MGT Consultants: Profiting from the School Crisis in Gary, Indiana and Taking Over Three Colorado School Districts

This blog will take a late summer break.  Look for a new post on Wednesday, September 11, 2019.

In a blog post on Monday, Diane Ravitch warned: “Colorado be very afraid.”  She is commenting on a decision by the state board of education in Colorado to hire a for-profit education management company to take over three school districts which Colorado’s state board has deemed “troubled.”

Ravitch is writing about an article from Sentinel Colorado, which explains: “As Colorado school districts struggle and fail to raise student test scores in schools with entrenched problems, they’re turning to private companies to fix public schools, for millions of dollars. Some critics question whether at least one of those private companies is qualified for the job based on their track record in another state and their close ties to what some say are anti-public schools alliances.”  The three districts are to be taken over by Florida’s MGT Consulting.

Sentinel Colorado‘s Grant Singer explains: “Leaders of the Florida-based MGT say they specialize in allocating public money more effectively while improving teacher effectiveness in the classroom and school culture. Its management process includes sub-contracting areas of school work to other companies, and it boasts completing over 10,000 projects in many states and abroad over several decades… MGT’s current chief executive officer also co-founded a consulting and lobbying firm tapped into a national network of for-profit education institutions, Republican education reformers, the testing industry and charter schools. That’s part of what draws controversy as public school academia question the motives of a company headed by pro-school voucher officials working to save failing public schools—for profit.”

Colorado state school board members praised MGT’s record in the so-called turnaround of the only whole school district it has managed—for the past two years—in Gary, Indiana.  The fact that MGT Consulting, a for-profit, was praised for work in Gary caught my eye. I have been to Gary, just as I have been to Detroit, whose public schools have shared some problems with Gary’s. Detroit’s school district was assigned a state emergency fiscal manager by former Governor Rick Snyder; in fact Detroit’s school district was assigned an emergency manager named Darnell Earley after he left Flint, where, as municipal emergency fiscal manager, he had permitted the poisoning of the city’s water supply. Fortunately Detroit’s schools have been turned back to the democratically elected local school board, which hired a professional educator, Dr. Nikolai Vitti.  And I have been to the cities in Ohio now in state takeover, and being operated by appointed Academic Distress Commissions. I am thinking of Youngstown, which in four years under an Academic Distress Commission and appointed CEO, has not turned around. I am thinking of Lorain, where outright chaos has ensued under an Academic Distress Commission’s appointed CEO, David Hardy. And I am thinking of East Cleveland, whose schools are just beginning the state takeover process, and ten other Ohio school districts—including Dayton and Toledo—being threatened with state takeover.

All of these Rust Belt cities and their school districts are characterized by economic collapse. They are industrial cities where factories have closed and workers moved away to seek employment elsewhere. When industry collapses, the property tax base—the foundation of the local contribution of school funding—evaporates, and as workers lose jobs or leave, local income tax revenue collapses as well.

The northwest Indiana reporter for WBEZ News in Chicago describes what happened in Gary and how economic collapse has affected the city’s public schools. Writing in February of 2017, WBEZ’s Michael Puente explained: “In December, the school board voted to close Jefferson and two other school district facilities at the end of the academic year to save money.  It’s just the latest cost-cutting effort for a district drowning in red ink. By June, Gary’s accumulated debt is expected to reach $101 million.  In the last two years, Gary has had to close six buildings amid declining enrollment, dwindling tax revenue and competition from public charter schools.  The school system is struggling to make payroll each month. It delayed checks to 700 employees, mostly teachers, in November.  March is also likely to be a problem.” After describing faltering attempts by members of the Indiana Legislature to pass legislation to assist Gary’s schools, Puente adds: “But none will fix two of Steel City’s greatest problems: industry decline and population loss.  Since 1970, some 100,000 residents—almost half the city’s population—have left Gary. Only about 77,000 remain… Gary has been bleeding jobs, especially at the steel mills, for decades. Big employers like U.S. Steel are still around, but its workforce has shrunk over the years. And, the huge steel facility can’t produce fat property tax checks for the local school system because a decade-old state property tax cap limits how much the Gary schools can collect.”

In July 2017, the state took over the school district in Gary and turned the schools over to a private, for-profit management company: MGT Consultants. MGT hired Peggy Hinkley, a retired school superintendent to run the schools, but she resigned a little more than a year later. The Post-Tribune‘s Carole Carlson describes Hinkley’s tenure: “Hinkley served 14 months and ruffled the feathers of some elected officials who criticized her decisions, especially the closing of the Wirt-Emerson School of Visual and Performing Arts. When Wirt-Emerson closed in June (2018), it left the district with just one high school, the West Side Leadership Academy. It stoked fears of a continuing exodus of students who would leave for charter schools or other districts… Under Hinckley, Gary reached a deal resolving $8.4 million in back payroll taxes owed to the Internal Revenue Service. The IRS forgave a large portion of the debt, leaving the district with a $320,000 payment. The freeing up of the liens on buildings allowed Hinckley to list 33 vacant schools and properties for sale.  By November, the district had accepted five offers, amounting to $480,000. More sales are still being weighed. In all, Hinckley erased about $6 million of the district’s $100,000 million in long-term debts and reduced its monthly deficit from about $1.8 million to $1.3 million… Academically, all seven elementary schools received Fs on state report cards this year.”

