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Published in Print: May 1, 2002, as Mich. May Intervene In Inkster-Edison Standoff

Mich. May Intervene In Inkster-Edison Standoff

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A tussle between the Inkster, Mich., school district and Edison Schools Inc. may lead to state intervention in order to force the system to pay its $1.2 million bill for the company's services.

Following a stalemate that has lasted several weeks, the state recently threatened to appoint a manager to oversee the district's finances if the 1,500- student system does not pay up.

The situation is being watched outside Michigan, in part because Inkster is the only place where Edison Schools, the nation's largest for-profit manager of public schools, operates an entire district's schools and administration.

Moreover, the flap comes at a sensitive time for the New York City-based company. Its stock price dropped 25 percent last Thursday to $8 a share, following a steady slide from its recent high of $14.05 on March 27. The market apparently is responding to a smaller- than-expected role for the company in a proposal to run Philadelphia schools.

As for the Inkster dispute, the district's school board claims that enrollment has further declined under Edison, and it says the company has withheld financial records from it. For that reason, the board, which retains some fiscal duties, has withheld management fees from Edison.

Officials from Edison, however, say the company has had a good rapport with the community. Edison, they add, plans to stay.

Looking for Help

The Inkster district, in a predominantly African-American suburb of Detroit, turned to Edison two years ago after rumblings of a state takeover. The district was then facing a $1.9 million deficit in its $12.8 million budget, an exodus of students to nearby charter schools, and dismally low graduation rates. ("Mich. District Hires Edison to Manage Its Schools, Feb. 23, 2000.)

Edison, which has a contract to run the Inkster schools until 2005, has invested about $5 million in infrastructure and technology—money the district would have to pay the company if the contract were voided.

Adam Tucker, a spokesman for Edison, said last week that the company had no immediate plans to pull out of the district. Its officials are trying to figure out a way to get their payment and improve relations with the school board, he said.

"We absolutely want to continue to be a partner in Inkster," Mr. Tucker said. "At the same time, we want the board to comply with and live up to the terms of our management agreement. That hasn't happened fully."

He added, "While there are still some issues, people are pretty satisfied" with Edison.

The Inkster school board had planned to discuss proposals to pay Edison Schools at a meeting on April 9, but that meeting was canceled because only three of the seven board members showed up.

Last week, though, dozens of Inkster residents voiced concerns about Edison at a public meeting on the school situation. Some residents worried that the schools had been turned over to business interests, while others complained that there weren't enough books and adequate athletic facilities to meet students' needs, according to news reports.

"After we negotiated a contract with Edison, our schools were turned over to corporate America, and they have failed us," former Inkster school trustee Claudia Wright told The Detroit News in an April 23 story. Officials of the Inkster district did not return calls for comment last week.

State Mulls Next Step

T.J. Bucholz, a spokesman for the Michigan Department of Education, said agency officials were considering whether to recommend invoking a state law that gives the state the authority to force the district to pay its bill.

"We're in the process of making the determination of whether to pull that trigger," he said. "We have strongly suggested Inkster pay its bill."

A state-appointed fact-finding team that investigated the situation determined recently that the district should pay the Edison bill, Mr. Bucholz said. In addition, the state determined that the Inkster school board had illegally approved a collective bargaining contract with teachers in March without Edison's permission, he said.

If the district does not pay Edison and the state finds the system is still in financial trouble, the state will appoint a financial manager, Mr. Bucholz added. He said state schools Superintendent Thomas D. Watkins Jr. likely would decide the state's next step this week or next. Edison asked the state in March to appoint a financial manager.

Payment Problems

Nationally, the reviews of Edison Schools have been mixed. The for-profit company, hailed by some for its willingness to take on and reorganize troubled and hard-to-manage schools, has yet to turn a profit in its 10 years. It now manages 136 schools in 22 states.

Last month, the company received news that it would be given a contract to manage 20 Philadelphia schools. Pennsylvania Gov. Mark S. Schweiker, a Republican, and some other state officials had called for the company to manage more of the district's schools. ("Groups Named to Lead Dozens of Ailing Phila. Schools," April 24, 2002.)

In Florida, meanwhile, a dispute over unpaid legal fees threatened negotiations last week between Edison and the United Teachers of Dade over a partnership to open nine new charter schools in Miami. The company has enjoyed a strong working relationship with the Miami-Dade County union, an affiliate of the National Education Association and the American Federation of Teachers.

On a more positive note, school officials in Baltimore reported last week that test scores at the three Edison-run schools in that city have improved significantly.

Mr. Tucker said that Edison's financial situation has been improving, and that it is showing smaller losses than in the company's early years. One of the reasons the company has lost money, he said, is that it puts so much money into schools to improve facilities. Edison lost $8.3 million in the quarter ending Dec. 31, 2001.

Furthermore, Mr. Tucker said, the company's strategy is to work with districts over several years.

Other management companies have seen similar falling-outs when districts have tried to rescind their contracts, said Jeanne Allen, the president of the Center for Education Reform, a Washington-based research and advocacy group that favors school choice and experiments with private management of public schools.

"It's a challenging time for private management companies," Ms. Allen said. She said she believes, however, that the presence of private management holds districts more accountable for finances, which districts otherwise could conceal from the public.

"It's harder to finesse the finances," she argued.

Ms. Allen suggested that the Inkster school board was looking for a scapegoat to obscure the district's financial problems.

"Here you have a district that all but collapsed—when people had choices, they exited," she said. "Now, they're biting the hand that feeds them, and they're going to ruin the relationship."

Vol. 21, Issue 33, Page 3

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