Texas Education Agency seizes control of Houston school district
Just one day after Houston Independent School District's board election, the Texas Education Agency notified the district that it would be taken over by the state, replacing elected officials and the current superintendent.
Houston ISD is the largest district in the state, and no state takeover on this scale has ever occurred.
“Given the inability of the board to govern the district, these sanctions are necessary to protect the best interests of the district’s current and future students,” Texas Education Commissioner Mike Morath wrote to HISD officials.
The letter, dated Nov. 6, came a day after voters rejected two incumbents and filled two vacant seats. The newly elected board will have no say in the running of the district while it is under TEA supervision.
The school district posted no notice of the takeover on its website and issued only a terse statement in response to an inquiry from The Bond Buyer.
“The Houston Independent School District has received a letter from Commissioner of Education Mike Morath regarding the appointment of a board of managers,” the district said. “We want to assure our students, parents, staff, and community members that our primary focus will continue to be the education and success of our students.”
The district has faced intense pressure from the TEA over student achievement, board practices and administrative missteps as the district recovered from the impact of Hurricane Harvey in August 2017.
On Aug. 15, TEA released a report chronicling a six-month Special Accreditation Investigation. In the report, investigators allege several instances of board misconduct including violations of the Texas Open Meetings Act, inappropriate influencing of vendor contracts and making false statements to investigators. The SIU recommended a number of actions that include lowering the district's accreditation status, appointing a conservator, and installing a board of managers to replace the existing board of trustees.
HISD's board has filed a response to the allegation and also filed a suit against the TEA denying the allegations.
The district had about $3.3 billion of long-term debt at the end of the 2018 fiscal year, according to Moody’s Investors Service. With more than 216,000 students in the fall of 2016, Houston ISD was the nation's seventh-largest, according to the most recent data from the National Center for Education Statistics.
Despite the threat of a state takeover, Moody’s saw little concern for bondholders.
It assigns its underlying Aaa rating to Houston ISD general obligation bonds, enhanced further by the Aaa-rated guarantee provided by the Texas Permanent School Fund.
“The State of Texas (Aaa stable) has strong oversight over its school districts and typically state intervention has been positive for bond holders,” Moody’s analyst Adebola Kushimo wrote in August. “The outcome of the current issue and any resulting impact will be incorporated into the district's credit profile.”
Under a law passed by the 2015 Texas Legislature, Morath must punish a district with a school that has been failing for more than four consecutive years, either by shutting down the school or taking over the entire district. The HISD takeover is the first time that law will be used to seize a district.
Wheatley High School, opened in 2006 and built with $35 million of bonds to replace a 92-year-old building, was declared a failing school by Morath. The board ordered Superintendent Grenita Latham to appeal the ruling in early October. Houston ISD's appeal of the ruling was denied on election day.
Two other school districts, Shepherd ISD in East Texas and Snyder ISD in West Texas, suffered the same fate on the same day.
State conservators will attend board meetings, oversee district operations and submit monthly progress reports to the state. Houston ISD has had a state-appointed conservator since 2016, appointed to oversee another long-failing school.
Boards of managers in the three school districts will be made up of local community members who apply for the job.
A temporary board of managers has the same powers and duties to oversee the school district as the elected one. When TEA declares the specific problems are fixed, Morath will gradually transfer power back to the elected board.
The Texas Education Agency has replaced several elected school boards due to a mixture of financial malfeasance, school board dysfunction, and poor academic performance.
Houston ISD is suing the state to prevent a takeover, which may delay the process of actually replacing the elected board. Houston ISD asked a federal judge in October for a preliminary injunction to stop Morath from interfering with the district’s selection of a new superintendent, replacing its elected board or taking any other action based on the state investigation.