For-Profit Firm Hired To Manage Schools in Duluth
The Duluth, Minn., school board last week entered into an unprecedented agreement with a for-profit school-management firm to provide the district with an interim superintendent of schools.
At the same time, officials of Education Alternatives Inc. said in interviews last week that the publicly held, Minneapolis-based firm may be on the verge of assuming responsibility for the operations of several districts around the country.
In Duluth, the school board contracted with the firm to name an employee of Education Alternatives as the district's superintendent.
The four-month, $40,000 contract also stipulates that the firm conduct a search for a permanent superintendent and study the possibility of running the district itself on a long-term basis.
Michael P. Maxim, the president of the Duluth school board, said the board's arrangement with Education Alternatives is "a fortuitous situation for both of us.''
It not only lets the firm enter a new market, he noted, but the district is provided with experienced leadership during difficult times.
"We'll see whether all of this works out after we've had some crises,'' Mr. Maxim said. "It is still very much a honeymoon period.''
David A. Bennett, the president of Education Alternatives, said last week that his firm is also negotiating a longer-term contract to take over the management of the Green Brook school district in central New Jersey and that the board of the Winona (Minn.) Independent School District has invited it to submit a proposal to manage that district.
All told, Mr. Bennett said, the firm is currently negotiating with more than 15 districts to manage all or part of their operations.
The firm has had no problem drafting contracts that conform to state laws, Mr. Bennett said, adding that three state school chiefs have expressed interest in having Education Alternatives manage districts that the states have taken over.
"Our company is not interested in building private, proprietary schools in competition with the public schools,'' Mr. Bennett, a former superintendent of the St. Paul schools, said. "We want to be the public schools.''
"We think we will establish an entirely different and alternative form of school governance where we treat schools like public utilities,'' Mr. Bennett said. "We manage them with strong public regulatory control, but private, for-profit management.''
Education Alternatives currently operates one public school, South Pointe Elementary School in Dade County, Fla., and two private elementary schools--one in Eagan, Minn., the other in Paradise Valley, Ariz.
In December, the company also entered into a novel partnership with Florida state officials who are hoping to persuade three districts there to agree to be managed by the company.
To date, however, neither Education Alternatives nor any other for-profit company has taken over the management of an entire district, experts on public-school governance said last week.
The closest precedent, they said, may be the contract that Boston University has had to run the Chelsea, Mass., public schools.
Willis C. Nowell, the former chairman of a Nashville-based firm that tried unsuccessfully to get into the business of running public-school districts in 1990, last week described the management of a school district by a for-profit company as "a difficult venture.''
"And yet,'' Mr. Nowell said, "I honestly believe that a private company with the correct management strategies can significantly improve the quality of instruction and lower the costs of [a district's] operation.''
Answering to Two Bosses
The $40,000 contract between Education Alternatives and the Duluth board costs about $5,000 more than what the district would pay an interim superintendent in salary and benefits over the same period, officials said.
It calls for the firm to provide the 13,000-student district with a licensed interim superintendent, whose appointment must be approved by the board, who will carry out the board's wishes while remaining an employee of the firm.
"This is a little tenuous,'' Mr. Maxim, the school-board president, acknowledged, noting that the interim superintendent will have to answer to "two bosses''--the district board and the company president.
One advantage to the arrangement, Mr. Maxim said, is that the interim superintendent will have access to all the resources and experience of Education Alternatives.
But, he noted, the board can revoke the contract at any time if the firm fails to perform.
"It has got to be very important to them that this works,'' Mr. Maxim said.
"If the community doesn't like what they are doing,'' Mr. Maxim said, "they are out on their ear.''
But George M. Balach, a school-board member, last week expressed fear that, now that the contract is signed, Education Alternatives would give the district little extra help and turn its attention instead to soliciting new business.
The contract requires the firm to help balance the district's budget, guide the board through the consolidation and closing of several schools, and conduct the search for a permanent superintendent to take over after the contract expires on June 30.
In addition, the contract calls on the company to subcontract with an accounting firm, KPMG Peat Marwick, and an operations and maintenance firm, Johnsons Control World Services Inc., to study whether there are better ways to manage the district's finances as well as its instructional and non-instructional programs.
The three-firm consortium, known collectively as the Alliance for Schools That Work, has collaborated since last fall, Mr. Bennett said.
Mr. Bennett estimates that the study alone would cost about, but said the firm included it in its proposed contract in hopes of persuading the board to contract with the firm on a longer-term basis.
Mr. Maxim said the board "has neither opened nor shut the door'' on such a possibility.
"I don't see any intent on the part of the board right now to discuss it,'' he said. "We have too many things in front of us.''
Disagreements on Board
The Duluth school system has been without a permanent superintendent for about 18 months. Its interim superintendent, Charles G. Anderson, resigned this month after management disagreements with several of the five new members of the nine-member district board.
Mr. Maxim said the board had put off trying to agree on a permanent superintendent because of divisions on the board over district finances and school closings.
In addition, observers said, the district has had little success recruiting qualified candidates.
Mr. Maxim said the interim superintendent will have to deal with a $1.5-million budget deficit and continuing disagreements between the board and district administrators.
Mae E. Gaskins, the vice president of school operations and marketing for Education Alternatives, has temporarily stepped into the interim superintendency.
She said her firm intends to show the district "how more of that instructional dollar can be spent on educational programs.''
Vol. 11, Issue 26, Pages 1, 18Published in Print: March 18, 1992, as For-Profit Firm Hired To Manage Schools in Duluth