Inside the shadowy world of the Arkansas school-“choice” movement – Part 6

On July 12, 2012, the Walton Family Foundation issued a $1.2 million check to the Southern Arkansas University Foundation to cover the salaries and operating costs for the Arkansas Public School Resource Center, a Walton-funded nonprofit founded in December 2008. 

An earlier letter, dated June 25, 2012, from the WFF’s then-executive director Buddy Philpot stipulated that the funds should, if possible, be deposited into an interest-bearing account. 

Per the letter, signed by then-SAU President Dr. David Rankin, the $1.2 million was to be used to “support an effort to support startup and operational costs for the Arkansas Public School Resource Center from January 2009 through June 30, 2012. Grantee agrees to use all grant funds exclusively for the grant’s purposes. Any changes in these purposes must be authorized in advance by the Foundation in writing.”

Previously, from December 2008 until sometime in 2012, the University of Central Arkansas Foundation had served as the vehicle for disseminating Walton funds to APSRC. In December of 2008, the UCA Foundation received a $4.6 million grant from the Waltons that was to be administered in “support” of APSRC. Then-interim UCA President Tom Courtway signed off on the deal.

The Walton Family Foundation already had initially awarded a $426,141 grant to UCA in May 2008 to “plan, develop and implement the APSRC.”

A UCA news release issued in December 2008 states: 

The purpose of the APSRC is to provide comprehensive services to advance and support school choice initiatives and the implementation of high quality [sic] open enrollment  [sic] public charter schools in Arkansas, as well as providing a variety of support services critical to the fiscal and academic success of rural public schools in Arkansas.

The APSRC’s work includes supporting school choice initiatives, implementing and expanding high quality open enrollment [sic] charter schools in Arkansas, protecting and continuing support of Arkansas public school accountability measures, and providing assistance to rural public school districts and schools committed to meeting accountability provisions of Act 35 and Act 1467, the Omnibus Education Act.

As I said in a previous post, I’m not sure what poisoned the relationship between UCA and APSRC, but by the spring of 2012, APSRC Executive Director Scott Smith was well on the way to drafting a memorandum of understanding with the Southern University of Arkansas Foundation.

The MOU was signed by Smith on July 20, 2012. Rankin and then-SAU Foundation Executive Director Jeanie Bismark signed off on July 24, 2012. 

The MOU opens with a reminder of Southern Arkansas University’s role as a state university:

SAU was established for the purposes of providing education opportunities at the university level on a regional and state wide [sic] basis and more adequately fulfilling its changing role as a multi-purpose, [sic] comprehensive [sic] institution of higher learning. See Ark. Code Ann. $6-65 401 et seq. Furthermore the Arkansas Department of Higher Education (“ADHE”) and the Arkansas Higher Education Coordinating Board (“AHECB”) set forth the role and scope for SAU to include serving “regional and state employees, both public and private – including school districts seeking technical assistance” and supporting public schools through various outreach programs such as APSRC. 

The MOU then continues with an explanation that presumably seeks to justify SAU’s need to partner with the WFF and APSRC: 

To further these purposes, it is important that students entering universities receive a high quality [sic] education at the K-12 levels through well supported [sic] and adequate open-enrollment charter schools and public schools. 

All righty, then. One would hope that it is every state university’s desire that students arrive on campus with a “high-quality” education. I winced, however, when reading that this “high-quality” education would be provided by merely “adequate” open-enrollment charter schools and traditional school districts. 

Enter the SAU Foundation on its white horse … 

The SAU Foundation, a private non-profit corporation existing solely to benefit SAU, has received a grant to support the operational costs for APSRC in affiliation with SAU. 

Now let’s take a look at APSRC’s role, per the MOU: 

Consistent with the role of SAU set forth in Section 1.01 above, APSRC was formed as an Arkansas non-profit corporation and as a public charity in accordance with the provisions of Section 501 (c)(3) of the Internal Revenue Code to do the following on behalf of the public schools in the state of Arkansas: 

(a) to provide comprehensive services and assistance to open enrollment [sic] public charter schools and also to rural school districts in the state of Arkansas (collectively the “public schools”);

 (b) to provide all forms of technical assistance to the public schools in areas such as school law, school finance, school technology, teaching, learning, accountability and testing, tracking and measuring student achievement, financial management and best practices, and other issues of importance to the public schools;

 (c) to provide forums, seminars, and other professional and educational and career opportunities for educators, administrators and parents with children attending the public schools, to provide professional development programs for the public schools; and

 (d) to engage in such other educational programs and activities as the board of directors of APSRC may from time to time determine is consistent with the overall mission of APSRC in supporting the public schools. 

You’ll notice that there’s no mention of Smith and APSRC staff attorneys’ numerous meetings with lawmakers before and during legislative sessions. Nor is there any reference to year-round meetings with Governor Asa Hutchinson and Arkansas Department of Education Commissioner Johnny Key. 

