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THE DISTRICT OF COLUMBIA SCHOOL REFORM

ACT OF 1995—BLUEPRINT FOR EDUCATIONAL

REFORM IN THE DISTRICT OF COLUMBIA

HEARING

BEFORE THE

SUBCOMMITTEE ON THE DISTRICT OF COLUMBIA

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

DECEMBER 7, 2001

Serial No. 107–128

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

BOB BARR, Georgia

DAN MILLER, Florida

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

DAVE WELDON, Florida

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

C.L. ‘‘BUTCH’’ OTTER, Idaho

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

JANICE D. SCHAKOWSKY, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

JAMES C. WILSON, Chief Counsel

ROBERT A. BRIGGS, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON THE DISTRICT OF COLUMBIA

CONSTANCE A. MORELLA, Maryland, Chairman

TODD RUSSELL PLATTS, Pennsylvania

THOMAS M. DAVIS, Virginia,

——— ———

ELEANOR HOLMES NORTON, Washington,

DC

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

RUSSELL SMITH, Staff Director

HOWIE DENIS, Professional Staff Member

SHALLEY KIM, Clerk

JON BOUKER, Minority Counsel

(III)

C O N T E N T S

Page

Hearing held on December 7, 2001 ........................................................................ 1

Statement of:

Chavous, Kevin, chairman, Committee on Education, Libraries and

Recreation, Council of the District of Columbia; Peggy Cooper Cafritz,

president, District of Columbia Board of Education; Paul Vance, superintendent of schools, District of Columbia; Josephine Baker, chairwoman, Public Charter Board; and Gregory McCarthy, deputy chief

of staff, Policy/Legislative Affairs ................................................................ 12

Gandhi, Natwar, chief financial officer, District of Columbia; and Charles

C. Maddox, inspector general, District of Columbia, accompanied by

William J. Divello, CFE, assistant inspector general for audits ............... 89

Letters, statements, etc., submitted for the record by:

Baker, Josephine, chairwoman, Public Charter Board, prepared statement of ........................................................................................................... 54

Cafritz, Peggy Cooper, president, District of Columbia Board of Education, prepared statement of ...................................................................... 25

Chavous, Kevin, chairman, Committee on Education, Libraries and

Recreation, Council of the District of Columbia, prepared statement

of ..................................................................................................................... 15

Gandhi, Natwar, chief financial officer, District of Columbia, prepared

statement of ................................................................................................... 93

Maddox, Charles C., inspector general, District of Columbia, prepared

statement of ................................................................................................... 114

McCarthy, Gregory, deputy chief of staff, Policy/Legislative Affairs, prepared statement of ........................................................................................ 65

Morella, Hon. Constance A., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 4

Norton, Hon. Eleanor Holmes, a Delegate in Congress from the District

of Columbia, prepared statement of ............................................................ 9

Vance, Paul, superintendent of schools, District of Columbia, prepared

statement of ................................................................................................... 36

(1)

THE DISTRICT OF COLUMBIA SCHOOL REFORM ACT OF 1995—BLUEPRINT FOR EDUCATIONAL REFORM IN THE DISTRICT OF

COLUMBIA

FRIDAY, DECEMBER 7, 2001

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON THE DISTRICT OF COLUMBIA,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:15 a.m., in room

2154, Rayburn House Office Building, Hon. Constance A. Morella

(chairwoman of the subcommittee) presiding.

Present: Representatives Morella and Norton.

Staff present: Shalley Kim, staff assistant; Matthew Batt, legislative assistant; Robert White, communications director; Heea

Vazirani-Fales, counsel; Russell Smith, staff director; Howie Denis,

professional staff member; Jon Bouker, minority counsel; and Jean

Gosa, assistant minority clerk.

Mrs. MORELLA. We’ve been patient because of the sound system,

but it sounds to me like it must be operating.

Good morning. I want to welcome you all to our last hearing of

the first session of the 107th Congress. This, in fact, is the 10th

hearing conducted by the Subcommittee on the District of Columbia during this session.

You know, as I was driving in this morning, I was reminded of

the fact that this is the 60th anniversary of Pearl Harbor, that day

of infamy, and you remember the slogan, ‘‘Remember Pearl Harbor.’’ For most of you, it was from a history book that you heard

that. So now also it was 3 months ago, too, that we had another

day of infamy, ‘‘Remember 9/11.’’ And as we look at that as an

overlap, we can see how important education is, and that is what

this hearing is all about.

There is no more important task for a municipal government

than providing quality education for its children. Good schools not

only produce better citizens, the ones who become our next generation of leaders, but they make a city more attractive for businesses

to locate and for people to live. Good schools make for a better community with less crime, a more stable tax base and strong home

sales.

Over the years, repeated efforts have been undertaken to improve the District of Columbia public schools. Frankly, the results

have been mixed. Unlike just a few years ago, the city now opens

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its schools on time each fall, but many of those schools are in dire

need of repairs.

Five years ago, nearly three out of every five D.C. public school

students performed mathematics at a below basic level for the

grade. Today, that figure has been reduced to a little more than

one in three—better, but not good enough. So today we’re very interested in learning how the reform efforts, led by the superintendent, Paul Vance, and the Board of Education president, Peggy Cooper Cafritz, are proceeding.

Special education, including transportation costs, continue to be

a nagging problem, and there are clearly fiscal and management

problems that are lingering. I must say, we were all shocked to

learn in September that the school system had overspent its budget

by $80 million. But I was even more stunned to learn that the

Chief Financial Officer now says that the deficit was in fact more

than $98 million. The CFO is already projecting an $108 million

budget shortfall in fiscal year 2002, which just started in October.

And we in Congress just approved the D.C. appropriations bill yesterday, and already the numbers don’t add up.

This is unacceptable, plain and simple. How are parents supposed to have confidence in a school system that can’t balance its

own books? How are children supposed to learn when their academic year is being cut short by 7 days because of fiscal and program mismanagement?

I know Superintendent Vance says he was embarrassed by the

disclosure of the deficit, and I trust the superintendent and the

school board president will tell us today what steps they’ve taken

to ensure that it does not happen again.

I know we’re going to hear today that the recent budget problems

show that the D.C. Public schools need more money, or perhaps

even a dedicated schools tax. Let me make clear that money alone

does not determine the success of a school district. According to a

U.S. Department of Education report published in October, the District of Columbia already spends more per pupil than Montgomery

County, MD or Fairfax County, VA. And while those school districts do, of course, receive some funding from their respective

States, neither has a dedicated revenue source.

Before I conclude, I want to point out some of the positive things

that are happening in the district schools; and, believe me, this is

just a partial list. More students than ever are taking advanced

placement courses, a sign that a culture of achievement is taking

hold in D.C. schools. Literacy programs have been beefed up, as

have summer courses. The school district has gotten creative in

looking for new teachers through its D.C. Teaching Fellows Program that has transformed about 100 professionals from various

fields into public schoolteachers. Dozens of charter schools are offering alternative educational opportunities. And, finally, nearly

two out of every three District of Columbia public school students

who graduated in 2001 enrolled in a 2 or 4-year college, many of

them through the assistance of the District of Columbia Tuition Act

Program, of which I in this committee am very proud to be an

original cosponsor and Congresswoman Norton, who is so very active in that enactment.

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The bottom line is, D.C. schools are making progress, but we will

not settle for mere progress. We want and the students and the

parents of the District of Columbia deserve excellence in education.

So I thank you all for being here today, and it’s now my pleasure

to recognize the distinguished ranking member of this subcommittee, Congresswoman Eleanor Holmes Norton, for her opening comments.

[The prepared statement of Hon. Constance A. Morella follows:]

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Ms. NORTON. Thank you very much, Mrs. Morella. I very much

appreciate that you’ve called this hearing. It turns out to be timely

indeed. I know you’ve wanted to have this hearing for some time.

I want to welcome all of today’s witnesses, and I want to ask everyone to excuse my voice, which is rapidly fleeing from my body,

as I have a cold.

It is too easy to look at the problems at the District of Columbia

schools and conclude that the system has a long way to go. I look

at where the system was 11 years ago when I first came to Congress, and I can see how far it has come. The progress has come

from many sources but especially from where it has always come

when improvement occurs in public schools in this country, from

the system’s leadership.

We saw significant changes in the DCPS for the first time in

many years beginning with Superintendent Arlene Ackerman, who

was so good that she was stolen by San Francisco. In a stroke of

plain good luck, Superintendent Paul Vance, who had recently retired from the very good Montgomery County school system, moved

out of retirement and was persuaded to bring his outstanding professional experience and reputation to the district.

In addition, the voters approved a new configuration for the

school board, and the new board is off to a good start. It has put

aside the quarrels and competence and interference with the superintendent’s prerogative to run and manage the schools that had

been the board’s trademark for years.

The subcommittee is naturally interested in the overall condition

of the DCPS. However, we would be most useful if we concentrate

on areas most related to our Federal jurisdiction.

Special education is the one area of local school budgets where

the Federal Government has promised significant help. To its discredit, Congress has continuously broken that promise. Help may

be on the way as events are developing with our new education bill,

which is still a work in progress. However, every school system in

the country is in the hole for special education, and no matter what

we do in the Congress public schools will continue to have a tiger

by the tail, given the disproportionate increases in special education costs, unless innovation and skillful management take hold.

A large financial management failure has added to DCPS special

education costs that were already out of control. Then a dispute

surrounding a deficit that kept growing threatened to throw the

DCPS back to the bad old days, with several of the actors threatening their own audits until reminded that they were endangering

the CAFR, or comprehensive annual audit of the District of Columbia budget.

If all of this were not unmanageable enough, we have just finished the D.C. appropriation, held up in part because the D.C. government failed to develop a sensible and internally consistent home

rule position on whether there should be any limits or caps on fees

paid to attorneys who represent children seeking special education

benefits. Eight D.C. council members sent a letter to Congress asking for no caps, while the Board of Education felt that there should

be limits on fees.

Since I have a strong and unalterable position to always uphold

the position of the home rule government on local matters, I am

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placed in an untenable position if there is no unified D.C. government position. All the cap that the council members and schools accomplish by communicating contrary positions to the Congress is to

toss a local decision to a Federal body, a posture hugely at odds

with their view that local decisions for the District of Columbia

should never be made by Congress.

The council has an obligation to work out its differences with the

board and vice versa, especially when another $10 million in attorneys fees that are not in the school’s budget for next year may result, as they now have. The leadership of the board and the council

need to solve the fee cap dispute once and for all at the local level.

The dispute caused a bitter fight among both House and Senate

Members.

It is something close to a fluke that the no-caps position prevailed this year, unlike prior years. I am, therefore, asking the

home rule government responsible for education, namely the

Mayor, the council, the school board and the superintendent to

make sure that whatever position you take next year, it is not a

two or three-headed monster.

I promise to fight to uphold the position of the D.C. government,

no matter how controversial. All I need is a position from the D.C.

government.

Finally, this subcommittee has a major interest in increasing college attendance in the city, because jobs with decent income and

benefits in this highly educated region virtually require college

education today. This year, the subcommittee passed important improvements in the D.C. College Access Act of 1999. As it turned

out, about the only bill we could pass here in the Congress that

could be as popular as the D.C. College Access Act would be voting

rights itself. The act gives our students what no others in the country enjoy, the right to attend any public college in the United

States at low in-state tuition in order to receive $2,500 dollars to

attend any private college in the city or region.

Mrs. Morella and I will carry the new amendments entitled the

District of Columbia College Access Improvement Act to the floor

next week. These amendments are expected to pass the Senate as

early as today. They will significantly expand the original D.C. College Access Act of 1999 in three ways.

First, the original College Access Act only allowed the stipend to

go to those who attend HBC—I’m sorry. The original College Access Act only allowed the stipend to attend HBCUs in the region.

Now residents will receive a $2,500 stipend to attend any historically black college or university in the country. Over 600 D.C. residents are expected to take advantage of this provision in the first

year of enactment alone.

Second, originally students who were somewhat older, because

they graduated prior to 1998, were not included in the College Access Act because of the Senate’s fear that funding would be insufficient. We have now persuaded the Senate to allow tuition benefits

to two groups of older students. The first group is D.C. residents

currently enrolled in college, regardless of when those students

graduated and regardless of the amount of time it took those students to enroll in college. This change will enable approximately

8

1,000 students previously denied in-State tuition, including many

older students, to qualify next year alone.

Third, the bill allows older students to take advantage of the bill

by removing a requirement that a student enroll in a college no

longer than 3 years from high school graduation. The Senate was

persuaded to remove the 3-year constraint prospectively to allow

older students to qualify no matter when they graduated, as the

House bill allowed.

Consequently, the first group of students who took longer than

3 years before enrolling in college can begin taking advantage of

the College Access Act benefits as early as next year, and more and

more older students are expected to receive tuition assistance in

the years to come.

These amendments to the College Access Act will provide assistance to thousands more D.C. residents left out of the original act

and will expand college education opportunities for many of our

residents. The timing of this hearing thus provides a coincidental

but important opportunity to let the committee know of the new

and improved D.C. College Access Act.

These unique education benefits depend largely on the preparation and encouragement our young people get from the D.C. Public

School System. The D.C. College Access Act means little if D.C.

students are not well prepared to enter good colleges and remain

until they graduate. I am very encouraged by current statistics

showing a significant number of DCPS students going to college.

Apparently, 64 percent of the class of 2001 went to college, compared to 43 percent nationally. At Banneker, 100 percent went to

college, and School Without Walls, 96 percent.

When I went to Bruce Monroe, Banneker when it was a junior

high school and Dunbar, it never crossed my mind that we would

not go to college, would matriculate and graduate forthwith. That

was the standard set for students and accepted by them, regardless

of income, in the segregated schools of the District of Columbia. It

is, therefore, difficult for me to accept a school system today that

cannot at least meet the standards of generations ago.

I see real progress. I congratulate Superintendent Vance; the

school board chair, Peggy Cooper Cafritz; and the board; and especially the principals, teachers and staff on the progress they are

making as they engage literally in rebuilding the public school system of the city.

Thank you, Madam Chair.

[The prepared statement of Hon. Eleanor Holmes Norton follows:]

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Mrs. MORELLA. Thank you, Congresswoman Norton.

I’m going to ask the first panel to come forward, and that is

Kevin Chavous, chairman of the Committee on Education, Libraries and Recreation, Council of the District of Columbia; Peggy Cooper Cafritz, president of the District of Columbia Board of Education; Dr. Paul Vance, superintendent of schools for the District

of Columbia; Josephine Baker, chairwoman of the Public Charter

Board; and Gregory McCarthy, deputy chief of staff, Policy/Legislative Affairs.

Don’t sit down and get comfortable, because I’m going to swear

you in. It is the policy of the full committee and all the subcommittees to ask those people who testify before our subcommittee to

take an oath of office. And let me ask our State education officer,

Connie Spinner, to be sworn in.

[Witnesses sworn.]

Mrs. MORELLA. The record will indicate a favorable response

from all.

I’m going to ask you if you would keep your testimony to 5-minutes, knowing full well that your total testimony will be included

in the record, and that way you’ll give us a chance to ask questions

before our second panel.

So if it is all right, we’ll proceed in the order in which you are

seated.

We’ll start off with you, Councilman Chavous. Thank you for

being here.

STATEMENTS OF KEVIN CHAVOUS, CHAIRMAN, COMMITTEE

ON EDUCATION, LIBRARIES AND RECREATION, COUNCIL OF

THE DISTRICT OF COLUMBIA; PEGGY COOPER CAFRITZ,

PRESIDENT, DISTRICT OF COLUMBIA BOARD OF EDUCATION; PAUL VANCE, SUPERINTENDENT OF SCHOOLS, DISTRICT OF COLUMBIA; JOSEPHINE BAKER, CHAIRWOMAN,

PUBLIC CHARTER BOARD; AND GREGORY MCCARTHY, DEPUTY CHIEF OF STAFF, POLICY/LEGISLATIVE AFFAIRS

Mr. CHAVOUS. Thank you very much, Chairwoman Morella, Congresswoman Norton and members of the committee. I appreciate

having this opportunity to testify at this hearing today on the current status of the District of Columbia Public School System and

the progress our government is making in implementing the requirements of the District of Columbia School Reform Act of 1995.

I am here on behalf of my colleagues on the council, as well as our

chairperson, Linda Cropp.

As you both have stated, we are in the midst of major school reform here in the District of Columbia. With the selection of Dr.

Paul Vance as superintendent, the composition of the new school

board, the act of involvement of the Mayor and the council, I am

more optimistic about the future of public education here in the

District of Columbia than ever before.

As education stakeholders, we have all formed an intimate partnership that includes regular contact, meetings and discussions

and, ultimately, policy consensus in most areas. Specifically, the

Council of the District of Columbia, through my committee, has

been instrumental in providing both legislative and budgetary support for our schools, as well as aggressive oversight over their acVerDate 11-MAY-2000 10:09 Dec 10, 2002 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\DOCS\82565.TXT HGOVREF1 PsN: HGOVREF1
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tivities. Over the past 4 years, we have added nearly $300 million

new dollars to public education, and this amount includes new

money for our charter schools, of which I’ve been one of the stronger proponents.

