ClassWallet — the vendor given a lucrative contract to manage the banking side of Arkansas LEARNS school vouchers — employs a lobbyist who also represents a political action committee for former Gov. Mike Huckabee, the father of current Gov. Sarah Huckabee Sanders.
The Arkansas Department of Education did not seek competitive bids last year before awarding the contract to manage the inaugural phase of the state’s “Education Freedom Accounts” to Kleo Inc. of Florida, a company that does business under the name ClassWallet. That contract is expected to earn ClassWallet more than $1 million in its first year.
A quick look at the Arkansas secretary of state’s website shows that ClassWallet is represented by the lobbying firm Legacy Consulting, who also lobbies for Huck PAC Inc., former Gov. Huckabee’s political vehicle.
Additionally, Legacy Consulting was founded by Chad Gallagher, Mike Huckabee’s former political advisor.
We reached out to Sanders’ staff for comment, but have not received a response.
Likewise, messages left for Gallagher have not been returned.
Second year, first bids
The contract to administer school voucher finances for LEARNS’ second year recently went out for a bid, garnering five out-of-state contenders, including ClassWallet. The winning vendor stands to earn about $2.4 million in service fees during the 2024-25 school year alone.
The amount and details of the bid submissions are unknown: The Arkansas Department of Transformation and Shared Services has refused to release them to us in response to our Freedom of Information Act request.
The third-party vendor — currently ClassWallet — provides the portal through which the LEARNS voucher funds are funneled.
With the voucher program established under the Arkansas LEARNS Act of 2023, public money can be used to pay private school tuitions and homeschool expenses. Parents upload invoices to the ClassWallet portal, then ClassWallet pays the bills directly.
ClassWallet charges a 2.5% service fee per transaction. That means that in the 2023-24 school year, ClassWallet stands to earn over $1.1 million, based on an estimated $46.7 million in vouchers already distributed. ClassWallet also handles payment under a new literacy tutoring grant program created by LEARNS.
In the second year of the program, whichever third-party vendor is selected in the bidding process stands to earn $2.4 million in service fees, based on the projected cost of $97.5 million as the voucher program expands to cover up to 14,000 students.
Asked how the decision was made to award ClassWallet the lucrative first-year deal, Department of Education spokesperson Kimberly Mundell said the state was already doing business with the company before Sanders became governor.
“We had an existing contract with ClassWallet before the administration change that was amended with legislative approval to cover the first year of the EFA program,” Mundell said.
Who is ClassWallet?
ClassWallet currently manages voucher programs in five states: Arizona, Indiana, Missouri, New Hampshire and North Carolina. The company is considered a leader in its field, but it is not without its controversies.
The state of Oklahoma filed a lawsuit against ClassWallet on Jan. 29 of this year for failing to prevent education funds from being misspent. According to a Jan. 31 article from The Oklahoman, this is the second time ClassWallet has been sued by the state.
In the first lawsuit filed by the state of Oklahoma in 2022, federal and state audits found $1,500 grants meant to be used for educational expenses were instead spent on kitchen appliances, power tools, video game consoles and other non-educational items. The lawsuit claimed that about $1.7 million was misused.
In response, ClassWallet denied any wrongdoing. Federal and state auditors said government officials, not ClassWallet, were at fault for failing to put proper guardrails in place. Oklahoma’s attorney general dropped the initial lawsuit, but Oklahoma Gov. Kevin Stitt announced last month that he’s refiling the complaint.
ClassWallet has experienced hiccups elsewhere, as well. In Arizona, a data breach spilled thousands of private pieces of information, including student names and their disability statuses.