Financial downturn at Education Plus led to director's departure
When Don Senti announced earlier this month that he was stepping down, effective immediately, after five years as executive director of Education Plus, he cited health issues.
But emails among Senti, his staff and board members of the school district cooperative show that concerns about the financial health of the organization had intensified in the weeks leading up to his decision to leave.
Information obtained by St. Louis Public Radio shows that since Senti took over at what was then called Cooperating School Districts, its financial reserves have dropped from 102 percent of its expenses to a projection of just 14 percent in the current fiscal year.
The organization is funded from two primary sources: Dues paid by its 62 member school districts and revenue from cooperative purchasing and training of teachers and other educators. The organization also provides services such as public relations for the members.
Operating revenue dropped 20 percent over the five years of Senti's tenure. The change is largely because of lower earnings from the sale of products and services -- a main reason the organization was founded in 1928. At the same time, expenses for personnel were up more than 20 percent.
Shortly before Senti announced his intention to leave, Education Plus had reduced its staff by 20 percent and sold $1 million worth of investments to cover its bills and its payroll. A spending freeze was also put in place.
Senti had also eliminated the job of his chief financial officer, Steve Chodes; he had been very critical of Chodes’ performance in emails. He also had hired a deputy CFO, Mickie Shank, outside the normal hiring procedure. From the start of her tenure, she had often had been at odds with Chodes.
In an interview this week, Senti said the budget shortfall that came to light a few months ago caught him by surprise.
“We realized in January that there was going to be a big gap between expenses and revenues,” Senti said. “So the cabinet started working immediately in January on closing that gap. That was a very long and difficult process, but we were able to reduce expenses enough, mostly with staff numbers, so that we were prepared on April 15, actually, to present a balanced budget to the board.”
That was the same day that Senti’s departure was announced, to the staff and to the public. His predecessor as executive director, John Urkevich, is serving in the job on an interim basis.
Senti knew that bad budget news was not going to help his tenure.
“I’ve spent my whole career understanding the ‘no surprises’ rule,” he said, “so the board was surprised, as I had been a few days earlier. They were angry. I don’t blame them. If I had been on the board, I would have been angry.”
A financial fiasco
Senti became executive director in 2011, after serving as superintendent of schools in Parkway and Clayton.
Employees unhappy with Senti’s leadership, financial and otherwise, would not comment on the record about his performance, citing concern for their jobs. In an anonymous email, one group used terms like “completely negligent and irresponsible” to describe Senti’s handling of the agency’s money, and they pointed to high-ranking officials who have left.
They said he spent money with little regard for the agency’s fiscal health, and his personnel decisions were often made in ways that violated sound business practices.
In the news release announcing Senti’s retirement, the head of its board, Orchard Farm Superintendent Tom Muzzey, said:
“His efforts have increased the regional influence of our cooperative and helped to improve the educational outcomes for the more than 300,000 students we serve in our member districts.”
But that sentiment is far removed from what Muzzey expressed in an email nine days before, when he told Senti that his disregard for sound financial decisions would not be tolerated if he were still working at a school district, as he did during his time as superintendent in Parkway and Clayton.
“The biggest issue for me to overcome,” Muzzey wrote, “is that you have made it crystal clear … you have total autonomy in making hires and that the board does not have authority to be involved in personnel decisions.
“In light of this, you are ultimately responsible for this fiasco and if these events unfolded while you were a superintendent you would have been out of a job.”
Kevin Carl, the superintendent of the Hancock Place school district and one of three members of a group looking into what went wrong with the financial picture at Education Plus, wrote Senti in a similar tone:
“I remain unclear how the need to cut $1,000,000 has occurred during this fiscal year. A 20% reduction is a significant number and it is difficult to understand how this has transpired during one fiscal year. I am certain if any school district decided to reduce their budget by 20% in any given year, it would raise a number of questions and concerns.”
In their email, the anonymous employees expressed relief that the fiscal morass was finally going to be examined.
“Now that the finances are so bad,” their email said, “they have to do something. The taxpayers and community deserve to know what is happening to this public entity so the board will be forced to take action and fix the problem.”
Two days after they sent the email, Senti, 71, announced his retirement to the staff. His salary for the current fiscal year is $193,730. Muzzey said he will receive no other compensation beyond that.
Too much spending, not enough income
For the fiscal year that ends on June 30, more than half of Education Plus’ revenue came from membership dues and income from workshops and seminars – professional development, in eduspeak. In terms of expenses, 62 percent went to salaries and benefits, with 34 for operations and 4 percent for instructional costs.
According to emails obtained through the Freedom of Information Act, the earliest indication of budget problems in the current year may have been in a message sent from Senti to members of the board on Feb. 5.
It said that during an all-day retreat with his department heads to look at the organization’s financial position, “we projected a significant gap – perhaps as much as $900,000. Our projections for our expenses are right on target. Our salaries are actually down from last year and under budget. However, even though revenue has grown, and we are only half way through the year, it appears that we over budgeted our revenue.”
The solution, he said in a subsequent email, “is to cut expenses – which means salaries. Since we do not have kids to teach or an NEA agreement and all of our employees are ‘at will’ we can take action more easily than a school district. We are also able to determine which employees are contributing to increasing revenue and which are not.”
A few days later, he asked superintendents to help improve the financial picture by using -- and paying for -- the agency’s services.
“We have had to significantly revise our financial projections,” he said, “and not in the direction we would like. We are looking at a variety of short and long term options to improve the financial stability of our organization.”
In mid-March, he told superintendents about the reduction in Education Plus’ staff of more than 20 percent, done to achieve a balanced budget for the coming fiscal year.
