BRIAN DEY: Why I voted no to the settlement:Key flaws, unreal savings, conflicts of interest...

Brian Dey is one of two members of the Racine Unified Board of Education to vote against the termination of the district's controversial management contract with the Public Business Consulting Group (PBCG). The contract, negotiated by former Supt. Tom Hicks, led to Hicks' resignation in August, as details of its bonus provisions came to light.

It's not that Dey and Julie McKenna, who were on the short end of the 7-2 vote Monday night to end the contract wanted it to continue; rather they objected to the financial settlement approved by the board to end its five-year contract with PBCG 2 1/2 years early. Details of the board's settlement amount haven't been officially released; press reports range from $750,000 (Journal Times) to $1,650,000 (Journal Sentinel), but what they comprise is not apples-to-apples so it's still uncertain. Our earlier story is HERE.

Today we asked Brian Dey to explain why he voted no. Dey has been on the school board since April 2005 and is finishing his first term. Rather than run for re-election this year, he is running against Ken Hall for the Racine County Board's 15th District seat.

Why I Voted No to the Settlement

For the past six months, the Racine Unified School District and Public Business Consulting Group have been in negotiations which ended in a settlement last evening. I, along with Julie McKenna, were the only dissenting votes in a 7-2 decision.

In my opinion, several key flaws contributed to what I call bad negotiating by the District, which eventually led to the approved settlement. I believe there was a conflict of interest with the relationship between PBCG and our legal counsel, but the Board was willing to accept that counsel would not jeopardize a 30+ year relationship with the District.

What I believe was the biggest mistake was entering into negotiations without all the facts. Board members have stated that the savings were real based on the report from the Special Investigation and the Deloitte Audit, as well as affirmation from David Hazen, the current Chief Financial Officer of the District. However, no one validated what constituted a savings or revenue enhancement. This is how it was laid out by the business manager of another Wisconsin school district, Todd Gray, assistant superintendent, business services, of the Appleton Area School District.

Health Insurance
Savings: Minimum of $6.9 million, implemented on May 1st
Gray: Not real savings. Under QEO bargaining laws, a major portion of the savings must go right back into teacher salaries.
Dey: Similar ideas were brought to Administration by Board Member Armin Clobes in 2004, Racine Taxpayers Association 2005 and Citizens for a Sound Economy in 2004.

Energy Education Program
Savings: Estimated at $364,500
Gray: We have tried this and the savings are not real dollars, rather, they are based on ‘what if’ scenarios.

4- and 5-year-old Kindergarten Expansion
Savings: $5,469,404 in annualized surplus
Gray: Not a savings…. may generate new revenues but not until the third or fourth year of operations. Again, this is an old program implemented in AASD years ago.
Dey: 4k and all day 5k were presented to Dr. Hicks by Assistant Superintendent Ann Laing in August 2005, four months prior to PBCG being hired.

Creation of Community Service Fund
Savings: $185,318 transferred from Fund 10 to Fund 80 this year
Gray: This can in no way be classified as savings…it is a 100% increase in property tax dollars. [For PBCG] [t]o get a commission on these so-called revenues would definitely be unlikely. If Racine taxpayers knew they were paying a 25 percent commission to be taxed more, it would not be pretty.
Dey: It is unconscionable that PBCG received a commission for taxing constituents more.

Transfer of Services Revenues
Savings: $1,868,450
Gray: Again 100 percent of these new so-called revenues come from new property taxes; same thing as the community service fund.

I believe that this could have been challenged in court with success had the Board decided to go that route.

Another challenge could have been material breach of contract. PBCG took over the duties of Chief Financial Officer and Chief Operating Officer in June of 2006. The investigation clearly found that the General Ledger was a mess, so much that numbers used for the 2007 Budget were unreliable. The Chief Financial Officer of any public or private entity’s key function is to balance the General Ledger and produce reliable budget assumptions. By failing to do so, they breached their responsibilities under the terms of the contract.

Further, there was a legal opinion regarding a possible violation of Wisconsin Statute 946.13, which reads:

Any public officer who does any of the following is guilty of a class I felony:
(a)In the officer's or employee's private capacity, negotiates or bids for or enters into a contract in which the officer or employee has a private pecuniary interest, direct or indirect, if at the same time the officer or employee is authorized or required by law to participate in the officer's or employee's capacity as such officer or employee in the making of that contract or to perform in regard to that contract some official function requiring the exercise of discretion on the officer's or employee's part...

PBCG, and no one in Central Office will disagree with this statement, had direct command and control of all personnel in the financial and operations areas, up to and including recommendations to terminate staff and replace them with their own employees. So much control, that a culture of fear permeated Central Office. Because of this command and control, with little or no oversight by the Superintendent (as pointed out in the investigation), by definition, PBCG was no longer acting as a consultant, but as officers of the District. This opinion was presented to the Racine District Attorney Mike Nieskes, who said that he would not pursue this. I believe this should have gone to the appropriate jurisdiction, the State Attorney General’s office.