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“That’s
right there are private companies that will come into a failing
school district, take the money the state is providing through
taxes, and do a better job of educating our children. One
of those companies—the New York-based Edison Schools—already
runs twenty-two schools in Michigan.” Walker closed by
pointing out, “As Edison schools prosper, parents are
starting to believe in real education reform.”
Now, more than two and a half years later, Edison Schools
Inc., the conservative poster child for the privatization
of public schools, is barely keeping its head above water.
The much ballyhooed for-profit public and charter school management
company is facing a double whammy: a financial crisis that
could result in its removal from the NASDAQ Stock Exchange
and the loss of contracts in a number of cities in the U.S.
As we have seen over the past several months, one of the surefire
indicators that a company is under-the-gun is when it goes
out and hires a hotshot PR firm to tell its story. As the
share price of Edison plummeted—going from a high of
$38 in 2001 to barely over $1 in mid-November—the company,
formerly called The Edison Project, has hired The Nieman Group,
based in Harrisburg, PA, to handle its advertising and public
relations. Edison Schools Inc. is the brainchild of entrepreneur
Christopher Whittle who also founded the controversial company
Channel One, a classroom television news program complete
with commercials geared toward kids (Channel One is currently
owned by K-III Communications, Inc., a property of Kohlberg,
Kravis & Roberts).
The
Nieman Group’s first salvo came in the form of a full-page
advertisement in the Monday, October 28 edition of the New
York Times. The ad, according to O’Dwyer’s PR
Daily, “addresses four main points critics are raising
about the ten-year old company—test score improvement,
acceptance of the Edison program, financials, and the flurry
of press coverage about the company.”
The ad pointed out that Edison is “the most scrutinized
school system in America, bar none” and declared “that
its operating position is strong despite the ‘ups and
downs’ of its share price.” The ad also claimed
that “test scores at Edison schools are rising on average
and that the company now educates 80,000 students in 150 schools.”
Although it has dramatically increased the number of schools
and students it has under contract, last year contract disputes
caused it to close 20 schools with 7,400 students, reports
Business Week.
The test scores claim doesn’t square with a late August
report in the Philadelphia Inquirer that found that
almost all the Edison-managed schools in the Chester Upland
district in Pennsylvania— historically one of the state’s
lowest-performing districts—“ranked well-below average
or below average, compared with test takers around the country.”
The Inquirer goes on to say: “In none of the district’s
Edison-run schools did all of the grades advance at least
one grade level.”
Business Week reported in its November 4 edition, “Edison’s
precarious financial position is forcing it to borrow funds
at exorbitant rates of 12 percent and higher. The Wall
Street Journal’s “Marketplace” section
on October 22 pointed out that the company had never turned
a profit—losing as much as $86 million last year—despite
the frequent optimistic predictions by Whittle to the contrary.
In June 2002, reporter Tali Woodward said that the company
had “racked up $250 million in losses” since its
founding in 1992.
In a report for Corp Watch, Woodward wrote, “Edison
is still reeling from a three-month inquiry into the company’s
finances by the Securities and Exchange Commission. Investigators
determined that the company consistently misreported revenues,
providing an unduly rosy picture to investors. For example,
Edison reported $375.8 million in revenue in fiscal 2001.
According to the SEC’s May 14 order, $154 million of
that never passed through the company: it was spent by school
districts on salaries for teachers and other staff at schools
run by Edison. The SEC also found that Edison does not have
an adequate system of internal accounting controls in place.”
Despite the SEC findings, only minor sanctions were imposed.
Overall, things looked relatively promising as Edison prepared
to enter the new school year with its heftiest contract—managing
20 “low-performing” schools in Philadelphia—under
its belt.
The genesis of the Philadelphia contract is worthy of note.
Woodward reports that in 2001, Edison was paid $2.7 million
by then governor Tom Ridge to perform an assessment of the
Philadelphia schools and “come up with a reform plan.”
Edison recommended that the state place 45 of the district’s
“lowest-performing schools” as well as the district
offices in the hands of a private company. According to Woodward,
“the company also targeted thousands of support jobs,
including janitorial services, for budget cuts.” In December
2001, the mayor of Philadelphia and the governor placed the
school district in the hands of a five-member reform commission.
