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Educational policy analysis archives
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1 of 17 Education Policy Analysis Archives Volume 9 Number 15April 24, 2001ISSN 1068-2341 A peer-reviewed scholarly journal Editor: Gene V Glass, College of Education Arizona State University Copyright 2001, the EDUCATION POLICY ANALYSIS ARCHIVES. Permission is hereby granted to copy any article if EPAA is credited and copies are not sold. Articles appearing in EPAA are abstracted in the Current Index to Journals in Education by the ERIC Clearinghouse on Assessment and Evaluation and are permanently archived in Resources in Education .Calculating the Benefits and Costs of For-Profit Public Education Alex Molnar University of Wisconsin-MilwaukeeAbstract As a policy initiative, for-profit operation of pub lic schools has not lived up to the claims of its proponents. An examination of issues such as teaching methods, academic achievement, autonomy, l ocal control, and the image and influence of for-profit public school s suggests that "for-profits" are unlikely to succeed in the long t erm in improving the overall quality of public education. They do, howev er, seem capable of harming public schools. Often referred to as Education management organizations (EMOs) for-profit firms have promised that their schools would be laborator ies for educational innovation, offer alternatives to rigid public school bureaucracies, and produce gains in student achievement far outpacing those of regular public s chools. The evidence suggests that they have not delivered on their promises, and logi c suggests that they cannot do so.

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2 of 17Introduction The last decade has given birth to a new industry that seeks to turn the publicly funded task of educating the nation's children into a source of private wealth. Education management organizations (EMOs) and their supporter s argue that, driven by the incentive of a potential profit, EMOs can use publi c dollars to provide children with a better education than they receive in conventional public schools at no greater cost to the taxpayer. They have promised to be laboratories for educational innovation, to offer nimble and flexible alternatives to rigid public sc hool bureaucracies, and, freed from many of the so-called constraints presented by thos e bureaucracies, to produce gains in student achievement far outpacing those of regular public schools. And they have promised they can do all those things and still mak e money for investors. The evidence suggests that they have not delivered, and logic suggests that they cannot do so. As a group, for-profit EMOs have not been true laboratories of educational innovation. They have not produced promised gains i n academic achievement. With a few exceptions, they have not even managed to retur n a profit. As operators of charter schools for-profi t EMOs have turned a core selling point for the charter school reform on its head. Where pr omoters of charters envisioned grass-roots, flexible alternatives to top-down scho ols ruled by distant, rigid, public school bureaucrats, the typical EMO-run charters ap pear instead to have substituted a private bureaucracy with all the characteristics of a public one, except for public accountability. The for-profit EMOs have at times shown a willingness to bend facts over matters ranging from the seemingly innocuous, such as how m any schools they operate, to core issues, such as student test scores. And despite im portant questions about their efficacy, they have managed to win political friends and infl uence, at times writing the very laws that grant EMOs access to millions of dollars of ta xpayers' money. Where they have operated, they frequently have tended to focus on s erving those students whose education costs less while leaving to the existing public schools the cost of teaching those students whose backgrounds, family situations and living conditions demand the most resources. They have done all these things while man aging to persuade politicians, editorialists, civic leaders and some members of th e public precisely the opposite: that they are innovative, creative and bold institutions that have succeeded in significantly advancing achievement for the students they serve. The weight of evidence to date strongly s uggests that for-profit companies cannot fulfill the important public task of educating chil dren to serve as free and responsible citizens in a democratic society and as participant s in a complex and changing economy, certainly not for less than we are already spending EMOs cannot help but add to the expense of properly educating our nation's children for two reasons. First, at some point, they will need to provide a return on shareholders' investment, money that would otherwise be available to enhance the educational s ystem. Second, they will inevitably require an additional layer of oversight to ensure that public dollars are not improperly diverted to private gain. By their very nature, EMO s would seem to result in a more expensive—and no more effective—alternative to conv entional public schools with which they say they seek to compete.Size and Scope of the Industry For-profit management of public schools t akes two general forms: the

