For-Profit Management of Public Schools

Can for-profit companies solve the problems facing public education by
running America's public schools? A handful of entrepreneurs and a few Wall
Street investors think so. The entrepreneurs are managing public schools --
either as charter schools or under contract to school districts. The Wall
Streeters are promoting education companies as hot new investments for the
1990s.

The number of public schools run by for-profit companies remains relatively
small -- about 60 in the 1997-98 school year. That number includes 14
schools operated under contract to school districts; the rest are charter
schools. While the number is small, it's growing -- especially in the
charter arena -- and these public for-profit schools could have a major
impact on the push to privatize public education.

The Edison Project is the leading for-profit public school management
company. Edison opened its first four schools two years ago, this year the
company runs 25 schools in 13 school districts. Edison's first four schools
opened for the 1995-96 school year. Thirteen of the current Edison schools --
in Miami, Florida; in Flint, Lansing, and Mount Clemens, Michigan; in Sherman
and San Antonio, Texas; and in Wichita, Kansas -- are operated under
contracts with the school district. The other 12 are chartered by either the
school district or the state.

The only other company with a contract to manage a public school is Beacon
Management (formerly Alternative Public Schools), which runs Turner Elementary
School for the Wilkinsburg, Pa., school district. A state court has ordered the
district to terminate the school management agreement at the close of the
1997-98 school year.

The For-Profit Management -- Charter Connection

The charter school laws of at least 12 states (Arizona, California,
Colorado, Connecticut, Illinois, Kansas, Louisiana, Massachusetts, Michigan,
Minnesota, New Jersey, and North Carolina) allow for-profit companies to operate
publicly funded charter schools. In several of these states, charters have
become the point of entry for school management companies. Arizona,
Massachusetts, and Michigan are the leaders in for-profit charter school
management, each with from 12 to 17 charter schools being run by for-profit
companies in the 1997-98 school year.

The Massachusetts charter school law not only allows companies to open
charter schools, it provides them with additional funding. Not surprisingly,
the state is becoming a magnet for school management companies. The Edison
Project runs two charter schools in Boston, and Beacon Management (formerly APS)
runs one in Chelmsford. Sabis International, the for-profit owner/operator of
seven private schools in Europe and the Middle East, also runs two Massachusetts
charter schools, as well as one in Chicago.

Additional for-profit charters have already been approved for 1998 and
beyond. Arizona has granted EAI a 15-year charter for 12 schools in the Phoenix
area, two or three of which were scheduled to open in 1997. Other companies
that operate multiple for-profit charter school sites include: Excel Education
Centers (7 schools in Arizona), Heritage Academy (2 schools in Arizona), and
Horizon Charter (2 schools in Arizona), Charter School Administration (5 schools
in Michigan), Education Development Corporation (4 schools in Michigan), and the
Leona Group (4 schools in Michigan).

The companies claim they'll improve student learning -- and make a
profit. Experience doesn't support their claim. Education Alternatives, Inc.
(EAI), was the pioneer school management company. EAI went from managing one
school in Miami, Florida, nine schools in Baltimore, Maryland, and the entire
Hartford, Connecticut school district in 1995 to not having a single public
school contract last year. Baltimore canceled the EAI contract when student
learning in the nine EAI-run schools didn't improve despite the fact that the
company received $20 million more than the city would have normally spent on
those schools. The Hartford contract was canceled in continuing disputes over
finances. And the Miami contract wasn't renewed when students in the EAI school
showed no academic improvement compared to similar students at a publicly run
Miami school.

The students at Wilkinsburg, Pennsylvania's Turner Elementary, run by Beacon
Management/APS for two years, have slipped academically under for-profit
management. On the state standardized tests, Turner students scored lower than
they had the year before the company took over and lower than students in the
other Wilkinsburg elementary schools, where scores increased substantially.

The only school management company that has shown any positive result in
student learning is Edison -- and Edison's results are mixed and not as good
as the company portrays them. According to the Edison Project, student
achievement at its schools has risen dramatically. A more objective analysis of
the available data shows that student achievement in a couple of the Edison
schools is quite good, in most it is average, and in a couple very
disappointing.

Edison's school management raises another issue in corporate takeovers of
public schools -- profit. Here too, despite the Wall Street hype, the
record is not encouraging. By its own account, Edison puts between $1 and $1.5
million of company money into each school the first year. But this is a
for-profit company that cannot and will not continue to operate at a loss. When
it's time for Edison to begin making money will the company cut back the program
in its schools -- or demand more money from school districts?

Because Edison and most of the other school management companies are
privately held, their finances can remain secret. Not so EAI, a publicly traded
company that must file detailed financial reports with the SEC. Those reports
show that EAI never made a profit managing schools, despite receiving additional
money in both Baltimore and Miami. Some years the company was profitable and a
few people made a lot of money -- from investments and stocks, not school
management.

Why, since for-profit management has produced lower student achievement for
more money, do some still see it as a viable option? Entrepreneurs and
investors see money to be made -- probably not in running schools, but like
EAI, through taking the company public, trading its stock, and investing its
assets. Some school boards and superintendents think they've found a silver
bullet -- someone who will come riding into town, improve their schools, and
solve their problems.

Of course there is no silver bullet, no outsider who can solve the problems
of schools and children. In the end, school improvement is accomplished through
the hard work of school staff, with administrative and parent support.
Everything the for-profit companies say they'll do has already been done in
publicly run public schools. Every curriculum and program they use is available
for every school in America to implement on its own -- without adding
corporate managers and without subtracting corporate profit.

• 187 Privatization