November 4, 2012 in Idaho

Eye on Boise: Student laptop ‘buyout’ math doesn’t add up

By The Spokesman-Review
 

BOISE – It turns out that the “buyout” clause in the state’s $182 million laptop contract is not what the state Department of Education originally described – a cost that “is only paid if the contract is severed for some reason” and “may or may not be paid.”

In response to my inquiries, after I found no reference to such an early-cancellation buyout fee in the contract, department spokeswoman Melissa McGrath told me, “That would be my error.”

Instead, the “buyout” clause is the amount the state would have to pay at the end of the contract term – after it’s run its full eight years – to buy out the remaining years in the four-year leases on the laptops issued to students still working their way through high school. Since they’d be phased in over the next four years and then replaced every four years, each year’s wave would have a different lease expiration date, and all would have to be bought out.

The eight-year Students Come First contract is intended to provide every Idaho high school student and teacher with a laptop computer. State officials signed the contract with Hewlett-Packard Co. on Oct. 23, but if voters reject Proposition 3, which authorizes the program, the contract will be canceled at no cost to the state.

The Spokesman-Review obtained a copy of the contract last week under the Idaho Public Records Law, though the department would provide the 362-page document only in paper form. We had it scanned, and it’s on our website.

I’m still awaiting answers as to why the buyout amount estimated by the department, $14.2 million, doesn’t match up to the amount of remaining lease payments times the number of laptops, which comes to $21.9 million. If that’s the required buyout at the end of the term, the total contract cost is $189,687,228, not the $181,935,125 the department estimates.

McGrath said the difference comes because the state is scheduled to pay the laptop leases in semiannual installments each year, with the two payments together totaling $292.77 per unit per year. “The $14.2 million figure was an estimate HP provided for us,” McGrath said in an email. “The $21 million calculation would have been based on the full cost of the buyout, yet since the state is doing semi-annual payments with HP, it will only pay half of these costs at the end of 8 years.”

Here’s my problem with that logic: Whether you pay in two installments or a single piece, you still pay the same amount. The state’s estimates show no additional payment in Year 8 for the first half of the buyouts; costs for Year 8 are estimated at $26,459,382, the exact same amount as for years 4, 5, 6 and 7 of the contract, equal to the estimated 90,376 laptops times $292.77.

McGrath was unable to get further information on the figure on Friday. “I believe either it’s already factored in or it’s not getting paid,” she said. “This is the full amount of the contract.”

She added, “That is how our accountants and HP accountants have figured this out based on the semiannual payments.”

Incidentally, the contract also allows for up to a 4 percent increase in the $292.77 rate after the first four years, if HP can provide “full justification as to why the adjustment is necessary.” If that full 4 percent were approved at that point, it would add another $4.2 million to the cost of the contract.

Give, take back, give?

The big news last week, when the previously anonymous donations to Education Voters of Idaho were revealed under a court order, was the $200,000 donation from New York Mayor Michael Bloomberg to the pro-school reform ballot measure campaign in Idaho. But the Associated Press identified another little story amid the names.

Hagadone Hospitality gave $15,000 to the secretive group, according to EVI’s campaign finance report. Hagadone also had given $15,000 to the official Yes for Idaho Education campaign, which was disclosed. But what AP found is that the Aug. 6 donation to the Yes group was refunded on Aug. 14. Then, on Sept. 24, the donation in the same amount was made to EVI.

That means Hagadone Hospitality gave openly to the campaign in favor of Propositions 1, 2 and 3, took it back, and then gave it secretly.

Otter OK with disclosure

Idaho Gov. Butch Otter, who said his wife, Lori, asked Bloomberg for the EVI donation and who said he personally solicited a $250,000 donation to the group from Albertsons heir Joe Scott, said he was fine with the donors being disclosed. “I think, look, that’s the law,” Otter said. “No matter where you organize the organization … they’ve got to obey our laws. And that has been my position all along.”

Betsy Z. Russell can be reached at (208) 336-2854 or betsyr@spokesman.com. Follow her on the Eye on Boise blog at spokesman.com/boise.

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