In addition, I have introduced a couple pieces of legislation that

ultimately became law, and it contributed to the far-reaching

school reform effort that we’re in the midst of in this city. For example, the new school board is comprised—is based on the composition in legislation I introduced. We now have a composition of appointed and elected members, and they are working and moving

forward toward resurrecting the dismal history of previous boards.

Additionally, my legislation created the State Education Office,

which was designed to be an independent monitor of State-related

functions administered by both the District of Columbia public

schools and the District of Columbia public charter schools.

These successes demonstrate that we are poised to continue to

implement the reform efforts in public schools.

I do want to relate one other council initiative based on legislation I introduced earlier this year that I am extremely excited

about. That is legislation that will lower the compulsory school attendance age from age 5 to age 3. The legislation will buildupon

the success that has been experienced by the Office of Early Childhood Development; and to explore the viability of this unprecedented piece of legislation, the first of its kind in the country, I

have created the Commission on Primary Education Reform and

have partnered with American University under president Ben

Ladner to develop a blueprint for it implication.

I am also pleased to parenthetically add that the Mayor, superintendent Vance and Peggy Cooper Cafritz all are supportive of

this effort.

Now let me address the current financial crisis facing our

schools. As you are aware, this fall our chief financial officer for the

District of Columbia, Dr. Natwar Gandhi, announced that the

DCPS would experience spending pressures initially estimated at

$80 million, and you’ve indicated now that they are up to $98 million.

At the core of these spending pressures was a failure to recover

Medicaid revenue, overspending the special education programs

and special education transportation costs.

Before I speak on the special education Medicaid problem, let me

inform you of the council’s efforts to identify the scope of the problem. As you know, we have engaged the services of the Office of

the District of Columbia Auditor. We’ve asked the auditor to look

at these spending pressures and to determine whether they are

systemic in nature. This audit will assist us in deciding what corrective measures to employ in addressing the problem for fiscal

year 2002.

Like many of you, I’m concerned about cutting 7 days from the

school calendar, and that should be a last resort. But we should not

begin that effort until we know exactly the full extent of the problem.

With respect to special education, as chairman of the Committee

on Education, Libraries and Recreation, we are now holding monthly hearings on special education programs, spending and transporVerDate 11-MAY-2000 10:09 Dec 10, 2002 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 C:\DOCS\82565.TXT HGOVREF1 PsN: HGOVREF1
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tation. We are also meeting with special education parents, providers and educators. Most of what we learn from these hearings and

meetings has been presented in a special council Committee on

Special Education’s final report, which was issued earlier this year.

But, working with these stakeholders and the superintendent, we

are committed to finding solutions to the special education problem

that has plagued the system for so long.

At bottom, the real solution to solving special education here in

the city really means a deeper commitment to providing services to

our children within the city’s borders and a more concerted approach to addressing special education transportation costs.

Finally, with respect to Medicaid, we are working with Dr. Gandhi, who has formulated a governmentwide solution to the Medicaid reimbursement problem. We all know that the city is losing

millions of Federal reimbursement dollars in the Medicaid area,

but I am confident that this collaborative partnership, headed by

our CFO, will move to addressing the problem and allowing us to

capture those dollars that we have not been able to capture this

the past.

In conclusion, though many problems do persist, I am, as I indicated earlier, very much optimistic about where we’re headed with

D.C. public education. It is of paramount importance that the good

work that has been accomplished by the educational stakeholders

in the District not be overlooked, nor minimized. The council, the

Office of the Mayor, the superintendent of schools and the president of the board, along with all of the board members, are committed to transforming the state of public education in the District

of Columbia, and we will succeed.

Once again, thank you for the opportunity to address this subcommittee this morning.

Mrs. MORELLA. Thank you very much, Mr. Chavous.

[The prepared statement of Mr. Chavous follows:]

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Mrs. MORELLA. Now I’m pleased to recognize Peggy Cooper

Cafritz, who is the president of our D.C. Board of Education. Thank

you for being here.

Ms. CAFRITZ. Thank you very much.

Good morning, Chairwoman Morella and members of the subcommittee, particularly our own Congresswoman Norton. I am

Peggy Cooper Cafritz, president of the District of Columbia Board

of Education. I am here today on behalf of my colleagues on the

board and with their unanimous support and on behalf, of course,

of the children of the District of Columbia.

When this new board took office, we did so with a mandate from

the citizens for change. The citizenry of the District has been very

clear in that it wants to see reform, and it wants to see it now.

Both the board and the superintendent are committed to that and

have spent the last 10 months working to rebuild an infrastructure

which will produce tangible results and which will lead to achievement. To that end, this new administration and board has accomplished things that haven’t been achieved in decades.

For example, the administration has broken ground for five new

schools this year, when no new schools have been built in 35 years.

With public input, the board developed and approved a 15-year

master facilities plan to improve our dilapidated school buildings.

We will work to do all we can to compress those 15 years.

The administration has transformed the nine lowest-performing

schools with the staff and materials necessary to turn them into

high-performing schools over the next several years.

The board recommended to Mayor Williams that, for better coordination and more efficient spending, city agencies and schools

integrate the social services provided to children. As a result, wraparound services are being provided to our transformation schools to

ensure that all students’ needs are met seamlessly. This is a pilot.

We hope to extend this wrap-around plan to all of our schools over

the next 3 years.

The administration proposed and the board approved a central

office transformation plan that will improve central office efficiency, while also saving the school system $17 million annually.

This board has provided stability to the school system by agreeing to give Dr. Vance a 3-year contract.

The board brought in McKinsey and Co. on a pro bono basis, following the example of the superintendent, to assess how we could

improve our operations so that we could most effectively parse with

the goal of the superintendent’s transformation plan.

The board hired an executive director for charter schools who has

extensive charter school experience. In fact, we stole her from the

other charter school board. She is charged with performing careful

oversight of board-chartered schools and providing, when necessary, technical assistance.

The board has also been very careful and is working very hard

to bring its charter schools into full compliance with all charter

school regulations. We approved only 2 of the 11 charter school applications submitted to us, 1 on a provisional basis, in an effort to

ensure that all approved applicants are capable of providing District students with a quality education.

22

We voted to close three charter schools for fiscal and/or management malfeasance. One is closed. The other two have us in court,

testing the constitutionality of our procedures. The board and the

superintendent are cooperating with the other charter board to improve a relationship that previously evidenced great animus.

The board and the superintendent are creating partnerships with

entities who can, in a new use of charter school legislation, create

facilities for the many children we must now send away to residential facilities outside of the District.

The administration and the board approved a reconciliation of

the DCPS fiscal year 2002 budget to be responsibly prepared for

any definitive amount of our deficit.

The board is working with the city’s CFO, the Mayor and the city

council to align the school’s budget with the city’s in a way that

best serves the school’s needs and meets the city’s requirements.

The board and the administration have made a commitment to

increase student achievement through the development of standards and core curriculum.

The board and administration have made a commitment to the

development of a strong vocational education program. The superintendent has assembled some of the best high school reform and

vocational experts in the country. They are still in the planning

phase.

The administration developed, and the board approved, a fiscal

2003 DCPS budget that realistically takes into consideration what

our children need to get, not a Cadillac education, but one that

builds the foundation for our children to receive an equitable education, making them competitive with students in the surrounding

jurisdictions.

Our students must be provided with a chance to have that kind

of preparation, which is the kind of preparation needed to compete

with the best students from any school district in America.

The astonishing thing on the board, if you know something about

our history in Washington, is that all of these issues have been

dealt with by unanimous vote by this board. And that is a major

accomplishment. Nine people with a collective will can mightily

contribute to the revolutionary change of our education system’s

needs. Before I elaborate on the fiscal year 2000 budget, let me

give you a little history of the D.C. Public School System.

In the late 1960’s, the city made a conscious decision to grow the

black middle class in the city, and toward that end, they hired

many new positions in the city government and in schools, but because the city had not prepared the infrastructure necessary to absorb this new middle class, they took their new middle class checks

and proceeded to build what is now the wealthiest African American county in America, Prince George’s County, which we affectionately call Ward 9. As the city plunged deeper and deeper in

debt with a more bloated bureaucracy, then schools became the

easy whipping boy, because children and the poor have no voice

and cannot protect themselves.

Year after year, the post 1960’s school system eroded and decimated by lack of money, will and skill turned out children and adolescents whose need for social services far outstrips the cost of even

an Exeter education.

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I assure you that there is not a Congressman or a Senator who

would dare send his or her children or grandchildren to school

under such conditions. Until 1990, the Department of Public Works

control the capital contracts for school buildings in the city. The

level of their neglect is legendary. When this function was given

back to DCPS, the buildings and playgrounds were in great disrepair. Can you imagine thousands of children being expected to

learn with no sunlight coming into their prison-like schools? This

is our children’s everyday reality still on December 7, 2001.

Further, when the Uniform Per Pupil Funding Formula was established in 1977, the recommended foundation funding level was

$6,260. An agreement was made by city officials afraid of growing

budgets, to change the amount to $5,500 and to restore the base

when times got better. Boom times came, but the promised adjustment and the uniform for pupil funding formula never followed.

District of Columbia public school children were never invited to

the party. We are now in a position to rectify this unacceptable situation and to do right by our children.

With the new leadership in the city and the school system, we

can save more money in the long run by investing in our children

instead of making victims of young adults. If we do not do this, our

rapidly growing social cost, such as crime, illiteracy, alcoholism,

drug abuse, teen pregnancy, mental illness and foster care will return the city to its precontrol-board state faster than you can say

‘‘money.’’ Simply adding the cost of social expenditures in the city’s 2002

budget reveals that we’re already spending disproportionate sums

and social costs. The only reason I can deduce for this fiscal imbalance is our disproportionate commitment to social services, caused

by underfunded schools and undereducated citizenry breeds social

service costs with a vengeance. Montgomery County spends 51 percent of its annual budget on education; Fairfax County, 50 percent;

Arlington, 35 percent; Alexandria, 34 percent; and in Washington,

an anemic 20 percent.

We are already imposing high expectations on our children. They

have been undereducated for so long that we cannot honestly expect them to meet our expectations unless we give them the tools

to do so. Our expectation and obligation and our children’s right is

that all students in the D.C. Public School System will receive the

same quality education as any student in the Washington metropolitan area.

As we go forward, we’re going to push to have the system funded

in a way that is equitable with other jurisdictions. The first time

you see this will hopefully be when the city council forwards our

next fiscal year budget to you. Fixing the D.C. schools will be expensive, because in many ways, Dr. Vance and his testimony are

charged with building a school system from veritable scratch in a

city that is 37 percent illiterate.

We must make this investment. We cannot continue. The level

of negligence that has consistently been leveled against a majority

of our children for three decades. It runs counts to every element

of President Bush’s education agenda. The Board of Education and

the administration have built a real budget based on real figures

and real needs of real children. Dr. Natwar Gandhi, the city CFO,

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has committed himself to work with us to address the structural

flaws in our approach to funding education, as well as the fiscal autonomy necessary to the good governments and administration of

DCPS.

Please join with us in the endeavor to educate our children. You

have an opportunity to show your commitment to the youth of the

city when you consider our fiscal 2003 budget. I hope you keep in

mind the American ideal of education for all and the Presidential

ideal of leave no child behind. The children of the Nation’s Capital

certainly deserve no less.

And in closing, I would like to say of Dr. Vance for the first time

in a very, very long time, we have a seasoned superintendent who

knows what he is doing and who has assembled and is assembling

a team that is competitive with any school system. These people

know what they are doing. They’re very, very good. We must give

them the tools that they need to make this happen. Thank you very

much.

Mrs. MORELLA. Thank you, Ms. Cafritz.

[The prepared statement of Ms. Cafritz follows:]

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Mrs. MORELLA. Well, Dr. Vance, she already introduced you, but

all I can say is we seasoned you in Montgomery County, and I

want to thank you for bringing your expertise and your commitment and your hopes to the District of Columbia Public School System, and I recognize you now for your comment, sir.

Mr. VANCE. Thank you. Good morning, Chairwoman Morella and

Congresswoman Norton.

Good morning, Madam Chairman Morella and Congresswoman

Norton, and members of the subcommittee. I’m Paul Vance, superintendent of the District of Columbia public schools. We’re appreciative of this opportunity to discuss school reform in Washington,

DC, and our progress under the leadership of the school board

president, Ms. Peggy Cooper Cafritz, and vice president, William

Lockridge, and other members of the board.

This is my second year as superintendent in Washington, DC,

but I have been a close neighbor in Montgomery County for many

years. I came to the D.C. schools, have been a teacher, school administrator and superintendent. I believe in public education. I advocate for urban schools and I believe fervently that we have the

capability to improve the quality of public education for all children. I came with a philosophy that education is a community enterprise and a community responsibility. I came with a commitment to stay the course, to make the tough decisions and to move

our school district aggressively forward on the path of school reform. And I have found in our city broad-based community determination and a commitment to public education that will make

school reform a magnificent reality in due time.

In addition to our written testimony, which is a bit longer than

the oral presentation, we have submitted a briefing document that

describes in greater detail our progress toward reform.

The rumblings, you may have heard on Capitol Hill, are the

sounds of new school construction. Lights turning on after school,

the lively discussion of strategic planning sessions and parent forums, the roar of school buses and the boisterous pride for the

mighty good teacher and students who led the Washington, DC,

team to their victory, first place, in the prestigious Panasonic Academic Challenge, busting schools from 39 States in our country.

This was a particular joy to me, because in my past life as superintendent of Montgomery County public schools, always came in

first and second, never lower than second. And we busted them.

They came in third this year with Florida—State of Florida coming

in second. So that was a joyous event for all of us.

Congresswoman Norton shared in that joyous moment with us.

I want to thank her again. What you hear is change, change in

progress right now.

Mrs. NORTON. We noticed that Mrs. Morella did not attend that

event.

Mr. VANCE. Oh, I forgot myself and got carried away. I’m sorry.

Reform is moving the school district forward, even if the pace has

been slowed by instability. We have built upon the work of the last

three superintendents, Dr. Franklin Smith, General Julius Becton

and Mrs. Arlene Ackerman, as we set out to transform schools and

permanently improve the way we do business. Our business plan

for a strategic reform will support students and staff and will move

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us significantly closer to the school reform and world class status

envisioned by the authors of the School Reform Act of 1995. The

plan covers 3 to 5 years, has six transformational goals, three

phases, was developed with broad community input and is the

product of one of my first undertakings as school superintendent.

The goals, when accomplished, will ensure an excellent teaching

staff, first-rate learning environments, rigorous curricula and

strong academic programs. Our goals are to create a service oriented, cost effective central administration that directs resources to

schools and student achievement who will have energized parents

and community involvement and strengthened partnerships with

city agencies.

We’re well into the implementation of phase 1 of the business

plan, in which we are tasked to get the fundamentals right, because we must get the fundamentals right once and for all, including our budget and finances, if we are to keep moving forward.

I would list our many accomplishments in this phase, such as our

aggressive work with curricula, standards and assessment, our new

D.C. teaching fellows program, our principal leadership institute,

our blue ribbon panels and senior high schools, our 7-point plan for

reforming special education, our $4.2 million reading excellence

grant initiative, the multimillion textbook adoptions, our afterschool programs, our comprehensive Summer STARS/SEAS, our expanded programs for women’s athletics, our new advanced placement office, our new principal for the new technology school at

McKinley. These and many more accomplishments and activities

and progress are referenced in the written testimony and the briefing report.

Later this month, we begin the realignment of central administration. The organization will not only create the first phase of an

administrative structure required to support local school needs and

better implement the business plan, but will also net approximately $14 million in savings, which are essential in light of the

current budget challenges. The people’s software that will soon

come online will effectively integrate and manage our personnel

and financial data as example of administrative reforms underway.

Our personnel office is being revamped with a strategy of total

work force development and focus on quality service delivery.

The communications office is proactive in getting information to

the community and promoting community engagement activities.

Our new transformation, what we call the T–9 schools, identified

at the end of last school year, represent turning points for our

school district as a first step in the children-first initiative. We

have assembled new instructional and administrative teams for

these schools that will be accountable for the implementation of

proven reform programs. The T–9 schools will serve as a model for

what all schools should eventually be, true community schools that

are distinguished by their onsite educational, social, public health

and recreational wrap-around services for students and parents

and eventually by their expanded school building facilities. We are

pleased that the first education of sill have I’s master plan, completed by the school district in over 30 years, provides the framework for all decisions regarding the improvement and utilization of

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cilities over a 10 to 15-year period at a cost of $2.4 billion. A phenomenal capital undertaking.

The one that is sorely needed to provide the state-of-the-art nurturing learning environments that are needed for our schools to become quality educational centers.

