The leader of a popular St. Paul charter school has resigned and the school is being urged to appoint an outside replacement — providing a troubling lesson in what can happen when public dollars are gambled away in a high-risk investment.
Hmong College Prep Academy (HCPA) founder and superintendent Christianna Hang quit after the state auditor confirmed that the school violated state law and its own policies when it invested $5 million in a hedge fund and lost all but $700,000.
This terrible squandering of public funds demonstrates several key points. State laws limiting the investment options of taxpayer-supported entities are on the books for good reason and should be followed. Charter school administrations must include people with financial expertise — committed educators and parents with a good educational plan are not enough.
Charter school authorizers bear some responsibility as well. They must provide strong oversight for the schools they sponsor — including paying close attention to financial management. The authorizer for HCPA is Bethel University.
State Auditor Julie Blaha's office reported that the charter school's investment violated state law regarding permissible investment of public funds, that the school has not been able to recover the loss, and that the corrective actions recommended by Bethel are "reasonable and appropriate."
Blaha told an editorial writer that 90-95 % of school budgets are publicly funded. "That money is intended for students — in this case they didn't get it, and that's a problem. A school is not a bank or investment firm … .''
It is not unusual for school districts to invest some part of their surplus or reserves, and the amount HCPA invested is not out of line with what some other comparable schools have done. However, state law requires that such funds are invested "only in securities that are generally considered to be among the safest available," and not in hedge funds, according to the auditor's report.
HCPA opened in 2004 with 200 ninth- and 10th-graders, according to its website, and has now grown to serve about 2,000 K-12 students. It has expanded several times on its campus in the Como Park area. The school ended 2019-20 with $13.7 million in cash and a $15.2 million fund balance, the auditor said. General fund expenditures totaled $26.6 million. Reportedly, its leaders had been looking to raise funds for a new middle school building.
In 2019, the school invested with Woodstock Capital LLC, the hedge fund it has now sued claiming fraud and negligence. Woodstock has blamed the losses on the pandemic.
Blaha has turned over her office's report to the Ramsey County, as statutes require. She said the law lists acceptable investments but does not address penalties for violations. That, the auditor says, will be left up to the county attorney.
The financial fiasco at HCPA is a cautionary tale for charter schools in particular, but also for any government entity considering investments of public funds. Taxpayer-generated funds are intended to be used for the public good and not put at high risk.