HGSE News: Classrooms, Inc.--Will Privatization Save Public Schools?

On an unusually hot morning in the South Bronx something strange was happening at the Harriet Tubman Charter School.
A great commotion—the sound of beating drums followed by shouts of jubilation—erupted in the hallway outside the principal’s office. A small parade of teachers and aides formed behind a triumphant-looking five-year-old girl, her tassel of braids encircled by a golden paper crown. The girl, named Avgayil, had just finished reading her 25th book, a small paperback titled More Spaghetti, I Say!

As Avgayil burst into the principal’s office, Michele Pierce, Ed.M.’95, the school’s founding director, greeted her with clamorous applause. In a small but confident voice, Avgayil then read the book aloud to a group of adults who had gathered in the doorway. “We believe it’s an occasion to celebrate whenever one of our kindergartners reads 25 books,” Pierce says.


photo: Stella Johnson © 2002

Avgayil is not the first kindergartner at Harriet Tubman to read 25 books. With few exceptions, all of the kindergartners read and write at a first-grade level. That is especially remarkable given that students in the South Bronx have a history of scoring lower on reading and writing tests than any other students in the country.

There is one other unusual aspect to the learning that is taking place at Harriet Tubman: somebody is making a profit on it—or at least trying to. The school is operated by Edison Schools, Inc., the single largest for-profit educational management organization—or EMO—in the United States. The company manages some 150 public schools in 23 states from its headquarters on Manhattan’s Fifth Avenue. Its student population, at close to 85,000, dwarfs all but a few dozen school districts in the country. Despite plummeting stock values, high debt, and a recent investigation by the Securities Exchange Commission, Edison plans to keep growing.

But the idea that a company might attempt to make a profit from learning—albeit a small one—has sparked tremendous controversy. In Philadelphia, about an hour-and-a-half drive from Michele Pierce’s reading kindergartners, that controversy has come to a head. Since the state seized control of the city’s troubled schools last December, Pennsylvania’s plan to yield a number of them to for-profit EMOs has made front-page news and has drawn intense scrutiny from students, parent groups, and teacher unions. One vocal critic of the plan, Philadelphia Mayor John Street, summarized the concerns quite clearly last November when he told a New York Times reporter, “We don’t believe that people who are making decisions about educating our children should be looking at our children on the one hand and at their fiscal bottom line on the other.” In April, the Philadelphia school system voted to turn over the management of 42 schools to EMOs, of which Edison received almost half.

School Ties
Edison Schools has indeed found itself caught in a fiery debate in which both sides claim to want the same thing: to improve K-12 education, particularly for poor, urban children. On one side, Edison and other privatization enthusiasts believe that running schools for profit will give educators greater incentives to raise achievement. On the other side, critics of for-profit schools argue that doing well and doing good are mutually exclusive endeavors.

Edison’s potential success in Philadelphia could give the for-profit EMO movement its biggest opportunity to date to prove its worth and open up a new channel for urban school reform.

Still, according to Stephen Tracy, Ed.D.’84, Edison’s chief architect behind the deal, Edison’s potential success in Philadelphia could give the for-profit EMO movement its biggest opportunity to date to prove its worth and open up a new channel for urban school reform. As senior vice president for development, Tracy searches the country to find new school prospects for the company. Edison lured Tracy from his position as the superintendent of schools in New Milford, Connecticut, in 1993, when the company was still the Edison Project—more or less a team of researchers and entrepreneurs with a bright idea: to tie school reform to the profit motive.

Edison’s philosophy and its school design were enough to convince Tracy to join the private sector after nearly a quarter-century in public schools. “Public schools change slowly, even under great pressure. Given all the talk about A Nation at Risk and school reform in the 1980s and 1990s, it’s incredible to me how much public schools have resisted true reform,” he says. In contrast to the public sector where large, discordant teams of administrators move at a snail’s pace to improve schools, Edison faces the constant threat of losing clients, he explains. At an Edison school, if test scores droop, parents complain or teachers quit, the company stands to lose its contract with that school system’s board. Edison is also beholden to its investors, who have supplied some $500 million for the research behind the company’s design. “Those investors have some serious skin in this game,” Tracy says. “They want to see performance, financially and in terms of student achievement.”

