An acquaintance in the St. Croix valley area has been publishing an email newsletter, and the below item is from it, with her preamble being the opening italics text, and with her intermediary email address removed.
View this as basically a republication, a "guest posting" of one John Sievert, a resident of the St. Croix valley locale. I do not know this individual, but his message is worth distribution and on its face invites redistribution, and hence is being "Crabgrassed" in its entirety:
Please see below. John is an active Republican in our district whom I've worked with off and on over the years. His wife is a teacher. Let the fight begin!
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From: john@[omitted_address].com
Date: Mon, 7 Dec 2009 11:45:02 -0600
Subject: Local Education Controversy
To: All,
I'd like to alert you to a controversy over education and give you my thoughts on this.
On Sunday, 11/29/2009 in a front page feature article the Star and Tribune exposed and detailed abuses of charter school funding (see link below). Specifically, these abuses demonstrated how some charter schools have exploited loopholes in the law in order to fund construction of school buildings. In this article, St. Croix Prepratory Academy (SCPA) was prominently featured as one of the abusers. SCPA recently built a new $21.7M school on Stagecoach just outside of Bayport in Baytown Township. According to the article, some of the proceeds of the sale of their public junk bonds were used to supply a total of $140,000 in "bonuses" to Jon Gutierrez (the executive director of the school), Kelly Gutierrez (wife of Jon and CFO of the school), and Carroll Davis-Johnson (school board member of the school). This was apparently done in a clever round robin sequence of board votes and abstentions by these three. These payments were above and beyond the salaries that Mr. and Ms. Gutierrez were paid in their roles as employees at the school. Ms. Davis-Johnson is a school volunteer and board member.
On Tuesday, Sen. Kathy Saltzman (D-Woodbury, representing the south end of ISD834) and Eugene Piccolo (Executive Director of the Minnesota Association of Charter Schools) held a joint press conference noting that these actions by SCPA and other charter schools were wrong and needed to be investigated and corrected. They announced that the Minnesota Senate will begin hearings on this starting today, Monday, December 7th. These hearings are a continuation of work that was done last year and that was to be continued this year but made [sic] certainly has been made more visible by this recent news.
Last Friday, the Star and Tribune Editorial board issued an editorial excoriating those that have abused the charter school funding system and commending the legislature for looking into this matter. The editorial specifically mentioned the payments at St. Croix Prep. The editorial also demanded that this be cleaned up. Similar mention also was made by the Pioneer Press.
Yesterday, in the Star and Tribune, Eugene Piccolo had an Viewpoint Commentary that specifically decried the "bonus" payments again.
As you can see, this is becoming a very big story statewide. A significant piece of this controversy and statewide problem comes from the St. Croix Valley. Links to all of these stories and editorials are below.
There has been some confusion that I think is important to clear up.
1- Charter schools are PUBLIC schools. They are 100% funded with taxpayer dollars. They are NOT private schools although they often walk, talk and emulate them.
2- St. Croix Prep is a PUBLIC charter school. While it resides in the district, it is not overseen by the ISD834 school board and has no relationship to ISD834 schools except that some special ed and transportation services are supplied by the district as required by statute. Many people are confused on this point. SCPA is often assumed to be either an ISD834 school or a private school. Neither case is true.
3- St. Croix Prep's building was financed by publicly issued bonds and will be paid for completely with taxpayer dollars. Unlike a school district, voters had no oversight or approval in this process as they would have if ISD834 (or any other school district) were to build a new 1000 student school building and had to seek out public taxpayer approval through a bond referendum election.
4- St. Croix Prep is not directly overseen by any publicly elected official below the Governor - compare this to a school district such as ISD834 that is overseen by a publicly elected school board that directly oversees its operations.
5- When (and if) St. Croix Prep's bonds are paid off, the school will NOT be owned by the public. St. Croix Prep, under current law, will still be able to charge the state for lease aid. In other words, the building will be paid for and the state will continue paying for the building as if it were rented from a third party. The taxpayers will not own the building that they paid for and will continue to pay for it forever.
In my opinion, what has happened here is wrong. It is without question, inappropriate for those who are paid with public funds to vote themselves large bonuses for work they are supposed to do anyhow - simply because they can. Can you imagine the (completely justifiable) public outrage if the same thing had happened in the district schools or in any other state agency? This "bonus" money should have gone to the education of the children and not to improperly enrich the leadership of this school.