Special education continues to be one of our major challenges,

one that we must solve as a critical ingredient to restoring stability

to the school district. Our assessment shows the parents’ systemic

shortcomings that we believe may be contributing factors in the

growing percentage of special education students in our slightly declining overall school enrollment. We have adopted a 7-point plan

for the strategic reform of special education. A copy of the plan is

included in the briefing report.

Pages 2 and 3 of our business plan will solidify the work in

progress and build on what we have aggressively begun. Details of

the business plan are also contained in the briefing report. It is my

intention to meet all challenges head on. Hard work, support and

leadership will sustain our progress and build needed momentum.

The road will be bumpy and steep but it leads to the other side of

the rainbow for students who still dream of the other side.

I thank you for this opportunity to provide testimony. I will be

more than pleased to answer your questions, and thank you.

[The prepared statement of Mr. Vance follows:]

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Mrs. MORELLA. Thank you very much, Dr. Vance, and please

know, as I said early on, that your entire testimony, which I know

is very extensive, will be included in the record. I also note that

we have imported Steve Seleznow now from Montgomery County

also to be part of the team. You see, we have a regional—we all

care about education.

I am now pleased to recognize Josephine Baker, who has the

awesome task of being the chairwoman of the Public Charter

Board. Thank you, Ms. Baker.

Ms. BAKER. Good morning, Congresswoman Morella and Congresswoman Norton. I am Josephine Baker, chairperson of the District of Columbia Public Charter School Board. The board welcomes

this opportunity to share with the committee the many accomplishments this board has made in establishing charter schools. There

are many challenges that public education in general and charter

schools in particular face. We believe the charter schools are part

of school reform and it is in that light that we function as we do.

The District of Columbia Public Charter School Board was established as an authorizing board in February 1997. Since that time,

we are indeed pleased with the track record that we have been able

to establish.

The board is now responsible for oversight of 20 schools on 23

campuses, which provide educational services to 7,792 students

from prekindergarten to adult education. It is important to emphasize that the students attending charter schools mirror the overall

student population of the District of Columbia, and many charter

schools are serving a disproportionate number of low income students as well.

The philosophy that charter schools are available on an equal

basis to all who apply is rigorously implemented by the schools

chartered by the board.

The schools administer the SAT–9 to the students in the spring

of each year and some schools elect to administer the fall test and

use it as a diagnostic tool. The board reports not only the test

scores that we receive from the publisher, but we use a statistical

analysis to evaluate the gains students make from 1 year to the

next. These gains are computed based on the scores of the previous

year, with year one providing a benchmark from which subsequent

results are evaluated.

Research supports the fact that it takes time for changes to make

a difference in the academic performance of students. We have seen

progress in student achievement in many of our schools. Some

schools are still working to start the upward trajectory that will

show that the academic needs of students enrolled in these schools

are being met, and they are indeed sharing those plans with us.

Our process for oversight involves monthly/quarterly financial reporting, monthly attendance and contact with the schools that is

both supportive and collaborative. Finance is a known area of difficulty for charter schools across the Nation. And the board has a

contract with an accounting firm that looks at the monthly and

quarterly finance reports so that any irregularities or concerns will

be red flagged early.

Schools are also reviewed by a team of monitors who gather information about the schools’ progress in implementing its accountVerDate 11-MAY-2000 10:09 Dec 10, 2002 Jkt 000000 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 C:\DOCS\82565.TXT HGOVREF1 PsN: HGOVREF1
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ability plan, and that is one of the things that we consider extremely important, the accountability plan. The school has provided

feedback on this information. A high level of performance is expected and schools exhibiting difficulty are required to execute an

MOU that articulates what actions they will take to remedy identified problems. Subsequent reviewers will look for the elimination

of the identified problems.

Charter schools continue to encounter problems, finding adequate space within which they can effectively conduct their programs at a reasonable price. As the total enrollment of charter

schools continues to expand, not only with new charter schools, but

also with planned growth of existing schools, the growing need for

space at an average of 75 to 100 square feet per student is served

by a diminishing supply of affordable and suitable space. There are

some concrete examples in my full testimony.

Obtaining financing is an additional problem. Most schools have

little or no equity to be invested in a major property investment,

and they do not have the established track record of academic and

financial success to become eligible for long-term bond financing.

Charter school facilities financing has been improved by the es- tablishment of the Credited Enhancement Fund of $5 million set

aside through the House Subcommittee on District Appropriations

in the 2000 budget. This fund is managed by the Office of the

Mayor and an appointed Credit Enhancement Board. There is an

opportunity for greater use of this approach if more money is made

available for the fund, and there is concerted effort by the charter

community to make lending institutions more aware and committed to support charter school facilities financing.

In spite of these handicaps or the handicapping conditions, our

residential charter school is one example of an ability to raise

funds to renovate an old DCPS school that had been closed and

also to build one dorm, with plans to build a second dorm. That

school, of course, is the only residential charter school in the Nation.

The D.C. Public Charter School Board believes that the independent public schools that it has authorized are indeed making a

positive difference in the public education of children in the District

of Columbia. We use the 3 A’s as a concept worth promoting, autonomy, accountability and achievement. There is a fine line between autonomy and accountability, and the oversight process we

have developed is designed to support both. Our collaborative approach and diligent implementation of the law are set on course to

bring about the desired achievement.

Thank you for the opportunity to testify, and look forward to any

questions you may have.

[The prepared statement of Ms. Baker follows:]

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Mrs. MORELLA. Thank you very much, Ms. Baker. And I am

pleased to recognize Gregory McCarthy, deputy chief of staff for

policy and legislative affairs, pretty much a surrogate for the

Mayor this morning.

Mr. MCCARTHY. Thank you very much, Mrs. Morella, chairwoman, and Mrs. Norton, my own Congressperson. It is a pleasure

to be here representing Mayor Williams, who’s attending the National League of Cities conference. Otherwise, he would certainly

be here.

I know later on we are going to talk about a lot of the problems

and challenges facing the schools, and the superintendent has certainly outlined some of the wonderful successes we’ve had but I

think it is worth posing a very basic question: Are schools better

off than they were 10 years ago? I think the answer is absolutely,

yes; 5 years ago? Absolutely yes. And even 1 year ago? Absolutely

yes.

And I think one of the things I need to stress that has changed

is that you have now elected and appointed leadership, the Mayor,

the council, the elected and appointed school board, the superintendent and his top staff all in strong positions and ready and

able to do the heavy lifting that is required to turn around our

schools. And at the core of this synergy is a strong policymaking

board and a seasoned superintendent providing day-to-day leadership as well as wonderful teachers and parents who are on the

front lines every day working extremely hard for our children.

The Mayor has acknowledged the centrality of improving our

school system to broader citywide efforts. In fact, our broader efforts to attract new residents, grow the economy, create jobs and

even promote public safety and public health will not be as successful as they can be if we don’t turn around our school system and

provide a reason for people to come and live in this city.

The Mayor’s role in education involves supporting the good works

underway at DCPS and also marshalling the resources under the

executive to support them and other initiatives. The Mayor has

thus far focused on supporting the superintendent’s efforts at turning around low performing schools, attracting top-notch teachers

and principals and modernizing facilities. He is also a supporter of

a vibrant charter school system and has expanded early childhood

intervention to newborn infants and young children, so at the time

they enter school they are ready to learn. He is also working to provide wrap-around services to children already in school and of

course regularize and standardize cooperation among executive

branch agencies to support the work at the public schools.

The School Reform Act of 1995 has succeeded in two very important ways. It has established an environment where public charter

schools have thrived, and it also established the uniform per pupil

funding formula. It has provided a stable and predictable funding

for schools and also ensured equity in terms of funding for public

schools and charter schools.

Ms. Baker has already talked about our charter school system.

It’s also worth noting that we have a total of 36 charters opening

on 39 campuses, enrolling more than 10,000 students.

The funding formula again has provided at least a basis for

steady increases in school funding. In the appropriations bill that

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this body just passed this week, we appropriated $669 million to

the D.C. Public School System and an additional $142 million to

the Public Charter School System, increases respectively of $39

million and $37 million over the year before. In fiscal year 2001,

indeed the public education system here received an increase in excess of $100 million. And under the leadership of Mayor Williams

and Councilman Chavous, who heads the council’s Education Committee, public education funding for K through 12, has gone up 43

percent since 1999.

Another major focus of the Mayor of course is aligning his agencies to support the reforms of the superintendent. To support his

low performing schools transformation initiative, the deputy mayor

for children, youth and families has launched an initiative to locate

critical family services such as family literacy, health and recreation programs at or near some of the nine schools that the DCPS

is focusing for intensive work.

As already acknowledged, Councilman Chavous provided the

leadership last year to create the State Education Office, which is

performing limited State level functions that affect children in all

educational settings, most notably management of the USDA summer feeding programs. And this year the council, under Chairman

Chavous’s leadership, also transferred management of the D.C. tuition assistance program to that office.

Recently the SEO has completed a study about revising upwards

the funding formula, and later on its director, Ms. Connie Spinner,

can answer questions about that. And I’m delighted to also say she

was confirmed unanimously by the council this week in her new

job.

Obviously there are some profound challenges before the school

system. The problem of the deficits is very alarming. As we have

already noted, these are likely driven by Medicaid overruns and

special ed. The superintendent has a seven-point plan he is ready

to implement, and the Mayor will be there supporting him in every

single way.

We are also helping to identify sites in the city where we might

locate special ed schools so we can bring some of our kids into the

city. And there’s also a citywide task force on Medicaid cost recovery that the superintendent is leading.

Obviously, in the course of all this, we are going to have a broader discussion of the structure and the amounts of overall funding

for the schools. The solutions are certainly going to involve maximizing local resources that we can for the school system, increasing

efficiencies within the school system, and perhaps even restructuring the financial system. And it also should involve, I think, some

increased Federal support.

As you know, Chairwoman, this city has a limited tax base. We

have the responsibilities of a city and a county and a lot of State

functions, and the tax base and ability to generate revenues, that

doesn’t come anywhere near that. So I think the Federal Government is going to have to help us in terms of upping some State

costs in funding the schools. In fact, I saw a report earlier that said

that in some municipalities, upwards of 44 percent of special ed

funding comes from the State capital. And indeed in our case, that

is a burden that falls solely on the backs of the city.

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And I always like to take the opportunity to mention the tuition

assistance grant program. And thank you for all you’ve done to

shepherd that. And if you like, I’d be happy to arrange a session

where some of the more than 2,000 people who benefited from that

can tell you personally how it has changed their lives, and there

are dozens, if not hundreds, of children who would not have gone

to college had that act not been in place.

So thank you, Mrs. Morella and Congressman Davis, who also

had an important role in that. And I’d be happy to answer any

questions you have.

[The prepared statement of Mr. McCarthy follows:]

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Mrs. MORELLA. Thank you. Speaking of that possible meeting on

the D.C. tuition access, it might be something that all of Congress

should be invited to. It may muster up even more support about

what can be done.

I want to thank you all for your excellent testimony concerning

your plans and recommendations. I am going to get to the bottom

line. One of the reasons I particularly wanted to have this hearing,

and Congresswoman Norton agreed, was the fact that we were embarrassed, as the superintendent has said, only several weeks before the end of the fiscal year that we discovered there was an $80

million deficit and it was like how come you didn’t know about this

deficit. Where did it suddenly come from, particularly with the concept the control board was going out of existence at the end of that

fiscal year and we were preparing legislation to give the District

of Columbia autonomy, as I think they should have, over their own

finances, a bill which incidentally we have submitted and has

passed this subcommittee, and we hope to get some movement on

that in the next session. And then we hear the $98 million projection and the fact that it may go even beyond that to 108 million.

And then somebody, who myself as a former educator and has had

many kids go through public school and believe that education is

the key to find out that the school year may well be shortened by

7 days—that is like a week-and-a-half—at a very time when we

talk about expanding the school year, expanding the number of

hours that kids have with this supervision and guidance and inspiration. So if I could ask you all this question, and you can give me

brief answers. And if you feel that someone else should answer

more extensively, fine. I know we have Dr. Gandhi on the next

panel.

Specifically, with all the great achievements that you have, all

the plans you have, how are we going to come to grips with why

we didn’t know that we had a shortfall that was 10 percent of the

budget at a time when it was the end of the fiscal year and will

we not have a reduction of the number of days in school? I mean

have we decided that we are not going to go about that—of 7 days?

Dr. Vance, do you want to start, or Ms. Cafritz is ready.

Ms. CAFRITZ. I think that part of that is due to information and

communication, and we have worked with and come to an agreement with Dr. Gandhi on how to fix that part of it. But the special

education, you know, definitely had cost overruns, no doubt about

it, and that is going to continue until we remove ourselves from

court order and we bring the functions that we are now paying

enormously for outside of the city and to private sources back into

the city.

The superintendent is working very, very hard on that, is assembling the right people. And I think, you know, you will see results.

It is going to take 3 to 5 years to get it fixed, but you will see results.

Now the budget overall, we worked very closely with McKenzie,

the best in the world. And we have scrubbed this budget to the

bone. And we do not have enough money to do what we need to

do. We have, I mean—and even going forward into 2002, our children are going to have about $5,000 fewer than charter school children. And we have got to be able to bring into balance with all

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their social needs and with all the disarray and the erosion that

is taking place in the school system and understand why it might

apparently cost more. But if you look at the services that kids get

comparatively, teacher salaries, facilities, they are not equitable.

Mrs. MORELLA. Anyone else who wants to comment on that? I

am also curious. Are you really going to make the school year 7

days shorter or is that just a trial balloon?

Ms. CAFRITZ. First of all, William Lockridge, who is the chairman

of our Fiscal and Facilities Committee, spent 24 weeks working on

this with the superintendent and his people. I spent quite a few

hours myself. And the board spent at its last meeting when we

made this decision 7 consecutive hours examining every possible

penetration of savings, and this is what we came up with that

would affect people the least. If we did, we looked at a 6 percent

across the board cut. That would require us to fire or RIF almost

500 teachers. Those 500 teachers, because of union rules, would

come from those teachers we have just worked so hard to hire as

we move toward, you know, full certification and a stronger work

force. So we thought that was a very bad idea.

We looked at it in terms of 3 percent plus adding some other

things. What will harm the kids the least. It’s horrible. We feel terrible about it. But we don’t see any other way out. But we were

surprised as anyone about having to do this.

Mrs. MORELLA. Would this mean that the teachers would also

not be paid for that week-and-a-half or 2 weeks? Is it a ripple effect

that is going to affect your teaching force?

Ms. CAFRITZ. No one would be paid. But the superintendent, you

know, wisely I think, looking at a plan which would spread the

pain across time, you know, adding a day to Christmas vacation

and a day to Easter instead of clumping it at all in one pay period.

Mr. CHAVOUS. Madam Chair, it is the council’s collective position

that we view the 7-day reduction of instruction time as the absolute last resort, and frankly my committee is going to hold a hearing to make sure that we know what other avenues are explored

to deal with this problem. So we have strong feelings against that.

But we need to know what machinations the school board went

through to come up with that approach.

One thing about how we got here not knowing the information

for several months, my committee as well as Dr. Vance requested

of the school CFO monthly spending reports. That’s one way that

we’re all able to track what’s coming in and what’s going on and

we weren’t able to receive them.

Frankly, I think there was an incredible disconnect between the

chief financial officer’s office and the school system. And you know,

we agreed with having a centralized financial system and a centralized procurement system, but we have found that there are

some instances where it isn’t practical nor does it work, and one

is in education. That is why we transferred procurement authority

back to Dr. Vance. And we really need to look closely to fashion a

way to give Dr. Vance or any superintendent greater control over

the financial shop. It just doesn’t make sense to have such a disconnect, particularly in the education arena, and I do think to Dr.

Gandhi’s credit we are now working more closely together. The systems are being integrated. The communication lines are opening

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up, but the reason why we got here, frankly, is you had the one

hand not knowing what the other hand was doing.

Mr. MCCARTHY. Mrs. Morella, may I add something briefly? Obviously, the Mayor shares the concern that will be a very terrible

outcome to have to shorten the school year. And one of the things

that he offered to do right away to help the school system alleviate

this or other pressures was to commit $60 million to help stem the

funding gap that was identified, and this was a commitment that

was made in fact before September 11th. And obviously since then

the hits to the city treasury are quite concerning, but the Mayor

is still making that commitment to provide the school system

through reprogrammings and other cost savings elsewhere in the

government $60 million to help cover some of the projected deficit.

Mrs. MORELLA. So what I hear is that you’re all going to be coming together and you’re going to have a public hearing. The Mayor

is going to try to assist. You now have communication, so you don’t

have this shock occurring as it did. So you’re telling me that you’re

working your way out of the situation like this so it will not happen again. Ms. Baker, did you want to comment on that?