Clearly, in Gary, Indiana, MGT Consultants has not miraculously achieved the kind of quick school district turnaround Colorado’s state school board bragged about when it contracted with MGT to take over three school districts.

And in the background there is also a troubling possible conflict of interest. You may remember that Tony Bennett was the elected state school superintendent in Indiana back when Mitch Daniels was the far-right Republican Governor. Tony Bennett left Indiana in 2013 to go to Florida, where he became the Florida school commissioner, but he resigned (also) in 2013, when it was discovered that, as Indiana’s state superintendent, he had secretly raised the state’s rating of a charter school whose operator was a mega-donor to Indiana’s Republican campaign coffers.

After he left Florida, Tony Bennett became a private consultant and, according to a second article by Carole Carlson of the Post-Tribune, “a partner in the Strategos Group, a Florida company, which acquired MGT Consulting three years ago.  As a result of the acquisition, Bennett became a member of MGT’s board of directors.”

The relevant issue of Bennett’s serving on MGT’s board when the state of Indiana hired MGT to run the Gary Schools is that Bennett worked assiduously with then-Indiana Governor Mitch Daniels to expand Indiana’s statewide private school tuition voucher program and to enable more charter schools—a vigorous school privatization venture that has further undermined enrollment in and funding for the public schools in Gary.  Carlson explains that back when Tony Bennett was the state school superintendent in Indiana, “then Gov. Mitch Daniels and Bennett led an education reform overhaul that expanded charter schools and launched a vigorous voucher program that gave tax dollars to private schools.  Critics say those policies nudged Gary on its downward spiral.”

Chalkbeat Colorado‘s Yesenia Robles describes the cozy, school-reformer-privatizer connections that may have contributed to the hiring of MGT Consultants to run Gary’s schools.  After all, Colorado is claiming it has chosen MGT Consultants to run three different school districts based on the company’s track record in Gary. Robles doesn’t draw any firm conclusions about the red flags this ought to to have raised among officials in Colorado who hired MGT to manage the three school districts the state has taken over, but she does raise the red flags: “In Gary, the state ordered an emergency manager to come in not only for academic problems, but because the enrollment decline and fiscal management problems landed the district deep in debt. MGT took over the responsibilities of the superintendent and the school board, at the state’s request and reports directly to state officials. The work has been controversial. Some lawmakers called for removing the firm when it was discovered that Tony Bennett, who was state superintendent in Indiana from 2008-2013, is a partner in the Strategos Group, which acquired MGT in 2015. Lawmakers argued that the policies Bennett rolled out in his time as state superintendent contributed to Gary’s financial problems that led the state to require an external manager.”

The Post-Tribune‘s Carlson reports that as of the end of 2018, MGT Consulants’ contract to manage Gary’s school district has reached $10 million.  MGT Consultants stands to make big profits in Colorado as well. Sentinel Colorado‘s Stringer provides details—for example, in MGT’s contract to manage the Adams 14 School District in Commerce City: “MGT’s work in Commerce City will net almost $8.4 million plus up to $1.7 million in incentives for improving the district scores and ratings…. In the first two years of its contract, the group can earn from $300,000 to $400,000 each year for improving test scores at different grade levels and for meeting achievement marks. In the last two years, MGT could make up to $400,000 each year for earning the district and individual schools gains in state ratings, even for bumps to levels below meting standards. The Commerce City district does not have a superintendent nor a chief financial officer and will likely not fill both positions… MGT will manage the more than $150 million in district spending, almost all state and federal dollars.”

My own experience has not familiarized me with the school districts which have been turned over by the state of Colorado to the for-profit MGT Consultants. But when I read about state legislatures and politicians in Rust Belt states taking over school districts and appointing emergency fiscal managers and academic distress commissions and CEOs with unlimited power to make changes without consulting locally elected officials or engaging the local community, I wonder why the democratic process seems always to be abridged in the school districts which serve the poorest children of color. In Gary, I wonder why a for-profit consultant is raking in millions of dollars to cover for the state’s failure to help the school district after the surrounding economy collapsed. The economic tragedy in a place like Youngstown or Lorain or Benton Harbor or Dayton or Gary demands the active engagement of state and local government officials on behalf of the public good and the welfare of the children.

3 thoughts on “MGT Consultants: Profiting from the School Crisis in Gary, Indiana and Taking Over Three Colorado School Districts

  1. Pingback: Jan Resseger: For-Profit MGT Did NOT “Turn Around” the Schools of Gary, Indiana | Diane Ravitch's blog

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