Published Online: January 24, 2012
Published in Print: January 25, 2012, as Market in Flux as Nonprofits, For-Profit Firms Manage School

Firms Scrap for Share of School-Management Market

A recent report on the organizations that manage public schools depicts an industry in flux, as the number of for-profit companies and the student enrollment in their schools continue to grow, though not as quickly as for their nonprofit counterparts.

Since the late 1990s, the number of for-profit "education management organizations," or EMOs, has tripled, to nearly 100, and the number of states those entities work in has nearly doubled, to 33, the new research shows. Over the past few years, though, the growth of some of those companies, particularly large providers, has slowed somewhat, even as the number of students they serve has increased.

Meanwhile, the number of nonprofit EMOs has continued to grow, and their schools' enrollment over the past few years has boomed.

The annual report, "Profiles of For-Profit and Nonprofit Education Management Organizations," whose 2010-11 edition was released this month by the National Education Policy Center, offers a mixed picture on the academic success of outside operators of public schools, as measured by their schools' ability to make adequate yearly progress, the main yardstick under the federal No Child Left Behind Act. It offers a dimmer assessment of for-profit virtual schools' performance by that oft-criticized standard.

The trends among for-profit EMOs likely reflect a number of factors, according to those familiar with the industry. Some say for-profit providers are finding it harder to open new schools, as authorizers of charters set more rigorous standards for performance and begin to look more favorably on nonprofit managers of schools.

Enrollment Trends

At the same time, student enrollment in schools managed by for-profits will continue to grow in the near term, the researchers predict, as those schools, many of which start by serving students in earlier grades, expand to serve older students on their existing campuses.

Growth Pattern

A new report traces the growth of private entities that oversee schools, known as “education management organizations.” Among for-profit EMOs, it found that growth over the most recent year for small EMOs was strong, while growth among large organizations leveled off, then dipped.

"We're going to see these school sizes grow larger and larger," said Gary Miron, a professor of education at Western Michigan University and the report's lead author. "There's always growth, because they're feeding from the [lower grades]."

The report defines EMOs as for-profit or nonprofit organizations that have "executive authority" over a school—typically, a charter school, but in some cases, a district school—rather than those providing specific services at them.

From 1999 through 2011, the number of for-profit EMOs surged from 33 to 99, and the number of states in which they operate has more than doubled, from 16 to 33. While the growth in the number of large for-profit EMOs stagnated over the past few years, smaller for-profits continued to grow, according to the research by Mr. Miron and his colleagues.

Yet student enrollment among for-profit providers has continued to increase, rising from 70,743 in 1998 to 394,096 in 2011, and adding nearly 20,000 students during the most recent year.

Among nonprofits, the growth was slightly greater, with the total number of organizations managing schools rising from 183 to 197 during the most recent year examined. From 2002 to 2011, student enrollment among nonprofit providers jumped from 20,133 to 384,067, and rose significantly, by about 146,000 students, from 2010 to 2011.

This is the 13th edition of the "profiles" report. Mr. Miron said he and his co-authors collect information from EMOs, as well as state agencies, charter school sponsors, advocacy groups, and other sources. He says he gives the EMOs the opportunity to confirm or correct the information. The National Education Policy Center, which published the report, is a research center based at the University of Colorado at Boulder. Its work includes conducting critical reviews of reports produced by think tanks.

Robin J. Lake, the associate director of the Center on Reinventing Public Education, in Seattle, said that the slowdown in the number of large for-profit EMOs was not surprising. Some charter school authorizers, such as states and districts, have taken a more favorable view of nonprofit operators than for-profit organizations in recent years, said Ms. Lake, whose center is affiliated with the University of Washington.

Among authorizers that approve charter schools, nonprofits are developing a "reputation for more consistent, and breakthrough results," said Ms. Lake, who studies charter schools. Overall, the trend today "is weighing heavily toward the nonprofits," she said.

For-profit operators had a more prominent role during the early days of charter schools, in the 1990s, Ms. Lake said. Over the past decade or so, as nonprofits grew more prevalent, they benefited by learning from the early mistakes of for-profit companies, she said. Thanks to those lessons, nonprofits did not attempt to expand too quickly or operate too many schools over too large a geographic area, and they focused on providing sound oversight of schools and support for teachers, Ms. Lake said.

Alex Medler, the vice president for research and evaluation at the National Association of Charter School Authorizers, with headquarters in Chicago, said he expected the enrollment growth among for-profit managers' schools to continue, "but not forever," as they come closer to their capacity in the schools where they now operate.

The academic showing of the EMOs profiled in the report was uneven. Forty-eight percent of the schools run by for-profit EMOs made adequate yearly progress. Nonprofits fared better, with 56 percent of their schools making AYP.

Those figures are comparable to overall public school performance, according to one recent estimate. A report released last year by the Center on Education Policy, a think tank in Washington, found that 52 percent of the nation's schools made AYP during the most recent year studied, and 48 percent did not.

Performance Indicators

Many observers have cast doubt on the validity of AYP as a measure of student progress, saying that the federal No Child Left Behind law has produced unrealistic and inconsistent academic targets across states and does not do enough to account for student academic growth.

One for-profit organization listed in the report, EdisonLearning, was found to have just 34 percent of its schools making AYP. But Michael E. Serpe, a spokesman for the New York City-based company, said the report in some instances incorrectly described EdisonLearning as the manager of schools not making AYP, when in fact the company was only providing services aimed at turning them around academically.

"The focus of our company has changed dramatically over time," said Mr. Serpe, and has shifted away from managing schools to providing turnaround work. Bringing about academic improvements at schools takes time and significant effort, he added, and AYP does not do enough to account for progress in that area.

Mr. Miron responded that his data are updated as often as possible, and that companies described in the report, including EdisonLearning, were given the opportunity to comment on the data.

The report found that a much smaller proportion of virtual schools managed by for-profit EMOs—27 percent—made AYP. Those academic-performance figures were for full-time virtual schools and not schools in which students were taking an online course or two, he said.

Like many education researchers, Mr. Miron considers AYP a relatively "crude measure" of overall school performance. Yet he also said the poor performance of virtual schools was "a bit of a mystery" and a cause for concern.

Susan Patrick, the president of the International Association for K-12 Online Learning, or iNACOL, in Vienna, Va., argues that many of the students coming into virtual schools arrive after having struggled in traditional academic settings, and that AYP does little to credit virtual settings for helping those students make progress.

The question about students served by virtual schools is "where are they when they come into the program," Ms. Patrick said. "We need to be collecting data that is outcome-based on students, and on meeting individual student growth."

Mr. Medler of the charter school authorizers' group cautioned about making sweeping judgments about the overall performance of for-profit or nonprofit operators of schools, based on AYP or other measures. The performance of individual entities, in his experience, has little to do with their organizational status.

"The broad class of schools doesn't matter as much as the individual actors," Mr. Medler said. What's important, he said, is that "high-quality providers and operators would be the ones approved to be operating new schools."

Vol. 31, Issue 18, Pages 8-9

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