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3 of 17Teaching Methods A central justification for charter schoo ls is that they will foster innovation in curricula and teaching methods. Innovation is a key promise made by virtually every for-profit company that markets itself to school di stricts or community groups as a prospective manager of charter schools. Some innovations claimed by charter schoo l operators, however, are in fact available to, and used by, public schools without t he benefit of a contracted third party. Edison, for instance, has not developed its own cur ricula, but largely relied on already available ones such as the "Success for All" readin g program and a math curriculum developed by the University of Chicago (Guthrie, 20 01). Other innovations offer questionable resu lts, at least as they are practiced. For example, a number of charter schools rely on Direct Instruction (DI), a highly scripted approach to teaching that focuses on group rote lea rning and memorization. "The underlying premise of Direct Instruction is to capt ure what works best in teaching and attempt to avail all of our teachers of these best practices," said Wilson of Advantage, where DI is the linchpin of the company-wide curric ulum. DI, he continued, "has developed lessons and refined, iterated, and polish ed them over 20 years to the point where they very reliably work for a diverse populat ion of students." Wilson asserted that DI "has a history of generating remarkable results" (personal communication, February 7, 2001). To be sure, Direct Instruction has demons trated its ability to raise, for instance, reading test scores. But the long-term benefits of DI are less clear. And Advantage's own use of DI does not live up to the claims the compan y has made in selling its charter schools to parents. In 1998, as Advantage was busy selling parents in Jersey City, N.J., on the benefits of its soon-to-be opened charter sc hool there, New York Times writer Michael Winerip visited an Advantage-run school in Rocky Mount, N.C., where company officials bragged that every kindergartner could read. There he observed DI drills in reading and math in which children perfor med well using materials with which they were familiar. When Winerip presented low-leve l reading books to three children who had been identified by a teacher as among those who could read, however, he found that the children could not pick out simple words i ncluding "I", "the", "my", or "house" in the context of a story that they had not previou sly encountered in the DI drills (Winerip, 1998). Wilson claims that the incident fo llowed unreported instances in which children read satisfactorily (personal communicatio n, February 7, 2001). Winerip says that is absolutely not the case. Indeed, he says, t he point of his exercise was less about the school's teaching quality than to point out the degree of hucksterism surrounding the for-profit EMO business. That hucksterism, he says, was reflected in the claims of Advantage employees that all its kindergartners cou ld read and that older children routinely read the Iliad and the Odyssey—claims tha t he demonstrated were not borne out by the facts (Winerip, 1998; personal communica tion, February 14, 2001). The use of DI in local schools enforced b y a distant, centralized corporation has also at times alienated teachers, who have complain ed they lacked the ability to adjust the curriculum to respond to the needs of their ind ividual students (Woodward, 2000). That would seem to be an ironic outcome in light of the stated raison d'tre of charter schools—to create schools that are freed from the h eavy hand of public school bureaucrats. It is not clear why the heavy hand of corporate bureaucrats should be preferred.

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4 of 17 There is also no evidence that charter sc hools, whether operated by for-profit or non-profit organizations, are serving as laboratori es from which public schools might benefit. An in-depth examination of 17 California c harter schools found that only one of 10 school districts used its charter schools as suc h laboratories, and that only one charter principal (at a non-profit school) engaged in any a ctive collaboration with the local public school (Wells, 1998). As constructed, the st ate's charter school network lacked any framework or structure for such collaboration t o take place. The proprietary nature of for-profit EMOs curricula seems certain to further discourage any sharing of information that might en able students in an entire school system to benefit in a way that would live up to th e promises of charter schools. Several for-profit firms, including SABIS, White Hat Manage ment and Mosaica, promote proprietary curricula. Edison's contract with San F rancisco states that the company shall own all copyright and other proprietary right s to all instructional materials, training materials, curriculum and lesso n plans, and any other materials developed by Edison, its employees, agent s or subcontractors, or by any individual including District employees work ing for, or supervised by, Edison which is developed during working hours or during the time for which the individual is being paid. Edison shall ha ve sole and exclusive right to license such materials for use by other sc hool districts and customers… The District shall take all measures rea sonably necessary to assure that no District personnel or agents disclos e, publish, copy, transmit, modify, alter or utilize Edison's proprietary infor mation without Edison's written consent unless otherwise required by law. ( "Charter School Management Agreement", 1998) Such a sweeping assertion of rights would appear to eliminate any possibility that Edison's charter schools would share innovative pra ctices and curricula with other schools.Educational Results The yardstick by which public schools are measured today is almost always test scores, and EMO companies have emphasized test scor es as evidence of their success. On March 28, 2001, Advantage posted on its web site a news release indicating its students had gained 9.1 percentile points on averag e in test scores across the 1999-2000 school year for its entire national system of schoo ls (Advantage Schools, 2001). Such self-interested claims have been routinely and uncr itically reported. Independent studies, however, have not te nded to confirm such reports. Among the most extensive studies of charter schools is on e conducted in Michigan by the Evaluation Center at Western Michigan University. T he study, by Horn and Miron, looked at the performance on state achievement test s by students from charter schools and non-charter schools, and compared as well the p erformance of charter schools operated by EMOs and those not run by EMOs. Overall charter schools showed no net increase in their students' pass rates—the percenta ge of students in a school who passed those tests—from the 1995-'96 school year to the 19 99-2000 school year, while public school districts where those charters were based sa w their pass rates rise from 49.4% in 1995-'96 to 68% in 1999-2000 (Horn & Miron, 2000, p iv.). EMO charter schools and non-EMO charter schools had similar pass rates over the four-year period, Horn and

