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Published in Print: July 8, 1998, as For-Profit Alternative Schools Are Hot Commodities

For-Profit Alternative Schools Are Hot Commodities

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Private, for-profit alternative schools can't multiply fast enough for parents and principals anxious to find new venues for students cast out of public schools.

Take the Spring Creek School. Just 1 1/2 years after entrepreneurs swung open their doors here, tractor drivers were heaving dirt to pave the way for several new log-cabin classrooms last month.

Set amid towering pine trees in the Rocky Mountain foothills, the 150-student school is bursting at the seams, and this multiple-classroom expansion is designed to welcome 90 more students.

"Even if we shut our marketing department, we'd keep growing by word of mouth," Cameron Pullan, the school's director, said as he patrolled Spring Creek's forested grounds, which look like a summer camp. The residential school charges $2,990 a month.

Thousands of similar for-profit ventures have cropped up in the past decade. They're helping to fill the void left by states with insufficient funds or political will to set up public alternative schools for the increasing number of students expelled for carrying weapons or drugs on campus.

But while many parents are relieved to find places where their children can finish school and receive the psychological counseling they need, some educators contend that many of these costly enterprises put profit before academic quality and offer students a mediocre education at best.

"There's big money in bad kids," said Lon Woodbury, an education consultant in Bonners Ferry, Idaho, who helps parents choose private schools. "Some people are educational visionaries ... but it's easy to have a cookie-cutter formula and run kids through like a factory."

Many companies set up shop in this region, Mr. Woodbury added, because states like Montana and Utah tend to have fewer regulations on operating such enterprises. What's more, the beautiful, remote setting here discourages runaways and helps administrators control the environment of the young men and women in their care.

No Dominant Company

Many of these enterprises are large, established corporations with therapeutic facilities that serve hundreds of students in several states. Others are mom-and-pop operations where students are sent by exasperated parents to be home-schooled in surrogate families. Many schools, especially those that employ therapists, charge parents as much as $40,000 a year for tuition and room and board. Companies that operate nonresidential day programs serving local populations often earn their revenue by contracting with public schools for a per-pupil fee.

Although an exact tally of such schools can't be pinpointed, education market analysts say the growth of this niche is impressive. For-profit alternative schools now constitute a multibillion-dollar industry that is expanding at an annual rate of 25 percent, according to Michael Moe, an education industry analyst with NationsBanc Montgomery Securities, a San Francisco-based investment banking firm.

"The market is growing significantly, and without a large dominant player, there's room to make a reasonable profit," Mr. Moe said.

A large number of school districts, saddled with violent and disruptive youths, have been more than willing to give these businesses a try.

That's a trend Robert H. Crosby can happily attest to.

Since the federal government required states to pass zero-tolerance laws by 1996 requiring districts to expel students who brought weapons to school or risk losing federal funds, Mr. Crosby's business has taken off.

The chief executive officer of Richard Milburn High School Inc., which has been contracting with districts to run for-profit schools for at-risk youths for 23 years, said his company operated 10 schools in 1996; Today, the Salem, Mass.-based enterprise runs 42 schools in seven states. In the past three years, annual revenues for the high schools have jumped from $1 million to $5 million, he said. And while Mr. Crosby expects construction costs and staff development to eat into initial profits, he projects that annual earnings for the business will reach $30 million in the next five years.

"We are the Edison [Project] of the at-risk school world," said Mr. Crosby, referring to the successful for-profit company run by Christopher Whittle that manages public schools under contracts and charters. With flexible schedules and smaller class sizes, Richard Milburn schools look a lot like their public-sector counterparts. All are accredited, employ certified teachers, and use essentially the same curricula as the local feeder schools.

Mr. Crosby argues that it makes financial sense for districts to engage his company rather than shell out money for construction, maintenance, and staffing themselves. And unlike some other private educational enterprises, he said, his schools are popular with teachers' unions because they remove the most disruptive students from the classroom.

"Our promise to schools is we'll take their worst kids and at no further cost to them," Mr. Crosby said.

Some state governments are even helping companies like Mr. Crosby's grow. Texas now requires its 22 counties with populations of 125,000 or more to set up alternative schools for expelled students. Seeing this as an opportunity to branch out into the alternative school field, Children's Comprehensive Services Inc., a $90 million Nashville-based company that runs private treatment programs for children with severe emotional disturbances, recently won public contracts to set up three schools for at-risk youths in the state.

Paying the Bills

Day programs for at-risk youths are not the only growing sector. Residential schools like Spring Creek that advertise a broader array of mental-health services for drug-dependent and violence-prone teenagers are multiplying as well.

Spring Creek is the newest member of the Worldwide Association of Specialty Programs. The Laverkin, Utah-based organization that provides education and management services to a small group of independently owned private schools expects its membership to grow.

