department’s figures served as a strong argument for consolidating small districts.

“All these complaints came from small districts,” Horne said. “They don’t have competent administration.”

But on Thursday, department officials told The Arizona Republic that they had shifted tens of thousands of dollars out of some schools’ budgets after all, into a shared pool of money dedicated to school improvement across the state.

That may not be the cause of all schools’ federal funding changes this year, according to the department. Minor adjustments happen every year, said department officials, who maintain drastic changes to schools’ federal fund balances were not a systemic issue.

School leaders said the confusing back-and-forth that spanned more than a month has shaken their trust in the department.

“Why can’t they just be honest from the get-go instead of making me feel like I’m not right?” said Dumon. “It’s just disappointing that this is how it worked out.”

School leaders surprised by large, late funding changes

Dumon was returning from a long holiday weekend on Feb. 20 when he received an urgent call from his federal programs director. The status of their Title I funding, federal dollars that support schools with high percentages of low-income families, had unexpectedly changed in the department’s system to “revision started.”

Title I allocations are generated using U.S. Census Bureau data about the poverty rate within school district attendance boundaries. The department factors in alternative poverty reporting to adjust allocations to account for charter schools.

These federal funds are initially allocated in the spring semester so school leaders have an expectation for what they’ll be able to spend the following school year. The allocations usually get revised in the fall once states get their shares from the federal government and account for any errors in data submitted by schools. Any subsequent revisions usually result in more money, not less.

The Altar Valley federal programs director asked Dumon if he knew anything about the February revisions. He didn’t, he said.

A district review soon found its Title I allocation had decreased by nearly $60,000, Dumon said. The change happened without warning, he said.

Altar Valley made several calls to the Education Department and learned their Title allocations were being revised because the department had made an error, Dumon said. One email sent to the district by a department specialist on Feb. 29 said the department was “working diligently to resolve errors.”

Altar Valley was instructed to work on its federal funding requests for the next school year until the error was resolved, Dumon said.

“It’s just frustrating that you’re telling us to plan for next year, and we don’t know what we’re doing for this year,” Dumon said. “This seems crazy. I thought it was just us at first.”

For weeks, Education Department officials said Altar Valley’s numbers were wrong. The department’s data indicated Altar Valley did not lose any funding this year, officials said. But then, on Thursday, Chris Brown, the department’s business officer of educational programs, acknowledged the department’s data did indicate the district experienced a loss.

It wasn’t just Altar Valley. At least a dozen charter schools and districts saw significant late-in-the-academic–year changes to their Title funding, according to school leaders and grant writers.

The Arizona Charter School Association, a nonprofit member organization that advocates for the state’s charter schools, is working with the department on a resolution, said association spokesperson Matthew Benson.

“We know it impacted multiple public charter schools, but we don’t yet have a sense of how many,” Benson said. Minor adjustments aren’t unprecedented, but what some schools have experienced this year is different, he said. “In some cases, you may have schools that have already spent the money. That’s not typical.”

Schools seek clarity from Education Department on funding revisions

The Education Department’s final revisions to federal Title funding for this school year included both increases and decreases, according to school leaders. In a dozen cases brought to the attention of The Republic, school leaders said the changes were implemented without notice.

Some schools came out ahead, like Bullhead City School District, which received an additional amount of about $17,000, according to data from Director of Educational Services Jennifer Lott.

The Espiritu Charter Schools network in Phoenix gained a net positive of more than $11,000 across its three campuses: One school received a roughly $14,000 bump, one gained about $250 and one lost roughly $2,800, according to data provided by Chief Financial Officer Armando Ruiz Jr.

“You trust that everything is going to be OK,” Ruiz said. “I’m not even quite sure what the issue was here.”

Premier Prep Online Academy never received any money at all.

Education Department officials told the new Gilbert-based charter school, which launched last fall and serves approximately 130 students, to expect Title allocations in January, said Co-Founder and Director of Operations Erik Gray. The academy anticipated $45,000 in Title I funds.

But when the new year rolled around, the school received no Title I funding, Gray said. The department told him its formula underwent changes this year that disqualified the school from some funding, he said. Brown, the Education Department’s business officer, told The Republic the formula remained consistent with last year.

Phoenix-based charter school Paideia Academies lost $20,000 in Title funding, said the school’s founder and Executive Director Brian Winsor. That’s money they’d already used to hire an interventionist, someone who addresses targeted student needs outside of classroom instruction.

“We’re in April. I can’t just say to the interventionist, ‘Hey, so sorry, I know that I paid you all year. I don’t have money now to pay you for the rest of the year,'” Winsor said. “We’ve already spent money on supplies, and software and all that kind of stuff. The only place I can cut back is with a human being. There’s no way I’m going to do that.”

And Dumon said Altar Valley lost almost $60,000 in Title I funding. Until The Republic provided the Education Department’s explanation Thursday, he wasn’t told what happened to cause such a large change so late in the year, he said.

“Everybody needs to do a better job of communicating,” Dumon said. “I don’t think things were transparent, and that’s how I try to operate.”

Emails show representatives with several impacted schools, including Paideia Academies and Altar Valley, reached out to the department in February with concerns over the reductions. Education Department responses provided no clear explanation for the funding changes, school leaders said.

Budget documents provided to The Republic by school leaders detailed the cuts at Altar Valley and Paideia Academies. The department initially dismissed those documents. Schools claiming they lost thousands were confused in their interpretations and failed to account for other variables, said Brown and Sarka White, the Education Department’s Title I director.

That dismissal was confounding to the schools’ leaders.

“I don’t know what there is to be confused about. We were told to cut our current-year budgets,” said Altar Valley’s Dumon.