I mean, do legislators, the governor and ADE’s commissioner also require professional development courses, educational programs and activities, or help with technology, teaching and law? OK, so Key might, given his lack of any sort of background in education. But c’mon. None of these players are located on K-12 campuses. 

Also, I don’t see anything laid out in the MOU that mentions APSRC’s influential role in drafting education-related bills alongside – and for – legislators. 

While APSRC purports to be a nonprofit organization that offers professional development, resources and technical assistance to traditional public school districts and open-enrollment charters, is actually yet another lobbying arm for the WFF and serves to recruit out-of-state charter-management organizations and to prop up existing failing charter schools in Arkansas. 

But hey, given that SAU’s relationship with APSRC is in its 8th year, the university and its foundation must be OK with managing the salaries, benefits and operational costs for what is, at its core, an organization that is – by its own acknowledgement via its Schedule C filings – involved in lobbying. 

Exhibit A. 

Exhibit B.

As a reminder – 

The IRS generally frowns upon lobbying conducted by organizations with a section 501(c)(3) status. 

Per the IRS: 

In general, no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying).  A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status.

Legislation includes action by Congress, any state legislature, any local council, or similar governing body, with respect to acts, bills, resolutions, or similar items (such as legislative confirmation of appointive office), or by the public in referendum, ballot initiative, constitutional amendment, or similar procedure.  It does not include actions by executive, judicial, or administrative bodies. 

An organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or if the organization advocates the adoption or rejection of legislation.

Organizations may, however, involve themselves in issues of public policy without the activity being considered as lobbying.  For example, organizations may conduct educational meetings, prepare and distribute educational materials, or otherwise consider public policy issues in an educational manner without jeopardizing their tax-exempt status.


Among my many roles as the communications director at APSRC, I was charged not only with reporting on the 91st and 92nd General Assembly and the 2018 fiscal session, but also tracking bills. 

Because of this, I sat in meetings that included Smith and APSRC attorneys. During these meetings, I witnessed the following on multiple occasions: 

  • Smith explaining which bills that APSRC would be drafting or supporting during the 2017 and 2019 legislative sessions 
  • Smith explaining which bills APSRC would not take a stand on. Such bills usually were those involving private-school vouchers, which are supported by the Waltons
  • Smith declaring which bills needed to be modified or killed 
  • Smith saying that he would meet with lawmakers to discuss bills that APSRC either supported or did not support
  • Smith instructing legal staff to tweak bills that he could then take back to legislative sponsors for proposed changes
  • Smith discussing the role that LobbyUp would play in APSRC’s bill-tracking (LobbyUp provided a portal that allowed APSRC member schools to follow the bills that APSRC was tracking. Smith and LobbyUp’s Bradley Phillips on two occasions – in my presence – discussed how to lobby without using the term “lobby.” I now understand why neither seemed eager to sign an MOU for LobbyUp’s services. At one point, Phillips informed me that he and Smith had a “gentleman’s agreement” and that he didn’t need to sign an MOU.) 

And then, during the 92nd General Assembly, I listened in disbelief when Smith denied that APSRC lobbies the state legislature when a bill pertaining to education membership organizations and lobbying ran in the Senate Education Committee. The bill, sponsored by Senator Breanne Davis, stated: 

Except as provided in subdivision (a)(1) of this section, a public school district shall not use public funds to pay membership dues to a teacher’s, classified employee’s, or public school district board of directors member’s educational professional organization that uses public funds to directly or indirectly engage in lobbying.

I asked Smith whether the bill – if passed – would impact members of APSRC. He said no. I was perplexed. It was my understanding that school districts and open-enrollment charters used state funding to pay for their APSRC memberships. Memberships for traditional districts cost $2,500. Memberships for open-enrollment charters were $3,500. I couldn’t imagine a superintendent or charter director pulling money from their own pockets to cover their APSRC dues. 

Other membership organizations, such as the Arkansas Association of Educational Administrators, testified against the bill. Smith didn’t.

That’s likely because Smith and others at APSRC routinely engaged in behind-the-scenes lobbying, even if they weren’t urging their members to contact lawmakers to support or criticize proposed legislation.  So how did the bill not “apply” to APSRC? 

Regardless, the proposed legislation didn’t make it through the House Education Committee before the legislature adjourned. 

Now let’s look at the SAU Foundation’s nonprofit status. Per its 990 in 2009, the foundation’s purpose is to “provide financial aid and scholarships.” 

Its mission remains the same in its 2018 report

I’m curious as to how APSRC’s activities might affect not only its own tax-exempt status, but also that of the SAU Foundation. (Please, experts, chime in here. Thank you.) 

Oh, but wait – APSRC made sure to give itself a little wiggle room in the MOU by including a section titled “Other Activities of APSRC” – 

The parties recognize that APSRC is a private non-profit organization, and as a result, will not utilize any resources of SAU except for the purposes set forth herein which are consistent with the public purposes of SAU. APSRC may, however, perform with its own funds and without utilizing any resources of SAU, including the use of SAU staff while such staff are performing their functions as SAU employees, other functions consistent with APSRC’s Articles of Incorporation and 501(c)(3) status.

