Editor’s Note: For more recent information on the privatization of public education, please read our explainers: School Choice, Explained (Video) (2016), What Are School Vouchers and How Do They Work? (2017), and Education Savings Accounts, Explained (2023).
Turning the operation of public schools over to private companies is a controversial idea based on the less-controversial notion that part of what makes improving public schools so hard is that they are bogged down in bureaucratic mire.
Advocates of privatization ventures see in them the combined virtues of government and business. They argue that government’s oversight function and its responsiveness to the needs of citizens can be retained while taking advantage of private enterprise’s ability to be more efficient, reduce costs, and maximize production—in this case, student achievement.
Opponents, however, see the pressure for profit replacing student achievement as the driving force within schools. They see individual needs—particularly those of children with special, costly requirements—being sacrificed to the needs of corporate shareholders. They fear that school districts won’t be nearly vigilant enough in monitoring companies’ performance. And, foes note, private managers can be as inefficient and incompetent as public ones.
In what some call the “second wave” of the charter school movement, for-profit management companies have taken over the operation of charter schools. According to EduVentures, a Boston consulting firm that has tracked the rise of the education industry, roughly 10 percent of the estimated 1,200 charter schools in 1999 were managed by for-profit companies. One successful private manager of charter schools is the Tesseract Group Inc., formerly Education Alternatives Inc. Private companies’ entry into the charter school arena raises tough questions: Should taxpayer dollars intended for schools be permitted to generate a private profit, even if the company produces positive student results? Does the involvement of private companies defy the traditionally grassroots nature of charter schools? The education research community, too, is taking note of the increased private focus on public education. Henry Levin, a noted education researcher and economist, moved in April 1999 from Stanford University to Columbia University, where he will direct the new National Center for the Study of Privatization in Education. Mr. Levin hopes to conduct neutral research, without any political pull from conservatives or liberals, on the impact of privatization to advance the debate about vouchers, charter schools, and private companies in education.
Private efforts to run public schools—launched with great fanfare—risk losing a lot of steam once they get down to the dirty work of running schools. But despite private contractors’ problems, the emergence of education as an industry continues. EduVentures estimates that for-profit education companies had revenues of $82 billion in 1998, a 25 percent increase over 1997. Revenues are projected to reach $99 billion in 1999 and $123 billion in 2000. Merrill Lynch & Co. has a slightly more conservative outlook. It estimates the industry took in $70 billion in 1998 and should reach $100 billion by 2001.
