How Oklahoma's mismanagement of federal education funds could leave $18 million on the table
At the end of January, Oklahoma’s new Attorney General, Gentner Drummond, announced he would change course on a high-profile debacle involving Secretary of Education and now State Superintendent Ryan Walters — and lots of federal money.
Due to the state’s handling of its previous round of funding, Oklahoma now has nearly $18 million of federal education funding sitting untouched — and time is running out to spend it.
StateImpact’s Beth Wallis sat down with Oklahoma Watch education reporter Jennifer Palmer for a recap of just what happened with the Governor’s Emergency Education Relief Fund.
Beth Wallis: So let’s back up. The whole situation starts with specific federal dollars that were distributed to states during the pandemic. And one of those programs was called the Governor’s Emergency Education Relief Fund, or GEER. What was the purpose of GEER, and how did it work?
Jennifer Palmer: So this is a specific pot of money, like you said, that [was] allocated to governors across the country. And Gov. Stitt received almost $40 million as part of that. This was separate from funds that schools received for educational needs, but it was also for governors to spend on schools and education. So they could give it to a school district, they could give it to a college or university, or they could give it to an education-related entity. But all of these. The purpose of it was just to provide some emergency educational funds to provide services.
Wallis: So in the summer of 2020, Gov. Stitt announced Oklahoma was going to spend some of that GEER money on new programs. We’re going to dig into a couple of those programs: the Stay in School and the Bridge the Gap Digital Wallet. Jennifer, how were these programs supposed to work?
Palmer: Both of these programs were handled by a Florida company called Class Wallet. And that company got the contract. It was a no-bid contract from the state to kind of oversee and distribute this money.
So they each had different purposes. The Stay in School [program] was to provide tuition grants to private school students of $6,500 each, the maximum. And that was so that they didn’t have to change schools if, say, their parents lost their job or were furloughed or had some change to their income.
The other one was for low-income families to purchase things like computers, iPads or other educational supplies that they needed while they were, most of them, learning from home. This was 2020, so a lot of schools were closed or were doing virtual and or some sort of blended or hybrid [format]. And there were a lot of different needs that kids had.
Wallis: So along with two reporters from the Frontier, Reese Gorman and Clifton Adcock, you started really investigating how this program was implemented and managed. What did you find?
Palmer: Well, we found that some folks did not buy things that were educational, and there was an audit that was going on at the federal level. These were federal funds. To get these funds, the state had to agree to follow rules with federal money in federal grants. And the way that the program was set up, there was the potential for guardrails, and some of those guardrails the state opted not to set up. And that left it open to some spending that was not education related.
Wallis: What kinds of things did people spend that money on?
Palmer: So we were able to obtain a list of all the purchases, and we were really surprised by what we found, in that there were hundreds of TVs. There were some home appliances, you know, washer and dryer, refrigerator. There was patio furniture, Ring doorbells, you know, lots of things like that.
Wallis: So at the helm of this program was Secretary and Superintendent Walters. How did his involvement start and what do we know about his role in administrating Bridge the Gap?
Palmer: So that was another thing that really surprised us. Sec. Walters was involved in this, setting up this program actually before he was even secretary of education. He was the executive director of Every Kid Counts Oklahoma (EKCO), and that’s a nonprofit that’s based in Oklahoma City. At the time, he was head of that nonprofit.
And when Gov. Stitt announced these programs, he said that that nonprofit would handle and distribute the funds. They would be in charge. What we found out, though, is that nonprofit actually didn’t get any of the money. I mean, mostly what they did was troubleshoot some issues, kind of advertise to try to find these parents. And it was a different state agency that the money went through.
But we also got some emails that really shed some light on how the program was developed behind the scenes. And what we found out there was that as head of EKCO, the nonprofit, Ryan Walters kind of made the connection with Class Wallet in Florida and the state. And at the time, the secretary of education was Michael Rogers. And so he kind of set that up. And along with another nonprofit, they developed this program, pitched the idea, [and] got Class Wallet the no-bid contract. And then shortly after that, Walters was named secretary of education. And then he continued overseeing those projects.
Wallis: Can you tell me a little bit about his role in the approval of these purchases through Bridge the Gap?
Palmer: Sure. So I mentioned the guardrails that this Class Wallet system has. They’re kind of customizable. This platform is used in other states for other programs. So one of the things that the states can do is they can limit the vendors. And that’s something that Oklahoma did do. They limited it to mostly educational supply vendors like Scholastic or some companies like that. But they also included Office Depot, OfficeMax, some stores that carried a lot more items. And we actually found in the purchases, there were a few made from Home Depot, even though that was not supposed to be an approved vendor. I’m not quite sure how they were able to do that.
