In Pa., District Tries 3-Way Contest To Fix Schools

There is a new business model for private management of public education.

It was developed not by an entrepreneur or venture capitalist viewing the public schools as a potentially rich market for privatization. The latest model was hatched, in effect, by the state board of control that oversees the troubled Chester-Upland, Pa., schools south of Philadelphia.

The board last fall invited private companies to bid on managing its 11 schools, serving some 7,500 students. Some companies, such as Edison Schools Inc., the largest private manager of public schools, sought to win the whole contract in partnership with the local teachers’ union.

But the Chester-Upland control board, which has overseen all the district’s operations since last year, had another idea. Late last month, it chose three companies to run the district’s schools—creating competition among the three for students. (“State Chooses 3 Companies To Run Pa. District’s Schools,” March 28, 2001.)

Edison will get the biggest piece: four elementary schools and two middle schools. LearnNow, a newer school-management company focused on urban education, will run the district’s lone high school and three other schools. And Mosaica Education Inc. will take over one elementary school. All three companies are based in New York City.

Under the arrangement, the three companies will have to cooperate on some matters, such as a joint teacher contract and the transfer of student records. But they will clearly vie with one another to persuade parents to choose their schools at the elementary and middle school level.

“I really think it is going to be healthy competition,” said Thomas E. Persing, the president of the three-member control board that made the March 22 decision. Mr. Persing, who is the superintendent of the nearby 3,300-student North Dublin district, has often said the board did not want to trade a traditional public school monopoly for “a private monopoly” in which one company managed the schools.

The other members of the control board are an investment adviser and the superintendent of a correctional institution.

“I think each company got enough of a bite that it is going to take them a little while to chew, let alone digest it,” Mr. Persing added. “We felt we were large enough, with 7,500 students, to divide it up so that parents would have a choice.”

Working Together

The Chester-Upland model is likely to be watched closely.

“It’s novel,” said Jeanne Allen, the president of the Center for Education Reform, a Washington think tank that supports school choice and private management.

“I was happy to see they picked three providers,” she said. “The more the merrier. The competition between them and the diversity of their programs will bring about a better learning environment more quickly.”

Private management of public education has boomed in recent years, driven by the rise of independent, publicly financed charter schools, many of which have turned to for-profit management from a dozen or so companies. Meanwhile, Edison, which is a major player in the charter-management market, also aggressively seeks contracts with districts to take over the management of traditional public schools.

Only recently, however, has Edison begun seeking to manage entire districts. Last year, the fiscally and academically troubled Inkster, Mich., school district hired Edison to manage all of its schools, serving 1,500 students. Edison has control over district finances, curriculum, and staffing, in addition to installing its educational program.

The Inkster deal was the first foray into overall district management by a private company since a handful of arrangements of the early 1990s essentially ended in failure. Most notable of those was a contract in which a company then known as Education Alternatives Inc. managed the Hartford, Conn., district from 1994 to 1996 and managed several public schools in Baltimore around the same time. EAI became Tesseract Schools Inc., which filed for bankruptcy last year.

Edison clearly wanted Chester-Upland to be its second contract to manage an entire district. It joined with the Pennsylvania State Education Association, an affiliate of the National Education Association, to bid on running all 11 schools.

“We had proposed to operate the whole district,” said Stephen C. Tracy, a regional vice president of Edison who was in charge of the Chester-Upland proposal. “Now it is going to be a little more complicated.”

District leaders and executives of the management companies all say they expect the new model to work to the benefit of children in Chester-Upland.

“Obviously, we’re going to be competitors, which is the whole point of this,” said Mr. Tracy, a former superintendent who has been with Edison for eight years. “But the three companies have some common interests. We have an interest in the overall success of this arrangement because it will reflect well on our industry.”

Thomas Stewart, the senior vice president of LearnNow, said parents at the elementary and secondary level will have three curriculum and school-management models from which to choose in deciding where to send their children.

“It’s exciting, because that is something that only parents with the wherewithal to seek out private schools have been able to pursue,” said Mr. Stewart, who oversaw LearnNow’s bid in Chester-Upland.

He said representatives of all three companies met with the control board last week to begin hammering out some of the details of the takeover. The companies plan to work with the teachers’ union and a Teamsters local that represents certain district employees on a joint contract.

“We all want to assuage teachers’ concerns about their status,” Mr. Stewart said.

Mr. Stewart agreed there will be a competitive dynamic, but not of the sort in which one company will try to drive the others out of town.

“The competition has been pretty intense up until the decision,” he said. “But now it behooves us all to create a seamless system.”

Bob Brown, the regional field director for the PSEA, said he has heard concerns that children would be entering the high school from elementary and middle schools using three different curriculum models. He also expressed concern about plans for the three companies to join together in working out a contract with the control board and his union.

“It’s going to be a five-party negotiation, so I really don’t know how that’s going to work,” he said.

Mosaica executives could not be reached for comment last week about the Chester-Upland contract. Mosaica runs 20 charter schools in five states, serving 5,000 students. It vied with Edison and others last year over a Maryland contract to run three failing Baltimore schools. The state chose Edison.

Limited Resources

Meanwhile, the Chester-Upland contract shines a brighter spotlight on LearnNow, which was started as a nonprofit venture in the mid-1990s by Eugene V. Wade Jr., a graduate of Harvard Law School and the Wharton School of Business at the University of Pennsylvania.

Since his law school days, the 31-year-old entrepreneur has envisioned a network of charter schools that would draw the best out of poor and minority children. But Mr. Wade could not attract the amount of capital necessary to expand his vision as a nonprofit venture.

“Nonprofit foundations said, ‘We don’t do that. We can give you $50,000 for a program,’ ” he said. “But we were looking for $1 million to build schools.”

LearnNow became the first for-profit investment of the New Schools Venture Fund, an education- investment program run by the legendary Silicon Valley venture capitalist John Doerr. It has also attracted early investment from Knowledge Universe, the diverse education company privately run by the former financier Michael R. Milken.

LearnNow this year operates five charter schools, serving some 2,000 students, in Philadelphia, St. Paul, Minn., and Washington.

“We go from 2,000 students to about 5,000 to 6,000 next year,” Mr. Wade said. “Our overhead is a fraction of Edison’s.”

Mr. Wade is used to making the most out of limited resources. He grew up in public housing in the predominantly black, low-income Roxbury section of Boston. He has attracted others to the executive ranks of LearnNow with a similar interest in improving the lot of needy students.

They include Mr. Stewart, who wrote his doctoral dissertation at Harvard University about the evolution of prisons in the United States, and LearnNow’s president, James H. Shelton 3rd, who grew up in predominantly poor southeast Washington and joined Mr. Wade after working for one of Mr. Milken’s units at Knowledge Universe.

Mr. Wade believes public acceptance of private managers of public schools is growing. That would bode well for his company and for more arrangements like the one in Chester-Upland.

“I think there will be more Chesters,” Mr. Wade said. “I don’t think you’re going to see Philadelphia or New York say, ‘Let’s hire an EMO [education management organization] to run our whole thing. But in smaller districts, this is a way to scale up and create some leverage for change.”

Mr. Tracy of Edison said he wouldn’t be surprised to see more districts hiring more than one company to manage their schools.

“It’s exciting, because there are now many combinations of strategies available to state and local authorities,” he said. “Certainly across the country, there are a lot of Chesters. And for the providers, there is an awful lot of potential work out there.”

Coverage of new ways of providing public education is supported in part by funding from the Ford Foundation.