EAA thinks it may get $12M from Detroit school rescue

Chad Livengood and Shawn D. Lewis
The Detroit News

Lansing — Officials at the Education Achievement Authority believe they’ll be relieved of $12 million in debt owed to Detroit Public Schools as a result of a $617 million state bailout of the city school system.

EAA officials said this week Gov. Rick Snyder approved a deal to relieve the authority of $12 million in lease payments it owed the Detroit schools for the past two school years for operating its beleaguered 15-school reform district inside former DPS buildings.

“The governor has been clear with me that the debt was solved for all of us. As such, we presented a budget to our board that eliminated the lease obligations to Detroit Public Schools,” EAA Chancellor Veronica Conforme said in a statement.

EAA officials disclosed the never-before-publicized debt relief deal this week after an April state Treasury Department email surfaced showing the EAA owed the old Detroit school district $12 million for back rent, as well as $2.8 million for information technology and public safety services. In July, the state created the debt-free Detroit Public Schools Community District to resume running the city’s public schools.

But Detroit schools officials are disputing the EAA’s contention that a deal exists to erase the $12 million rent bill — and Snyder’s office is encouraging the two education entities over which the governor has direct control to hash out a deal on their own. The EAA’s schools are set to rejoin the Detroit school district in July 2017.

“The EAA and DPS will ultimately come together as one entity, and they need to work to make that happen in a thoughtful way,” Snyder spokeswoman Anna Heaton said Wednesday in a statement. “It is up to them to decide how to best resolve any outstanding issues.”

The service contracts will be paid off, but the rent will be forgiven since DPS now is no longer saddled with past operating debts, EAA spokesman Robert Guttersohn said.

“We had the blessing of the governor’s office to assume it was going to be forgiven or applied to the EAA,” Guttersohn told The Detroit News on Wednesday.

But the renamed Detroit Public Schools Community District said Wednesday the EAA’s unpaid bills — totaling $14.8 million — were still under negotiation. Since 2013, the city school system has leased 15 buildings to the EAA for $1 a year, plus $910 for each student enrolled to cover their share of legacy operating debts shouldered by all DPS students.

“DPSCD aspires to provide excellence in education for its students. It is on a path to achieve that goal. EAA’s payment of the millions of dollars that it owes will further help achieve that goal,” district spokeswoman Chrystal Wilson said in an email.

Unpaid rent

Snyder’s office did not confirm or deny a deal was reached on the debt.

“Treasury officials remain committed to help facilitate discussions, but at the end of the day this remains an issue to be negotiated between DPS and EAA,” Treasury spokeswoman Danelle Gittus said Wednesday in a statement.

The EAA’s unpaid rent became public this week after former Highland Park school board member Robert Davis obtained an email Chief Deputy State Treasurer Thomas Saxton sent Detroit school officials in April about Conforme seeking debt relief from former DPS Emergency Manager Darnell Early.

Saxton said he advised Earley against signing an agreement to forgive the debt before he left the district in February.

Conforme chided Saxton for not signing off on the debt relief for the EAA.

“Everyone, including Treasury, needs to follow suit,” Conforme said. “I am shocked and disappointed that there has been such miscommunication about this issue... .”

The state Treasury Department, which oversees the Detroit school district through its interim emergency manager, Steven Rhodes, also has been involved in talks about the EAA debt.

Budget plan

State and EAA budget documents show the unpaid rent debt to DPS was not calculated in the reform district’s 2015 spending plan, making it appear as though the EAA’s budget was balanced after it erased a deficit last year. The EAA’s board approved an amended 2016 fiscal year budget in June that relies on not having to pay Detroit schools $6 million in order to be balanced.

In June, the Republican-controlled Legislature narrowly approved bailing out DPS and creating a new debt-free district after more than a year of debate and negotiations over the cost and governance of public education in Detroit.

Charter schools lobbyist Gary Naeyaert said Wednesday he never recalled the Snyder administration saying the EAA would benefit from the DPS financial rescue package.

“While it may have been somewhere in the fine print, it was not in anything that I read,” said Naeyaert, executive director of the Great Lakes Education Project. “It’s not surprising that an administration that allows its DPS emergency manager to not pay its (pension) bill would also let its EAA not pay its rent.”

About $163 million of the Detroit school district’s accumulated debt was from unpaid pension bills dating back to October 2010.

The EAA has been an “expensive experiment” with “ambitious goals” of improving schools in Detroit with persistently low test scores and student achievement, said Robert Floden, dean of the College of Education at Michigan State University.

“I have yet to see reports about what we learned by this expensive experiment,” Floden said. “This recent revelation about unpaid rent indicates that the experiment was even more expensive than we thought.”

Great Lakes Education Project, the pro-charter school lobbying arm of the powerful DeVos family, has been aligned with Democrats in criticizing the EAA and how it has functioned as an experimental school reform effort since 2013.

“The sooner we exit the DPS-EAA financial quicksand, the better,” Naeyaert said.