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Privatization: An Interim Report Card

Have the school "privatizers" gone from boast to bust? It's too soon to say, and privatization remains 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 underperformers and say it's time to call in the parents for a serious talk.

Bear in mind that Edison and E.A.I. are no longer new kids 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 schools for the past two years, at the same time scores were rising throughout the rest of the district--forcing Mayor Kurt L. Schmoke to put E.A.I. on probation. (See related story ) 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 whose 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.I. 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 potholes 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 wizards and magic. They know that the stuff(See education comes down to one thing: the complex reality of day-to-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 best 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 "non-essential" 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.

The Edison Project points up a 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 announcedmoney needed just to stay in business. (See related story

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