Conservative education pundit Chester E. Finn, Jr., M.A.T.’67, Ed.D.’70, the president of the Thomas B. Fordham Foundation, also joined the Edison Project during its inception. Finn recalls how the group envisioned the ideal school “completely uncontaminated” by the clutches of government. “It was great fun,” he says. “We essentially got paid to brainstorm the perfect school design.” That design has remained largely intact to this day, says Finn. It includes, among other elements, the Success for All reading curriculum, Spanish instruction in every grade, monthly computer-based assessments, and a whopping 90 minutes of professional development time for each teacher, every day. The company also mandates an eight-hour school day, as well as a longer school year. Since it opened its first school in 1995, Edison has purchased more than 30,000 computers for its students’ families. These efforts have added up to success in most Edison schools: the company boasts that it has raised achievement in 84 percent of them.

The Potential for Profit
The financial payoff, however, may take some time. Despite its propensity to attract investors, Edison has yet to turn a profit. In fact, after its stock fell sharply earlier this year, the company had to find new financing that amounted to $40 million to fund its new acquisitions in Philadelphia and elsewhere. As anyone at the company would freely admit, Edison does not foresee making money until it assumes management of many more schools; it would do well, say company sources, to capture around 1 or 2 percent of the 92,000 public schools in the country. Since Edison receives the same public funding, per pupil, that district schools receive, it can make a profit only by running its schools more efficiently—that is, for less money. The more schools it manages, the more cheaply it can purchase computers, curriculum packages, and supplies. Edison also curbs costs by having just one central administrative office, where a staff of about 350 oversee operations at all of its schools. In contrast, districts of comparable size have as many as 1,500 administrators on the payroll.

Chester Finn recalls how the Edison Project envisioned the ideal school “completely uncontaminated” by the clutches of government. “It was great fun,” says Finn. “We essentially got paid to brainstorm the perfect school design.”

Yet if and when Edison does turn a profit, it will be a relatively small one. The profit margin for EMOs hovers at around 7 percent. (Software companies may enjoy margins of as much as 30 percent.) But EMOs are the love child of a new kind of venture capitalist, says Peter Stokes, the executive vice president of Eduventures, Inc., a research and financial advising firm that specializes in educational markets. “These are investors who believe they are challenging the status quo. It’s really a politicized investment,” he says.

Whether or not the private sector should plunge its sticky fingers into the public pot is not a new debate—and doing so is not a new phenomenon. The past two decades have seen privatization in the postal service, energy services, and many parts of public education outside of whole-school management. McGraw-Hill sells textbooks to students; Marriott charges them for school lunches; Coca-Cola holds exclusive “pouring rights” in certain districts. For-profit companies have had a large and relatively inconspicuous role in education for a long time, says Edison’s chief development officer Manuel Rivera, Ed.M.’75, Ed.D.’94, who, like Tracy, works to develop new Edison partnerships with schools. “I remember when I was a superintendent,” says Rivera, who led the Rochester (New York) Public Schools from 1992 to1994. “I would sign million-dollar contracts with textbook companies or companies that provided school lunches. They were making profits, and with no accountability. No one was out there holding a sign that said, ‘Hey, you’re profiting off our kids.’”

Building an Empire—And Holding It Accountable
Last year, the education industry brought in over $100 billion in revenues—a number that must have appealed to Edison’s founder and CEO, Christopher Whittle, media entrepreneur and former chairman of Esquire magazine. In the late 1980s, Whittle had earned a reputation for blending the sacred—education—with the profane—business—when he launched Channel One, a TV program produced by and for teens that delivered 10 minutes of news with 2 minutes of commercials to classrooms across the country.