Ms. BAKER. My comment is not really on the deficit itself but on

the comment that I heard that charter schools somehow are receiving an inequitable amount of money. And I am not sure how those

figures were devised, but I believe the system that the money is received is very fair. And I certainly would like to have further conversation about how that statement can be made because I think

the distribution of the funds is a very fair one. We don’t see our

schools swimming in money. They are fighting to try to stay above

the flow just like everybody else is. So I just wanted to testify my

concerns.

Mrs. MORELLA. Mr. McCarthy mentioned uniform per pupil formula.

Ms. BAKER. Yes, exactly. We get the same X number of dollars.

They have a small facilities allotment, but of course DCPS does not

get that because they have facilities and they don’t pay rent and

they don’t pay a lot of other things that charter schools have to figure out how to pay. So I think it is a statement that I do have

some concern about. That’s all.

Mrs. MORELLA. And I think Ms. Cafritz mentioned the fact that

the per pupil—or the amount of money from the budget is much

less in the District of Columbia than it is in Montgomery County,

but not the per pupil expenditure. So there is that distinction?

Ms. CAFRITZ. Yes, because it is categorized as an enhancement.

But the increase that the city is giving to charter schools in 2002

is $37 million for 7,700 students and to the school system $28 million for, you know, 68,000 or 69,000 kids.

Mr. VANCE. One factor that impacts that ratio, and it’s quite

alarming, is that 32 percent of the operating budget goes for the

education of 16 percent of our student population. That is our special needs population, the special education population. We just

sent entirely just far too many children into the outer areas of

Maryland and Virginia to attend private schools to receive special

education services. And not only have the costs of tuition escalated

but likewise the cost and problems associated with transportation.

I don’t think that other school systems, Baltimore, Chicago, notable

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for the problems they had in special education, had a problem comparable to the one we had.

So our major effort in our plan is to reduce those costs and to

bring a sizable number of those youngsters back to the District and

educate them per the legislation in schools in their community and

not deprive them of that right and responsibility and provide the

appropriate programs and facilities and staff for those young people

and likewise to engage in more private and public partnerships and

expand those that are currently in the District and to encourage

others who are not in the District to locate or relocate in the District. We see that as a major cost saving initiative on our part.

And in that regard, we are recently engaged in discussions with

persons who have done that elsewhere in the Nation. Doctor Thomas Hare, who did that in Chicago is currently teaching and doing

research at Harvard University and has agreed to come in for a

brief period of time to support us in that area. And likewise, Mrs.

Morella, you may know Linda Bluth, who is one of the officers in

special education in the State Education Office in Maryland. And

Linda was the one who primarily worked on those problems in Baltimore City and came away being quite successful. And we believe

with Tom and Linda helping us and with the very able support of

our current superintendent for special education doing the day-today and operational things, we will embark on a path that will not

only save money but will abide by the law and will service those

youngsters in a manner in which should have been serviced all

along.

Mrs. MORELLA. I appreciate your comments, and in our second

round I do want to pursue that concept, what can we do with regard to special ed and transportation particularly, which is such a

tremendous responsibility. But you also were shocked with the

budget shortfall, weren’t you?

Mr. VANCE. Yes.

Mrs. MORELLA. And you are going to be a major stakeholder in

pulling this all together. I am now pleased to recognize Ms. Norton.

Ms. NORTON. Well, I want to pick up where the Chair left off in

discussing this shortening of the school year notion that shocked

the whole city. I certainly understand enough about budgets so

that I can understand why this is certainly the easiest thing to do.

You lop it off. You lop off 7 days. Voila, you saved the money. All

of us took a hit and some of us won’t get as much money and the

children won’t get as much education, we go on with the next

thing. I regard this as not the school board’s problem, not the

CFO’s problems, not the council’s problem, not the Mayor’s problem. I regard it as a D.C. government problem that has not been

fixed for this reason.

Apparently this is Medicaid money. The notion that Medicaid

money would pop up here again is an outrage. And let me just say

for the record, the reason there is no D.C. General Hospital now

is in large part because the Mayor when he was CFO and then

when he was Mayor and the present CFO and the control board

and the entire council let D.C. General go knowing full well that

the Medicaid money was the most broken part of the D.C. government and was not, in fact, being received and the council just—and

the Mayor and the CFO just continued to give money, and of course

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when Washington, D.C. General went down they acted as rescuers

except for the Mayor who took the hit, and the control board.

But the fact that the council sat there and continued to let D.C.

General Hospital be run by managers who were not collecting the

Medicaid money and then everybody ran to the rescue and we had

one of the worst fights in the District of Columbia, and the fault

was the fault of the government. So bad as that was, with people

even running up here where the Congress favored what the Mayor

was doing. We had members of the council coming up here where

the Congress was in favor of what the Mayor was doing. At the

very least I thought with all the demagoguery going on that somebody had fixed the Medicaid system.

With the Medicaid problem from D.C. General hopping over to

the school system, this committee has every reason to be outraged,

because if the collapse of D.C. General at the hands of the council

and the Mayor and the CFO and the control board did not get the

government of the District of Columbia to fixing the Medicaid system, what will?

Now we are having the collapse of a second institution, and it is

not the school board’s fault. It is the fault of the council and the

fault of the Mayor, because you went through it with D.C. General

Hospital.

And the notion that this would happen again with the school system, what other institution is going to come up next, ladies and

gentlemen? Is it going to be the welfare system? What other part

of the D.C. government which uses Medicaid has not been fixed?

Medicaid is a Federal program. And I am going to ask the Chair,

given the fact that this problem has crossed over from D.C. General

after all we have gone through now to the school system, I am really afraid because Medicaid is a part of many programs of the District of Columbia. And now it’s about to bring down or at least

cause serious disrepair to a second part of the D.C. government at

least as important to us to the part that we are on the way down

because of Medicaid. And at this time I don’t want anybody running forward saying we are going to save it at the end. We are

going to save it now because we are going to fix Medicaid in this

city once and for all.

Now the notion of—the Chair says well, we tried 6 percent, we

tried 3 percent. The problem is when you do these kinds of cuts in

the Congress we always resist across the board cuts, at least some

of us do. They are all analytical cuts. They are the easy way to do

it. Everybody gets hurt. And you end up reserving things that

should have been cut anyway. The bad gets preserved with the

good that way.

Now part of this, of course, can’t be helped because it has to do

with Medicaid and not with anything anybody in the school system

has done in particular with respect to education. But I do want to

ask you, and I’m here not talking to the school system alone. I

think the fact that the council and the Mayor and the CFO let this

happen with Medicaid, this is not overspending on the other part

of their special education. It means that you have got to help them

find an alternative. And I don’t simply mean sit down and bicker

with them. I’m saying you who are financial experts, you and the

council, who have to make all kinds of analytical cuts all the time.

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I am asking you to sit down with the school system and look for

other slices of the pie.

All they have looked at, at least the Chair says they have looked

at various gradations of cuts by percentage. Even on a temporary

basis, people who know budgets and know the finances of the

school system may be able to find something that—or some other

parts that could be cut and at least save us some more days unless

you are telling us that 7 days don’t matter to these children. It

seems to be a huge number of days, a whole week or more. I think

we have an obligation to do more, and I would ask that you do that

and submit to the Chair within a month an alternative that is not

put together by the school board alone. It’s not their problem that

has everybody around a table, the CFO, the council, the Mayor,

and of course, the school board and superintendent. Let’s try to

make a more analytical cut. If you can’t do it, you can’t do it. But

submit to this committee within 30 days what your options are so

we can see at least what other options are besides percentage

across the board cuts, which almost never make it in the Congress

because, as I said, somebody has just decided to do it the easy way.

Now let me ask this, since this is a shared problem, the D.C.

Public School System, people who were supposed to keep the Medicaid records didn’t keep it. The CFO depended on them to keep it

and yet he’s the one who had all the responsibility for records, so

he should have made sure that they kept it. The council, which had

oversight, didn’t know about it. OK. So it’s everybody’s problem.

Now I want to know what you think, whether everybody has made

a contribution to the solving of the problem thus far. Has the council come forward with an amount of money? Has the Mayor come

forward with an amount of money? And have the schools done so?

I would like to know that, please.

Mr. CHAVOUS. Well, Congresswoman Norton, to answer your last

question, yes, we have. We’ve had a number of meetings and have

agreed on a consensus approach. The first order of business, of

course, is to ascertain the real extent of the problem, and we are

in the process of doing that.

Second, we are working on a plan that would help rectify the situation financially and from a management perspective. But I dare

say that we all are together in terms of trying to find some collaborative approach to solving the problem.

Ms. NORTON. 7 days——

Mr. CHAVOUS. We don’t agree with the 7 days. We are going to

have a hearing. I said that. We don’t agree with that. That is an

absolute last resort. And I vow to you this, between the council and

the Mayor we are going to make sure that doesn’t happen. We do

not support that in any way.

But Congresswoman Norton, you raised the Medicaid issue. I

think with all due respect, there is not the same type of analogy

that you are making to D.C. General, and if there were Members

of Congress who were so firmly committed to the Mayor’s point of

view, frankly they were either ill-informed or ill-advised.

Ms. NORTON. I don’t want to rediscuss D.C. General.

Mr. CHAVOUS. You brought it up.

Ms. NORTON. I do want to say this. The only reason I raised D.C.

General is that the Medicaid problem of the District of Columbia

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has not been fixed, and I am going to have a separate hearing on

that. I don’t mean to say that what happened to D.C. General is

what is happening to the school system, but it is the failure to collect Medicaid money. These are children entitled to Medicaid

money. Once it happened to D.C. General, that was a huge alarm

bell that said let’s take this system and let’s concentrate on fixing

this system. It is part and parcel of the same system. I am not

going to reargue D.C. General here.

Mr. CHAVOUS. Well, Congresswoman, you brought it up, and I

dare say I am going to comment on it because I think the analogy

doesn’t apply. Now with respect to Medicaid, clearly we have a

problem with capturing Medicaid funds. Part of the reason is that

the system has been broken across government lines. During my

testimony I alluded to the fact that to Dr. Gandhi’s credit he has

put in place and he will testify to this, I’m sure, a governmentwide

approach to recapture Medicaid dollars. And the council and the

Mayor are all involved, particularly the Chair of the Human Services Committee, Council Member Allen, who has the lion’s share of

the Medicaid dollars. But I can tell you this and assure you this,

since you raised the analogy, please take comfort in the fact that

Medicaid is not going to shut down our schools. Whatever problem

exists with Medicaid, it is small in comparison to the other problems the school system is facing and it is not going to rise to the

level where we will shut down the doors of our public schools.

Ms. NORTON. But the fact that it would cross over at all is very

disturbing, and I know it is disturbing to you as well. And I don’t

say that the whole system is for your committee, God knows, to fix.

You’re right. Most of that money isn’t with the school system. But

the notion that you would now find it yet in another committee, it

could not be more disturbing to me because—and surely you must

feel as well, Mr. Chavous, that it must be other places that are

having the same wide problem.

Mr. CHAVOUS. Clearly it is a governmentwide problem and we

are taking a governmentwide approach, and I am sure we will

solve the problem. I do think we are well on our way to doing that.

If you look at the deficit, while Medicaid is a big problem, frankly

the biggest problem is special education. And that is the one that

drives our budget, and that is frankly because the court situation

is something we can’t necessarily control. Medicaid is something we

can control better, and I agree we need to do that.

Ms. NORTON. You raise an important point when you say the

other part is special education. I haven’t gotten the good sense

from the testimony given here today how much about the rising

costs generally of special education and whether if you left aside

the Medicaid part of it, whether we are getting a handle on that

or even how much Medicaid pays for special education. Could you

give me some sense of whether or not this is just one part that has

slipped out of control?

Mr. CHAVOUS. That is a fair question. It is all complicated by the

court situation where we have to provide court transportation—I

mean bus transportation to and from school for a number of children. And we have had extreme examples where one child gets on

one bus with two aides and goes as far as Baltimore to receive

services and is transported back and forth in that matter all beVerDate 11-MAY-2000 10:09 Dec 10, 2002 Jkt 000000 PO 00000 Frm 00081 Fmt 6633 Sfmt 6633 C:\DOCS\82565.TXT HGOVREF1 PsN: HGOVREF1
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cause of the court order. It is an extremely expensive proposition.

It is also complicated by the fact that we have so many out of State

placements in private facilities outside the city.

So we have conducted these monthly hearings and that follows

up on a special committee that the council impaneled a year-anda-half ago which issued a report earlier this year, and now we have

reinstituted regular monthly hearings where we are looking at let’s

bring our children back into the city. We have a primary obligation

to educate our children. They are our children. We should not be

sending them out to California, Utah, Baltimore.

Ms. NORTON. Let me ask Mr. Vance because that is—the council

has raised that over and over again. We know that some of these

children need very special services that no city could provide. But

could I ask you in response to what Mr. Chavous said, what proportion of our special education children are educated here in the

District of Columbia? What plan do you have in what proportions

to bring back children who are now educated outside the District

of Columbia? You and Ms. Cafritz.

Mr. VANCE. We have set a rather ambitious target for ourselves

for this school year to return 800 children who are placed in private tuition-based special education schools to the District to programs which we are currently in the process of developing. That is

my immediate response.

Ms. NORTON. 800. And how many are going to schools outside the

District of Columbia today?

Mr. VANCE. That is just a moving figure, and let me turn around

and ask Ms. Gay. 1,829 private day programs.

Ms. NORTON. 1,800 actually have to travel outside the city and

be brought home every night.

Mrs. MORELLA. I have a figure on a chart here that I was going

to ask about. The chart has 2,506 nonpublic placements versus

9,102 in public placements. The difference in price allocation per

student for the public placement is $17,000 versus $34,000 for the

nonpublic placement. So it seems to me that is key coming to grips.

Ms. CAFRITZ. In addition, if I might add—we have 12,000 students, 21 percent of our student population is in special ed, which

is the highest—I mean 17 percent—17 percent. And 21 percent of

those are on private tuition grants, and this is extremely high.

Ms. NORTON. Nancy—if we were in a State, the State I take it

would take up part of that tuition grant?

Ms. CAFRITZ. They would pay for all the transportation. They

would take care of all of the administrative costs related to filing

for Medicaid. They would take care of many, many other costs in

terms of special services to this population.

But we have no place to go.

Ms. NORTON. Just let me say, I think that, even doing the best

you can do, it would be very hard to come up against that.

I am going to be putting in a bill to get more State functions

moved to the Federal Government. This is not a—I don’t—and, you

know, and with education in general, everybody considers that a

local function. If you get for me the State function such as the

transportation, the part of it that the State would pay for special

education, I will make sure that is a part of this bill.

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I think, doing the very best you can, you’re not going to be able

to do much better, given these costs.

Ms. CAFRITZ. We really applaud your efforts on that and your

challenge to work with everybody.

But one thing I do want to say on behalf of the school board, we have already made about $35 million of extremely analytical cuts.

We had to make about $9 million more worth of cuts, and that is

how we came to the furlough, but only after we had gone through

our budget line item by line item from, you know, janitors to

nurses to paper.

Ms. NORTON. We’re not—Mr. Chavous, when I said perhaps that

there needs to be a contribution by everyone, you know that they

are going to have $10 million added because of the—there’s no

caps, and there’s good—there’s a reason for it.

Mr. CHAVOUS. Yes.

Ms. NORTON. But it means $10 million on top of a flood of deficit

already. Do you think that the council is going to be able to help

with that, inasmuch as a majority of the council apparently wrote

and said they think that was a necessary expense for the school

board to have, even given this large deficit?

Mr. CHAVOUS. Yeah. Well, Congresswoman Norton, you’re right.

The council is taking the strong position about the caps, and I had

supported over the years. I will say, though, that this year I did

sign a letter with the Mayor indicating that we need to look at

some caps for the past situation because of the escalating financial

circumstances. We are working on this issue. We’ve clearly, clearly

need to address it, but it is driving our budget. And I’m concerned

about why we have to preserve the rights of those children who

aren’t getting services. I am somewhat concerned about people who

are taking advantage of the system, and that is a reality we’ve got

to face.

I do want to thank you and applaud your suggestion that you

look at the State functions on special education, and I will convey

some of the research we’ve done. I think that is a role for the Federal Government, to help supplement these clearly State-related

costs. We’re the only municipality in the country that has to bear

these costs in special education, and it will go a long way toward

reducing these escalating deficits.

Ms. NORTON. If you were perfect, you couldn’t get out of that one.

Yes, Mr. McCarthy.

Mr. MCCARTHY. I don’t know if you were here before, but in my

testimony I mentioned that we have a study that says, for some

municipalities, upwards of 44 percent of their special education

costs are borne by the State Capitol. And here, with our limited tax

base, that is something that we bear all ourselves.

Ms. NORTON. Would you believe that the States are here crying

bloody murder because they are having to pay special education

costs, and here the District of Columbia has a burden that is simply impossible to bear. We’ve got to do something about that.