As one who has gone before the public to pass an operating levy, I find this misuse of money in a public school to be deeply troubling and disappointing. Schools, because of their critical mission, are held to the highest standards of accountability and transparency - as is appropriate. When something like this happens in a public institution funded by taxpayer dollars - institutions charged with the all important mission of educating our children - we all should not accept such behavior on behalf of those responsible for the disbursal of those funds.
St. Croix Prep and those with financial interests in SCPA, but specifically SCPA Executive Director Jon Gutierrez, have put forth a tortured explanation of why they "deserved" these "bonuses." This is, of course, an attempt to distract from the issue at hand. Every penny of that money - plus high junk bond interest - will be money that will not be supporting the education of children. I can think of no more flagrant abuse of the taxpayer's goodwill nor misuse of their hard earned money than that.
Some will tell you that this school was not built with public money. While this is technically true, every penny of that bond will be paid for with public money and at junk bond interest rates and the public will not own the building. SCPA would default on their bonds in very short order if they failed to receive state money to pay for the school since all of their revenue comes from the taxpayers.
Those who would defend this behavior will try and talk about the "excellent" education that SCPA and charter schools supply in order to camouflage what they have done. While SCPA is about average if compared to the ISD834 schools, this is simply not the issue. The ends have never justified the means and that principle does not change here. It was wrong to do what they did, it remains wrong, it will always be wrong, and the the quality of education is not relevant in this discussion if it is improperly funded. This issue is about the proper use and stewardship of public money. There is one standard for how the taxpayer's money must be handled. That standard requires complete transparency, accountability and absolute integrity. SCPA leadership intentionally circumvented these principles and needs to be held accountable. SCPA should receive strict oversight by the Minnesota Department of Education (MDE). The school leadership that supported these actions should be purged from the school. The MDE should consider taking the school into some form of receivership - all of which would happen if this were a district school overseen by elected officials and directly by the Department of Education (MDE). These three who received these bonuses need to return the money as they exit.
This all needs to be cleaned up because any controversy over education hurts all good schools - be they public school district schools, public charter schools or private schools. Our education system in the this state (and this district) is one of the best in the country (and arguably, the world) and an asset that needs to be preserved. That becomes considerably more difficult in the presence of financial improprieties. Public trust, once lost, is difficult to regain and that mistrust spills over to all in the education community.
Please write your representatives and the Minnesota Department of Education and tell them how you feel about this. This needs to get fixed. Do not underestimate the power of a single voter in requesting action on an issue like this. You voice will be heard and it will be important.
Representatives covering the ISD834 school district are:
Senate:
Senator Kathy Saltzman --- sen.kathy.saltzman@senate.mn
Senator Katie Sieben --- sen.katie.sieben@senate.mn
Senator Ray Vanderveer --- sen.ray.vandeveer@senate.mn
House:
Rep Julie Bunn --- rep.julie.bunn@house.mn
Rep Matt Dean --- rep.matt.dean@house.mn
Rep Denny McNamara --- rep.denny.mcnamara@house.mn
Rep Marsha Swails --- rep.marsha.swails@house.mn
Minnesota Department of Education
Commissioner of Education, Alice Seagren: alice.seagren@state.mn.us
Here are the articles that relate to this note:
Original Star and Tribune article, 11/29
http://www.startribune.com/local/75464082.html
Star and Tribune Editorial - "Clean the junk out of charter schools"
http://www.startribune.com/opinion/editorials/78478392.html
Eugene Piccolo, Executive Director of Minnesota Association of Charter Schools, Viewpoint Commentary
http://www.startribune.com/opinion/commentary/78555452.html
St. Paul Pioneer Press Editorial
http://www.twincities.com/opinion/ci_13921259
Articles on Sen. Kathy Saltzman and Gene Piccolo Press Conference
http://www.startribune.com/politics/state/78286802.html
As always, feel free to forward this on if you think it is helpful.
Regards,
John Sievert
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The term "junk bond" is unclear to me in this context, and I shall set out my best understanding with a request that any reader knowing more should supplement it via a comment or email.
