A bill from an Arizona lawmaker could radically transform school procurement laws, allowing districts to adopt some of the shadiest financial traits of the charter school sector.
HB 2035, sponsored by Representative-elect John Fillmore of Apache Junction, would subject Arizona school districts to the same procurement laws and procedures applied to charter schools beginning in the 2019-20 school year. The only problem? For the charter sector, laws preventing conflicts of interest in procurement and bidding essentially don't exist.
“It’s charter-izing public schools," said Curt Cardine, a research fellow with the nonpartisan Grand Canyon Institute, upon his review of Fillmore's bill. Cardine, a critic of existing Arizona charter school regulations, called the Republican lawmaker's proposal "crazy."
During the last legislative session, Arizona strengthened the school district procurement laws Fillmore's bill would undo.
Under Arizona law, nearly all charter schools are exempt from district procurement rules that require a public bidding process. It's the reason why charter chains such as the prestigious BASIS network can ink no-bid contracts with a private educational services company owned by the founders of the charter network, Michael and Olga Block, as the Arizona Republic uncovered.
Additionally, charter school finances are not subject to investigation, audit, or review by the state auditor general.
The timing of Fillmore's bill is stunning.
A school finance scandal related to procurement conflicts of interest recently rocked Scottsdale public schools, and there is finally momentum at the Capitol behind proposed reforms to Arizona's charter sector. Those proposals are in part the result of charter school entrepreneurs like the Blocks, who have profited off of lax rules.
Even with public bidding requirements in place for school districts, problems arise. The Scottsdale Unified School District scandal arose last year because of inappropriate ties between district officials, contractors, and a construction firm hired to do work for the district.
The mess led to a civil and criminal investigation by the state Attorney General, the 11-count felony indictment of the district's former CFO, and the ouster of superintendent Denise Birdwell and other district officials.
In response, the Legislature tightened up laws governing the district procurement procedures in the education budget passed last May. The new rules, designed to ensure the integrity of the procurement process, spelled out that the lowest bid must win a contract and prohibited gifts from contractors to district officials. Accepting a gift worth more than $300 is now a class 6 felony; attempting an end run around the new rules is a class 4 felony.
Republican legislators allowed charter schools to remain exempt from those provisions. Amendments from House Speaker J.D. Mesnard removed language that would have applied the new rules to charter schools.
Meanwhile, the insider deals and sketchy payouts taking place at Arizona's charter schools – some of them high performers like BASIS, some of them not – have prompted Republicans like Governor Doug Ducey and State Senator Kate Brophy McGee to endorse the idea of reform.
What's ironic is that Fillmore's bill would do the opposite, refashioning the district system in the mold of the free-wheeling charter sector — never mind the scandals.
"We know all this abuse is going on in the charter [sector], now we’re going to turn around and give the same thing to the school districts," Cardine said. "Not a good idea.”
In a 2017 report, Cardine, along with Grand Canyon Institute research director Dave Wells, found that more than 77 percent of Arizona charter holders engaged in what is known as related-party transactions. Those deals occur when for-profit companies are linked to the charter holder through family members employed by the company.
Occasionally, the individual in charge of the charter network may even be employed by the supposedly independent contractor.
“There are no procurement laws that apply to charter schools, really," Cardine said. "They’re free to contract with whoever they want, and that’s why they can do the related-party transactions."
Fillmore represented District 23 for one term in the Arizona House from 2011 to 2012 before running unsuccessfully for the State Senate. After seeking a House seat in District 16 during every subsequent election, Fillmore was finally elected in November. The conservative East Valley district contains parts of Mesa and Apache Junction.
He did not respond to requests for comment on the bill.
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