Mr. MCCARTHY. That’s why I’d like to add, Mrs. Norton, in terms

of the contributions that you’re talking about, as I said earlier, I

think the Mayor and the council have agreed to find savings in the

main city budget, use limited reserves or make cuts in other programs to give schools an additional $60 million this year to cover

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some of these problems. In fact, the budget that was passed yesterday has some reserve relief. The reserve requirement was reduced,

and the only part of that was actually allocated for any use was

$12 million for public education. So that’s a—— Ms. NORTON. Could I ask this? I’d like to know, what is the ethnic background and income level of students using out-of-State and

private schools for special education in the District of Columbia?

Ms. CAFRITZ. We have done a survey of just the, I think, four

most expensive schools; and of the student population, which is privately placed there, they come from, with very minor exceptions,

the most expensive ZIP codes in the city and in complete disproportion to their presence in the school system.

Ms. NORTON. Y’all are sitting ducks. Come in and get your legal

fees paid, and then send your child to the most expensive schools.

Move in from Montgomery County. I have heard of instances in

which that has happened, Madam Chair. I’m not just using your

county pejoratively at this time.

Ms. CAFRITZ. The other thing on spending pressure to be aware of, the $60 million that the Mayor is contributing to this solution

is taken into account in the cuts that we made. So that doesn’t affect the cuts that we’ve made at all. I mean, it affects that we

would have had to have made more, but—— Ms. NORTON. I have a few more, but I’m going to pass on to the

Chair now.

Mrs. MORELLA. I want to pick up on that same issue. It seemed— and, yes, there are special need students who do go to Montgomery

County because they can get the education that the law says they

should have. I would hope that you would have some plans to incorporate within your schools the classrooms, the environment that

is necessary for special education. Maybe you need to do some dazzling things like certain scholarships to get teachers trained. You

know, maybe there would be a startup cost you would need.

But, you know, what I understand also is that even the transportation, that you have bus drivers who are at the behest of the recipients’ families, so they stop Monday and Tuesday one place.

Wednesday, they go to a different place. Thursday, it may be a different place. I mean, this is very expensive. It seems, again, that

could be streamlined so that in the long run you could come up

with a plan—I’m sure that in the Federal Government we would

try to assist if we knew that this was a program that was going

to take your nonpublic placements to bring them into public placements, and the District of Columbia could be a model. I know you

have more students with special needs than other jurisdictions.

I know this is an enormous challenge, but I believe you’re up to

it. I mean, we have a great board of education, a great superintendent, the council, the support services, charter schools. They’re off

the wall in terms of numbers. Why? Because people must be sensing that they are just not getting it in the public school system,

other than charter schools. I’m not sure—you have a good question

about space, what are you going to do about it? But do you see

what I’m saying? The bottom line is that we’ve got to make plans

and accommodations so the District of Columbia can be able to educate within the public placements.

Does anyone want to comment on that?

81

Ms. CAFRITZ. Congresswoman, we would love to have—perhaps,

Dr. Vance and Mr. Sellas now come up and do a briefing for you

on our plans to address some of the very things that you mention,

and I think emerging from that will be some things that we can

certainly work on together, perhaps even legislatively.

Ms. BAKER. I might also say that I guess it was back in 1998

when charter schools were really beginning to evolve that it was

a kind of thought that it might be one way to provide service to

children in the special ed population. So that might still be a resource. Yes, it would have to be handled by people who really understood and knew what they were doing, but there are a lot of

people out there who might take on that challenge, which would

provide another resource for actually providing special education to

children through the public arena in a way that would be very cost

effective.

Let me also say that, early on, we talked a little bit about enrollment or whatever, but, in 1998 or 1999, that was the first time in

the District of Columbia that the actual enrollment numbers overall for public education increased, because charter schools brought

back students whose parents had elected parochial or private

schools, not in huge numbers, but what we’re saying is that all

kinds of reform can make that kind of difference, and that same

kind of reform in special ed could also make that kind of difference.

Mrs. MORELLA. Which is why you should also be involved in any

plan that is undertaken.

Dr. Vance, do you want to comment on that?

Mr. VANCE. No.

Mrs. MORELLA. I would be happy to meet with you and Steve and

maybe Ms. Cafritz, and I know that Congresswoman Norton would

join me. We could have a little briefing on what your plans are to

do that kind of thing, and then we’d—— Mr. VANCE. We’ll be delighted to make those arrangements, and

perhaps we can set a date or two before we leave here today.

Mrs. MORELLA. And, Mr. Chavous, you agree, too, don’t you?

Mr. CHAVOUS. Yes, absolutely. I think that is an excellent suggestion. We are working on a plan; and one thing about it, Congresswoman Morella, we’re going to be making sure that, once the

plan is set, that we’ll have regular hearings to drive the implementation, which is always problem. We’ve made a lot of great plans

in the city in a lot of areas, but if you don’t drive and ride herd

on it day in and day out, you may not be followed.

Mrs. MORELLA. Absolutely. That is one of the reasons for this

hearing, too.

I’m going to defer now to Ms. Norton for maybe the last round

of questions. We’d like to submit some further questions to you, but

we need to get on with the second panel, and we held you for a

long enough time, but we do plan to continue. Ms. Norton.

Ms. NORTON. Yes. Could I ask the superintendent if you would

submit to this committee within 30 days the ethnic background and

income level and school of children using private or out-of-State

schools in the District of Columbia. That must be already available

someplace. I’m not trying to cause you any extra work, but we need

to know that.

Mr. VANCE. Yes, we will.

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Ms. NORTON. Thank you very much.

I’d like to ask a question about an old issue that has come up

that we thought had been satisfied. It’s mentioned in Mr.

McCarthy’s testimony. It has to do with enrollment. Indeed, Ms.

Baker mentioned enrollment having increased. We were fairly surprised at the first enrollment audit, and, frankly, it did not seem

to us entirely credible, but, you know, they said they did it, and

that is that. That’s good, enrollment not going down. And I certainly do believe that there would have been children attracted by

the charter schools.

If I may say so, Ms. Baker, who started from literally nothing

and created a very credible charter school board—a charter school

department right off, did, it seems to me—and the school board

quickly got itself to the point where it, too, was drawing people. So

there’s no question that there may have been people who were

drawn.

But in Mr. McCarthy’s testimony, he says, prior to this year, the

enrollment audit included only a sample of students in DCPS

schools and all students in public charter schools. That’s the first

I’ve ever heard of that.

Ms. CAFRITZ. Would you repeat that?

Ms. NORTON. It said that the enrollment audit included only a

sample of students in DCPS schools, and all students, of course,

the public charter schools.

Mr. MCCARTHY. That is true, Ms. Norton. And prior to the creation of the SEO, the audit of the DCPS enrollment was just that.

It was just a sampling of a few students here and there to come

up with the number.

One of the reasons to have the SEO was to improve that process

and structure it, and Councilman Chavous made sure that indeed

now DCPS have an enrollment audit that was a census audit student by student. The SEO—Ms. Spinner can talk about that—has

just undertaken the first one of that kind. And what can you say?

Ms. SPINNER. As has been indicated, for the first time we have

undertaken a contracted full audit of the school system’s enrollment process, where every school in the district of the—every public school in the District of Columbia is being counted, and the

records are in fact being audited. And it is true that in the past,

while the charter schools did undergo 100 percent count, the public

schools went through a sampling process. This was the first year

that the council did in fact require that we do this, and we are

even as we speak learning from that process. We have completed

that process and look forward to being able to use those numbers

and that audit count to really accompany the recommended full

funding formula to come up with the most accurate assessment of

costs.

Ms. NORTON. What’s the number? How many children are there

in New York—in the D.C. public schools, please? Somebody tell me,

please. I mean—well, she says the audit has been done.

Ms. SPINNER. The audit has been completed. We will receive our

final report toward the end of December.

Ms. NORTON. You don’t have any number you could give this

committee?

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Ms. SPINNER. I don’t have a number for combined that I can give

you, but certainly—— Ms. NORTON. I want to know for the D.C. public schools. How

many children are there in the D.C. public schools?

Ms. SPINNER. We will get you a number before close of business

today.

Ms. NORTON. You don’t have a number?

Ms. SPINNER. I don’t have it in my head right now.

Ms. NORTON. It’s December, and you don’t have a number. Do

you have a number in Montgomery County?

Ms. SPINNER. No. Mrs. Norton, let’s be clear. The D.C. Public

School System did in fact do its count in October, as it is prescribed

to do. What we don’t have is a final audit count, because there is

a resolution process that you go through around enrollment. Once

you do the count, you then verify that these young people are in

fact residents of the District.

Mr. VANCE. Our report, which we submitted to the Board of Education as of October 5, 2001, reported 68,449 students enrolled in

the District of Columbia.

Ms. NORTON. Thank you for your candor.

First of all, I appreciate—whenever you come before this committee—first, let me say to Mr. Chavous, because I guess it was your

committee that really looked behind this and discovered the

truth—— Mr. CHAVOUS. Yes.

Ms. NORTON [continuing]. I want you to know that it was never

reported to this committee that a sampling was done. Of course,

this committee is not the oversight committee, sir. You are, and

you have done your job. And you’ve made the school system do for

the public schools what, of course, they were requiring of the charter schools. The number that said there wasn’t a single child lost

in the public schools and that we had the same number of children

growing, growing, just didn’t seem credible to us, and nobody said

they were doing a sampling.

So it’s really important to do what the superintendent just did.

He gave you the number he had. He’s going to be willing to submit,

if the audit finds that there are other numbers, but that’s what you

do when you come to a hearing, ladies and gentlemen. You give

your best information.

Ms. CAFRITZ. Congresswoman, I just want you to know, our numbers are not based on a sampling. What the superintendent has

presented are the numbers——

Ms. NORTON. I know.

Ms. CAFRITZ [continuing]. For October—OK.

Ms. NORTON. I know. That’s right. Because in Mr. McCarthy’s

testimony, it said for the first time you did, apparently, pursuant

to the city council mandate, a real audit. And of course that’s what

every other school system in the United States does.

Mr. CHAVOUS. If I may quickly—— Ms. NORTON. Yes, please.

Mr. CHAVOUS [continuing]. On that. You raise an excellent point.

We introduced the legislation for the State Education Office for

that purpose. We did not think it was fair, nor was it appropriate

when we’re going to a per pupil funding basis to evaluate how we

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fund public education, for one to have a sampling, the other to have

a complete audit. And so—— Ms. NORTON. It’s apples and oranges.

Mr. CHAVOUS. Yeah. And so we wanted to have uniformity, and

we wanted to have an independent monitor, and that’s why we’ve

created that office. And I’m very pleased with the work the State

Education Office has done. I’m looking forward to the audited numbers. You will never have a question as to how many students are

in—being educated in our public schools, because we will have the

real count and an audited real count, and that’s what the legislation intended to do.

Ms. NORTON. It’s such an important step forward. This committee took—had a GAO report, went through the whole ball of wax

just to try to find out how many students.

I’d like to ask a question on scores, and I’d like to ask it of Ms.

Baker as well as of our school officials. I’d like you to—you haven’t

said much about scores here today. I’d like to know, over the past

3 or 4 years, have scores in every one of the classifications gone up

or down? The ones that of course are the lowest, you’d want to go

down. The ones that were the highest, you want to go up. That’s

the first question.

The second question is, would—I have read in the newspapers— and I need clarification—on the notion that the scores for our D.C.

Public school system children are—have been consistently higher

than the scores for our public charter school system. So would all

of you who are relevant discuss that, please.

Mr. VANCE. While the standard for nine test scores indicate that

we have significantly reduced the percentages of students scoring

in the below-basic-proficiency level, over the past 4 years, Congresswoman Norton, our student’s performance in reading, mathematics achievement is still deficient, where we’ve made—I’m reluctant to call it a gain—is where we’ve reduced the number of youngsters who have moved from that below basic to the basic level. But

we are still, in terms of youngsters reading on grade level development tally, terribly flat and deficient.

Ms. NORTON. We are flat?

Mr. VANCE. Flat. The scores are just flat there. We cannot detect

any progress in moving those youngsters along, and that’s a major

initiative of ours this year.

Ms. NORTON. Ms. Cafritz.

Ms. CAFRITZ. Oh, another thing that I would like to point out, because I think the SAT 9s, you know, reflect on it, because so much

has been made of them. But I think that, in terms of our student’s

reputation, even more important are the SAT scores, and they are

awful. And you have in place a team here who readily admits that

they’re awful and who——

Ms. NORTON. Can I ask you a question on that, Ms. Cafritz? We

had a program here right at the time that the city went down that

offered children SAT score help, and we had a person who made

tremendous progress, and he was the first to go. You can understand, they had to just save the basic schools. Do we have any such

program in the District of Columbia now?

Ms. CAFRITZ. I think the programs that you have in the District

of Columbia, which you’ve had for years, are becoming real. OK?

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But when we start at our high school for the gifted and talented—

and, quite frankly, any charter school you can name—where the

scores are—we have many scores in the 700’s and 800’s at

Banneker, so you can imagine what it must be like in the rest of

the system. I mean, that’s what we’re up against, and that’s what

we’re facing when I address the question of equity.

Mr. VANCE. We have expanded the service you’ve mentioned.

We’re currently using in our high schools the Kaplan plan, we’re

using the Sylvan plan, and we’re using the Princeton plan.

Ms. NORTON. Well, those are good plans.

Mr. VANCE. Outstanding plans.

Ms. NORTON. Of course, it assumes the children have been educated to the point where they can absorb those plans.

Mr. VANCE. Precisely. And we are beginning working with them.

We made a presentation to the board on our effort to expand those

plans in each of our senior high schools. We did have a representative in from ETS, an Educational Testing Service, and they indicated their willingness to work with us to reinforce what we were

doing and also expand it to our intermediate, that is, our middle

and junior high schools. So we’re in the process this year of implementing that in every one of our high schools.

Likewise, we did create an office for honors and advanced placement classes in all of our high schools.

Mr. CHAVOUS. Ms. Norton, quickly, if I may, if you would indulge

me, I’m convinced we will not improve test scores just through education alone. The biggest problem is the social conditions our children live under, and we are embarking on an initiative to integrate

some of those wraparound services with what the education folks

are doing. I think it’s going to make a tremendous difference.

One of the reasons why our children aren’t reading or they don’t

operate and do math at basic is because they have little or no reinforcement at home. And I think with the early childhood initiative,

the compulsory attendance level that I’m going to introduce and

the commission we put in place, working with the Mayor and Carolyn Graham as deputy mayor in this area I believe that we can put

in place a program that will give our young people the support beyond that 8-hour school day or 6-hour school day that will make

a huge difference. And then we will see that bear out in test results

down the road.

Ms. NORTON. Could I encourage you—Mr. Chavous, I think that

your early childhood initiative is an excellent one. D.C. has one of

the best essentially childhood programs in the country as it is, because the council and the Mayor moved ahead of other jurisdictions, and all kinds of children in early childhood, they could not

be in other jurisdictions. And I know you’re going through a very

thoughtful process, working with American University and the

rest, but particularly as hard times set in, I would just look to encourage you, since there’s already so much experience in the D.C.

Public school system with early childhood, one of the great success

stories of the D.C. Public school system, I would like to encourage

you to move that program along even more quickly, and I would

like to challenge you to have at least part of your program in place

by September.

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That is just how important I think what you just said is. If you

start there, then by the time we get to the Kaplan or the D.C. college access program and, God knows, the high schools, the job will

be much easier, and we won’t be asking the principal and the

teacher to do everything.

Mr. CHAVOUS. Well, indeed we expect to have a report by the end

of January. We’ll have hearings.

And then I can also say that this is a collaborative effort. The

Mayor, the superintendent, the school board and I are working together, the council, and Carolyn Graham has been working with

the superintendent’s office. We’re talking about some pilot programs in the fall. So we’re really on the same page with where you

are.

Ms. NORTON. Excellent. Ms. Baker did not get to answer the

question on the difference in scores between the charter schools

and the D.C. public schools.

Ms. BAKER. Right. I think that there was actually a flaw in the

process that was used, and I guess that—a year or so ago in terms

of that comparableness. I think that one of the things that if you

start going into statistical analyses you have to look at if you are

comparing 500 students to 5,000 students, you’ve got to make some

adjustments, because that is not a clear—— Ms. NORTON. Yeah, but they know—— Ms. BAKER. No. Mathematicians and—in one case that was not

done, is all I’m saying. That was not done. It was just a—you

know, you add this up and you add that up and you don’t make

any allowances, and that does not work.

But I would also say that, yes, we still have a good deal—number

of students who are, yes, below basic, but we also chart gains, and

I think that’s clear in the complete report that I did leave with you.

And that is that it’s important to see how much growth has occurred in children over the course of a year, and we do have a company that does that for us so that we look very carefully at whether—and what percentage of the students gains were in the school

so that——

Ms. NORTON. Are you saying that the schools are comparable

now or not?

Ms. BAKER. I don’t know that there has been an analysis—an actual comparison.

