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EAA uses DPS to survive

Roy Roberts

Roy Roberts

By T. Kelly
The Michigan Citizen

DETROIT — In 2011, Gov. Rick Snyder promised that the Education Achievement Authority (EAA) would provide a new, stable, financially responsible set of public schools dedicated to improving outcomes for the lowest achieving schools. The EAA’s brief history has demonstrated it could not exist without Detroit Public Schools (DPS), the district from which EAA was carved, and whose borrowing authority is key to the governor’s education vision.

EAA funding is erratic, dependent on foundation giving and DPS, according to documents received under the Freedom of Information Act by St. Rep. Ellen Cogen Lipton. DPS itself is a district driven $320 million into debt under state takeovers dating to 1999.

Documents reveal that the promised foundation funding for EAA did not come immediately as press reports indicated. Before the first month of school ended in September 2012, the EAA was seeking $6 million, using DPS borrowing authority. Created by an Interlocal Agreement between EM Roy Roberts and Eastern Michigan University Department of Education, the EAA is without any legal basis to borrow money. And with no financial history, EAA lacked the data to secure any other loan, the EAA admitted in the documents.

Legislation to expand the EAA statewide has passed the House and is pending before the Senate. The new law would give the EAA powers to tax and borrow.

Because the EAA is in its first year and “experimental,” Lipton said, she requested all financial, testing, student achievement and teacher qualification information from the EAA. What she has received she has posted on her Web site (www.lipton.housedems.com/resources/publications).

“The EAA bill is in the Senate,” Lipton said. “That’s the reason for the FOIA. I want to make certain the Senate has information the House didn’t have.”

Lipton said Gov. Snyder is lobbying for the EAA expansion to proceed.

The documents reveal how the EAA has survived financially, depending on DPS, and erratic corporate funding.

EAA borrowed $6 million in September, documents reveal.  In February 2013, after the EAA repaid DPS, with $10 million from the state, it borrowed $6 million from DPS. Throughout the process, the offices of the governor and state treasurer appear to have helped get additional DPS funds, by aiding EAA in “accurately” filling out the loan application.

In an e-mail — attachment 14 in the documents on Lipton’s Web site — dated Jan. 14, 2013, EAA Deputy Chancellor Fiscal Affairs Rebecca Lee-Gwin described the state involvement and requested the opportunity to discuss the new loan with EAA Chancellor John Covington. It reads:

“Doc, After the call from John Barton, Treasury and the Governor’s office are requesting that we change the state aid application to reflect a shortage in payroll instead of a shortage to cover debt (the $6M loan received through Detroit Public Schools). Will we have to get Board of Director approval? Changes in the category also means a change in the justification section. In the original application, we indicated that the debt would not be reoccurring because the loan would be paid in full in January. Payroll is an ongoing expenditure. We would need to change the explanation section to match the category. Should anything be changed after approval by the Board of Directors? I have not sent any changes to Treasury. I would like to discuss this.”

Gwin-Lee recently left the EAA and was not available for comment. Barton is a staff member in the state treasurer’s Bureau of Bond Finance.

In a request for a state aid advance dated Dec. 12, 2012 (Attachment 31), the EAA stated that, if it did not receive the money, it would be “unable to make debt obligation payment” and admitted it was $2 million short. In fact, it reported it would only have $37,000 on hand at the end of January.

Caleb Bush, spokesperson for the Treasury, said the $10 million given to the EAA on Jan. 17 was a state aid advance that had “nothing to do with DPS.”

According to Bush, the DPS money would be repaid by the student aid payments the state makes. “The money was guaranteed by EAA state aid payments. DPS worked as a partner; it was guaranteed repayment.”

However, the EAA financial statements (Attachment 10) showing income for the seven months ending Jan. 31, 2013, lists the line item, “Short-term loan $5,912,000.”

And, on Nov. 30 (Attachment 20), Lee-Gwin sent an e-mail to DPS Chief Financial Officer William Aldridge saying that his deputy, Delores Brown, had requested the EAA make its first loan payment. Lee-Gwin replied the EAA was “waiting for an invoice from you to make sure we were paying the correct amount.” She then requests the invoice.

Bush said the September loan of $6 million was repaid Jan. 22. A second $6 million loan was made in February and will be repaid by July 22.

Bush also said that assisting with loan applications is routine staff work. Treasury staff routinely review paperwork and suggest changes intended only for accuracy. Such help with the wording would be provided in any district, he said.

When asked why the state or EMU couldn’t have advanced the funds to EAA, Bush said he didn’t think the state had the authority.

Loan documents (Attachments 1-5 and 19) reveal the EAA asked for the following fund amounts using DPS borrowing authority and stated these purposes for the funds:

  • Sept. 14, 2012 — $2 million for advance to EAA.
  • Sept. 14, 2012 — $3 million for payroll; and another $3 million advance to EAA.
  • Sept. 14, 2012 — $500,000 for payroll; $414,000 for Scholastic READ 180.
  • Oct. 19, 2012 — $500,000 for payroll; $414,000 for major vendor Scholastic Read 180.
  • Feb. 18, 2013 — $3 million to pay School Improvement Network; Michigan Futures (Special Education), Transportation and Utilities.
  • March 7, 2013 — $2 million to pay Detroit Parent Network; Utilities (DTE, City of Detroit); and Institute for Excellence in Education.

EAA Executive board members have denied publicly that they knew of the EAA loans from DPS. Mayoral candidate Mike Duggan, the EAA board secretary, refused to be interviewed, and through a spokesperson, referred this paper to EAA Board Chair and Skillman Foundation employee Carol Goss for comment.

Goss did not return a call for comment.

Board minutes, EAA financial statements approved by the board and the Michigan Treasury requirements for Board authorization all indicate the EAA board knew of the loans from DPS.

Calls to Covington or EAA spokesperson Tyrone Winfrey were returned by Bob Berg of the public relations firm Berg Muirhead Associateds, after this paper went to print.

EM Roberts transferred 15 Detroit school buildings and all their contents to create the EAA. Elected DPS board members have repeatedly asked for copies of the lease agreements that Roberts worked out as EM for DPS and President of the Board for EAA.

“The 15 schools forced into the EAA in 2012 were the most financially endowed, not necessarily the most academically needy, because they weren’t all in the lowest 5 percent. Whole neighborhoods have been destroyed with these viable schools having been arbitrarily closed by people whose only connection to Detroit was their appointment by higher ranking strangers to the city,” is how former Michigan State Board of Education Member Marianne McGuire described the origins of the EAA in a letter written Dec. 31 to State Superintendent Mike Flanagan while she was still on the board.

Elected DPS board President Lamar Lemmons said the board has been concerned with what they believe is an unhealthy relation between EAA and DPS. “It’s a conflict, “ Lemmons said. “Roberts at the same time is president over both entities.” Repeated board requests for information have been ignored.

Bush said he does not believe Roy Roberts is in conflict.

McGuire objected to the state giving the EAA $10 million in January. Her successor representing Detroit on the state board, Michelle Fecteau, said the state board did not vote on the $10 million to the EAA. “We didn’t vote on it. [State Supt.] Flanagan doesn’t always consult with the board. It’s an ongoing issue,” Fecteau said.

“There is nothing positive that can be said about the EAA, a system that has already been given too much money; money that should’ve been earmarked to help the real DPS,” McGuire told Flanagan.

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