So one of the things that when the program first kicked off, parents had questions. They were told they could buy anything from these vendors. So the vendors were limited, but when Class Wallet reached out to Oklahoma and said, ‘Hey, parents have questions. Can they really buy anything off these vendor sites?’ Ryan Walters, his response to that was, ‘Yes, they have blanket approval to purchase anything.’ And we found out later that they could have set up other guardrails, such as limiting purchases to certain items. They could have had a human involved — like, a request to purchase, a human looks at that decides if it’s educational and then either approves or denies. But Oklahoma decided not to do that.
Wallis: So you had mentioned the federal audits. What did the feds find?
Palmer: So the federal audit came out after our investigation. It really kind of echoed what we had found. You know, we spent some time analyzing those purchases and kind of developed our own standard for what was educational. We tried to be super, super lenient, like, somebody bought a kitchen table. We said, ‘Okay, you can maybe use that for Zoom school,’ you know. So there were some like that, that we just pushed in the educational bucket, even though it’s kind of questionable.
And even so, what we added up ended up being about half a million dollars in purchases that were not educational. While the federal audit found even more than that — they said there [was] $650,000 worth [of purchases] that were not educational at all. And they told the U.S. Department of Education, ‘Hey, we may need to claw those funds back. We may need to get that money back, that it was misspent.’ And they also said that the state needed to review another $5.5 million in purchases to see if there was more that needed to be reclaimed.
Wallis: That’s a lot of money. What did the state do next, and how has that played out?
Palmer: So they haven’t been very public about what is going on. I have been told multiple times by the U.S. Department of Education that they are working with the state to develop better oversight of federal dollars, which is good. But the main thing, the main way that the state responded, was to file a lawsuit against Class Wallet. They said… ‘This is their fault. You know, in filing the lawsuit, it’s the company’s fault. We’re going to get the taxpayer money back from the company.’
Wallis: And so our new attorney general, Gentner Drummond, he decided to change course on this. What’s he doing now?
Palmer: That’s right. One thing that was interesting about the lawsuit is it was filed back in August, but the attorney general at the time, John O’Connor, and his office, never actually served Class Wallet. Now, they do have a number of months — they hadn’t met any statutory deadline to serve them. But it is somewhat unusual for that to take so long. And because they hadn’t ever been served, Class Wallet never got to file a response to the allegations in court.
And so what happened is when Gentner Drummond took over, he looked at that case and said, ‘We’re not going to proceed with this.’ I think his exact words were ‘it’s almost wholly without merit.’ So it was not a winnable lawsuit for the state and was probably going to be a waste of taxpayer dollars. So he dismissed it.
Wallis: So where’s he looking now?
Palmer: So he has said that he will be looking at state actors. And from our investigation, we know that to be state officials, perhaps folks in these nonprofits. Maybe Ryan Walters, Michael Rogers, some of these other folks who worked for the state that we know were involved in setting up the programs.
Wallis: So what threads are you following now? And do you see this debacle ending any time soon?
Palmer: I did not expect to still be reporting on gear this far into 2023, actually. But, you know, there is a big question that I had from the beginning, and that was what about GEER 2? And that is a question I’m still trying to answer.
So the pot of money we’ve been talking about came out of the CARES Act, and that was the almost $40 million. But the [Coronavirus Response and Relief Supplemental Appropriations Act], the second batch of relief money, actually gave governors another allocation. And Oklahoma got $17.7 million out of that. We have not announced any programs at all. It has just been sitting there. Every time I ask about it, there is no answer. There’s no announcement.
The U.S. Department of Education ensures me that the state… hasn’t given it back. But they’re about to run out of time. The deadline is January 2024, and that is to fully spend the money. So they would have to award a contract, get the programs going and get all of the money spent in less than a year. So it’s looking more and more like they’re not going to be able to do that.
And the reasons when I ask, ‘Well, why aren’t we doing anything with this money?’: I mean, kids have needs, right? There’s a lot of trauma. There’s a lot of academic setbacks that have happened since the pandemic that this money could go to fund. I mean, it could go to classroom teachers. It could go to programs for tutoring, for counseling. I mean, there’s such a broad array of things that they could spend this money on. And the answers I’m getting are because of Year One. So it’s kind of the ripple effect because they didn’t handle the first batch well enough, and they’re trying to get better processes in place. But it’s holding up the second batch of funds that we may or may not be able to spend in time.
Wallis: What a mess. Well, Jennifer, thank you so much for sharing your reporting and for coming in today.
Palmer: All right. Thanks for having me.