As such, the actions of APSRC shall not be considered the actions, opinions or positions of SAU and shall be the private action solely of APSRC. SAU recognizes that as a private corporation records and data of these activities may be kept separate and confidential consistent with any applicable law. 

This might explain – along with the lack of any confirmation that the WFF would or not approve the most recent grant application – why Smith went on a tear during 2017 and 2018 regarding how each APSRC team leader could raise enough revenue to cover 75 percent of his or her salary. 

The fact is, however, that APSRC needs SAU way more than SAU needs APSRC. 

Why? To attract quality staff. No one who has put years into state retirement or the Arkansas Teachers Retirement System is going to chuck all of that aside for a job at a nonprofit organization with dubious ties. 

(Helpful hint: If you work for such an organization and feel compelled to offer a “but” when explaining why you work there, you’re pretty much conveying to the listener that you are ashamed of what you do. I know because I found myself using that “but” clause all too many times during my years at APSRC.) 

But back to why APSRC and the Waltons rely on state university foundations to help achieve their mission of charterizing and privatizing public education …

Before being asked to lead APSRC, Smith – an attorney with a background in business administration – had put in years with the Arkansas Department of Education. So had the woman he hired to be his business manager, Lisa Walters. Factor in as well attorney Tripp Walter, who joined APSRC in 2010. Prior to that, Walter also served as an attorney at ADE.

Also, while Smith had a stable of attorneys and office support, he desperately needed respected public-school leaders to make APSRC more … palatable … to potential members. But he couldn’t lure educators to his organization if they stood to lose their retirement. 

Over the years, little tweaks here and there to state legislation have made it possible for certain state agency employees and university staff to become members of the Arkansas Teacher Retirement System (ATRS).  Full-time employees of the entities listed below are, conveniently, able to become members of the Arkansas Teacher Retirement System. So here’s a list of participating reciprocal state retirement systems: 

  • Arkansas Public Employees Retirement System
  • Arkansas Teachers Retirement System
  • Arkansas State Highway Retirement System
  • Arkansas State Police Retirement System
  • Arkansas Judicial Retirement System
  • Alternate Retirement Plan for the following:
      • Arkansas Department of Higher Education
      • Arkansas Department of Workforce Education
      • College
      • University
      • Vocational-Technical Schools

Hence, my friends, the Waltons’ need to persuade state university foundations to take on APSRC.

Per the MOU, here’s a list of Southern Arkansas University’s obligations to APSRC: 

Providing access to adequate full-time or part-time SAU staff to APSRC to perform those functions as described in Section 3 below, such staff’s salaries and benefits to be reimbursed to SAU by the SAU Foundation through grants received by the SAU Foundation for such purpose. 

Working in concert with APSRC to host conferences, events, seminars and trainings to better prepare faculty, staff and board members of traditional and charter K-12 public schools in Arkansas. 

Helping APSRC provide specific technical training in the areas of school law, school finance, school technology, teaching and learning, and other areas set forth in Section 1.04 of this MOU. 

Providing APSRC’s full-time, non-contracted staffs with equivalent benefits and privileges as are provided to SAU’s full-time employees. 

Reports will be provided as needed for year-end accounting and other reporting needs. 

Now let’s take a look at APSRC’s obligations: 

In exchange for the consideration provided herein by SAU, APSRC will provide SAU with access to the following resources and benefits and provide the following services in furtherance of the purposes of SAU, such as but not limited to: 

Obtaining grant funds for the benefit of SAU to support the expense of APSRC staff including the payment of the salaries and benefits of employees of SAU supporting APSRC. 

Obtaining grant funds to support the rental of facilities and other resources from SAU and others. 

Obtaining grant funds to support the administrative cost of administering a grant program. The amount of support will be 4.5% of salaries paid. 

Providing from time to time APSRC staff for adjunct teaching assignments and seminars at SAU. 3.05 Providing internship program offerings at APSRC for the College of Education students of SAU. 

Providing assistance to SAU for the purpose of educating the public on public school issues, enhancing the teacher education program, and the overall advancement of teaching and learning in public schools. 

Providing technical and other assistance to public schools consistent with the purposes of 

Reporting to SAU on request, but at least annually, those activities of SAU which involve SAU resources provided in accordance with Article 2 above. 

Should either party want to sever ties, the MOU details the process: 

This MOU is effective as of June 30, 2012 for fringe benefits and July 1, 2012 for other purposes and will continue in effect until either party terminates it for any reason by giving the other party at least ninety (90) days prior written notice of termination. 

This MOU may be immediately terminated by either party in the event that grant funding of the SAU staff working with APSRC is no longer available. 

SAU may immediately terminate this MOU in the event it determines that any SAU resources provided hereunder are not being utilized by APSRC 


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