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5 of 17Miron found. Edison considered questions about its dat a serious enough to hire the RAND Corp. to provide an independent analysis of its sco res. "There have been accusations that they were cherry-picking better-performing schools to include in their analysis," Silber says (personal communication, February 1, 2000). In San Francisco, where a new school board philosophically opposed to privatizing public schools has threatened to cancel Edison's contract to operate a charter elementary s chool, the fact that 35 % of the school's fifth-graders scored at national averages on reading tests in the spring of 2000—up from 24 % the year before—has been widely p ublicized as evidence of the school's success. But more complex, and more ambigu ous, findings at the very same school have been less widely publicized. In the spr ing of 2000, under Edison, 28.5% of the school's fifth graders scored in the top two qu artiles on reading tests. The previous year, before Edison took over, the figure was 17.7% making the operation's results seem particularly impressive. Yet in the year before tha t, the number scoring in the top two quartiles was 29.2 %—higher than what Edison has to date accomplished (Woodward, 2001). Moreover, demographic data for the school sh owed that the post-Edison improvement occurred as the school's population was shifting, with a decline in the number of students qualifying for free or reduced-p rice lunches—a standard indicator of poverty—and a decline in the number students with l imited English proficiency, both factors that may explain by themselves an increase in test scores (Roth, 2000). An investigation of the San Francisco school by the ci ty's superintendent of schools produced a number of allegations against the compan y, including questionable financial procedures (Ackerman, 2001). The same investigation also raised questions about whether Edison discriminated against African-Americ an students and those requiring special education in composing the school's student body. Ackerman also reports that test-score gains at the Edison school were matched by gains at other district schools that were not in the charter program, and cited evidence suggesting that the school's gains were an artifact of demographic changes including a n increase in the number of students from higher-income and English-speaking families an d a decrease in the number from lower-income, non-English-speaking families. Parents in New York City also apparently have doubts about Edison's potential for success. Parents of children at all five of the sch ools eligible for conversion to Edison run schools appeared to reject the opportunity to h ave Edison run these schools—a majority of them did not even vote. Those parents w ho did participate in the vote that ended on March 30, 2001, in effect, voted against t he conversion (Wyatt, April 1, 2001; Wyatt & Goodnough, 2001). The New York parents had cause for concern. For example, while Edison was lobbying to run schools in New Yor k City, trouble was brewing in the Edison-run Inkster, Mich., schools. Despite hiring Edison, the Inkster schools failed to meet state academic standards. As controversy erupt ed between school board and representatives of Edison schools, Arthur Ellis, Mi chigan's state schools superintendent, indicated the state will step in if Edison Schools requests help ("Inkster Schools," 2001). A San Francisco group opposed to Edison's operation of the school there has found further discrepancies between what the compan y claims it has accomplished and what other institutions report. In recent press rel eases dated February 12, 14, and 19 of 2001, the organization, Parents Advocating School A ccountability (formerly San Francisco Parents for Charter School Accountability ), reported that: While Edison claims on its web site that at its San Francisco school, 79% of students qualified for free or reduced-price lunche s in the 1999-2000 school year, the San Francisco Unified School District data for the same school put the number