"In the last four years, more kids are getting in trouble for alcohol- and drug-related problems, and parents are turning to private boarding schools 'cause it's the only place to go," said Tony Pallotto, the president of Teen Adolescent Placement Services, a nonprofit parent-support group based in California's San Diego County. Mr. Pallotto founded the organization in 1994 after a fruitless search for a suitable placement for his son, who was addicted to heroin. "The hospitals that treat children are told they can't help anymore when insurance runs out," he said. And the local public alternative school reminded him of a juvenile hall.

Faced with similar choices, Mr. Pallotto said, many parents like him are often compelled to make a serious financial investment.

"We are in it for the duration no matter what it costs," Nancy C. Callahan said last month as she enrolled her 16-year-old son, Patrick, at Spring Creek School. She and her husband, who live in Carmel, Calif., have spent $65,000 in the past four years on private, alternative schools for their son. A bright student who was failing school, Patrick had an eating disorder and was severely overweight and suicidal when he enrolled at another private school four years ago. Now, he is earning A's and B's and has dropped 150 pounds, said Ms. Callahan, exulting over a recent report card from an affiliated school.

"Our son is our only child. I'd rather spend it on this than a new Corvette," Ms. Callahan said.

Skimping on Academics?

Although a significant number of students at such high-priced schools come from highly affluent families, some parents mortgage their houses and tap into their children's college savings to pay the tuition.

"My mom literally sacrificed everything. She moved out of the house and in with my sister," said Ryan, an 18-year-old student at Spring Creek who has been enrolled here and at another private alternative school for nearly two years. He entered them after overdosing on drugs three times and doing time in drug-treatment centers. Now, he is sober and has college plans.

While graduation from high school is more than many parents of these teenagers expected, some educators who accredit for-profit alternative schools suggest that parents should be getting more academic bang for their bucks.

"A lot of the for-profit schools are in the business of getting kids and working on behavior and drug rehabilitation, and school is [just] something they have to do," said Connie Love Amos, an educational specialist with the Utah education department, who routinely reviews such schools' accreditation status. "Many are business people and not educators, and they don't understand the importance of education principles," she said.

Ms. Amos is specifically concerned about schools that offer "packet learning" in which students are handed curriculum materials to study on their own. She recalled one school that operated in a strip mall above a laundromat and used a curriculum that was "about as inviting as a tax form."

She also frowns on programs light on formal lectures.

In one of Spring Creek's log-cabin classrooms on a recent day, 13 students pulled out their assignments and began to study in silence. One girl penciled in answers on a U.S. history worksheet while another studied for a geometry test.

While each classroom at Spring Creek has a certified teacher, there are no classwide lessons and no group projects here. Each student works on a different lesson based on an individualized academic plan because every student entered school at a different time. The school plans to add periodic lectures on certain subjects when students need a refresher course on basic skills.

But Mr. Pullan, the school's director, maintains that this independent-study approach fits with the school's self-help philosophy.

For some students, it's a breeze.

"I took 65 tests last week: American Literature, a married-and-single class, and U.S. Government ..." said a 16-year-old girl, as she sped through a dozen more subjects.

She is one of the school's brightest students, Mr. Pullan explained, and her pace is hardly average. Students aren't asked to take more than 12 tests a week, he added.

But while students like her say the school is less than a challenge, others find it much harder. As 15-year-old Ryan flipped open the day's lesson, he admitted it would be easier to understand if he had been taught the material, especially because students must score 80 percent to pass an exam here.

"I like public school better. I was doing well, getting A's and B's. It's hard to give myself my own little lectures," he said.

"Independent study is not the best system for everybody," Mr. Pullan acknowledged. But he said his teachers are available to give students individualized tutorials, which is a benefit that most public school students don't enjoy. And in this disciplined environment--which rewards course completions with social privileges--many students perform far better than they ever did in public schools, he said.

'Prepared for Life'

Some smaller, family-run operations with low student-staff ratios have won praise from education consultants. But while most private alternative schools provide students opportunities to excel academically and go to college, they shouldn't be compared with top prep schools that churn out Ivy Leaguers, Mr. Woodbury, the private school consultant from Idaho, said.

"The number-one priority is to get their heads screwed on straight. The second thing is academics," he said.

"We aren't preparing them for Harvard. We are preparing them for life," added Mr. Pullan.

That couldn't be more true of 18-year-old Brook Tebbs. Little more than two years ago, she was a drug-addicted prostitute living on the streets of Santa Barbara, Calif. "I pawned everything to get heroin. I tried quitting, but I couldn't do it on my own." Finally, her mother hired escorts to take her to drug rehabilitation and then enroll her at Cross Creek School, a private alternative school in Laverkin, Utah, affiliated with Spring Creek. She took self-esteem seminars and participated in group therapy sessions, as well as academic classes. Now, she has an $18,000-a-year job as a member of the staff at Spring Creek, where she helps usher other troubled adolescents toward graduation.

Ms. Tebbs' calls these schools lifesavers. "It's awesome, because you get credits and there's a lot of support. Now," she said, "I've got all the tools to start all over again from square one."

Vol. 17, Issue 42, Page 1&JPS

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