One way or another, Oregon Department of Education representatives say 41 school districts in Umatilla, Morrow, Grant, Union, Baker and Wallowa counties will begin repayment of about $2.6 million by Jan. 1, 2009.

That’s how much money the ODE and Secretary of State audit’s division determined the districts received in error because of inaccurate membership reporting for students enrolled in alternative education programs, lasting from 1999 to 2004.

Each district had contracted for alternative education services with the Union-Baker Education Service District, which apparently handled most of the membership reporting and accounting.

The audit report said the districts and the La Grande-based ESD over-reported 606 average daily membership numbers, used as the basis for doling out state funds.

Because the districts received the state money, they are being held liable.

“We didn’t have the authority in law to withhold money from the ESD,” said Ed Dennis, ODE deputy superintendent.

The Echo School District, for example, faces a $116,287 bill, possibly only $32,318 if the ESD can pay a negotiated obligation of $83,969.

“Basically, none of the attendance figures were turned in by our school district,” said Echo Superintendent Rob Waite, explaining the ESD did the reporting. “We’re just trying to negotiate an equitable and fair settlement.”

Such negotiations, however, remain between the districts and the ESD, not the state, Dennis said. Although the state suggested the ESD pay back its fair share, it is not obligated to do so.

Initially, Dennis said, “The ESD was not receptive to that offer.”

Echo isn’t the only district facing a penalty. Others include Hermiston at $55,389; Morrow County at $52,250; Stanfield at $55,582; and Umatilla at $53,904.

Those amounts – even if cushioned by the ESD – could be quite a blow to many of the districts, some of which began having to pay for their own alternative education services after canceling with the Union-Baker ESD.

“As much as we’d like to see it go away, I don’t think it’s going to,” said James Thompson, business manager of the Hermiston School District. “We feel basically the repayment of these funds is hurting these kids today for a mistake that was made in the past.”

Stepping fresh into the mix is Michael Sowder, who began July 2 as the new half-time superintendent for the Union-Baker ESD. He seemed to agree the ESD does have an obligation in the repayment.

“I’ve already proceeded with setting meetings up at the state level,” he said. “I firmly believe there can be an agreement that is going rectify the situation.”

He spoke optimistically about striking a deal with the state to pay the ESD’s share of the money owed over time.

Indeed, all agree there did not seem to be foul play in the reporting errors, as all the money received was spent on alternative education.

In the meantime, the Hungerford Law Firm of Portland has been hired to represent the districts, some more disgruntled than others on the issue.

By asking the ESD to share the brunt of the costs, Dennis said the state was hoping to avoid a legal mess in which the districts would sue the ESD.

“We don’t want the districts going after Union-Baker,” said Mark Mulvihill, Umatilla-Morrow ESD superintendent, who has helped lead a delegation of district superintendents to help work out the problem. “What I hope people understand is there isn’t a bad guy.”

Still, even he said much is pending on how much the Union-Baker ESD can bite off from the main amount.

“We’re just waiting to see who’s going to pay what,” Dennis said.

At one time, the Union-Baker ESD employed more than 200 people and operated alternative education programs in Florence, Burns, Eugene, and The Dalles. There are about 24 employees now.

A number of key ESD administrators, including Superintendent Ed Schumacher, Director of Alternative Education Lyle Mann, and Director of Special Education Lenny Williams, left the agency several years ago amid a flurry of charges about alternative education, contracting laws and accounting procedures .

The Wallowa County Chieftain contributed to this story. By FLYNN ESPE

East Oregonian Publishing Co.