Report: Texas tax dollars diverted out-of-state to charter schools founded by Mike Miles

A report by Spectrum News alleges that millions of Texas education tax dollars were diverted out-of-state to a network of charter schools that were founded by Houston Independent School District Superintendent Mike Miles.

As FOX 26 reported late last summer, Miles was appointed by Texas Education Commissioner Mike Morath to lead Houston ISD after the state took over the district. Before his appointment, he had served as CEO of Third Future Schools, a network of public charter schools in Colorado, Texas, and Louisiana.

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According to Spectrum News Reporter Brett Shipp, Miles started three Third Future Schools in Colorado after leaving Dallas ISD in 2015, and then the charter network expanded to Texas with more schools starting in 2020.

Shipp stated that internal school records and a nationally recognized school rating agency indicate that the three Colorado schools have struggled with performance, enrollment, and finances. Shipp's report further stated that one of the Colorado schools was forced to close last summer, leaving the school with $5 million in unpaid bond debt.

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By the end of the 2023 school year, Shipp reports, the three Texas schools had a $2.68 million deficit. According to Shipp’s report, more than $25 million public tax dollars were being spent on the three Texas schools, but only about $15.6 million was being spent on teachers and supplies, and the other $10 million went to "management and general" expenses like admin salaries and benefits, admin support costs, professional services and other operating services.

According to Shipp’s report, an auditor’s notes show the Texas schools’ deficit was documented as being "caused by the liabilities to other TFS network schools and to TFS corporate."

Shipp’s report details evidence showing two checks sent for more than $1 million each from Miles' charter school in Odessa, Texas, to Aurora, Colorado.

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Miles responded to the report in a letter on Wednesday:

Friends, Partners, and Board Members:

I had initially planned not to respond to an article circulating that badly misunderstands, or worse, intentionally misrepresents the financial practices of Third Future Schools. While I have not worked at the Third Future Schools network for more than a year, I find the piece irresponsibly inaccurate, and I cannot let this kind of misinformation go uncorrected.

I have an obligation to make very clear that during my tenure Third Future Schools was always a responsible steward of every public dollar received, all financial agreements and obligations were approved by local boards of directors, authorizers, and in our Texas schools, the school district with which TFS partnered. Eight different districts in three states have trusted Third Future Schools with the education of their most underserved students and have overseen TFS’s overall financial health and propriety.  Third Future Schools has a consistent track record of clean audits year over year, and I have no reason to believe that is any different now. These baseless claims cheapen the hard work and dedication of thousands of staff and students.

The budgets of all Third Future Schools in Texas are attached to the management agreement with the local school district and are part of the approval process.  Administrative fees are applied to all schools in all states in order for the central office to oversee and monitor the schools as well as provide network-wide supports (such as finance and human resources) from people and departments in the central office, which is located in Colorado.  This is common practice for charters and other independent partnership schools and is not only allowed, but anticipated by Texas’ education law. Spectrum News either intentionally or, through gross incompetence, mischaracterized these common place financial arrangements between charter schools and the charter management organizations that support them.

The Spectrum News reporter also worked to undermine the progress we made in Dallas ISD. It appears he is resurrecting old tactics that are not worth more time and attention. I do not intend to comment further on these spurious assertions. I am committed to staying focused on the tremendous challenge of improving Texas’ largest district.

We have an obligation to finish the year strong for our students and staff, and that is where I will direct my time and attention. I thank you for your partnership and ask that you do the same as we look ahead to the 24-25 school year and beyond. We’ve accomplished a great deal and there is even more left to do.

Reaction to the report

In a statement to FOX 26 on Tuesday afternoon, The Texas Education Agency said, "TEA is aware of the report and is reviewing the matter." 

In reaction to the report, Jackie Anderson, President of The Houston Federation of Teachers issued the following statement on Tuesday.

"Just days after learning that Mike Miles is laying off hundreds of custodians, librarians and removing popular principals from our schools, we are now learning that he’s treating our public school system as his own personal piggy bank," said Jackie Anderson. "The diversion of Texas public funds to shore up his private charter school company in Colorado is an outrageous betrayal of trust and requires a federal criminal investigation. The corruption of this deal stretches beyond just Mike Miles - the board of managers is also complicit in this shadowy scheme by failing to provide oversight and transparency. Greg Abbott’s takeover of our schools has failed. Teachers, students and their families deserve better and in response we are demanding the immediate resignation of Mike Miles and the immediate exit of the TEA from HISD."

Harris County Commissioner Rodney Ellis issued the following statement on Tuesday:

"I’m shocked by what I saw in one news report regarding allegations concerning state-imposed HISD Superintendent Mike Miles. This also calls into question every dollar he has spent as superintendent. While teacher benefits are being slashed, libraries are being closed, and support staff are being let go, HISD parents and taxpayers deserve a robust and timely investigation to ensure that tax dollars are being used appropriately and ethically. This is especially true at a time when the district is under the direct control of the State and not accountable to a locally elected board."