“The bottom line is, I know what my budget is, and I know what I received,” said Paideia’s Winsor. “It’s easy. It’s math.”

But on Thursday, department officials acknowledged the schools’ figures were right.

Brown said data indicated Altar Valley and Paideia Academies had, in fact, lost thousands of dollars because the department took funds and contributed them to a pot of money set aside for school improvement efforts across the state. Schools and districts contribute to this school improvement fund every year through their Title allocations, he said.

The school improvement fund provides support and programming for schools identified as needing federal assistance for underperforming populations. The state must contribute up to 7% of its Title I allocations to the fund, Brown said.

Education Department: Schools submitted bad data, delayed process

White attributed the swings in federal funding to schools’ bad data, communication problems and staff turnover, saying there was no issue at the Education Department. Still, she said, big changes were few and far between this year.

The Education Department requests data like enrollment count, number of students who qualify for free and reduced lunch, and number of English language learners before determining Title I and other federal funding for each school or district, White said. If schools submit incorrect data, the department must request corrections, which takes time, she said.

Some submitted no data at all, meaning the Education Department’s allocation formula had to be revised to factor in entire schools, thereby siphoning money away from others, she said.

In a typical year, schools receive preliminary funding allocations in March so they can begin hiring personnel and making other plans for the next year. They start spending that money at the start of the new fiscal year in July.

Final allocations are often solidified by October or November, school leaders said. That’s when the state Education Department revises its payments as necessary.

But because the department spent more time requesting data corrections than in previous years, White said, final allocations didn’t arrive until much later.

That delay caused problems for schools, said Paul Tighe, executive director of Arizona School Administrators, a nonprofit that supports school leaders.

“That’s not normal. … People are in a holding pattern at the district level,” Tighe said. “Usually, the variation from year to year is not as dramatic, and there’s better communication.”

Jon Lansa, Tucson Unified School District’s senior director for grants and federal programs, described this year’s funding process as a “roller coaster.” The Education Department initially told Tucson Unified to expect final allocations by December, then by February, he said.

They finally arrived on March 11, but the damage was already done. For three months, the district put its spending on hold because of the delay, Lansa said.

“We lost programming. We lost support,” Lansa said. “We had to be conservative in what we were doing, and it’s unfortunate that some of that money probably went unspent because we couldn’t spend it not knowing if it would be there or not.”

White also said school staff turnover is potentially to blame for the increase in faulty data submissions. School employees with institutional knowledge who usually handle Title funding may not have been around to provide data, she said.

Education Department officials said their own staffing turnover has not contributed to delays or other funding problems. They declined to provide details on recent staff turnover within the department.

But Tyler Kowch, a former Education Department employee who now works for Save Our Schools Arizona, a public education advocacy group, said that since Horne took office in January 2023, the department has experienced turnover in at least seven leadership roles related to school finance and federal funding.

Some schools did not receive Education Department updates on this year’s Title process because they were not signed up for its email list, White said. The department has provided training sessions, presentations, site visits and other communication throughout the year in an attempt to prevent mistakes, department officials said.

“We’re always out there training,” said Deputy Superintendent Margaret Garcia Dugan. “We are a service organization, and that’s what we’re doing, is going out and trying to help people understand why they’re doing what they’re doing.”

To prevent delays in the future, White said, schools should make sure they are included in the department’s email list and are submitting accurate data.

Horne: Department justified in withholding 20% of poverty funds

As some schools grapple with lingering confusion over the current school year’s Title funding, they’re already bracing for anticipated shortfalls next year.

In March, the department decided to withhold 20% of next year’s Title funds on a preliminary basis until official funding amounts roll in from the federal government. For some schools, that decision, which many school leaders questioned, has left staff positions in limbo and caused program cancellations.

Horne said doing so was a precautionary effort to avoid clawing back money later. That decision has been vindicated, he said, after the federal government provided clarity last week on the money coming to Arizona.

U.S. Census Bureau data shows Arizona’s share of the nation’s people living in poverty is down by about 6.9% this year. A state’s relative poverty is a primary indicator of how federal funds are distributed across the country, though the federal government also considers other factors in its formula for funding these programs.

“This is the first year the Census Bureau has had these types of significant swings. To me, in my experience, this is unheard of,” Brown said.

In a typical year, the state education department withholds 10% until the federal budget is finalized. The department this year withheld the usual 10% as a baseline, then subtracted another 7% to adjust for the decrease in relative poverty. The department withheld an additional 3% to provide extra cushion, according to department officials.

The numbers are in, and schools are slated for “record-breaking” cuts after all, Horne said.

“The 20% we used was very prudent,” Dugan said. “They were saying we were alarmist, we did something we weren’t supposed to.”

Schools will receive updated preliminary allocations soon, Horne said.

Brown offered Chandler Unified School District as a peek at what’s to come. The district stands to lose between 12% and 15% of funding compared to last year, he said. That means instead of having to repay money had the department only withheld 10%, they’ll instead receive more money. Tucson will lose 10%, he said.

Education Department officials said they know Arizona’s need for poverty funding is no smaller than it was a year ago, but a failure by members of the public to respond to Census Bureau surveys suggested a decrease in poverty.

“Our census numbers are down because people are not filling it out, and the ones that are filling it out don’t qualify for poverty,” White said. “These surveys are vitally important when they send them to people. … People don’t understand that this has bigger implications in our community.”

Lawsuit filed:Tom Horne’s wife sues Phoenix school district over dual language program

Reach the reporter at nsullivan@gannett.com.

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Poverty funds dispute shakes schools’ trust in AZ Education Department

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