Better scrutiny sought for state funds used at private schools

A growing dispute between the state and two private schools that serve special-needs students at public expense is putting a spotlight on new efforts to hold private schools that get public money for special-education students to tougher accountability standards.

At the center of the conflict are Loveland Academy and the Pacific Autism Center, which the state alleges have stymied its efforts to monitor children’s prog­ress and failed to provide detailed billing for hundreds of thousands of dollars in tuition charges accrued over the last school year.

The Department of Education says it will not pay several months of back tuition to the institutions until they turn over more information on what services were provided for the billed amounts — and why those services were necessary. The DOE did not release a total for the payments withheld.

But according to the department, annual per-student charges at Loveland Academy are as high as $250,000; the Pacific Autism Center charges up to $192,000 per child yearly.

"What we want is a record of services delivered, proper invoicing to account for those services delivered, and we want prog­ress information and monitoring information about the students to help us better improve the child’s program and course of study," DOE Deputy Superintendent Ronn Nozoe said.

Officials representing the two for-profit schools say they are being unfairly targeted and that the state’s decision to withhold payment has forced them to downsize. Loveland Academy last month announced the school was closing, but later said that announcement was premature.

Loveland has laid off 78 employees but plans to bring some back if the DOE resumes payment.

Carl Varady, the attorney for Loveland Academy and Pacific Autism Center, said the schools "are being starved out of existence."

He has filed motions in federal court seeking to compel the department to pay.

THE CONFLICT comes as the Department of Education looks to bolster its in-house services for special-education students while also beefing up oversight of private schools that serve special-needs students.

Loveland and Pacific Autism Center are among six Hawaii private schools that receive DOE money to provide services to a fraction of Hawaii’s special-education children.

In the 2010-11 school year, the state paid $9.4 million to educate 68 special-needs students at private schools in Hawaii.

Thirty-three of those students attended Loveland, which received $6.9 million that year for its services — for an average per-student cost of $210,000, DOE data show.

The school with the second-largest payout was Pacific Autism Center, which received $1.1 million.

Nozoe said the decision to question billing statements from Loveland and Pacific Autism Center, after the DOE paid the schools for years, is about making sure public funds are being properly spent and that kids are well served.

He said that over the past two years alone, the department has paid Loveland Academy more than $13 million.

As of last month, the DOE said, 18 students were attending Loveland at state expense. The department said fewer than 10 public school students are receiving services at Pacific Autism Center.

"Our absolute first priority is making sure students get appropriate services," Nozoe said. "In this particular case there’s a very close second, which is the trust that the public puts in us to be good stewards of public funds. We’re not playing a game here."

The DOE has contacted parents of students attending Loveland to discuss options.

Under the federal Individuals with Disabilities Education Act, special-education students can attend private schools at public expense if their needs would be better served there.

In Hawaii, private-school placements are many times made by parents unsatisfied with public school services.

The law allows parents to place a child at a private school and then file for tuition reimbursement through a due-process case, during which they must argue that the public system wasn’t offering an appropriate public education and the private school would be better equipped to help their child.

Patricia Dukes, owner and executive director of Loveland Academy, said the DOE’s allegations against her school are a "tactic … because they don’t want to pay."

In an interview with the Star-Advertiser last week, she defended Loveland’s services and said she hasn’t changed her billing procedures much since the school opened in 1999.

Dukes acknowledged Loveland is expensive, but said the school’s charges are comparable to similar mainland facilities. She added Loveland is ultimately saving the DOE money by keeping high-needs kids in the state.

"Our services are expensive because we’re trying to keep the kids in their homes," she said.

Dukes also responded to the DOE’s concerns about access to students for monitoring, saying DOE personnel are welcome to come on her campus to observe students.

But she also has had concerns about DOE workers making unannounced visits, which can be disruptive to autistic children, she said.

DOE monitors are "in here all the time," Dukes said. "We never turn them away if they are strictly here to monitor and if they have parental permission to observe."

The department, meanwhile, alleges Loveland has refused or placed "unreasonable conditions" on efforts to monitor students.

Last year, in response to DOE concerns, the Legislature passed laws requiring private schools to allow the department to monitor children whose services are publicly funded, and also mandated that such schools be accredited, make their tuition rates public and charge the state only for services that a student is determined to need.

The laws, Acts 128 and 129, say that if schools don’t meet the minimum standards, DOE is required to withhold payments.

But in June a federal judge ruled the state could not halt tuition payments to Loveland because DOE personnel were not able to fulfill their monitoring requirements.

Varady, the attorney for Loveland and the autism center, said the DOE has no standing for continuing to withhold payment.

He added that because the schools have gone months without payments for some students, they have had to reduce their operations.

The Pacific Autism Center relocated from a 40,000-square-foot facility in Kakaako to a 5,000-square-foot facility nearby, he said.

Loveland Academy is vacating a portion of its space, said Dukes, and is looking to share its Makiki property with other tenants.

In an interview last week, Nozoe said the DOE is not raising concerns about all private schools that serve public school children, but is trying to ensure that special-needs students are getting a high-quality education.

He said federal law requires that the state monitor public school children placed in private settings.

And the new state laws make clear, he said, that the department has a responsibility to ensure students are being adequately served.

It is common for states to send some of their highest-need special-education children to private schools because public schools cannot serve them.

But a recent state-commissioned report on Hawaii’s special-education system, conducted by a national education firm, said that while private school placements represent a small portion of overall special-education services, they constitute a disproportionately high percentage of the state’s spending on special education.

State Sen. Jill Tokuda, chairwoman of the Senate Education Committee, said the monitoring of special-needs students is critical.

Ultimately, she said, it’s up to the state to make sure that students’ needs are being met. The new laws were "really about trying to make sure that we were doing our best by our students," Tokuda said. "You would think you wouldn’t need a law to do this."