Report raises concerns Texas education dollars were funneled out of the state

Mike Miles, state-appointed superintendent of Houston ISD, is at the center of the investigation.

By David Brown & Kristen CabreraMay 17, 2024 1:59 pm,

Mike Miles is no stranger to controversy since being appointed by the Texas Education Agency to oversee a state takeover of Houston’s public schools. His steps to remake HISD as superintendent have been the target of pushback from many teachers and parents.

But there’s a new controversy involving Miles’ work in education that’s getting the attention of state lawmakers and the TEA, this one involving an apparent transfer of Texas education dollars to schools in Colorado.

Brett Shipp, veteran investigative reporter with Spectrum News 1, broke the story. He joined Texas Standard to discuss his findings. Listen to the interview above or read the transcript below.

This transcript has been edited lightly for clarity:

Texas Standard: We should note out of the gate that this does not involve Houston public schools per se, but rather Miles’ role as founder of a charter school company called Third Future Schools, based in Colorado, which has schools there and administers schools in Texas, too. Is that right?

Brett Shipp: That’s correct.

When Mike Miles left Dallas ISD in 2015, he went back to his original home in Colorado Springs, and he started three different charter schools. Those charter schools grew to some extent during the late teens and then right around pandemic time, began having enrollment issues. And I think that pretty much kicked off the series of events that led us to uncover the fact that money was flowing from Texas to Colorado.

Now, when you went looking into his role with the company, I know you followed the money. And in particular, Texas taxpayer dollars paid to Third Future Schools based in Colorado for administering schools in Texas. How much money are we talking about here?

Well, it’s hard to know.

When things started to go south in Colorado Springs and in Aurora, Colorado, for his three charter schools, he started losing enrollment and found it difficult to make bond payments on a building that they had purchased – actually had constructed. That’s when one, then another and then a third – not necessarily charter school, but charter management – operations began in Texas – in Midland, Odessa ,and then Austin.

And almost immediately the schools started in Texas started losing money – $1 million, $2 million, $3 million. In 2022 and ’23, the three schools together in Texas that Miles was operating had lost $2.7 million. We were very curious as to why and asked many times to see financial records that would show where the money was going.

Miles was no longer in charge, but the people in charge then – starting last summer – of Third Future Schools refused to to talk to us, give us any information. And then we came across the real, what I call “the smoking gun” that got me, very interested in this story.

That is when I was tipped off to the fact that in an investor call, this chief financial officer at Third Future Schools told the investors that they’re not so worried about the flow of money at the schools in Colorado because they were getting supplemental funds from Texas. And that set off all kinds of alarms that really kicked my investigation into full motion.

And when you ask “how much money”… We know that millions of dollars were paid to the operations in Colorado. We do not know how much of that money actually was used to supplement the schools in Colorado.

I see, so it’s not clear how much of this money flowed, actually, from Texas to Colorado. 

Right. It’s not clear yet. We’ve asked for detailed information to find out.

We’ve not been really responded to in any meaningful fashion, but audits that we have received, internal revenue records that we have asked for and received through the Freedom of Information Act, have shown that the Texas schools were losing millions of dollars without explanation.

So Texas education dollars funding charter schools in Colorado. I mean, what has Miles had to say about this?

Well, he really spoke out for the first time and essentially he dismissed it off hand as nonsense. And then he basically said, “the way we operate, the way a lot of charter schools operate, is to set up a network and then take a network fee and then that money is fungible and able to be used by the different schools within the network.”

That’s his explanation. That is not our understanding of what the law says. And that’s why we decided to move forward with our story, that all these missing millions of dollars are unaccounted for.

We can get no explanation as to where the money went. And we do know through several sources that the money is being taken from Texas and used to help out the schools in Colorado.

Is there any law that says money that Third Future gets from Texas has to stay in Texas?

Well, there’s not a specific chapter in verse that says that because it’s presumed nobody’s going to take Texas tax dollars and spend it on children in another state. But there is law within the Texas Education Code that says that every dollar that is spent has to be accounted for, and every dollar that is spent has to be attached and affixed to a contract for services. Meaning if you send money out of state, what are you getting in return?

We have asked repeatedly for that information. Where is this money going? What services are the schools in Texas getting in return? And again, nothing but crickets from Third Future Schools in Colorado.

What about the teachers? What have they had to say? 

We received a generalized statement saying, “we’re going to look into this” because Ana Hernandez, state representative, asked for an investigation. So they are going to proceed with one. To whatever extent, I’m not aware.

But they say immediately the story that I did doesn’t raise concerns with them. And and that’s fair. They shouldn’t be backing any assessment based on my story. They should do a full and forensic investigation. And I expect that they should and would.

As a result of your reporting, you mentioned a state lawmaker has raised red flags. I know some Houston teachers are calling for Mike Miles to be investigated. Where do you see this going? And could this affect his role as HISD superintendent?

That’s a tough question to answer. I just don’t know.

I do believe, and this is my opinion, that the Texas Education Agency is not the right body to do the investigation, because I think the commissioner, Mike Morath, is conflicted because he’s friends with Mike Miles. He appointed him to take over Houston ISD. They worked together in Dallas. Mike Morath was on the school board. He hired Mike Miles in Dallas. They’ve been close associates since that time. And I just don’t think that the Texas Education Agency is the right agency to do that investigation.

I think there are calls now for a federal investigation. I think if the Securities and Exchange Commission and the Internal Revenue Service were to get in and do full forensic investigations into where this money went, I suspect that superintendent Miles could be in a lot of trouble.

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