EAI Gets Contract To Develop N.Y. District Budget

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Education Alternatives Inc. won a consulting contract last week to draw up a new budget for a school district in New York state.

The $100,000 contract with the Wappingers Central district, though small, could not have come at better time for the beleaguered school-management company.

Minneapolis-based EAI lost its contract with the Baltimore district last year in a conflict over finances, while the Hartford, Conn., school board voted last month to drop its partnership with the company. A proposal suggested earlier this month by Hartford city officials to keep EAI involved in managing the district's finances remained up in the air last week. (See Education Week, Feb. 14, 1996.)

EAI reported a net loss of $4.6 million for the quarter that ended Dec. 31. The loss was related to the cancellation of the Baltimore contract and write-offs of expenses stemming from its Hartford contract, the company said.

The decision by the Wappingers district came as observers were questioning whether the company had any future in the nascent field of private, for-profit management of public schools.

"The reports of our death as a company are greatly exaggerated," EAI Chairman John T. Golle told participants last week at an investment conference in New York City that showcased education companies. (See story, page 1.)

The 11,000-student Wappingers district serves a 101-square-mile area near Poughkeepsie, N.Y., that has been hard hit by recent layoffs at the International Business Machines Corp., one of the largest local employers.

The school board voted 5-4 on Feb. 12 to hire EAI to develop a budget that is about $4 million less than the $99 million spending plan proposed by the school administration. The board includes several members who were elected on a slate opposed to rising school taxes.

Peter F. Donnelly, the board president, said last week that the board also sought proposals from other school-management companies, such as Alternative Public Schools Inc. of Nashville, Tenn.

However, "the company with the greatest assets and resources and experience was EAI," Mr. Donnelly said. He looked closely at the company's bruising experiences in Baltimore and Hartford but concluded that opposition by the teachers' unions and others was to blame for the problems that arose.

"Instead of admitting there is something wrong with education and trying to fix it," he added, "it seems that most educators just try to cover it up and demand more money from the taxpayers."

New and Improved

Both EAI and Mr. Donnelly said that if the budget contract goes well, the company could move into a larger management role.

The Wappingers contract fits the new approach that Mr. Golle said EAI was taking in pursuing contracts. No longer will the company sign contracts that can be canceled on short notice, he said. The company will begin with specific consulting arrangements with agreed-upon fees and will move into management from there.

Also, the company is targeting less politically volatile districts, Mr. Golle said. "We have to protect the company's assets from capricious political decisions."

Vol. 15, Issue 22

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