View Letter to Department of Education

New York City Comptroller William C. Thompson, Jr. criticized the Department of Education (DOE) for dramatically inflating savings achieved through its controversial Alvarez & Marsal initiative to restructure administration and instruction.

“As the City’s budget is being finalized, it is critically important that accurate data be used to guide DOE decision-making,” Comptroller Thompson said in a letter to Schools Chancellor Joel I. Klein. Thompson branded savings claims as “particularly optimistic projections that are notably short of evidence.”

Thompson’s letter – available at www.comptroller.nyc.gov - raises serious questions about whether the contract with Alvarez & Marsal yielded all of the touted savings, substantially pared administrative costs, improved instruction and provided more cost-efficient transportation services for students. In fact, Thompson repeatedly raised the specter of false claims over the last three years.

“I have indicated previously that the Department appears to be engaged in a ‘shell game’,” Thompson said. “This latest review does nothing to dispel that judgment. Exaggerated claims undermine the Department’s credibility, and the withdrawal of critical information – such as the cessation of school-based expenditure reports – limits transparency and accountability.”

On February 7, 2005, Thompson wrote Mayor Bloomberg and expressed concern that the Department’s touted $250 million in savings from administrative restructuring could not be verified and that Thompson’s probe identified only $140 million in savings. Thompson further faulted the Department for circumventing procurement rules by selecting A&M instead of allowing other companies to bid on the work.

Thompson’s new review was prompted after the Department claimed additional recurring cost savings of $290 million from initiatives developed by A&M. According to an A&M report in November 2007, these savings include $81 million from the elimination of the Department’s regional administration structure. However, Thompson notes that A&M’s analysis failed to include the cost of implementing the new structure, so net savings were only $25 million.

Further, in the Fiscal Year 2008 Executive Budget, the DOE’s budget reflected combined savings of $35 million from pupil transportation and contract school payments. At the same time, the City provided new funding totaling $42 million in these areas.

“Though the Department argued that these actions were separate and unrelated, these offsetting changes actually resulted in an increase in funding for these functions.” Thompson said.

Finally, Thompson questioned the DOE’s ability to fluidly restructure student busing. During the 2006-07 school year, the DOE reduced bus routes mid-year, triggering confusion among parents and stranding children at designated stops no longer serviced by school buses. Now, Thompson said, the DOE has rolled out similar changes to special education busing.

“I note that DOE’s bungled effort to implement transportation savings has not discouraged the Department from attempting a similar measure in special education transportation during the current year,” Thompson wrote.

“The Department has eliminated 200 special education bus routes by consolidating existing routes and attempting to maximize ridership on buses,” he said. “The move has caused understandable distress among parents due to longer bus rides, overcrowded conditions, and in certain cases, children being excluded. While we recognize the need to achieve greater efficiencies in the current fiscal climate, the Department has an obligation to maintain adequate levels of services for all schoolchildren.”

The Comptroller strongly urged the Department to resume publication of reliable school-based expenditure reports so that analysts and the public can have a more transparent view of its efforts.

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