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FOIA documents reveal financial troubles, loans for Education Achievement Authority

Brooke Harris

A suburban Detroit state representative says newly released documents raise some “serious red flags” about the Education Achievement Authority.

That state-run “reform district” for the lowest-performing schools is only operating in 15 former Detroit Public Schools right now.

State Representative Ellen Cogen Lipton, a Huntington Woods Democrat, got the information through a Freedom of Information Act request.

The records released so far reveal some financial trouble for the EAA.

The district has borrowed at least $12 million—apparently in two $6 million chunks, in September and February—in state aid through the Detroit Public Schools.

DPS has its own financial troubles and is operating under a state-appointed emergency financial manager, Roy Roberts.

The EAA is operating right now under an interlocal agreement between DPS and Eastern Michigan University, while Governor Snyder pushes legislation that would codify it in state law. The State House has already passed that bill.

Emails also reveal that when DPS called in part of the loan, the EAA couldn’t pay and had to ask for an advance on state aid, which it received.

An email from EAA Deputy Chancellor of Fiscal Affairs Rebecca Lee-Gwin shows that state officials asked them to modify their request so it didn’t indicate a loan payment.

“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 the Detroit Public Schools),” Lee-Gwin wrote to EAA Chancellor John Covington in an email dated January 14, 2013.

Caleb Buhs, a spokesman for the State Treasury, confirmed the loans. He says DPS merely served as a conduit for the EAA’s borrowing rather than a direct lender, because the EAA isn’t authorized to borrow on its own yet.

Buhs emphasized that it isn’t unusual for school districts to borrow money, and the EAA is dealing with startup costs while also fundraising to support its operations.

That’s reflected in another email from Governor Snyder’s Transformation Manager, Richard Baird, to EAA officials regarding its application for a state advance.

“All we need to say is, ‘As a start-up organization, EAA received no Foundation Allowance funding until the schools were opened and operating. The costs associated…were covered by philanthropic gifts from Corporations and Foundations, and there is a cash flow differential based on pledges made over time,’” Baird wrote on January 2, 2013.

As for the larger FOIA request that revealed these documents, Lipton says she’s only received some of what she’s requested. To get the rest, she must pay almost $2700.

Though Lipton believes the fee is exorbitant, she’s paid it anyway because she thinks it’s important legislators and the public know what’s going on in the EAA.

“Some education advocacy and other groups have made FOIA requests, and have been blocked by being charged very high fees,” Lipton says. “And it’s had a huge chilling effect on the ability to get documents.”

Lipton says finances are only one reason she’s concerned about what’s going on in the EAA.

“I feel that we are following a very flawed model,” Lipton says.

“It’s not enough to say, ‘At least we’re doing something’ [for the state’s lowest-performing schools]. If the something is worse than the problem you were trying to solve, that’s not a solution.”

Sarah Cwiek joined Michigan Radio in October 2009. As our Detroit reporter, she is helping us expand our coverage of the economy, politics, and culture in and around the city of Detroit.
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