Edison curbs costs by having just one central administrative office, where a staff of about 350 oversee operations at all of its schools. School districts of comparable size have as many as 1,500 administrators on the payroll.

Since Whittle founded the Edison Project in 1992, a number of EMOs have started, and many have folded. About 35 remain, but mergers and acquisitions keep this number in constant flux. Edison is, by far, the largest EMO, and one of few that has also started managing public, noncharter schools, such as the ones in Philadelphia. But almost none of the EMOs has turned a profit. “A lot of these companies came on like gangbusters, saying that any reasonable business could do a better job. It is a lot tougher than most companies thought it would be,” says Henry Levin, director of the National Center for the Study of Privatization in Education at Columbia University’s Teachers College. “Schools are extremely labor intensive. They are hard to run, and the profit potential is very small.”

Skeptics fear that for-profit EMOs might withhold important information about their faltering finances in an effort to keep a positive public image. Glen Wilson, Ed.M.’98, assistant director of the Commercialism in Education Research Unit at Arizona State University, recently coauthored a report on the for-profit educational management industry under the supervision of Alex Molnar, a nationally recognized opponent of commercialization in schools. Wilson says that while conducting his research for the report, he had difficulty getting straight answers from some companies, especially when it came to questions of profitability. “These companies will always put their best face forward. One EMO operating out of Phoenix told parents it was the ‘Harvard of Elementary Schools.’ Meanwhile, the company didn’t even have enough money to mail the report cards,” he says.

Other researchers question whether or not EMOs’ achievement claims will always represent reality. One research report by Gary Miron and Brooks Applegate at Western Michigan University looks at scores from 10 Edison schools that have been in existence the longest. In their report, Miron and Applegate conclude that Edison Schools do improve from year to year on norm-referenced tests, which measure gains in students knowledge over time, but on criterion-referenced tests, which measure whether or not students meet state standards, Edison students fared no better than students from surrounding public schools. “It is clear from our findings that across all schools we studied, Edison students did not perform as well as Edison claims,” said Miron in a press release.

The Results
Edison management does not hide the fact that some of its schools have incurred a bevy of grievances, low scores, and bad press. More than 20 schools have ended contracts with the company for a host of reasons. In one inflammatory case, the Edison Charter Academy in San Francisco drew charges of discrimination against African-American and low-achieving students. In the end, though, parents voted to keep Edison running the school. “No one here will tell you that we’ve hit the ball out of the park every time. Far from it, in some cases. But the fact is that we are improving achievement in the majority of our schools,” says R. Gaynor McCown, Ed.M.’87, Edison’s senior vice president for business development and a former senior education policy analyst for the Clinton administration.

“A lot of these companies came on like gangbusters, saying that any reasonable business could do a better job. It is a lot tougher than most companies thought it would be,” says Henry Levin, director of the National Center for the Study of Privatization in Education.

Edison recently hired RAND, a nonprofit, nonpartisan research organization, to conduct an independent evaluation of achievement in the company’s schools and of claims in its annual reports. RAND will not complete the study until 2003, although it has released preliminary findings that verify scores listed in Edison’s annual reports. “Edison is an institution that is committed to learning. We want to learn from our mistakes, and we have to stay afloat,” says McCown. “That’s how any business works.”

Textbook Edison
The Harriet Tubman Charter School had a turbulent beginning. The school’s board had contracted originally with another EMO for start-up funding. But in the summer of 2001, just before the charter opened its doors, financial woes forced the EMO to consolidate with the bigger, brawnier Edison. Michele Pierce and the school’s board worried that the community would not welcome the change. Only months earlier, New York City residents had voted to keep Edison out of five area schools, one of the schools less than a mile from Harriet Tubman. “Parents wondered what was going on. The teachers I’d hired wanted to know what that meant for their jobs,” Pierce recalls.

