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Baltimore To Terminate EAI Schools Contract

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Baltimore abruptly ended its 3-1/2-year experiment with school privatization last week when the school district announced it would terminate its contract with Education Alternatives Inc.

EAI's five-year contract to run nine city schools has been one of the most closely watched and contentious school-reform efforts in the nation. Its early collapse raised new questions about the future of the Minneapolis-based company and about similar efforts elsewhere by private companies to run public schools.

Mayor Kurt L. Schmoke and members of the Baltimore school board jointly concluded last week that the contract with EAI should be terminated in the middle of its fourth year.

The city and the company have been locked in a stalemate for months over Baltimore's efforts to reduce the amount it would pay EAI this year. And many school officials in the district had become disillusioned with the agreement.

Superintendent Walter G. Amprey, long a backer of the privatization experiment, said he had mixed feelings about the decision.

"We think we led the nation going into this," he said in an interview. "We can now probably give some lessons on how you sever from it."

'Let's Move On'

Mayor Schmoke, who has ultimate control over the school district's finances, had sought to cut $10 million, and later $7 million, out of the $44 million EAI was scheduled to receive this year.

The mayor said the cut was necessary to reduce a projected $32 million shortfall in the district's overall budget of $647 million.

"We can't go on negotiating back and forth," Mr. Schmoke told reporters on Nov. 22. His comments came the morning after a closed-door meeting with the school board during which board members reportedly told the mayor they had become disillusioned with EAI.

"They said make a decision and let's move on," the mayor added.

John T. Golle, the chairman and chief executive officer of EAI, said his company had engaged in "good faith" discussions with Baltimore for several months but could not accept a $7 million cut.

"We are gravely disappointed with the potential cancellation, but we are not willing to cut back on what we're offering the children of Baltimore," Mr. Golle said in a written statement on the day the city announced the termination.

It was unclear last week how the cancellation would affect the company's prospects. The company's statement said only that the financial impact of the city's move "is unknown at this time."

Mr. Golle, however, told local reporters earlier in the week that the company could survive the loss of the Baltimore contract.

Cancellation of the contract requires a majority vote of the school board and 90 days' notice. The board scheduled a special meeting for Nov. 30, and district officials said they hoped to serve EAI with official notice by Dec. 1.

EAI said in its statement that it expects to continue to work in its Baltimore sites during the 90-day notice period "to develop an orderly transition plan to ensure minimal disruption to students." A company spokesman declined to elaborate on the prepared statement.

School board members reportedly told Mayor Schmoke last week that the nine EAI-run schools could be transformed into "enterprise schools," which are district schools managed by their principals and community school-improvement teams.

The Baltimore Teachers Union, EAI's loudest local critic, hailed the news.

"The company never lived up to the promises it made, and the contract has become a luxury that we no can longer afford," said Linda Prudente, a spokeswoman for the union.

Lengthy Negotiations

City officials had been negotiating with EAI since June to wring some savings from the company's contract. The dismissal came after two weeks of shaky negotiations.

On Nov. 16, Mayor Schmoke threatened to end the contract. EAI officials later reached a tentative agreement on the $7 million fee reduction, but that agreement apparently left many details unresolved, and by last week the company's future in Baltimore was again in doubt.

EAI reportedly sought assurances of a contract extension that would allow it to recoup any fee reductions.

On Nov. 20, the mayor attended a meeting of about 200 parents at City Hall to discuss the future of EAI. Mr. Schmoke listened as both fans and foes of the privatization experiment gave their views about whether it should be continued. EAI reportedly bused in dozens of its supporters to praise the experiment.

Some observers had suggested that Mr. Schmoke and other city officials were seeking a face-saving way out of the contract, which has generated enormous controversy since it began. City officials, the union, and the company had squabbled repeatedly over test scores and other issues relating to the company's performance.

An independent evaluation of EAI's educational efforts by the University of Maryland-Baltimore County, released last summer, found only modest gains in standardized-test scores and criticized the company for poor strategic planning. (See Education Week, Sept. 6, 1995.)

Series of Difficulties

The Baltimore news comes at a difficult time for EAI, which has also faced uncertainty in Hartford, Conn., where it has a contract to manage the school district and run several schools there.

The company has been enmeshed in a dispute with Hartford officials over how much it will be paid for its services. EAI also lost its chief operating officer in October in a management dispute.

The company got a boost earlier this month when privatization advocates retained control of the Hartford school board--although by a slim margin--despite a spirited campaign to elect board members who would dump EAI. (See Education Week, Nov. 15, 1995.)

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