We hate to say we told you so, but we told you so.
In a video released statewide a few months ago, Fox News analyst Dick Morris and Education Action Group Foundation Vice President Kyle Olson warned Indiana taxpayers that the Indiana State Teachers Association would attempt to stick them with the bill for the financial mess the union created.
“We remain concerned for the taxpayers of the State of Indiana that they will be left on the hook for tens of millions of dollars caused by union incompetence,” Olson said in the video.
We sure called that one. Here’s what happened, in a nutshell:
ISTA Trust, the insurance wing of the ISTA, convinced about 30 school corporations around the state to enroll in a special insurance pool for employees. Under the program, unused premiums were supposed to be repaid to the schools.
But somewhere along the line, ISTA lost track of about $23 million owed to those schools. According to officials, this was probably the result of comingling those funds with other union dollars that were lost in a series of bad financial investments.
ISTA Trust’s sole trustee, Ed Sullivan, is currently trying to cut deals with the victimized school corporations, offering to reimburse them about 30 cents on the dollar.
The offer is ridiculous, to put it lightly. Do ISTA officials honestly expect the state’s struggling schools, and the taxpayers that support them, to pick up the tab for union incompentence? Apparently so.
But the school corporations may be forced to consider the offer, or risk recovering nothing at all if ISTA Trust seeks bankruptcy protection. Several school corporations are apparently considering a lawsuit to recover their money. We wish them well in that endeavor.
There is an answer to this unfortunate situation. We believe the well-financed National Education Association, which took over management of the sinking ISTA in May, should pull out its checkbook and fully reimburse the schools that were ripped off, even if it takes a few years.
The ISTA clearly lacks the assets to correct the situation, while the NEA reported net assets of $142 million last year.
It’s becoming increasingly clear by the day that union caused this mess by grossly mismanaging its own funds, as well as the money that was supposed to be reimbursed to schools.
Indiana Secretary of State Todd Rokita last week filed a lawsuit in Marion County Superior Court accusing the ISTA, the National Education Association and other related financial institutions of committing a slew of securities violations.
The lawsuit alleges, among other things, that the ISTA neglected to register the long-term health and disability arrangements as securities, acted as paid investment advisors to the schools without authority, and misrepresented the nature of the investments it made.
The money was invested in a “highly speculative manner unsuitable for the purchasers,” the lawsuit alleges.
Even the ISTA is suing those who are allegedly responsible for the mess – former ISTA executive director Warren L. Williams and former trust director Robert Frankel – for what Sullivan called “terrible investments, horrible fiscal behavior,” according to the Indianapolis Star.
The NEA, which is the parent organization of the ISTA, should reinforce its supposed commitment to education by taking financial responsibility for this mess, the sooner the better. And we hope that Indiana schools, and schools throughout the nation, learn from this fiasco.
Unions aren’t insurance companies and can’t be expected to function like them. Schools are much better off contracting with private insurance carriers that know what they’re doing.