In April 2002, “the commission announced…that 42
schools would be handed over to private managers—20 of
them to Edison.” A major battle ensued, involving thousands
of teachers, parents, and students vehemently protesting the
Edison contract.
At
its website, Edison claims to have “implemented its school
design in 150 public schools, including many charter schools,”
across the country. Its “school design” included
a prepackaged standardized curriculum, a longer school day,
reducing administrative costs by slashing the educational
beauro- cracy, and taking advantage of economies of scale.
Edison’s plan translated into the hiring of inexperienced
and lower paid teachers, initiation of a cookie cutter curriculum,
the removal of special needs students, and an overemphasis
on teaching testing.
In late October, despite talk of a possible Edison bankruptcy,
the Philadelphia school system sent the company a check for
$5 million “after signing a deal guaranteeing that the
district wouldn’t be left without school equipment and
supplies if the company failed,” the British newspaper,
the Guardian, reported.
The threat of bankruptcy has been a concern of other school
districts with Edison contracts. In June 2002, the Michigan
Department of Education warned its schools that it should
have contingency plans in place should Edison go out of business.
As the Mt. Clemens school board was negotiating an end to
its seven-year contract with Edison, Watkins told local school
boards or colleges that they may have to consider dissolving
their Edison-run schools. The Detroit News reported
that state Schools Superintendent Tom Watkins told charter
school sponsors that these plans “may be as simple as
hiring another educational service provider to immediately
take over Edison’s responsibilities.”
According to a late-August editorial in the Boston
Globe, earlier in the month the school superintendent
in Dallas “informed Edison that the city intends to cancel
multi-year contracts at seven Edison-run elementary schools.”
Last May, the Globe pointed out, “the Boston Renaissance
Charter School also severed its relationship with Edison,
citing the need, and ability, of local Renaissance staffers
to manage curriculum issues, standardized testing, and personnel
administration without Edison’s help.”
Privatization’s Failing Grade
Many
public school advocates and opponents of privatization have
watched Edison closely and conclude that the company relentlessly
toots its own horn, but rarely meets the claims it trumpets.
While some schools run by Edison have shown some improvement
in test scores, the American Federation of Teachers says that,
like the company’s financials, these numbers are often
illusory. (For an AFT report on Edison titled “Student
Achievement in Edison Schools: Mixed Results in an Ongoing
Experiment,” see www.aft.org/research/edison-project/summary).
In the midst of this current crisis, the October 22, 2002,
edition of the National Center for Policy Analysis’s
Daily Policy Digest reported that Edison says it will
tighten its belt, cut unprofitable contracts, and overhaul
its strategy by cutting back on expansion plans. The NCPA,
a conservative policy institute, claims that “The future
of public education in the United States, and efforts to reform
it, are closely tied to the prospects” of Edison.
In early October, perhaps out of desperation or frustration,
Edison’s founder Christopher Whittle came up with a strange
scheme to reduce the company’s labor costs. Whittle proposed
that public school students take on some of the company’s
administrative work. According to a press release issued by
Philadelphians United to Support Public Schools, Whittle pointed
out that the company’s bottom line could be enhanced
because “600 pupils working one hour a day was the equivalent
of 75 full-time adult staff.”
Given its lack of profitability, falling stock price, less
than august educational track record, and ludicrous comments
by Whittle, it is going to take a heck of a PR effort by The
Nieman Group to handle Edison’s growing problems. Business
Week gives the company until next June to prove “it
can make money while effectively running schools in such tough
places as Philadelphia. If it fails,” Business Week
says, “Edison will likely either become a private company
or face bankruptcy.”
If the company files for bankruptcy as the Tesseract Group
(formerly Education Alternatives Inc.)—another for-profit
company that managed public schools—did in 2001, school
districts with Edison contracts will be left in the lurch.
Privatization? In the short run it may slow it down, but it
certainly will not end these efforts; America’s public
schools represent a multibillion dollar industry and the privateers
desperately want their share.
Bill
Berkowitz is a freelance writer covering conservative politics
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