Don't doubt it's that level of stoopid.
That said, from what I've been hearing, it's not so much the washout rate itself that represents the heart of the problem at the school house. It's the inconsistencies between instructors, the inconsistencies in testing protocols, and the internecine battles being waged. The tests are so varied between candidates that it makes one wonder if standard testing protocols even exist. One candidate gets 3 ops in 30 minutes. Another candidate gets 15 ops in 30 minutes. ??? A class is doing really well with a certain instructor. Then, 3/4 of that class fails on the test because their instructor is hated by the instructor giving the test. ??? ... Those sorts of things.
I'm not there, so I'm not certain. But the stories I'm hearing from reliable folks make the ATC school house sound like a pretty fubar place these days.