The pass-through or conduit bonds are sponsored by a government entity, and from that a tax-exempt status attaches, as with municipal bonds. They are non-recourse against the conduit governmental entity, and secured by the charter school building they finance; so that the common concept of a "junk bond" being an unsecured one is not the case here. If the liable party on the bonds [how that's determined is vague, and it is in every instance spelled out in the bond prospectus, I would guess, since I surely would not buy any bond without that basic information and I presume regulators would not allow issuance without basic prospectus review]. With private placement of bonds, as might often be the situation, there might be triggering of an SEC exception to prospectus preapproval control, (and that gets into nuances of securities law I do not pretend to have mastered). If there is no regulatory review, but private placement with caveat emptor being the rule, then state securities oversight approval of prospectus terms and conditions prior to issuance might be a possible route to flexible case-by-case reform since a private placement would only involve assurances of private interests being intact, without regard for the public interest that regulatory prospectus review would entail. Surely, bond underwriting and legal costs would escalate with regulatory review, but is that a greater evil than condoning potential public-interest-abuse types of mischief that regulation might curb?
My understanding is the bonds are for 100% of the cost of construction, with construction caps in place between the contractor and the liable party on the bonds, so that the bond income is guaranteed sufficient for the construction. In that way they differ from mortgages on homes where less than 100% of the appraised value of the security is lent in almost all instances where there is non-recourse against the borrower beyond foreclosure on the security. But with the building as security, these bonds differ from unsecured high yield "junk" bonds. If charter schools are allowed at all to be promoted unsecured, i.e., without the building securing the bonds, then that might be an overdue reform step for legislators to consider.
Add to that 100% cost coverage norm the situation that appears to have been "engineered" in the instance the guest post describes, where more than 100% of truly anticipated construction cost is attained by bonding, and where, apparently, the building is completed for less than the bond income; so that a "slush fund" remains for personal enrichment of charter school insiders in ways that were not disclosed in the prospectus [or if so disclosed, potential insider bonus payments, where the regulators were asleep in allowing such "slush fund" terms in an issuance where the charter school statute has to be viewed as envisioning duly constructing needed facilities without undue enrichment possibilities for insider promoters or facilitators of the venturing].
Bonding that permits any such "slush fund" potential is wrong and should not be possible; nor should it be possible to over bond beyond the amount needed for construction without a prospectus commitment that any and all overage be put into the charter school management and operating funds - and with statutory reform curbs being placed on insider and consultant [lawyers, etc.] fees and salaries so that during the lifetime of the charter school there is no gross looting of operating funds by diversion of undue amounts to insiders and promoters via existence of "loopholes".
Again, my major complaint against charter schools is that those gravitating to use of such things too often have religious motives prominent in mind, but disguised in fact so as to not breach law while deliberately skating where the ice is thin, out of hubris and belief in their "knowing best." To me the invitation to breach treasured separation of church and state Constitutional norms is too attendant to the process to be acceptable in any way whatsoever. I believe that charter schools impede proper running of public education and should be eliminated in all ways and means, to remore this burden and bleeding away of funding that should be spent only on wholly secular and publiclly accountable public education; elected school boards and all.
That's my major beef - education should be entirely secular, with Jesus, Mohammed, or Buhda being outside of and forcibly divorced from ALL publicly funded education of the young. Home values belong only in the home, not otherwise, and in my view of a perfect world church property and income would be taxed no differently from other private property and income.
Add to that the "slush fund" potentials that appear to have been exploited in the situation the guest post identifies, and there are more devils at play beyond breach of separation of church and state. It is needing of reform, at least, with my policy preference being elimination as the best possible measure of reform. Make it all accountable to the public via public districts with elected boards that have to go to the public with capital funding requests for approval, and get rid of this back-door mutant disgrace that allows crass exploitation of public money.
And all that also is the basis of my great dislike of lawyer John Cairns. I view him as a clear facilitator of the current status quo being as it is. Indeed, he touts himself as exactly that, on his website. See the link given at the opening of the post, which includes screenshots there from his website. Himself, described in his own words, so you need not view my opinions as fact.
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NOTE: Press links in the original email have been made hot links (with tracking suffixes removed), and each opened properly in the browser I used to prepare this post. Email addresses are not hot links and you need to open your email server and appropriately cut/paste or type in the addresses. In doing a cut/paste from an email, I did some reformatting and hope I did not inadvertently run any paragraphs together. Double checking, it appears to me to be true to the original, including one typo/glich.