For now, Pierce enjoys the amenities that Edison provides. All of her teachers have laptops with projectors and e-mail, and Edison provides a 24-hour help desk for computer questions. Although Pierce has not integrated every aspect of Edison’s design into the running of Harriet Tubman, she has mimicked the company’s policy of bringing parents into the school at the end of every trimester to discuss their children’s progress. “We give the parents their children’s report cards in person,” says Pierce. So far, the school has had 100 percent attendance at those meetings.

Just as the Harriet Tubman Charter School represents a departure from the standard Edison rubric, the Wintergreen Interdistrict Magnet School in Hamden, Connecticut, goes as far as any school in exemplifying the company’s vision. On a sunny day in April, the K-8 school looks more like a country club nestled at the edge of a wilderness area and upper-middle-class residential neighborhood than a public school. High arched ceilings and walls of windows pour natural light into the building. A poster of Thomas Edison holding a lightbulb grins over a gleaming, glass-enclosed computer facility in the front hall.

As in many Edison schools, Wintergreen starts each day with a 15-minute (advertisement free) closed-circuit television “news” broadcast, written, filmed, and produced by Wintergreen students. The students then embark on a 90-minute stretch of reading and writing, using the Success for All curriculum, or arithmetic, using the University of Chicago’s Everyday Math program. Starting in kindergarten, all of the students take Spanish, and if Dale Bernardoni, Wintergreen’s principal, gets her way, all of them will play an instrument before they graduate.

“We want this to be a one-stop facility,” Bernardoni says. “A lot of students have breakfast here and then stay until dinnertime.” Posters touting afterschool yoga, karate, and journal-writing classes hang throughout the foyer of the school. Roughly three-quarters of the students take part in the afterschool programs.

In the End, What Runs the School?
Kathy Morse, a music teacher who is taking her 90 minutes of professional development time in the teachers’ lounge, adopts an evangelical tone when extolling the Edison model. “I can teach here,” she says. “We are actually given the tools and support to teach here.”

RAND will not complete its study of Edison until next year, although it has released preliminary findings that verify scores listed in Edison’s annual reports.

Morse’s sentiments are not unusual. A recent National Education Association-funded study conducted by Peter W. Cookson Jr., C.A.S.’91, of Columbia University’s Teachers College, found that the “striking investments” that Edison makes in teachers often result in high morale. Teachers attend yearly professional development seminars, for instance, and take part in career-ladder programs. Teacher pay at Edison varies from district to district, but Edison sources say it is competitive with district salaries, often higher to compensate for the longer school day and year. The Cookson study suggests that the extra teaching time may contribute to teacher burnout, though. Some Edison schools do have high teacher attrition rates, but the average attrition rate for Edison schools has dropped to around 17 percent, only slightly higher than the national average. Wintergreen, though, has an astoundingly stable teacher population. Few teachers have left since the school opened, says Bernardoni, and each one plans to stay for the next year.

Certainly no one could describe the vibe at Wintergreen or at Harriet Tubman as overly corporate. Critics have raised warnings that for-profit schools would lead to assembly-line instruction and cookie-cutter classrooms, but under Bernardoni’s and Pierce’s watchful gazes, learning at these two school looks chock-full of humanity. At both schools, students move through the halls with a restrained chaos typical of their ages. They talk out of turn in class sometimes. They seem, well, like regular kids.

Whether or not Pierce and Bernardoni are regular educators is another question altogether—one that may well explain why their schools flourish while other Edison schools flounder. The key to the company’s success, at least in terms of academics, may revolve around hiring truly dedicated school leaders and teachers. Perhaps Michele Pierce puts it best when she explains what really underlies the learning at Harriet Tubman: “This school works because the people here care a lot about it. We’re a community here, a family, and we believe that learning is about relationships,” she says. “EMOs don’t really run schools in the end—people do.”

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