Ms. NORTON. Well, I wish you would report to this committee on

that so we could know the truth on that, rather than read it in the

newspaper.

Ms. BAKER. Well, I don’t know—I just question——

Ms. NORTON. Fair is fair. The fact is that I am a strong supporter of the charter schools. It was my bill that was the——

Ms. BAKER. Right. I understand that. I’m not denying a comparison, but I just think that the comparison that we make needs to

be sure that we compare apples to apples. I don’t believe that we

need to take X number of students and compare them just—I think

you need to break it down, is what I’m saying.

Ms. NORTON. I think statistically, you need to look—you’re absolutely right on this. You need to look at the composition of the income and other compositions of those students—they might be

skewed in some way or the other—and compare that with——

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Ms. BAKER. There are a number of things that you ought to take

into account, yes.

Ms. NORTON. Finally, I just want to get on the record one way

or the other on this. The IG wrote to all of you and sent copies to

all of us, and this is about the—and let me quote him. As a result—and he was referring back to possible audits by the D.C. public schools and the council. Then he goes on to say, timely completion of the CAFR is at risk. He said, I am recommending that all

efforts other than the CAFR to audit DCPS financial records for

2001 be suspended until completion of the CAFR on February 1,

2001. Have all audits—how have the parties responded to his recommendation?

Mr. CHAVOUS. Well, earlier this week, the IG, the CFO, the superintendent, Ms. Cafritz, the Mayor and I and also KPMG, the

D.C. auditor, we were all in the same room. The Mayor chaired the

meeting to deal with that very issue. We have come to a meeting

of the minds as to how to proceed in a way that would not be disruptive to the CAFR. The council needs to have an audit done, and

now the request that the school board made has been folded into

the work of our auditor.

The reason why we need to have the audit is we need to understand how we got in this mess, which just follows up on the questions that Congresswoman—Chairwoman Morella indicated—I

mean, asked on. But we aren’t going to get in the way of the CAFR.

We’re going to make sure that, working with KPMG, the city’s

auditors and the IG, that we’ll work in tandem and we don’t get

in the way of that effort, because that is a top priority of the city.

But we do need to make sure as well that the city auditor is able

to do her work so that, as we build the 2003 budget, we don’t repeat any mistakes in the past.

So we’re—we have a working group. We’re working through a

memorandum of understanding, and we will make sure that the

CAFR is done in a timely manner.

Ms. NORTON. That is exactly the way to do it. Thank you very

much.

Mr. CHAVOUS. Thank you.

Mrs. MORELLA. Thank you, Ms. Norton. I know we’ve been keeping you——

Ms. CAFRITZ. One last thing I wanted to point out. It’s so important that we realize that all of these children are public school children, and there is not one panacea that is any better than another

panacea. It’s going to take a lot of hard work.

The public school system is beginning work with Richard Wayne,

who is a well-known researcher in the charter school area, and I

think it’s—the 21st Century Schools is the name of the company,

to do a joint study on all the charter schools’ scores and DCPS

scores in a way that they are appropriately, statistically

disaggregated. So, you know, we will be able to bring you across

the board, you know—and I think that everyone is participating in

that as far as I know.

Ms. BAKER. Our board has already used Rich and Joyce’s strategies as a—for the analysis that we get annually, and so then they

will be folding in those as well.

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Ms. CAFRITZ. We couldn’t afford that. We had to wait till they got

a grant.

Mrs. MORELLA. That’s good that—I was going to ask that kind

of question. But just one final question. Do you have full-time kindergarten as a demonstration program or requirement?

Ms. BAKER. Full time.

Mrs. MORELLA. You have full-time?

Ms. CAFRITZ. Full-time, universal.

Mrs. MORELLA. Excellent. Because that is, you know, your—following up on your preschool education has been found in some recent studies——

Ms. CAFRITZ. We also have universal pre-K.

Mrs. MORELLA. Yeah, universal pre-K. Excellent. Good.

It’s interesting, because your wraparound schools very much are

like linkages to learning, where you need to bring all of the facilities together if you’re going to give that kind of background and environment to the students.

I have looked at the Stanford 9 tests in reading and mathematics, and it is true, as you have indicated, the improvement is

very slight, particularly over the last few years. There’s been some

significant improvement from many years ago, but the last few

years when you have 36 percent below basic, and basic is 36 percent with regard to math, and 25 percent below basic, and 46 percent just basic when it comes to reading—and so it just seems to

me that there are programs you must be offering that start from

the very beginning, not just SATs. When they’re ready to take the

preSATs or the SATs, they’re going to help to develop this. And,

again, I look forward to hearing more about what you are planning

to do.

I just want to ask our State education officer—congratulations on

your appointment, Ms. Spinner—are you doing any evaluation of

test scores?

Ms. SPINNER. At this point, we haven’t undertaken any evaluation of test scores, but it’s important, I guess, that I say that at

this point in time that the State Education Office in the District

of Columbia came about, as you all know, through a legislative

process that makes it a bit different from other State education offices. We really are focusing on monitoring and oversight and the

kind of research and information gathering that will allow for better data-driven decisionmaking across the city. We’re very hopeful

that this time next year we’ll be coming back to you with the kind

of information about not just one set of our public schools but all

of our public schools that will inform what you know and how you

know it.

Mrs. MORELLA. So are you planning to do an evaluation?

Ms. SPINNER. Yes, we are, and we’ll be doing that in cooperation

with our public schools.

Mrs. MORELLA. Very good. Splendid.

I want to thank the panel. We will be forwarding some questions

to you. You know, education opens doors, but it also prepares people to go through those doors, and you are working with the potential leaders for the future. Thank you all very much for being with

us.

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Dr. Gandhi and Mr. Maddox will be coming forward, and I think

you were going to have Mr. DiVello—before you sit down, too, I’ll

swear you in. So if you would raise your right hands, gentlemen.

[Witnesses sworn.]

Mrs. MORELLA. Thank you. Affirmative response, for the record.

Well, you’ve heard our long morning deliberation, the statements,

the questions, the responses. So I think that you’re all ready for us,

and we’re certainly ready for you. Thank you again for your patience in waiting so long to be able to testify. So we’ll start off,

then, again, in our usual way.

Dr. Gandhi, you’re a familiar person who appeared before this

subcommittee, and so you know that your entire testimony will be

in the record, and look forward to hearing from you, sir.

STATEMENTS OF NATWAR GANDHI, CHIEF FINANCIAL OFFICER, DISTRICT OF COLUMBIA; AND CHARLES C. MADDOX,

INSPECTOR GENERAL, DISTRICT OF COLUMBIA, ACCOMPANIED BY WILLIAM J. DIVELLO, CFE, ASSISTANT INSPECTOR GENERAL FOR AUDITS

Mr. GANDHI. Thank you very much, Madam Chair. Good morning, Chairwoman Morella, Congresswoman Norton and members of

the subcommittee.

I am Natwar M. Gandhi, chief financial officer for the District of

Columbia, and I’m here to discuss the financial management of the

District of Columbia public schools.

First, let me address the District’s commitment to the children.

The record is clear that Mayor Williams and the council have made

a commitment to put children’s education first in the District of Columbia. Because of this commitment, there has been a need to increase our investment in schools, and over the past few years this

has been done.

The combined operating budget for D.C. public schools and D.C.

Charter Schools has increased from $568 million in fiscal year 1999

to about $801 million in fiscal year 2002. This is a 41 percent increase over a 4-year period, while during the same time total enrollment in schools has increased from about 79,000 to 82,000, a 4

percent increase.

The public education local source budget for fiscal year 2002 constitutes about 23 percent of the total D.C. budget.

As the chief financial officer, I can tell you that, in today’s revenue environment, the District cannot continue this trend of an

annualized 10 percent growth to this budget without radical

change in the District’s commitment to other components of its

budget. Therefore, the long-term financial viability of the DCPS is

substantially dependent on structural change in the management

of its program and cost profile.

In that cost profile, as we just heard, special education is the cost

driver. The District’s special education program, comprising about

16 percent of the student population, accounts for one-third of its

operating budget. When we compare the fiscal year 2000 budget for

special education to the fiscal year 2002 budget, we find a 38 percent increase in costs. Over the same period, the number of students requiring special education services increased by 11 percent.

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Others have already spoken about underlying problems with the

special education program itself that contribute to making it so

costly and why changing this cost will take some years to correct.

Most of the costs are tied to compliance with Federal mandates,

and the District has no control over these expenses and only a limited ability to anticipate them.

Now let me turn to fiscal year 2001. The projected fiscal year

2001 financial deficit at the schools has unfortunately generated

much controversy over the past few months. I fear that a good portion of this controversy stems from inadequate and untimely communication between the Office of the Chief Financial Officer and

the superintendent and the Board of Education, a failing which I

deeply regret. At the end of the day, however, what matters for the

schools and the District is the audited financial statements and not

our projections. We have gone over the books for fiscal year 2001

and the independent audit is in full force.

The actual figures provided to the District’s independent auditor show deficits of approximately $60 million after the gap closing

measures of $38.2 million. Had no action been taken, the deficit

would have been $98.2 million.

It is important to note, however, that although this shortfall presents us with challenges as we enter the new fiscal year, it will not

impact the District’s goal of financial viability. Our financial forecasts for fiscal year 2001 included provisions for unanticipated

spending pressures of potential revenue shortfalls, and this gives

us the ability to manage unforeseen budgetary challenges.

In the current fiscal year, the schools have major financial problems that could result, because the problems identified in fiscal

year 2001 continue in fiscal year 2002. Before corrective actions are

taken, we project a deficit of about $108 million in fiscal year 2002.

The Board of Education has voted to make structural changes in fiscal year 2002 operations that will reduce costs by about $44 million. We have taken on the challenge of addressing Medicaid revenue shortfalls District-wide. We have also proposed that, in addition, $40 million be reallocated from other accounts in the city to

the schools. The District’s proposal approved by the Congress will

make an additional $9.7 million available for the schools. Along

with these and the cuts of new programs at the schools, these

items will bring back solvency to fiscal year 2002 in the schools.

Let me now turn to what I believe is a major source of friction

between the schools’ leadership and my office, the method the District uses to manage the financial affairs of the public school system. From a financial standpoint, the schools are managed by the

District in the same manner as other agencies of the District government. It receives its budget on an October/September fiscal

year; its financial flexibility is governed by the same reprogramming restrictions applicable to other agencies; it operates only partially through the District’s financial systems, and its financial personnel report to the chief financial officer.

Both the school board and the superintendents have contended

that this model is not a good fit for the public school operations and

point to the models of surrounding jurisdictions that have much

wider latitude for independent action by the school management.

The District already has moved to give the DCPS greater independVerDate 11-MAY-2000 10:09 Dec 10, 2002 Jkt 000000 PO 00000 Frm 00094 Fmt 6633 Sfmt 6633 C:\DOCS\82565.TXT HGOVREF1 PsN: HGOVREF1
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ence but not as a part of a comprehensive plan. For example, DCPS

exercises independent personnel and procurement action. Also,

steps are under way to give schools their own payroll system, and

the Mayor has recommended changing the school’s fiscal year to a

July/June basis.

As each of these incremental changes is made, the current financial operating matter becomes progressively less viable. For example, DCPS intends to integrate its personnel and payroll operations

in a software package that includes budget, procurement, payroll

and accounting. Even if the accounting module is well integrated

with the District’s accounting system, financial personnel would

need to operate on both systems simultaneously, a cumbersome

and expensive mode of operations the District does not have funds

to support.

I believe this would be a good time for the Mayor, the council,

the Board of Education, the chief financial officer and, of course,

the Congress to jointly review what model makes sense for managing the schools’ finances going forward. I believe it is possible to

devise a system that would give schools much greater financial

flexibility, while at the same time protecting the District’s Treasury

from unauthorized spending.

Moving in this direction could actually contribute to more efficient program operations by giving the schools both the authority

and responsibility to manage their financial affairs. Here are what

some of the components might be of that arrangement.

One, establishment of the schools as a component unit of the District government, somewhat similar to the University of the District of Columbia.

Two, creation of a statutorily binding DCPS maximum fund allocation for the fiscal year that cannot be exceeded. A binding limit

would protect the District’s Treasury and, at the same time, encourage innovative program solution to solve financial issues.

Under such a binding limit, I can envision the establishment of the

Office of the Chief Financial Officer at the schools as a unit of the

schools.

Three, implement at the Federal level a schools capital fund, to

free up the District’s debt service funds to cover necessary maintenance on new capital projects. The school’s facility master plan

cites capital improvement needs for up to $2.2 billion between fiscal year 2002 through 2007, but the District’s capital improvement

program funds only $868 million over the same period. In addition,

the program has no funding for charter schools, and the District

has no budgetary flexibility to fund routine maintenance for new

buildings.

Four, changes in the DCPS fiscal year to a July/June basis. Operating on a fiscal year that does not coincide with the school year

is a unique handicap for the schools.

Five, devise an oversight structure to periodically review both

programs operations and financial statements.

And, finally, amend the provision regarding the public charter

school oversight to require audited financial statements by the District’s independent auditor.

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Madam Chairman, this concludes my testimony, and I request

that my written testimony be made part of the record. I’ll be prepared to answer any questions you may have. Thank you.

Mrs. MORELLA. Yes. Without objection, your statement in its entirety will be in the record. We thank you, Dr. Gandhi.

[The prepared statement of Mr. Gandhi follows:]

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Mrs. MORELLA. I’m now pleased to recognize Mr. Charles Maddox, inspector general for the District of Columbia. Thank you, Mr.

Maddox.

Mr. MADDOX. Good afternoon, Chairwoman Morella and Congresswoman Norton. My name is Charles Maddox. I am the inspector general for the District of Columbia.

Accompanying me this afternoon is Bill DiVello, who is the assistant inspector general for audits. Mr. DiVello was also the Chair

of the CAFR Committee during the course of the CAFR audit.

I appreciate the opportunity to appear before you today to discuss issues that relate to continuing efforts by the District of Columbia to improve its public school system.

Today, I would like to provide you a brief summary of work performed by the Office of the Inspector General since the enactment

of the District of Columbia’s School Reform Act of 1995. Specifically, I would highlight some of our work concerning current financial matters and special education. In addition, I will discuss some

concerns regarding our ability to conduct audits of charter schools.

We have expended considerable audit and inspections resources

regarding facilities maintenance, property management, the capital

improvement program and procurement. I am willing to provide information about these efforts according to your interests after this

testimony.

In the latter part of fiscal year 2001, the chief financial officer

for the DCPS identified revenue shortfalls from Medicaid and other

obligations that, while still subject to a final accounting, negatively

affected operations of the District of Columbia’s Public School Systems. The amount of the shortfall and spending pressures estimated recently at a combined total deficit of $80 million was initially disputed by the president of the Board of Education. In an

attempt to resolve these matters, the OIG issued a management

alert report requesting that the District’s CFO provide details surrounding the possibility of all overobligation, including a determination whether an Antideficiency Act violation has occurred.

Additionally, to address growing concern over the deficit and to

determine the effect of the apparent deficit on the city-wide Comprehensive Annual Financial Report [CAFR], we decided to expedite the portion of the CAFR audit that involves D.C. public

schools. We expected the audit work to be completed by the end of

December, and it will be distributed immediately so that policymakers will have the benefit of our findings for short and long-term

planning.

In addition, we have expressed great concern about indications

that the D.C. auditor and a firm hired by the DCPS independently

to conduct their own assessment of the deficit—specifically, we are

concerned that such efforts could compromise timely completion of

the CAFR.

Furthermore, we are concerned that those efforts could violate

appropriations language which restricts spending of appropriated

funds for purposes of auditing the city’s financial statement. Specifically, section 132 of public law 106.522 prohibits the use of such

funds, ‘‘unless the audit is conducted by the OIG.’’ Accordingly, any

audit efforts that would duplicate those performed by the District’s

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CAFR auditors under contract to the OIG may not be financed by

district funds.

On November 7th and 9th, we notified the Congress and District

leaders of our concerns and recommended specific actions, including both the recommendation that the D.C. auditor and DCPS suspend their efforts until completion of the CAFR on February 1,

2002. Copies of those transmittals are provided for the record.

On a daily basis, I will continue to work with District leaders to

monitor developments in this area so that we can avoid the potential conflict.

We have issued findings on 17 audit reports and related inspections. Although I cannot comment on pending investigations, I can

say that we are also have and continue to investigate a range of

matters at DCPS. A list of the audit inspection reports is included

as an attachment for the record.

We have consistently reviewed programs and operations at

DCPS, because DCPS delivers key services to many District residents and because many of the existing challenges at DCPS threaten the fiscal viability of the District.

With regard to special education programs, we have completed

two audits. The first was completed in calendar year 1999 and second in calendar year 2000. In our 1999 audit, we found that DCPS

was not in compliance with Federal or District regulations in the

administration of special education program.

