'America's Choice' Taps Profit Motive
America’s Choice School Design, a school improvement program that has enlisted 547 schools in 16 states in its brand of comprehensive reform, plans to announce this week that it is loosening its nonprofit moorings and changing to a for-profit company.
The purpose is to raise capital and attract talent that will fuel plans for development and growth, say officials at the nonprofit National Center on Education and the Economy, the research organization here that developed and operates America’s Choice.
“This will no longer be a boutique operation,” said Marc S. Tucker, the president and founder of the NCEE, which will have majority control of the new company.
Like other nonprofit initiatives involved in comprehensive school reform, America’s Choice no longer can attract the large sums of money that foundations and the federal government once lavished on it for research and development. Instead, it sees its future tied to the delivery of services to help schools improve, a demand stoked by the federal No Child Left Behind Act that other school reform programs are also experiencing.
That growing market niche for services has been richly supported by federal grants and by funding distributed by states.
Federal grants for comprehensive school reform, for instance, made $320 million available to school districts for the 2004 budget year, according to Hugh Burkett, the director of the national comprehensive-school- reform clearinghouse at Learning Point Associates, an education research group based in Naperville, Ill. The selection of providers has been left to districts, but federal law requires that schools meet 11 different criteria for receiving such money.
By far the greatest contributor to the growth of the educational services sector is the federal Title I program, which received $12.3 billion for fiscal 2004, and can be used for whole-school programs benefiting disadvantaged students.
At the same time, some states have endorsed and steered districts toward specific improvement programs or lists of programs.
Mississippi, for example, has a contract with America’s Choice to help in planning for school improvement efforts, said Susan M. Rucker, the associate state superintendent for innovation and school improvement. However, she said, districts can make their own choices about which programs to use. ("At State's Urging, Mississippi Schools Use Reform Model," Oct. 13, 2004.)
Justifying the Move
America’s Choice needs new money to develop its standards-based curriculum and training materials, Mr. Tucker said in explaining the reasons for the move to for-profit status in an interview at the NCEE’s headquarters in Washington.
Equally important, he said, as a $40 million-a-year operation, the program needed the management and marketing prowess that it could not attract without offering talented executives an equity stake, which the NCEE could not do as a nonprofit.
The highest-profile addition to the board is Thomas H. Kean, a former New Jersey governor and the chairman of the federal 9/11 Commission. Mr. Kean, the president of Drew University in Madison, N.J., also was the chairman of the New American Schools Development Corp., a business-backed group that selected the NCEE’s prototype for America’s Choice to receive start-up funds in 1995.
Mr. Kean’s New York City investment firm, Quad Ventures LLC, typically adds up to $6 million to the education companies it invests in.
With money and personnel now in place, the for-profit program could expand to serve thousands of schools rather than hundreds, Mr. Tucker said.
Some other experts in the field agree with that analysis.
America’s Choice is one of the most enterprising of the dozens of comprehensive-reform programs operating in this marketplace, according to Henry Levin, the founder of a popular nonprofit school reform program called Accelerated Schools.
“They really are very well organized in terms of regional offices and so on—they’ve gotten huge amounts of both federal and foundation money as a nonprofit,” said Mr. Levin, the director of the National Center for the Study of Privatization of Education, at Teachers College, Columbia University.
In the database that the Southwest Educational Development Laboratory in Austin, Texas, maintains on comprehensive-school-reform awards, America’s Choice is listed as the fourth-largest program in number of participating schools. Success for All, a nonprofit initiative, is the largest; followed by Lightspan, a for-profit program purchased a year ago by Plato Learning Inc.; and Accelerated Schools.
Foundation Money Dries Up
Mr. Tucker said that the NCEE was confident in changing the status of America’s Choice after research—notably an extended study published in February by the Consortium for Policy Research in Education, based at the University of Pennsylvania—indicated “that we were getting the effects we had set out to get in terms of student achievement.” ("Studies Find Benefits From ‘America’s Choice’ Design," April 21, 2004.)
But despite positive research and loyalty among schools that have tried America’s Choice, he said, there have been “clouds on the horizon of the program,” especially its declining support from foundations. The new for-profit approach should address such concerns, he said.
The program started developing its model in 1989, drawing on research into educational practices in other countries whose students fared well on international comparisons of academic achievement. Over the past 15 years, the NCEE has spent more than $100 million, provided by philanthropies such the John D. and Catherine T. MacArthur Foundation as well as the federal government, to develop its curriculum and training materials.
But over the past couple of years, those sources of money have largely dried up, Mr. Tucker said.
At the same time, the NCEE was finding itself hard-pressed to ramp up high-quality services to support its network of participating schools, which had doubled annually over its first four years.
Starting about six years ago, America’s Choice slowed the growth in the number of participating schools, stopped its marketing efforts, and developed a training program to prepare for large-scale future growth, Mr. Tucker said.
The impact of a nonprofit operation becoming a for-profit venture is uncertain, said Mr. Levin of the center for the study of privatization.
“There are a lot of nonprofits that are generating huge surpluses, that then go into salaries and employee perks,” he said. “There are slick nonprofits that don’t operate very differently than for-profits.”
Even so, he and other observers agree, there is a difference in perception.
“People in education believe if any money goes to profit, that’s being taken away from operation of the school,” Mr. Levin said.
What’s more, when things go wrong, for-profit status “can be a lightning rod” for criticism, said J. Mark Jackson, a senior analyst for Eduventures, a Cambridge, Mass.-based firm that tracks the education industry.
On the other hand, experts also point out that most of the companies schools do business with are profit-making enterprises, from textbook publishers to food-service providers and bus companies.
America’s Choice officials insist that their clients will not see a downside.
“One hundred percent of our staff has signed up to continue, and we will not be raising prices because it’s for-profit,” said Judy B. Codding, who will leave her post as the vice president of the NCEE to become the new chief executive officer of America’s Choice. “We’ve talked to all our major clients thus far, and not one has had a negative reaction.”
‘On the Right Track’
The agenda for America’s Choice Inc. will still focus on the development of its curriculum and teacher professional development in student literacy, and the completion of its materials on science “from a standards-based point of view,” as well as the work it has done for its leadership-training programs, said Ms. Codding.
Mr. Tucker said the company would be “in a position to start unbundling components and offering them independently” from the overall program. For example, last year the program started offering its advanced-literacy materials separately.
In the future, math products might also be unbundled, Mr. Tucker said. He noted that breaking up the comprehensive program into independent elements requires more extensive marketing and development.
America’s Choice will also work to formalize relationships to help states and districts design and implement improvement strategies for poorly performing schools.
Michael J. Dolan, the new board chairman for America’s Choice and one of its investors, said that before putting money into it and becoming its chairman, he visited the 127,000-student Duval County, Fla., school system and interviewed the superintendent and 15 principals whose schools used America’s Choice.
“I came away convinced that [America’s Choice] is on the right track,” said Mr. Dolan, a former CEO and chairman of Young & Rubicam, a New York City-based advertising agency.
Although he expects to turn a profit, he said he told other potential investors that “if this isn’t something you feel intellectually and morally committed to, don’t do it.”
Vol. 24, Issue 12, Pages 1, 13Published in Print: November 17, 2004, as 'America's Choice' Taps Profit Motive