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Maybe there isn't anything illegal about a reported $6 million in "secret" loans from one broke school district, the Detroit Public Schools, to the statewide Education Achievement Authority.
Maybe DPS emergency manager Roy Roberts didn't break any laws by borrowing the money through a state finance authority.
And maybe mayoral candidate Mike Duggan, who serves as secretary of the EAA board, really didn't know anything about the loans until he learned about them from a constituent, which he claims.
But there's still plenty wrong about a deal in which a cash-strapped DPS, itself in the throes of a financial emergency that the overmatched Roberts is doing his best to wallpaper over, coughs up so much money to keep the state's shaky, experimental school district afloat.
The Detroit News: Administrators at the Education Achievement Authority took $6 million in loans from the cash-strapped Detroit school district without approval from EAA board members, according to the secretary of the recovery district's board.
Mike Duggan told The Detroit News on Thursday he learned of the secret loans from a constituent Wednesday night, but he never heard of the loans at monthly EAA board meetings, which he says he regularly attended.
"The board has never approved a loan from DPS. I'm pretty confident the board was never advised of it, either," said Duggan, who is running for mayor of Detroit.
The loans came to light this week in documents obtained by state Rep. Ellen Cogen Lipton through a Freedom of Information Act request.
The EAA is a newly formed statewide school district created by Gov. Rick Snyder to take over the state's lowest performing schools. All 15 EAA schools are former Detroit Public Schools.
"I think it's very troubling, and it raises questions about transparency. The finances of DPS and EAA need to be kept separate; a lot of board members feel that way," Duggan said.
I understand that DPS has a vested interest in the EAA. Roberts has been handing over DPS buildings to the state district (15 so far) like he's doling out sticks of gum. And while the EAA has been getting the buildings for a song, the statewide district is expected to eventually pay the leases on the buildings. DPS wants to get that money back, and it doesn't unless the EAA takes off.
But if the state's district still needs money after raising several millions from foundations and other private backers, why treat DPS like an ATM and then have to hope like hell that the EAA can actually make payments? Why not go directly to the state itself for the cash? Why add to the burden of a district that's already been taken over by an EM because of its severe cash shortages?
Secret "Reforms" in Back Rooms
If the Detroit Public Schools are in such bad financial shape that the state simply had to appoint an auto exec manqué to take over the reins, how does it make any sense whatsoever for the Detroit district to take out a loan on the EAA's behalf?
And in light of the governor's recently exposed secret meetings to design "value schools," you have to wonder why it suddenly seems that everything these people do in the name of "reform" have to be done in back rooms and under cover of darkness. If this idea is so sound, why (allegedly) hide the loans from the taxpayers, from the EAA board itself?
While critics contend the EAA is part of a long-term plan to undermine traditional public education in Michigan, EAA supporters insist the district is supposed to be a boon for DPS. Created by DPS and Eastern Michigan University to take over the lowest-performing schools in the state, the statewide district was expected to be flush with more money than DPS this coming school year and was supposed to be more cost-efficient because of initiatives such as reduced teacher salaries and greater staff investment in benefits.
Rep. Ellen Lipton, D-Huntington Woods
But for all the ballyhooing from right-wing politicians in Lansing and operatives like Roberts, reports such as that about the loan suggest that the state experiment threatens to be more of a drag on the Detroit district.
As Rep. Ellen Lipton, D-Huntington Woodfs, rightly asks about these loans: "How does that further stabilize an already compromised school district?"DPS even gave the state district school buildings that were newly renovated with bond money voters had earmarked for Detroit education.
Meanwhile, another legislator expressed even deeper concerns.
Senator: 'They've Gone Underground'
In a Deadline Detroit interview, state Sen. Bert Johnson, D-Highland Park, called the EAA a "failed enterprise" and said it's time to scrap the alternate district. "The EAA has no ability to legally draw in public dollars," explains Johnson. "It's why the state and governor started them under the premise they'd use philanthropic funds to push their program.
"They don't qualify for state funds since they aren't in the school code. That's what they're trying to change, but right now the EAA isn't eligible. Also, since the truth about EAA has hit the fan, some of the philanthropic organizations have backed off. So now the state has been forced to pony up money in the form of loans so that this district could stay afloat."
Sen. Bert Johnson, D-Highland Park
Johnson, who says some documentation he's seen makes him worry that the amount of the DPS loans could actually be twice as high as what's been reported, says that the governor and his accomplices knew they couldn't keep giving loans directly from the state to the EAA.
"This idea that they were going to keep dumping money into the EAA wasn't going to fly," he says. "There's never a situation where the state continues to give emergency funds to anything. They knew this idea that they were going to keep dumping money wasn't going to fly. So what has happened is, they've gone underground.
"Roberts and Covington have taken control of this EAA district into the governors' office. So Covington reports to the EAA board, which is chaired by Roy Roberts. And that board answers to the governor's office. Without question this is a giant shell game. And that's the way it has been since they designed this EAA school district.
"This idea that they've been secretly funding the EAA stinks to high heaven."
Open-Ended Experiment
Will the hustle only grow? Given that state legislators narrowly voted in March to expand the EAA to cover schools outside of Detroit, how much more of a burden will the EAA be on Detroit's finances? Would other districts that are sucked in to this experiment be expected to pay for the EAA's shortfalls, too? Will Detroit be forced to cover even more poorly thought-out "reform" measures as the EAA grows?
And the concerns about oversight that many citizens have raised clearly aren't empty worries. After all, how's it possible for a loan this large slip by Duggan and the rest of the EAA board? And how much due diligence is the board really putting in in 45-minute meetings that, to many, amount to little more than rubber-stamp sessions?
Duggan says he's "pretty confident" the board was never advised of the loan, but the utter lack of transparency at the EAA makes it hard for taxpayers to be sure.
Secret multi-million dollar loans adding to the burden of the cash-poor Detroit district; outright lies from Roberts about educational improvement at DPS; an EAA chancellor with a dismal record of achievement — the state sold Snyder's plan for education reform on the grounds that it would be financially efficient and educationally effective for Detroit school kids. Instead, we get questionable financial decisions, continued classroom mediocrity and publicly opaque operations.
So far, it's hard to see how the governor's new way of doing things is any better for Detroiters than the old.
