We reported last week that a Detroit area charter school used state money to pay its bondholders instead of its teachers.
Many employees at Michigan Technical Academy spread their paychecks out over the year, but late last month, the charter school's board had to divert those summer paychecks to creditors.
MTA closed its doors officially at the end of the school year after Central Michigan University revoked its charter, citing poor academics and financial problems. Once CMU pulled the school's charter, MTA's creditors moved to accelerate their repayment per their contract agreement. So that meant 97 percent of MTA's school aid fund went to the bondholders, and the remaining three percent went to CMU, according to an official at the state's treasurery department. School employees did not receive any payment for time worked in the classroom.
Matchbook Learning is the nonprofit charter management company that directly employs MTA staff. It appears Matchbook Learning CEO Sajan George is trying to resolve the summer payroll issue, though it's unclear at this point whether those efforts will prove fruitful.
This the latest letter George has sent to MTA employees (two previous letters were sent last week) citing his efforts to get them paid. The third letter reads in part:
On August 21, 2017 MTA will receive its final State Aid payment for approximately $642,000. That would be more than sufficient funds to meet all of your summer payroll (3 pay periods totaling approximately $315,000). I have reached out to the bondholders’ legal counsel. I have urged him to advise his clients to allow that August payment to be used to pay employees money they are owed. Matchbook Learning has not been paid for over five months, but I’m not concerned about that. We will forgo the money we are owed – we simply want to get sufficient funds to pay the summer payroll. Should the bondholders agree, we can access these funds and get you paid after August 21, 2017.
Also, I have spoken with the head of the Michigan Finance Authority (MFA), John Barton. Mr. Barton is sympathetic. MFA is responsible for intercepting the State Aid payment and transferring it according to the bondholder wishes. Mr. Barton is checking with the Michigan Attorney General to determine – if the bond holders won’t help us – whether MFA has the legal authority to override the bond holders and dedicate a portion of the August State Aid funding to summer pay for our employees.
Finally, I have spoken with members of our MTA Board and CMU, which authorized MTA’s charter. The MTA Board is trying to organize an emergency meeting at which they could decide to petition the Court to appoint a Receiver for MTA. A Receiver would be an independent, impartial individual who would have authority to review and determine the disbursement of funds. If neither the bondholders nor MFA are able to help us, then we will appeal to this Receiver.
MTA's outstanding debt consists of more than $15 million in long-term bonds and $50,000 in short-term loans.
Janelle Brzezinski with the Governor John Engler Center for Charter Schools at Central Michigan University said her office is unaware of the latest letter sent by George to MTA staff. She says they have been contacted by Mr. George but that "there have been no updates" since late last week.
No one with the Michigan Finance Committee was available for an interview, but Michigan Department of Treasury spokesman Ron Leix said in a written statement that the MFA "has taken steps to ensure both the bond and note holders are aware of the situation with the missed payrolls and the effect this has on teachers and staff; however, the MFA and Treasury are legally bound to the terms of the contract that MTA and Central Michigan University signed."
MTA board member Jerome Espy confirmed with Michigan Radio that the board is in talks to hold a special meeting to "look at the options and try to move things forward," but no date has been set. "We’d like to work to make sure that the educators get the money that's due them," said Espy. He also confirmed the "receiver" option mentioned in George's letter is an option, but he says no decision has been made.
A press person for Sajan George said the Matchbook CEO was in transit today and couldn't be reached, and messages sent to other MTA board members were not returned.
