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Directions 2000: A Forum: Privatization: An Interim Report Card

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Have the school "privatizers" gone from boast to bust? It's too soon to say, and privatization remain' the political catchphrase of the 1990's. But with the Edison Project failing and Education Alternatives Inc. flailing, a teacher would look at these two underperformer and say it's time to call in the parents for a serious talk.

Bear in mind that Edison on and E.A.I. are no longer new kid in school. Edison, the brainchild of the media whiz Christopher Whittle, was initially placed in the gifted-and talented track. Mr. Whittle brashly pledged in 1991 to "invent and build a new American school." But what began as a bold plan to build 1,000 of these "new" private schools was scaled back to a goal of managing 200 "old" public schools. Today, a humbled Edison hopes to open three to five public schools by the fall of 1995.

The other major privatizer, E.A.I., currently manages a single public school in Dade County. Fla., plus nine more in Baltimore. In October, the company made headlines by winning a contract to manage all 32 public schools in Hartford, Conn. But E.A.I.'S report card in Baltimore shows mostly C's and D's--mathematics and reading scores have declined at E.A.I.-run school for the past two years, at the same time cores were rising throughout the rest of the district-forcing Mayor Kurt L. Schmoke to put E.A.1. on probation. (See story, page 3.) Earlier E.A.I. contracts with Salt Lake City and Duluth were terminated prematurely or not renewed.

In fairness, the school-privatization story also has a positive side. E.A.I. deserves high marks for the physical makeover of its schools in Baltimore, where it took dingy, dangerous buildings and transformed them with paint, bright lighting, and security into places fit for learning. One can also cite the case of Public Strategies Inc., a small, unheralded firm who e president now serves under contract as the superintendent of schools in Minneapolis. This experiment is worth watching.

Nonetheless ,there is no avoiding the larger story in the sputtering performance of privatization's two high-profile players, Edison and E.A.r. What has gone wrong? And what does it mean for the remainder of the decade and beyond? On the yellow-brick road to private management of America's schools, four gaping pothole are making for a rough ride:

(1) The magicians have been all top hat and no rabbit. Like many high-intensity salespeople, Mr. Whittle and E.A.I.'S president, John Golle, aren't selling just another product-they're selling magic. E.A.I.'S brochure claims that students in its schools "outperform the national norm, gaining, on average, 1.5 grade levels for each year of school." Edison's prospectus is even more sensational, promising "quantum gains in students' academic performance and in the quality of their lives... "

Meanwhile, back in the real world, teachers have no time for wizard and magic. They know that the stuff of education comes down to one thing: the complex reality of dayto- day engagement between teacher and pupil, and the intensity of commitment that both parties bring to the task. Pupil progress is hard won, and even the be t of schools have only limited leverage on pupil performance. A study by the National Assessment of Educational Progress ,for example, determined that 89 percent of variability in students' math scores was accounted for by only four variables: the number of parents in the home, level of parental education, type of community, and local rate of poverty. None of these four variables is controlled by the school. Of course, this is exactly the stubborn reality that E.A.I. is butting up against in its Baltimore schools, where pupil test scores are falling, not rising.

Some privatizers offer other forms of wizardry. They pledge to root out public-sector extravagance and incompetence, and to set a high standard of managerial excellence. On this score, people still inclined to believe in magic should read the Oct. 31, 1994, profile in The New Yorker of Edison's rise and fall: "Nearly everyone agrees that Whittle tried to do too much at once, that he was spread too thin, that he failed to heed signs of trouble, that he overpaid executives and didn't fire them when they failed to perform, and that the company lacked management controls and discipline. Everyone agrees that costs soared out of control." Surely no one is eager to graft these management practices onto public schools.

(2) "Quarteritis" has led to cutting corners. Privatizers often seem less interested in pupils' report cards than in their own quarterly reports to investors. This is understandable, inasmuch as these firms live or die by their financial performance. This corporate focus, however, is often at odds with education's very different bottom line: student learning. For example, E.A.I.'S profits in Baltimore are determined by how deeply it can slash per-pupil spending. Most of what E.A.I. cuts, it gets to keep. This creates powerful incentives to "economize" by increasing class sizes, cutting back on expensive special-education programs, and eliminating "nonessential" teachers of art, music, and other specialized subjects.

This is exactly what E.A.I. has done in Baltimore. Class sizes have ranged as high as 48 students. Experienced teacher aides were fired and replaced by interns. E.A.I. " saved" another $1 million by taking hundreds of learning-impaired students out of special classes and mainstreaming them en masse in regular classes (an investigation by the U.S. Education Department found "serious violations" of laws governing special education).

