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Publishers Probe Text Warehouses After Scandals

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Stung by million-dollar losses, a group of textbook publishers is pressing for reforms in the book-depository system, which some critics have labeled a wasteful relic of "horse-and-buggy days."

The publishers' task force, which is expected to report to state textbook directors next year, could recommend the first changes in decades in the system, which in 15 states requires storage of textbooks in a central location before they are distributed to districts.

The task force was created in the wake of scandals involving privately owned depository firms in Texas and Utah. The incidents cost publishers millions of dollars and resulted in litigation and changes in the two states' book-distribution practices.

Until those recent cases, the depositories--in most instances, private firms that contract with publishers to store state-adopted textbooks and distribute them to districts--have remained virtually unchanged since they were created in the early part of the century, observers say.

States at that time ordered publishers to use the facilities to ease shipping difficulties and ensure that textbooks remained available to remote schools.

But some researchers argue that the growth in the publishing industry and improvements in transportation have turned the depositories into "dinosaurs" that drive up the cost of books by requiring publishers to pay unnecessary warehousing costs.

"Why would anyone need such a thing in the days of the United Parcel Service and Express Mail?" asked Arthur Woodward, research associate in the graduate school of education and human development at the University of Rochester.

Despite such criticism, the publishers are unlikely to propose abolishing the system, according to Donald A. Eklund, vice president of the school division of the Association of American Publishers.

"We're trying to make the system as efficient as possible," Mr. Eklund said. "If a state requires publishers to maintain a depository, we want to make sure the publishers' interests are looked out for."

The publishers' task force on the issue, established this past summer, is expected to meet twice a year. Any proposals it makes would have to be approved by state education departments or legislatures before taking effect.

Utah, Texas Problems

Although the task force plans to examine all depositories, it probably will focus on the problems publishers have encountered in Utah and Texas, Mr. Eklund said.

Those troubles began in February 1987, when the Salt Lake City-based Utah-Idaho Supply Company, which has operated the state's textbook depository since 1917, went bankrupt.

Under Utah law, publishers are required to store state-adopted textbooks in the central depository. Districts buy their books either from the depository or directly from publishers, according to Shawna S. Stewart, textbook manager for the Utah Department of Education.

"The state has no business in it," she said. "It's a private business."

The firm's failure initially resulted in huge losses for many publishers, who did not receive their payments for books purchased at the depository, according to Ms. Stewart. Since then, however, a creditors' committee has worked with the company to obtain some back payments.

The publishers now use a new depository in Clearfield, she noted.

Then last spring, operators of the Texas School Book Depository in Dallas--notorious as the site from which Lee Harvey Oswald allegedly shot President John F. Kennedy in 1963--failed to pay publishers what they were owed for textbooks, according to the Texas Education Agency.

The depository, the largest of seven in the state, was afflicted with "cash-flow problems," the state agency found.

Several large publishers, includ4ing D.C. Heath and Company and the McGraw-Hill Book Company, reacted by suing the depository. In addition, the state board of education changed the method for paying for textbooks.

Under the new policy, the state will pay the publishers and the depository owners separately. In the past, the state paid the depository owners, who took an 8 percent fee and paid the balance to publishers.

The board also acted to allow publishers to transfer their books from one depository to another. As a result, 26 publishers switched to another depository, leaving only six publishers in the Texas School Book Depository.

'Horse-and-Buggy Days'

Textbook critics say they hope the problems of the Texas and Utah depositories will spur state policymakers to abolish such costly relics of "horse-and-buggy days."

"They are dinosaurs that are still there, and no one knows why," said Mr. Woodward of the University of Rochester.

"The idea made sense years ago," he added, when "states wanted to ensure that a supply of textbooks was available. That's not a problem anymore."

Many publishing firms now maintain their own regional distribution centers around the country, according to Mr. Eklund.

Noting that publishers generally pay about 8 percent of the cost of their inventory to depository firms, Mr. Woodward called the depositories a "weird layer of bureaucracy" that adds costs and "doesn't serve any particular purpose."

California, Virginia, and five other states that adopt books statewide do not use depositories, he noted, and districts in those states are able to obtain textbooks.

In addition, the cost of maintaining inventory in a depository makes it difficult for small firms to compete in the 15 states that mandate them, suggested Harriet Tyson-Bernstein, the author of a critique of textbooks published last spring by the Council for Basic Education.

Defending Depositories

Despite such contentions, state officials defend depositories as a useful method of textbook distribution.

For one thing, noted Ms. Stewart of Utah, many state-level educators continue to "want books available at a warehouse in the state."

Even in an era of improved transportation, central warehouses continue to help hold down costs, argued Sam Bundy, textbook director in the North Carolina Department of Education.

Publishers "ship to us in large quantities," he said. "That saves them a considerable amount of money. If they would ship to school systems directly, that would be more expensive."

North Carolina is the only state that maintains its own depository.

In any case, most of those involved in the debate agree, the states are unlikely to do away with depositories any time soon.

"Once something becomes institutionalized in a state," Mr. Woodward said, "it's hard to break out of."

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