Specifically, DCPS did not do the following: Evaluate and place

special education students in a timely manner; conduct due process

hearings or implement determinations made by an independent

hearing officer in a timely manner; provide student-remitted services specified in their individualized education programs; and report activities of the program annually to the Board of Education.

We also noted that DCPS did not properly maintain Medicaid

records. As a result, DCPS did not timely submit requests for Medicaid reimbursements, which totaled $14 million. This delay resulted in a loss to the District of approximately $1 million in interest.

Our calendar year 2000 audit focused on transportation costs

within the special education program. This audit disclosed that

DCPS experienced difficulty in meeting the demands of providing

transportation services to its special education students. This situation had been exacerbated in part because of the nationwide shortage of school bus drivers. Moreover, DCPS had not implemented

measures to reduce transportation costs. Such measures include devising pair shared bus routes, implementing staggered bell times,

establishing neighborhood schools special education programs and

designing efficient and economic bus routes.

Similar types of measures have been implemented in other school

jurisdictions with significant savings in transportation costs. Implementing such measures could save the District at least $2.4 million

annually.

We also identified the following deficiencies in the administration

of the special education program. They include an inaccurate data

base of special education students, an inadequate review of special

education tuition payments, and insufficient monitoring of nonpublic based schools and residential schools.

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As a result of insufficient monitoring, we found that students

were attending schools that did not have special education programs or that did not meet the requirements for providing special

education. We were able to confirm that DCPS paid over $175,000

for tuition costs to schools that did not meet the standards for providing special education programs.

Factors causing these conditions include internal control weaknesses such as insufficient policies, procedures and personnel, and

the failure of personnel to comply with regulations.

In an effort to ensure that DCPS implements the recommendations they agreed to in our reports we are including DCPS in an

ongoing, District-wide followup audit of actions by several agencies.

We have completed field work on the followup audit and plan to

issue our report by end of January 2002. In addition, we have included in our fiscal year 2002 audit and inspection plan a reaudit

of the special education program, because we know that major challenges remain. We believe that there is an increased need for performance audits and for inspections of charter schools in order to

address the risks for fraud, waste and mismanagement.

Unfortunately, my office has no independent authority to initiate

an audit or inspection of public charter schools because of the following restrictions: Section 2855(b) of the Reform Act, which limits

the opportunities to conduct performance audits of charter schools,

to request from the consensus commission section 2002, 10(a) of the

Reform Act, which defines the term District of Columbia government, thereby establishing the parameters of the OIG’s jurisdiction; and, second, 2002, 10(b) of the Reform Act, which specifically

states that public charter schools are not included within the definition of the District of Columbia government and therefore not

subject to the OIG’s jurisdiction.

Section (b) provides in part that the consensus commission may

request the inspector general of the District of Columbia to audit

the records of any public charter school to ensure, monitor and

evaluate the performance of the charter school with respect to the

contents, standards and District-wide assessments described in the

act.

In addition, D.C. Code section 38–1802.04(c)(3)(b) states that a

public charter school shall be exempt from District of Columbia

statutes, policies, rules and regulations established for the District

of Columbia public schools by the superintendent, Board of Education, Mayor, District of Columbia Council or Authority except as

otherwise provided in the school’s charter or the subchapter.

If this legislative impediment were removed, I would initiate an

audit which would include a review of such areas as staff qualifications, tuition reimbursements and procurement. Improvements in

these areas would likely have a major fiscal impact and improved

service delivery for many students.

In summary, Madam Chairman, I believe that the work conducted, ongoing and planned, by my office addresses important control areas that directly affect the quality of life for many residents

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of this great city. I look forward to working with District leaders

to continue doing all we can.

At this time, Mr. DiVello and I will be pleased to respond to any

of your questions.

[The prepared statement of Mr. Maddox follows:]

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Mrs. MORELLA. Thank you very much, Mr. Maddox and Dr. Gandhi.

You know, if I were doing this hearing again or I could start off

again this morning—I think the hearing has been excellent, and I

appreciate your patience—I would have started off with you, Mr.

Maddox, because I am shocked to learn from your testimony the

violations by the District of Columbia public schools. I mean, you

have enumerated here the fact that they haven’t been responding, they paid over $175,000 for tuition costs to schools that did not

meet the standards for providing special education programs.

Transportation is mentioned here by you as something that needed

some special attention.

You call it a list of—in your list of deficiencies, they have also

an inaccurate data base of special education students, inadequate

review of special education tuition payments, insufficient monitoring of nonpublic day school residents. They have not implemented

measures to reduce their transportation costs.

It goes on and on. They are not in compliance with Federal or

District regulations in the administration of the special education

program.

Now, we will be meeting with those principals to talk about this

special education reform that they are hoping to put together. I

hope that will be at the table. Certainly we will have—we will get

back to them with the list of your deficiency recognition, and that’s

just part of it. But do you see yourself as having a role at the table?

Mr. MADDOX. I think that, as always, when asked do I see the

IG having a role in helping to shape policy or to answer questions,

there is a reluctance in a part of the planning process, because

then I have to sit down, make the evaluation of that same process

that I am an equal partner in. I think there may be a limited part

that the IG can play. We just have to see.

Mrs. MORELLA. I understand what you’re saying, and I know the

role of the inspector generals. I’m a big supporter of inspector generals and have met with many of them. I know you’re reticent, and

you don’t feel you make policy. That’s true, but you have some accountability of an assessment of those policies in terms of are they

accurate and where do you see problems. So I’m not saying you

would be involved in the policymaking but that you would scrutinize the plans or the proposals to make sure that they reflect what

you know in terms of the best management principals. Is—— Mr. MADDOX. I certainly agree with that, Madam Chair.

Mrs. MORELLA. Do you agree with that?

Mr. MADDOX. Yes.

Mrs. MORELLA. Because I’d certainly like to know that you were

there in some way to make sure they’re not violating these problems and that they are responding. You even mention the—what

is it—the deficiency—you know, the nondeficiency—or discrepancy

law that we have, that they in fact have been violating that.

Now your turn, Dr. Gandhi, to respond to that, and then I have

some other questions I’d like to ask you, sir.

Mr. GANDHI. Madam Chair, I simply see my role to be in sitting

down with them, and I have been doing that. And I do not want

to beat on the special education situation, but I do need to point

out one more time, and I think Dr. Vance already pointed it out,

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that roughly 16 percent of the student population is absorbing onethird of the budget. So, there is an incentive in the District to have

one’s child qualified in special education, primarily because it provides transportation and that you get to send your child to the best

available school in the region, if not in the country.

Let me just give you some numbers about the size of it, which

is to say the formula. The foundation level per student is $5,907.

Then we have some add-on to that, about $4,000. But then once

you get into the special education, just to give you some estimate

here, if you have a level 4 child, then per student you add on

$18,903. We have 177 students like that. If you have a level 3

child, you add on $10,220 per child.

And then moving to the charter schools, we have about 90 students where we spend $55,000 more as an add on to the foundation

formula.

So what we want to note is, that this portion of our total population is expanding over the last 4 years. It has grown by 41 percent, and there are thousands of cases lined up here. So to think

in terms of our education and not to go after special education aggressively, effectively and now, it’s like playing Hamlet without the

prince, and as a student of Shakespeare, you will appreciate that.

Mrs. MORELLA. That’s right. Things without remedies should be

without regard. What’s done is done, but we need to move forward,

because we can work on it. It is not a done deal. And we have to.

And I agree with you and you’ve given me all these statistics, but

let me ask you, the inspector general issued reports in June 1999,

November 2000 that identified management deficiencies. We see

even in the statement given now by the Inspector General private

placement payment billing and Medicaid recordkeeping were two of

the problems. What is the status of the recommendations that were

made to correct these problems?

Mr. GANDHI. As far as the financial function at the schools is

concerned, I regret to admit that the financial function has failed

at the school primarily in terms of the communication with the program people, the superintendent and the school board. We have

taken effective action immediately, and removed top management

plus certain personnel in their financial function. But the program

statistics are a function of the program side of the house, and we

also find a lot of problems in collecting and assembling that information.

Mrs. MORELLA. And I noticed in today’s paper Mr. Molina has

changed his job. Do you want to comment on that?

Mr. GANDHI. Yes. Mr. Molina has provided excellent service to

the schools. He has performed brilliantly. His only problem was

that he was there to give bad news.

When I found that the earlier CFO and his management at the

school was not performing up to my expectation and failed to report

to me, to the city officials, as well as to the school officials the extent to which we were facing deficits, I removed him and his colleagues. I put a mole there. He joined a few months ago there. As

soon as he went in there, he started digging, and what we found

was an $80 million problem as of September 6th. At that time, it

was an estimate.

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As I indicated in my testimony, we have finished the work at the

school. He has finished his work at the schools. We completed the

books, closed the books, given the numbers to KPMG for audit. So

Mr. Molina’s work has been done over at the schools.

I expect all of us in the CFO cluster to work closely and cooperatively with the program people, and it was not happening at the

schools. That was not the level of trust that should exist between

the CFO and the program management. Consequently, I decided to

remove Mr. Molina from the schools; and, indeed, given his excellent credentials—he was a CFO at the Milwaukee school district,

a much larger school district, a senior accounting officer in the city

of Houston and other places—I asked him whether he would be

kind enough to accept the position of the deputy chief financial officer for budget and planning, meaning director of the budget for the

entire city.

Actually, this is a promotion for Mr. Molina. He will indeed be

in charge of the whole city’s budget, and I have great confidence

in him. I must say the school’s loss is the city’s gain.

Mrs. MORELLA. It appears as though what was neglected were

the, essentially, warning signs.

Mr. GANDHI. Yes.

Mrs. MORELLA. And you have accepted some of the blame for

that. I think it goes beyond that, and I hope that will be remedied.

You did give us a dire report, mentioning that, in the future, $108 million; and I guess that says that we need to look at special

education, but we also want to make sure, Dr. Gandhi, that we

have the best management tools and implementation. How do you

feel about that?

Mr. GANDHI. I think it is extremely important. You’re right on

mark there, Madam Chair, that, in the ultimate analysis, the CFO

is a bean counter. All one can do as a CFO is to tell the number.

It is for the program people to manage this program effectively and

efficiently. For that, of course, they need good information, and we

have committed to Ms. Cafritz and Dr. Vance and other management at the schools that we would provide them information, as

much as they want.

I personally would brief the school management once a month at

the minimum. So there will not be any dearth of information from

CFO’s side, but it is still they and they alone would have to manage it.

Mrs. MORELLA. Uh-huh. And you will have to make sure that

you’re there to oversee it or to know something more about the

management.

Mr. GANDHI. Absolutely right.

And I want to state one point further. Given the experience of

the schools and given that in 2002 we do not have the revenue

flexibility, I’ve written to the superintendent and the school board

that I need a spending plan for fiscal year 2002, meaning I would

like to know how much they would spend month by month. This

is the concept of apportionment, and I would provide available cash

on a quarterly basis. If I were to judge that in a given quarter they

are spending more money than they should be spending, then I

would simply alert them, and, if need be, we would cut the cash

off.

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Mrs. MORELLA. Are you using the apportionment authority?

Mr. GANDHI. Yes, ma’am.

Mrs. MORELLA. Very good.

I will now recognize Ms. Norton.

Ms. NORTON. Thank you, Madam Chair.

With Mr. Gandhi and Mr. Maddox at the table, let me just start

with the umbrella issue I raised for the next panel, and that is to

say the Medicaid problem in the District of Columbia. With a great

deal of effort, we were able to get the Medicaid percentage to the

District of Columbia raised from a killing 50/50 to something like

70/30. We still are higher than any city in the United States, and

it still is a killing amount of money, even if they were to pay every

bit of it.

As you know, while there’s a District matter, and therefore I did

not—you didn’t hear from me on it—I do regard it as a failure of

the entire government that not only did Medicaid send D.C. General down, but nobody blew the whistle. Nobody. Or if they did,

they sure didn’t blow it loud enough. So now we have, as I said before, this problem skipping to yet another and perhaps—God knows

what other department.

Mr. Chavous indicated, well, there’s some differences. There’s

really not a dime’s worth of difference, not a dime’s worth of difference. It’s the same problem. The agency does not apply for Medicaid money do it from the Federal Government. As a result, the

agency is in the hole.

You know, Mr. Chavous is right. It won’t take the school system

down, because somehow all the taxpayers of the District of Columbia and the rest of us will somehow rush forward. But it bothered

me no end to see this problem crop up in the school system, because of what it said to me is that the Medicaid problem of the District of Columbia is still entirely broken. So, as I sit here today, I

have no confidence that what we saw at D.C. General, what we

now see in the school system is not to be found in each and every

department of the D.C. government which receives or should receive Medicaid money.

Can you assure me that is not the case? And, if not, what are

you going to do about it, each of you, please?

Mr. GANDHI. You are exactly right, Ms. Norton. This is exactly

the message and our problem. They did not want me to tell them

that the Medicaid money was not coming to them, and when the

CFO——

Ms. NORTON. You just kept giving them money until the overobligation—I don’t even see how—how did what overobligation go

on for so long, Mr. Maddox? This was a straight-out overobligation,

violation of Federal law, violation of D.C. law.

Mr. GANDHI. Because we kept a fiction on our books of counting

assets that were not realizable. We had a——

Ms. NORTON. How could you do that? I thought that the law says

you have to spend what your budget says you have to spend. So

each time—if they were on a monthly basis putting—adding money

to the D.C. General budget, so everybody with his eyes wide

open——

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Mr. GANDHI. And that is why we put them on apportionment.

From now on, we’re not going to keep writing the checks on D.C.

General.

But coming back to the Medicaid problem, you’re absolutely

right. It is a city-wide problem. It is $1 billion issue, because it’s

about $1 billion of the city’s budget that is in Medicaid. It’s 20 percent of our budget——

Ms. NORTON. Do you have any idea what percentage of that

money we do not get back each year?

Mr. GANDHI. Well, you are right in that it’s a problem not only

at the schools. It is in health, mental health, child and family services, and other agencies. So what we have decided and have already been doing the last 2 months is to have a city-wide task force

headed by me and Mr. Koskinen. We have the agency director sitting in there. We have a very effective way of making sure that we

would be very aggressive in, first, the billing and then retrieving

every dollar that is coming to us.

And, again, all of these Medicaid dollars that I’m questioning

here, we’re not going to give up on those dollars. We are going to

hire the best available lawyers to get that money back. We’re going

to seek your help, Ms. Norton, to get that money back.

But from an accounting perspective, when an auditor tells me

that money is not coming, I cannot put it up on the books. We are

not going to let that happen, and I can assure you that Medicaid

is a top priority. The Mayor is aware of that. The council is aware

of that. I have personally briefed the Mayor, Mr. Koskinen, Mr.

Chavous, Ms. Allen, and Ms. Cropp. So we are all on board. We

have an effective program ongoing on that front.

Ms. NORTON. Mr. Maddox, have you ever done an audit of the

Medicaid system cross government? Not just in one or the other

place that it has a problem, but the receipt and—of Medicaid funds

and the filing for Medicaid funds by the District government?

Mr. MADDOX. Congresswoman Norton, if it pleases the committee, I’m going to have Mr. DiVello speak to you on that issue.

Mr. DIVELLO. Good afternoon. It’s a pleasure to appear before

you today.

My name is Bill DiVello. I’m the assistant inspector general for

audits for the District of Columbia.

No, we’ve never really done a cross-agency review. We’ve been

looking at the agencies on an agency-by-agency basis. For example,

in the area of special ed in 1999, we reported that there was problems with Medicaid documentation. Now, that causes a real problem, because the latest information I got—we’ve received back in

the area of special ed is that because of either poor documentation

or a cost that was submitted to the Fed for reimbursement, the Fed

took a look at it. Now the District has got to pay them back $17

million. So that’s a problem that we’ve reported as far back as——

Ms. NORTON. Mr. DiVello, shouldn’t there be a governmentwide

approach to how to file for Medicaid funds? I mean, what is the

point of going agency by agency if you find that you have a systemwide problem in the entire government?

Mr. DIVELLO. Well, let me say this. I don’t disagree with that.

The more we can tackle different audits from a systemic approach,

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the more bang we get for our buck. I’m absolutely on board with

you.

I would tell you this, that we’re trying to get some of the big-ticket item, and that’s an approach we’ll consider, but we’re looking at

the Department of Mental Health right now. So I would——

Ms. NORTON. Well, could I just ask Mr. Maddox, could I ask that

you give priority—first of all, I think anybody that uses Medicaid

money that has not been audited, you’re right, you’ve got to do this

first. You’ve got to do this first agency by agency, and then you’ve

got to figure out or recommend something approaching a systemwide approach.

And everybody is going his own way and nobody is collecting

enough money.

Could I ask that there be audits done of each and every agency

that does—that files for Medicaid funding, so we can get a handle

on this problem before it becomes a governmentwide disaster for

us?

Mr. MADDOX. Yes, we will.

