Texas has a peculiar law: if only one school in a district is “failing,” the state can take control of the entire district. That happened to Houston. The state takeover was triggered by the “failure” of Phyllis Wheatley High School, which had a higher proportion of high-needs students than any other high school in the district.
The State Commissioner of Education, Mike Morath, who is not an educator, appointed Mike Miles as superintendent of the Houston Independent School District and fired the elected school board.
Morath previously served on the Dallas school board. Miles, a former military officer and a Broad Academy graduate, was the state-appointed superintendent in Dallas, where he drove out a large number of teachers and left with no grand accomplishments. Miles is a top-down manager who believes in standardization and compliance.
But here’s the fishy part. After failing in Dallas, Mike Miles started his own charter chain in Colorado called Third Future.
Here’s the sweet deal: if a district brings in a Third Future charter school, the state won’t take control of the district! It is the only charter school with that privilege!
Third Future started opening charter schools in Texas. The Houston Chronicle reported that it is $14 million in debt.
The Houston Chronicle has the story. It is eye-popping:
One of Texas’ most high-profile charter school networks could soon begin laying off staff amid a multimillion-dollar budget shortfall, throwing its future into question just as more and more districts have turned to it to avoid a state takeover.
The Texas branch of Third Future Schools, founded by Houston ISD Superintendent Mike Miles, is facing a $14 million deficit, forcing it to cut many of the 700 new employees it hired this year.
The grim budget projection follows years of multimillion dollar deficits and a dire warning by its auditor — issues that might have forced other charter schools out of business. Instead, the nonprofit has seen its footprint more than triple this year, and state officials continue to allow school districts that hire Third Future to avoid being taken over.
At a board meeting last month, its leaders said the nonprofit was experiencing the same problem as many of its traditional public school counterparts: fewer students.
“As you guys know, districts across Texas are seeing a declining enrollment,” Third Future Schools Superintendent Zach Craddock told board members. “Some of that is passed on to us.”
The Colorado-based nonprofit network is far from the state’s largest chain of charter schools, which are taxpayer-funded public schools operated by third parties. But it’s among the most scrutinized because of its ties to Miles, who was brought to Houston under a state takeover, and its unusual role. Rather than open its own campuses, school districts hire Third Future to turn around failing schools using a tool under state law that allows districts to avoid being taken over by the Texas Education Agency.
To avoid takeover, districts have to have their plan approved by TEA, run by longtime education commissioner Mike Morath. Morath tapped Miles to lead Houston ISD in 2023, where he implemented Third Future’s rigorous learning model, which includes daily quizzes in core classes and requiring teachers to stick to provided curriculum rather than coming up with their own. The model employs high numbers of staff.
This year, Third Futures Schools Texas took over 15 campuses, bringing its total to 19 across seven school districts, including San Antonio and Waco. None of the schools are in Houston.
The Colorado-based nonprofit network is far from the state’s largest chain of charter schools, which are taxpayer-funded public schools operated by third parties. But it’s among the most scrutinized because of its ties to Miles, who was brought to Houston under a state takeover, and its unusual role. Rather than open its own campuses, school districts hire Third Future to turn around failing schools using a tool under state law that allows districts to avoid being taken over by the Texas Education Agency.
To avoid takeover, districts have to have their plan approved by TEA, run by longtime education commissioner Mike Morath. Morath tapped Miles to lead Houston ISD in 2023, where he implemented Third Future’s rigorous learning model, which includes daily quizzes in core classes and requiring teachers to stick to provided curriculum rather than coming up with their own. The model employs high numbers of staff.
“(We) have a significant amount of right-sizing to do over the course of the next month,” one of its finance directors, Rich Billings, said.
This year, Third Futures Schools Texas took over 15 campuses, bringing its total to 19 across seven school districts, including San Antonio and Waco. None of the schools are in Houston.
To handle the growing workload, the six-year-old nonprofit hired 700 new employees this year and expected to oversee 9,600 students, Craddock told the board last month. At the time, just 7,775 were attending the 19 schools.
Since the nonprofit’s funding is based on student attendance, the gap is expected to leave a $14 million hole. Student attendance is expected to go up slightly, but the nonprofit will be forced to cut $9 million, including reducing staffing, this month, officials said. The other $5 million was expected surplus.
Billings did not outline where the cuts will be made. A spokesperson for Third Futures declined to comment for this story.
A charter school overprojecting the number of students it’s enrolling is nothing new. It’s by far the top reason why charter schools close, said Carol Burris, executive director of the Network for Public Education and a critic of charter schools.
“It’s not that people are shutting them down because the test scores are bad,” she said. “The enrollment gets to a point where it’s unsustainable.”
Third Future Schools Texas has struggled to break even for years, according to financial audits, and has faced controversy over its finances. Its agreement with Beaumont ISD to operate three schools ended prematurely last year amid a request for millions more than it had previously agreed to. News reports that the nonprofit was inappropriately paying its Colorado headquarters millions of dollars were investigated and dismissed by TEA in 2024.
Miles stepped down as CEO of Third Future Schools in 2023, but was found this year to have accepted at least $190,000 in consulting fees from the nonprofit since then. Much of that was after a state law barred district administrators from profiting from outside education work.
Financial audits show that the nonprofit posted a $2.6 million deficit in 2023. In 2024, the deficit grew to $5.3 million, after a nearly $3 million “error in the payroll calculation” was discovered, auditors wrote.
Last year, the same auditing firm wrote that the nonprofit’s deficit grew to $7.3 million, “which raises substantial doubt about the organization’s ability to continue as a going concern.”
That kind of language from an auditor would make it hard for an organization to attract lenders and suggests it could be headed toward bankruptcy, said Nathan Goldman, an accounting professor at North Carolina State University who writes a column for Forbes.
“For any organization, it’s a big deal,” he said.
Typically, TEA might move to shut down a charter school with those kinds of deficits. The agency performs financial integrity ratings for traditional charter schools that includes submitting audits. But because of Third Future’s unusual business model, it falls outside those requirements. TEA told the Chronicle that local school districts that hire the nonprofit are responsible for overseeing its finances.
The agency does not approve those agreements, known as 1882 partnerships, but does approve the benefits, which can include a two-year delay for a state takeover. Some local school officials have said they felt they had to choose Third Future Schools because it was the only one with which TEA would agree to delay a takeover. TEA has said any outside group can be approved as long as it meets its requirements, including a track record of success.
Financial disaster is not success!
How did this sweetheart deal get approved?






