June 29, 2016

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Superintendent Stepp’s claim of required MBA disputed

Loren Genson and David Knox

MEDINA — Superintendent Randy Stepp repeatedly has said his taxpayer-paid master’s degree in business administration was a requirement of his job as superintendent of Medina Schools.

The available public record doesn’t support that claim.

While it is clear the school board wanted Superintendent Stepp to get an MBA — which cost taxpayers nearly $94,000 — a review of Ohio law, Stepp’s contracts with the school board and district records requested by The Gazette failed to show anything that indicated Stepp needed the degree to keep his job.

Asked whether the board required Stepp to obtain an MBA, board spokeswoman Jeanne Hurt sidestepped the question.

“Dr. Stepp’s acquiring his MBA was mutually agreed upon by the Board and himself,” Hurt wrote in an email response Monday. “The Board president at that time signed off on the employer agreement to support Dr. Stepp in the program he was entering.”

The cost to taxpayers of Stepp’s MBA and his other educational benefits — totaling more than a quarter-million dollars in the past three years — is at the core of the continuing controversy over how and why the school board agreed to such lucrative payouts.

School board members acknowledged last week that they did not know the total amount paid for Stepp’s education or how the payments had been made.

A request to district Treasurer Jim Hudson for “any documentation showing that the school board asked Superintendent Stepp to complete the master’s in business administration as a requirement of his job” drew a direct response.

Hudson provided a copy of the district’s “letter of endorsement” of Stepp’s 2010 application to Case Western Reserve University’s executive MBA program and cited the portion of his superintendent’s “contract pertaining to professional development.”

Stepp’s contract does state “the board encourages the continuing professional growth of the superintendent” and pledges to pay for “any college coursework completed for the purpose of expanding his professional knowledge and skills.”

But nowhere do the contracts cite any specific coursework, program or degree as a requirement.

Nor does the June 25, 2010, letter of endorsement from then-board President Mark Dolan state that the MBA was a requirement of Stepp’s job. It only assured the dean of Case Western Reserve’s Weatherhead School of Business that “Dr. Stepp’s work schedule will be adjusted to accommodate program activities. This includes attendance of all scheduled, on-campus classes and off-site activities that are part of the curriculum, such as the international trip.”

Stepp was accepted into the program and started classes that fall. Over the next two years, Stepp directed the Medina County Schools’ Educational Service Center to pay nearly $93,000 to the university using district money held in a “carryover fund.”

Stepp also was reimbursed $1,012 for his passport, vaccinations and an airline seat upgrade for his June 2011 trip to China and Vietnam, which was part of the MBA program.

Stepp received his degree in May 2012.

Ohio does require superintendents to have a master’s degree. But Stepp already had one when he became superintendent in 2006. He earned his master’s in education from Ashland University in 1998.

Superintendents also must have more college credits — about 45 hours beyond the master’s, according to Tom Ash, a spokesman for the Buckeye Association of School Administrators.

Stepp had accomplished that. He was awarded a doctorate from Ashland in 2010.

The Medina district taxpayers also picked up the bill for those earlier degrees — thanks to a November 2011 amendment to Stepp’s contract that obligated the school board “to pay the costs associated with the Superintendent’s acquisition of past academic degrees.”

Two months after the amendment was approved, Stepp directed the Educational Service Center treasurer to write a $172,011.40 check to the U.S. Department of Education to pay off all his student loans.

In January, the board approved a new contract for Stepp that pledged to do more: The board agreed to pay “any tax liability” resulting from the educational payments.

Stepp has indicated he would ask the board to pay any taxes owed on his $172,000 federal loan payoff.

“If the liability occurs, the contract has language to address that,” he said in an email response last week.

Asked about taxes owed on the nearly $94,000 cost of his MBA, Stepp said he doesn’t think that constitutes a taxable fringe benefit.

Again, Stepp said the reason was that the degree was a requirement of the job.

“Based on my understanding of tax law the Case Western Reserve MBA was a part of the job requirement and therefore should not be considered income,” Stepp said in an email Sunday. “It is professional development that was supported and directed by the Board.”

But tax experts say the law isn’t that clear-cut — especially concerning MBA degrees, which some courts have held help the degree earner move to a new profession.

“Education is not deductible if it qualifies you for a new trade or business,” said Donald B. Tobin, associate dean for faculty at Ohio State University’s Moritz School of Law.

Tobin said that if the school board gets stuck with paying the taxes on Stepp’s old college loans, there may be an additional cost to taxpayers.
That’s because the tax payment itself also could be taxable.

“If the employer decided to pay the tax that was due, that amount also would be considered income to the superintendent,” he said.

Did the school board seek legal advice before agreeing to pay for Stepp’s education? No lawyers are listed as being at any of the closed-door executive sessions where Stepp’s new contract was discussed. The contract was approved at an open session Jan. 7.

Nor was Jim Shields, the district’s human resources director and legal counsel present.

Treasurer Hudson said the absence of lawyers at the meetings doesn’t necessarily mean the school board didn’t have the contract reviewed.

“They could have consulted an attorney on their own,” Hudson said.

An email was sent Tuesday afternoon to Hurt and the school board members asking whether the board did seek legal advice during the negotiations on Stepp’s contracts in 2009, 2011 and 2013.

No response was received as of Tuesday evening.

Contact reporter Loren Genson at (330) 721-4063 or lgenson@medina-gazette.com. Contact David Knox at (330) 721-4065 or dknox@medina-gazette.com.

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The Gazette is Medina County's daily local news source, serving the community since 1832. Contact The Gazette's news department at (330) 721-4065 or areanews@medina-gazette.com.