Mr. DIVELLO. May I add that in our CAFRs we’ve also given

some early warnings. If you look at our comprehensive annual financial report and you look at the accounts receivable, when

KPMG or whatever auditor that we hire, they take a look at the

receivables and they determine what’s the collectibility; and those

receivables are written down because our financial auditors that

we hire have concern based on cost reports that we might not get

back all this money from the Fed.

So there has been indications. But I do understand your point.

Ms. NORTON. Well, I’m going to ask that the recommendation of

the audits be hooked up with the CFOs so that we can fix the system system-wide and not continue to run these terrible deficits.

What’s the use of getting all this new money from the Federal Government if we are continuing to have to pay large amounts from

the pockets of the taxpayers in the District.

Would you please submit to us a plan for which agencies are

going to be audited, that have not yet been audited on Medicaid?

I recognize you can’t proceed to fix it system-wide unless you know

what’s happening to all the agencies that in fact use Medicaid.

Mr. Maddox, are you satisfied with what we heard from the last

panel, that there was an MOU, an agreement, about these multiple

audits? Are you satisfied that no audits that will interfere with the

CAFR are being performed?

Mr. MADDOX. I can’t sit before you right now and tell you I am

100 percent satisfied.

Ms. NORTON. You weren’t at the table at that meeting, I take it?

Mr. MADDOX. Yes, I was. I was there when we all agreed, No.

1, that the No. 1 priority was to make sure that the CAFR would

proceed unimpeded and that it would be completed on time.

Now what took place at that meeting also was what role the D.C.

auditor and possibly the law firm of Hogan and Hartson would play

with auditing requests from the president of the school board.

What came out at the end of the meeting was that the parties involved were to sit down and map out a memorandum of understanding as to what process they would use, taking into considerVerDate 11-MAY-2000 10:09 Dec 10, 2002 Jkt 000000 PO 00000 Frm 00159 Fmt 6633 Sfmt 6633 C:\DOCS\82565.TXT HGOVREF1 PsN: HGOVREF1
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ation that whatever the process was, it would not interfere with

the ongoingness of the audit.

That is still going on. We still have not come to closure on that.

Ms. NORTON. When are you going to come to closure on that, Mr.

Maddox? After all the CAFR is due out in February.

Mr. MADDOX. I think you can take some comfort in knowing that,

so far, as we speak today, nothing has interfered with the CAFR.

We are moving along on schedule. It is just a matter of keeping everybody true to their word, and I’m watching it very carefully.

Ms. NORTON. Mr. Maddox, there is, by statute, a D.C. auditor.

And of course if the school system or any agency—you can understand the school system finding itself with a surprise deficit would

want to find out what happened.

Now the D.C. auditor is a statutory office of the District of Columbia. And we can understand why the council would want to

have its own auditor. And you cite stuff here that I don’t consider

relevant at all. No appropriated funds would be used for purposes

of auditing the city’s financial statement. Well, it is neither the

auditor of the council nor whoever it is that the school system is

hiring that is interested in auditing the city’s financial statements.

And the Congress never meant to say that people who find themselves overspending should not try to find out what was wrong.

Where they may have gone awry is in the controversy that developed between them and those charged officially, the CFO.

Nobody is interested in anybody else’s audits ultimately except

the CFO and the CAFR. But I don’t think we want to say to agencies, if you find that there is a problem in your agency that you

did not know about and should have known about, that you

shouldn’t try to find out what the problem is. It could be a management audit. It could be some kind of substantive audit to find out

what was wrong. But I don’t see how it would necessarily interfere

with what you’re doing, since they’re not auditing the city’s books.

They are trying to find out what happened in their own agency,

which I think as auditor, or as IG, you should want them to try

to do.

Mr. MADDOX. You are absolutely correct, Congresswoman Norton, that if that were the case—you are absolutely right. The problem is, we don’t know what the scope—we asked that question time

and time again, what is the scope of the probe. And what we’re

saying is, my interpretation of the law is that if another audit is

asking the same questions, going over the same documents, financial statements and auditing the same work that is contracted to

the independent auditor, then that shouldn’t be.

The problem we are concerned with is—if I could, the problem

we are concerned with is that the number that the independent

auditor comes up with is the number.

I think the Mayor—— Ms. NORTON. And no matter what they do, that’s the number. No

matter what they do, there is an official audit and there is—Mr.

Maddox, I don’t want to belabor this. All I want to do is to say that

for years when a government that—when mistakes like this were

made, say, OK, let’s go on to the next joke. And to the extent that

somebody wants to find out what happened, it seems to me we

ought to encourage this.

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I hope they are not spending money to find out. I hope that they

are not interfering with the CAFR. And I think it is outrageous for

them to get involved in arguments with the CFO or with the official auditor. If they want to do an internal audit that does not

interfere or put people to multiple layers of work, then it seems to

me that we ought to find a way to do that. I certainly don’t think

we ought to repeat your work, but I suppose I have been so used

to the opposite that I don’t want to discourage people moving forward.

I do want to ask you a question about this rising special education deficit. OK, it is $60 million now. Before it was $98.2. And

it is going to rise to $108 million next year. And so far as I can

tell, the school system still doesn’t accept that number; although it

has to, because it doesn’t have any special education money to

make up for it, so that’s the number.

So I don’t think—that kind of foolishness isn’t even worth spending time on. You can have those kinds of discussions in your own

kind of internal meetings. But to have those come out and be a

whole big number is kind of silly and makes people look silly.

But what bothers me is that if the number keeps going up, how

can you assure this committee that the deficit is under control, Mr.

Gandhi? Is it under control? I think you testified that by 2002, that

will be the end of it? It wouldn’t go up anymore?

Mr. GANDHI. If the school board is effective enough to take those

actions that they have promised—after all, they promised that they

would cut $40 million, and those measures have to be implemented

soon enough—effectively and efficiently, then you do realize that

savings. That’s one.

Two, on special education, we expect improvement to show sooner and faster, so we can contain that spending, and we can contain

that overspending. But again, in many ways, this is a moving target. If you do not do what you promise, then it is going to go on.

For example, in other parts of the city they say we are going to RIF

people. But the date by which you RIF, if you do not RIF by that

day, or do not reduce your payroll by that day and extend into the

next quarter, there is more money to be spent and it takes longer

to get to the people. So the issue that this number is dependent

upon, and contingent upon, is a series of actions that had been

promised.

We are currently evaluating the school’s promise to pay back as

much as $40 million, and we hope that those are the right measures in terms of the numbers. And again, we are not telling them

what to cut. It is their decision.

Ms. NORTON. Well, you will know whether they’re the right numbers because you’re the CFO and you’ve got your own guy there to

find out.

Mr. GANDHI. Right. But again, these measures have been doubled basically by the school system itself and because of the breakdown of the communication that had existed there.

But as Ms. Cafritz pointed out, I met with them last week several times; and we are working together at all levels with the

schools to come up with these gap-closing plans. We’re going to

work on the 2003 budget. And we have extended all the available

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resources of the chief financial officer both at the schools level and

the city level to meet these challenges.

My overall assessment is that if this works out—and I think the

city has committed to provide 60 percent, or $60 million roughly,

toward the solution; and the schools some $40 million—I think we

should be able to manage this.

Ms. NORTON. I am going to ask this one last question before closing off this round.

We have a school deficit—unexpected, very large. We have the

September 11th revenue shortfalls, and we have a tax cut still to

be implemented. Do you think this city can correct this deficit, live

with the September 11th revenue shortfalls and implement the tax

cut that is supposed to go forward this year?

Mr. GANDHI. In the Tax Parity Act, the overall impact is about

$325 million annually when finally phased in.

Ms. NORTON. How much annually?

Mr. GANDHI. $325 million.

Ms. NORTON. That is a school deficit right there. Go ahead.

Mr. GANDHI. The next installment is $60 million.

Now, at each year, there is a threshold. The threshold says that

if in its winter forecast, the CBO—Congressional Budget Office,

were to come out with a prediction of a 1.7 growth in the real GDP,

then that trigger is alerted, the threshold is met, and the next installment of the Tax Parity Act, which is $60 million, is postponed.

Now, what I have seen in the blue chip forecast, which has come

out the last 2 weeks, is an expectation that the trigger will be met,

the threshold will be met. Unless the CBO comes up with a higher

forecast, you will have to postpone the next installment of Tax Parity, meaning you would have about $60 million available in the

2003 budget to manage it.

For the fiscal year 2002 budget, I don’t see that as a remedy.

However, given that we have $120 million of budget reserves and

have already have accumulated $100 million of cash reserves as I

speak here today, and given that the council and the Mayor met

just last Friday on how this can be met, we should be able to manage ourselves.

A lot depends upon the loss of revenue. If the economy were to

stabilize or perform as well as it has in the last 2 weeks, then our

losses may not be $100 million; it may be less than that. We will

have much better estimate by early January as to how we are

doing. On February 1st, we will also provide you an official forecast

for the revenues for fiscal year 2002 and going forward.

But we are not waiting, as I said. I am working very closely with

the Mayor and the council. I have shown them where the pressures

are and I have also shown them where the resources are. The Mayor’s office has already told me to prepare a package to forward to

the council. So the city is busy working, meeting these pressures.

And I am quite confident, quite confident, that the city will not accumulate deficits in fiscal year 2002 citywide.

Ms. NORTON. Thank you.

Mrs. Morella.

Mrs. MORELLA. We hope your projections are correct in terms of

being able to resolve it. And that’s why we gave you some indeVerDate 11-MAY-2000 10:09 Dec 10, 2002 Jkt 000000 PO 00000 Frm 00162 Fmt 6633 Sfmt 6633 C:\DOCS\82565.TXT HGOVREF1 PsN: HGOVREF1
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pendent authority, at least till July, and we hope before that time

to have our legislation enacted to make it permanent.

Mr. GANDHI. Madam Chair, I appreciate your leadership and Ms.

Norton’s leadership on the Morella-Norton bill. I think that really

has given a great deal of assurance to the financial markets, where

they’re really worried about the status of the chief financial officer.

Mrs. MORELLA. Also going back over your testimony, Mr. Maddox, I noticed, since we talked a lot also during this hearing about

charter schools, you indicated that you do not have the authority

to conduct performance audits or inspections over the charter

schools? Am I understanding that statement?

Mr. MADDOX. That’s correct.

Ms. NORTON. Would the gentlelady yield? I have some background on that, because the idea is entirely correct.

There was a provision put in our charter school law, the Federal

charter school law, that assumed there would be something called

a ‘‘consensus commission,’’ which never in fact occurred.

I wasn’t for that in the first place; I was for putting everybody

under the same auditor. And what I will do—and I will ask the

Chair to cosponsor with me—I would put it in a bill to simply to

take that out. It is obsolete. It never occurred, and you should have

been able by now to do an audit of the charter schools.

Sometimes you bring to me things that I think maybe the city

government should do. This is something that had not been

brought to my attention, or we would have had this out already.

So I’m very pleased to do this. Please bring things like this to

my attention.

Mrs. MORELLA. We don’t need to pass legislation.

Ms. NORTON. I think we just to need to erase it.

Mrs. MORELLA. I am glad you pointed that out in your testimony.

It just seemed like a glaring difficulty.

And I would be happy to be involved with that legislation.

I guess I want to ask you, Mr. Maddox, when you perform these

audits and you point out, as you have, to us, you know, there are

weaknesses with the internal controls, insufficient policies, failure

to comply with existing policies, inaccurate data bases of special ed

students, problems with transportation, tuition payments, not looking at the standards of the schools where these students are going,

do you just ignore it?

And I don’t know if Mr. DiVello also wants to add to that.

But what’s happening? Why has it stopped? You conduct the investigation. You give your report, and I suppose they look at it.

And then do they just put it aside? Do they get back to you?

Mr. MADDOX. I don’t think that we’re being outright blown off so

to speak. What we do as far as our process, once we make recommendations to agencies—not so much D.C. public schools, but in

all agencies—we give them a certain amount of time to comply

with the recommendations or to give us reasons why that recommendation is inadequate and another solution is more appropriate.

Then we do what we call a ‘‘followup audit,’’ and we look at those

specific recommendations to see if there’s compliance. In some

areas with respect to the D.C. public schools, we are going to do

a reaudit, which means it’s a little better than a followup audit beVerDate 11-MAY-2000 10:09 Dec 10, 2002 Jkt 000000 PO 00000 Frm 00163 Fmt 6633 Sfmt 6633 C:\DOCS\82565.TXT HGOVREF1 PsN: HGOVREF1
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cause not only do we look at those recommendations that everyone

agreed to that they would change, but we do the entire thing all

over again.

But to answer your question directly, I would say, on balance, we

do get cooperation from the agencies to make those corrections.

Mrs. MORELLA. It just seems that so many of the statements that

have been made should certainly be part of an overall policy trying

to address the concern and the challenge of the special education—

special education and the funding of special education and giving

the very best to our young people.

I did notice you said you were going to have a District-wide audit

in January, ongoing District-wide audit in January 2002, right?

Mr. DIVELLO. What that is is what Mr. Maddox was referring to.

I would tell you this, and I feel I need to say it: The cooperation

from the school, at least new people that have been in special education, they readily accepted our recommendations, and I think

they are working hard toward them. The disappointing thing sometimes is, when we point to a condition in 1999 and we see the same

condition in 2000. But I don’t think there’s any malintent there.

That’s how I feel. That’s just a personal thing.

I would tell you what we’re doing as a check and balance, and

the city, including the deputy mayor’s office has adopted this readily, we’re taking a look at all our audit reports dating back to 1998

through 2000, the 3-year period we’re looking at; and we are selecting audits across the District to see if the agencies are implementing the recommendations that they agreed to. We’re using that as

a performance measure for us.

In addition, the—and I am giving you the indicators before the

final is out, but I think this is OK.

So what I want to say, like, for example, we noted that the District didn’t have a tracking system itself for making sure at the top

management levels that recommendations were implemented similar to the Federal model and OMB circular 850. Well, John

Koskinen has adopted that, and they’re implementing such a system. So that will make sure that the deficiencies that are pointed

out, they are tracked and they’re acted upon.

So I feel really encouraged by that. And our final report will be

out the end of January on that.

Mrs. MORELLA. I note that you will share it with us. And I know

there is no malintent; everybody wants it to work. It’s just sometimes things are dismissed because there is just too much of a

problem at that moment, and they say, we’ll do it later on.

I wanted to give you each an opportunity for any final comment

you want to make before we adjourn.

Mr. GANDHI. You know, what I have found in Superintendent

Vance and his top team there is an absolutely first-rate group of

people, struggling with some of the most difficult problems of an

urban school district. I cannot imagine you will find a better team

or group of people. So the District is very lucky to have that group

of people there. And this is as good a board as you can find. Working with them, I am quite confident that the city will be able to

resolve many of the problems that we discussed here.

Mrs. MORELLA. Mr. Maddox, any final comments?

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Mr. MADDOX. I would like to go back to one of the points that

Congresswoman Norton had asked me about with regard to the situation with the CAFR.

I think you need to understand what was going on in our minds

at the beginning when the question of the numbers came up. We

were concerned because we did know what areas the other auditors

wanted to look at—that we thought at least the CFO—and I

thought that if his auditors were tied up serving two masters,

meaning to answer questions, provide documents, that would have

a direct adverse effect on the timing of the CAFR. That was the

one issue.

And the second issue that really caused me to lay out for the

record all of the rules and regulations with regard to this process

was that the auditor advised me in writing, per their counsel, that

if any auditing was going on covering the same areas prior to February 1, that they would refuse to give an opinion. It would be an

unqualified opinion.

That raised a lot of concern with me. That’s why I thought it was

important to alert everybody what the rules were and what the adverse effect would be.

Mrs. MORELLA. Mr. DiVello.

Mr. DIVELLO. No, thank you.

Mrs. MORELLA. I want to thank you for your excellent testimony

and especially for the work that you’re doing; and I hope that you

know that we are open to any suggestions you may have on our

role in the Federal Government, because we all have a stake in the

educational system of the District of Columbia. We will comment

on some items to be part of the record.

I do want to indicate our thanks to our staff on the minority side,

Jean Gosa and Jon Bouker. On the majority side, Shalley Kim,

Matthew Batt, Robert White, Heea Vazirani, Howie Denis and Russell Smith. Thank you all for being here.

Thank you. The subcommittee is now adjourned.

And I’m going to ask that—without objection, I want to add into

the record a GAO report, number GAO 01963, and the record of the

public hearing held at the Department of Education dated Tuesday,

November 13, 2001. The hearing was convened to gather information to be used to determine whether a compliance agreement with

the District of Columbia public schools is appropriate to allow

DCPS additional time to develop an assessment system that meets

the requirements of title I of the Elementary and Secondary Education Act, the largest Federal educational program, providing financial assistance to school districts.

DCPS received $26.2 million in title I funds for the 2001–2002

school year.

The meeting is now adjourned.

[Whereupon, at 1:30 p.m., the subcommittee was adjourned.]

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