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CPS Parents File Formal State Complaint Against UNO Charter Schools

By Ted Cox | January 18, 2013 5:35pm
 Critics are asking the state to look into the finances of the UNO Charter Schools Network.
Critics are asking the state to look into the finances of the UNO Charter Schools Network.
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DNAinfo/Ted Cox

CHICAGO — Education-reform groups, including the president of a Pilsen Local School Council, have filed a formal complaint with the state against the UNO Charter Schools Network.

Julie Woestehoff, executive director of Parents United for Responsible Education, and Rosemary Sierra, president of the Pilsen Academy LSC, filed the complaint in Chicago Thursday asking Illinois Executive Inspector General Ricardo Meza to probe UNO's school finances.

The complaint charges that the United Neighborhood Organization, a Hispanic community group since the 1980s, has overleveraged its charter schools and is using more than $70 million in state-approved tax-exempt bonds in part to pay off private loans rather than fund education.

"I wondered what they were doing with all that money," Woestehoff said Friday. "We found that they're very overextended in their debt."

The complaint cited $17.3 million in bonds for UNO and the Noble Charter Schools arranged through the Illinois Finance Authority in 2006. The IFA approved another $15.8 million in bonds for UNO in 2007 and an additional $35.9 million in 2011, which Woestehoff suggested went in part to pay interest on a reported $65 million loan UNO arranged with the help of Ald. Edward Burke (14th) in the darkest days of the financial collapse in 2008.

According to official nonprofit filings by UNO Charter Schools in 2011, it posted $69.6 million in overall assets and $71.2 million in liabilities for a net debt of $1.7 million. It claimed $61.9 million in mortgages and notes owed to third parties, with $2.9 million in interest paid for the year.

UNO has 13 charters in the Chicago Public Schools, and 12 received funding increases in the 2013 budget for a total outlay of $55.6 million. That's tied directly to school attendance, but Woestehoff suggested that's part of the problem, that UNO uses students as "collateral" in its loans.

A Standard & Poor's report in September 2011 gave the school bonds a BBB- rating, warning of "considerable growth risk with two schools opening." It made clear that UNO's ability to repay was based on school population.

"That money they're getting that's supposed to be for children is being used to pay their debt," Woestehoff charged. "That doesn't seem like a healthy situation."

Asked to comment, UNO spokesman Ray Quintanilla invited media to visit the construction site of a new UNO high school on the South Side on Tuesday. "We will be happy to expand on other concrete measures UNO has taken to address student overcrowding at that time," he added by text.

Ald. Daniel Solis (25th) is an UNO co-founder, and the agency has abundant political ties.

As a nonprofit agency, UNO is not allowed to play a role in political campaigns, but Chief Executive Officer Juan Rangel has skirted that by saying he makes endorsements as a private citizen, not as an UNO representative. He was co-chairman of Mayor Rahm Emanuel's campaign in 2011, and he backed Burke's brother, Dan, in his state representative campaign against Rudy Lozano, Jr., with Rangel citing Lozano's opposition to charter schools.

According to 2011 non-profit filings, Rangel has a salary of $207,000, and UNO's chief operating officer, senior vice president, vice president and director of operations all make more than $100,000 each. They're cited as officers with the UNO Charter Schools as well, which also pays two school directors over $100,000. The filing for UNO that year also posted $125,000 paid to the Edelman public relations firm for consulting.

UNO received $98 million from the state in 2009, the largest taxpayer subsidy to a single charter network. "There are no other charter networks getting anywhere near that money," Woestehoff said.

According to Woestehoff, UNO was up for another $35 million state grant during the recent lame-duck session of the General Assembly, but it didn't go through, although it's pending. She said her complaint was filed in part to draw attention to UNO and encourage legislators to reconsider their support.

Cole Kain, chief of staff in the Office of Executive Inspector General, said he was forbidden to comment on any complaint filings or ongoing investigations.

"We have watched them grow into a political powerhouse," Woestehoff said of UNO. "We looked at how they started and got into the charter school business, and when I say business, I mean business."