About 10 days before his departure was announced, Senti told the board:
“I know you are being blindsided. So was I. The first I knew of the problem was less than a week ago – March 30. Even then, Steve (Chodes, the CFO) presented in a way that didn’t sound particularly serious. Should I have known? Perhaps. But I was a superintendent for 21 years and assumed the CFO what (sic) minding the store.
In early April, about 10 days before Senti’s departure was announced, Muzzey wrote him that he has had “concerns about our financial future since I joined the board.”
In response, Senti told Muzzey what he thought the source of the problem might be and reacted to some less than favorable critiques of his performance.
“I am aware,” Senti wrote, “that even though the last two CFOs have screwed up I am ultimately held accountable for this situation. If you look at the numbers of the board’s evaluation, it was far above average. The way you handled the comments was inappropriate. I have no idea who wrote the negative comments but I am sure that they did not represent the feeling of the entire board. You also gave me no opportunity for input at all into the evaluation….
“That said, I am not interested in a fight. Mostly because it would be bad for the future of EdPlus. Tom, your opinion of me and Kevin Carl’s has been obvious for a while. Kevin says he is speaking for other superintendents. So if your feelings are shared by a significant number of other superintendents and the Board, I am prepared to step down.”
In its earliest incarnation as Cooperating School Districts, Education Plus concentrated on helping its members save money through combined purchasing power.
Before the internet, that approach was a big benefit, particularly to districts like Carl’s, which has just 1,500 students at three schools in south St. Louis County.
Now, Carl said, that advantage has waned. The best deals, he said in an interview, can be just a couple of clicks away.
“We use Education Plus as another vendor,” he said. “If we’re going to buy truckloads of paper, for example, we’re going to find out what the price is at Ed Plus. We’re also going to get the price independently, because now it’s pretty easy to do that. You don’t even have to pick up the phone anymore.
“Then we’re going to go with the best price. I think that level of competition and ease of access for districts is what makes that such a challenge now for Education Plus.”
Senti disputed that interpretation of the value of Education Plus’ purchasing power. But he acknowledged that the revenue from purchasing needs to grow.
He also cited activities of Education Plus that have benefited the region but brought in no money.
- arranging the logistics for more than 2,300 students to transfer from Normandy and Riverview Gardens, on a tight deadline;
- convening a transportation summit to try to move students in all districts more efficiently;
- hosting a session on transgender education;
- starting Gateway2Change after the death of Michael Brown in Ferguson, bringing together students from high schools in differing financial situations.
“Those are all really good things for the region,” Senti said, “and we actually won an award from Focus St. Louis for having an impact on the region. What they all have in common is they’re not revenue generating. We did all that for free, in a sense.”
Another move that he had hoped would boost the bottom line was changing the name of the organization from Cooperating School Districts, usually called CSD, to Education Plus. So far, he said, the move has had little effect.
“For some reason, most people thought it was Special School District, or the city of St. Louis, or Clayton School District,” Senti said. “But for sure they thought it was a government agency. So corporations and others were not anxious to give money to a governmental agency.”
'The board was surprised, as I had been a few days earlier. They were angry. I don't blame them. If I had been on the board, I would have been angry.' — Don Senti
Will a change in purchasing strategies mean a change in the basic activities for Education Plus?
“We’re digging into some of that data now,” said Carl, the Hancock Place superintendent, “so I’m not prepared to give a recommendation or a full analysis.”
One area where the agency continues to be a big help, particularly for small districts like his, is public relations, Carl said.
“They provide a lot of resources for a smaller district that we don’t already have,” he said. “They just did some public relations videos for our district. If we had to go out and contract for services like that, it would be a very high cost, and I don’t even know that we would get quite the value and the quality that we’ve been getting from Education Plus.”
He also praised the teacher training that the agency provides, and he said that its Character Plus program also remains strong.
What needs to be done, Carl said, is a detailed analysis of what Education Plus members need, what the agency can afford to provide and what is best left for individual districts. And it has to be done sooner rather than later.
'You are ultimately responsible for this fiasco and if these events unfolded while you were a superintendent you would have been out of a job.' — Board chairman Tom Muzzey to Senti
“Given where the organization is right now,” he said, “time is of the essence. I think it’s critical to understand what’s transpired, and then what we are going to do moving forward. Member districts rely on the services. They need to have the confidence and knowledge that Education Plus is going to continue to be there for them.
“I have no reservations about Education Plus continuing and being of great service to the member districts. Might it look at little different in the future? Sure. But I think that’s a natural evolution. As business models change and as the needs of the members change, it should look a little bit different.”
For his part, Senti thinks the purchasing program should remain strong and maybe even expand. The challenge, he added, is finding ways to bring in more revenue.
“I think it would be a huge mistake not to continue cooperative purchasing,” he said. “That’s really important to a lot of districts. I think one of the errors we made is that we reduced the margin we were charging, so the revenue dropped. It’s big money, and if we stopped doing cooperative purchasing, I couldn’t quite understand that.”
Discussing the future — one of many points when he slipped into using “we” when he talked about Education Plus instead of “they” — Senti said he feels that the agency is “ready to turn the corner, and that people who are in charge now are ready to stay with it. I think that revenues will go up, and I think that this might even ironically bring some attention from the corporate community as to what good things we are doing.”
What people need to understand, he added, is that while education is the organization’s focus, it doesn’t operate like a traditional school district from the point of view of finances, so it needs to concentrate more on raising money. He compared the task to his old job as a school superintendent.
“We didn’t have to bring in 60 percent of our revenue by selling things,” Senti said. “It came in every January, as tax money. Our organization actually is more like a business than a school district.”
Follow Dale on Twitter: @dalesinger