Perhaps the most disturbing aspect of E.A.I.'S tenure in Baltimore has been the company's misreporting of pupil test scores. Bear in mind that, in the eyes of investors and the public alike, pupil test scores are perhaps the measure of a privatizer's potential. In August 1993, E.A.I. claimed that students in its schools advanced, on average, nearly an entire grade level after just three months of instruction. E.A.I. later admitted that the claim was inflated-several key test scores had actually declined. Last June, company and school district officials again claimed major test-score gains at E.A.I.run schools. However, last October, chagrined Baltimore officials acknowledged that test scores at E.A.I. schools had actually fallen for the past two years, at the same time scores were rising districtwide. This startling revelation came two weeks after E.A.I. signed its $200 million contract with Hartford.

different set of problems. Despite the fact that Edison remains stuck at the drawing board and has yet to operate a single school, corporate partners have been persuaded to put tens of millions of dollars into the venture. The New York Times (Oct. 30, 1994) cites critics who depict Edison as "an oversold fantasy that would use America's schoolchildren as bait for investors." Belatedly, Wall Street has caught on, with some analysts concluding that Edison can't come close to meeting its pledge to educate public school children at the existing per-pupil rate while still turning a 10 percent profit. Edison originally planned to raise $2.3 billion in equity and loans. Today, it must be content with the $30 million in investments the company recently announced-money needed just to stay in business. (See Education Week, March 22, 1995.) Oh, yes, the children. It's easy to overlook them in this discussion of corporate marketing, profiteering, and P.R. In the brave new world of school privatization, it is natural to view children as just so many "units" to be processed with profits contingent on cutting per-unit costs.

Not surprisingly, the privatizers welcome this challenge. Coming from the world of business, they are keen to transform schools by applying industrial models and Harvard Business School efficiencies. The "problem," here, is that schoolchildren are not widgets. Widgets are punched out of cold steel with perfect predictability. Children are warm, fragile, fractious human beings. When it comes to kids in classrooms, the factory assembly line is hardly a relevant model

(4) The cream-skimmers have curdled. What initially lured entrepreneurs was the prospect of tapping into a virgin $260 billion public education marketplacE' Their basic idea was simple: Se! the magic of private-sector-styl management to well-finance suburban school districts. Private managers would sweat the fat out of a school system, drive down per-pupil expenses, and skim off a handsome share of the savings.

But there was a catch. Most affluent suburban school systems are performing well. A 1994 Gallup poll found that 70 percent of parents nationwide give their children's public schools a grade of A or B (if the poll had been limited to suburban parents, the percentage percentage of satisfied customers would be even higher). In short, these schools "ain't broke," so their school boards have no incentive to pay big money for the privatizers' "fix."

With doors slamming all across suburbia, E.A.I. and others have had little choice but to focus their marketing on poor, beleaguered school systems in America's inner cities. There, any skepticism about the privatizers' sales pitch is softened by a fatalistic attitude that says "things are so bad, what do we have to lose?"

It is no accident that E.A.I.'S biggest contract is with Hartford, the poorest urban community in Connecticut. The company's aggressive pursuit of the Hartford deal reminds one of the dog that chased the big yellow school bus-and caught it. Now what to do with it? E.A.I.'S corporate officers and other privatizers must confront the dilemma that has bedeviled even the best of public educators: how to create successful schools in a context of urban decay. Actually, E.A.I.'S challenge is even more daunting. It has to make these schools work and squeeze out a profit.

More likely, E.A.I. will discover that there is no blood in this particular turnip. Edison, as reported in The Wall Street Journal (Oct. 24, 1994), has made a similar discovery. The company's executives have "found that many

of the. chool district [they] had targeted-especially in the We t and Southeast-do not spend enough money on schools to make a privatization contract financially viable."

The original idea was to skim a share of their clients' wealth. Instead, E.A.I. and others could end up sharing only in their clients' poverty.

Which brings us to an unofficial fifth-and admittedly speculative- reason for the lackluster record of school privatization. That reason is culture clash. Clearly, educators and entrepreneurs are very different types. To generalize, while teachers seek to do good, businesspeople seek to do well. In Baltimore, Hartford, and other cities where public schools are struggling, administrators driven by desperation have entered into contracts with entrepreneurs motivated principally by profit. As in any problematic marriage, it is the children who are caught in the middle and stand to suffer when things go sour.

"J don't see anyone that's shown yet how you make a profit from public schools," says the Stanford University economist Henry Levin. There is also more to the story: Perhaps education shouldn't be profitable. Perhaps it shouldn't become just another marketplace transaction.

Bear in mind that public schools perform a crucial civic function: educating all who come through their doors; molding good citizens; instilling a common sense of values, purpose, and destiny. For good reasons, mass education is a public responsibility in every country in the world. It is best managed by the public and with full public accountability.

The lessons are clear. If school administrators are failing to lead and manage, then hold them accountable. But don't superimpose another layer of (private) management. Likewise, if there are legitimate savings to be squeezed out of school budgets, then squeeze away. However, those savings should be reinvested in schools, not siphoned off as contractor profits.

Vol. 14, Issue 27, Pages 34, 39

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