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6 of 17much lower, at 58.2%. The lower figure would sugges t a lower proportion of students living in poverty, a well-known risk facto r for lower educational achievement.Edison's claims that in the 1999-2000 year 95% of t he school's students in grades 2 through 5 took the California STAR test, the stat ewide test used to measure student achievement, were contradicted by data that showed only 247 of 322 students in those grades were tested, or 73.5%. Sim ilarly, in the 1998-'99 school year, Edison reported that 86% of students in grade s 2 through 5 were included in STAR testing, but the real figure was 210 of 284 st udents, or 72.5%. Deliberately excluding students who might be thought to score lo wer on tests can inflate a school's test scores overall. Edison has benefited from the release of a wildly e rroneous statistic that, prior to its takeover, just 2% of the school's 5th graders s cored at or above the national average in reading. (The correct figure is 35%.) Th e company has denied being the source of the datum, which nonetheless found its wa y into editorial columns in The Wall Street Journal and The Economist criticizing plans by the newly elected majority on the San Francisco Unified School Board to revoke the school's charter. Finally, a recent examination of test sco res for 10 Edison schools that were opened in 1995 or '96 sharply contradicted the comp any's own assertions about its schools' performance. The paper, published by The E valuation Center at Western Michigan University, found that: On norm-referenced tests, the Edison students' achi evement gains were consistent with grade level advancement, but did not consisten tly exceed grade level expectations, contrary to Edison claims (Miron & Ap plegate, 2000, p. xxii.). criterion-referenced tests, students often lagged b ehind district performance and almost always behind state performance, with Edison students in nearly half of the examined trends making smaller gains than compariso n groups. In another 40% of trends, Edison students' gains were similar to thos e of local districts and other comparison groups, while in only 10% did they make gains larger than those of comparison groups (p. xxiii.). The results, the authors say, suggest "th at the expectations of district and charter school boards that contract with Edison as well as the expectations of parents who enroll their children in an Edison school are not being me t" (p. xxiv.). Edison Schools is not the only for-profit firm being challenged by school boards. Trustees of Mosaica Academy Charter School in Bensa lem, Pa., voted April 18, 2001, to end their contract with Mosaica Education, Inc. The y explained their action: "As a public agency entrusted with the responsibility of spending public funds wisely, we did not think we were receiving any value from our rela tionship with [Mosaica Education]," trustees President Kathleen Harr said. (Yanoshek, 2 001 [b] ) In a twenty-eight page report issued in April, the school board reported c oncerns about a curriculum that included inappropriate lessons for some grade level s, inadequate computer systems, and mishandled payments to vendors (Yanoshek, 2001 [a] ). School officials stressed that the school would not close if it separates itself from Mosaica Education. Autonomy and Local Control

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7 of 17 The for-profit EMO industry is still earl y in its development, but already some companies are losing contracts even as they gain ne w ones. Advantage has lost four contracts: in Malden, Mass., Albany, N.Y., Chicago, and one of its first, the Rocky Mount, N.C. charter school that Advantage salespeop le had used as a showcase when selling their services to parents in Jersey City (W inerip, 1998). The loss of the New Covenant School contract in Albany was due to many things, says New York State Assemblyman Steve Sanders, who chairs the assembly' s education committee, among them the rush by local founders to start the school and the lax oversight of the State University of New York Board of Trustees and the st ate Board of Regents. But Advantage was remiss in not urging its local partne rs to slow down and take their time, Sanders says. "They should have made an indication that this just wasn't ready" (personal communication, January 26, 2001). The circumstances surrounding the termina tion of the Rocky Mount contract were the subject of a sealed, out-of-court agreement bet ween the company and the school's founders that binds both parties to secrecy (R. Mau ldin, personal communication, February 7, 2001). The existence of such an agreeme nt at all involving an entity that is spending public funds contradicts the very notion o f open and accountable operation that is at the heart of good government, and is further evidence that the charter and for-profit alternatives to public schools are being held to a lower standard of accountability than the public institutions for which they purport to b e setting an example. While bound by the agreement not to discu ss details, it is clear from their general discussions the two parties have rather different v iews of why the contract was terminated—views that cannot be evaluated for accur acy or completeness without access to the sealed record. Advantage CEO Steve Wilson bl ames the loss of the contract on a dispute over rebuilding the school in the aftermath of Hurricane Floyd, which flooded out the school building (personal communication, Fe bruary 7, 2001). Mauldin, chairman of the school's board, suggests the issues were lar ger, however: "Our basic difference with Advantage was that when we entered into an agr eement with them to be our manager, we looked at them more as advisors, [while ] they looked at us as just being an operator of one of their schools." The school has c ontinued to operate with largely the same personnel under the direct supervision of its board (R. Mauldin, personal communication, February 7, 2001). In Michigan, Horn and Miron note, the ten dency of national EMOs to assert authority over local charter schools violates the v ery reasons for establishing charter schools in the first place: Although charter schools are intended to have their own boards with decisions made locally, the growing involvement of EMOs has had an impact on the local control. Edison advertises itse lf as the first national school system. National Heritage Academies, Beacon Education Management, Advantage, and others are also establis hing national networks/systems of charter schools. This movement results in local governance being replaced by decisions made halfway across the country. This is clearly not what was intended when charter schools were legislated in Michigan or in other states. (Horn & Miron, 2000 p. 48) In their influential book Politics, Markets, and America's Schools Chubb and Moe (1990) speculated that because private schools have more autonomy than public schools they are more likely to have higher student achievement. Glass, however, challenged this speculation. In a study comparing t he autonomy of public and

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8 of 17independent college preparatory schools Glass found that: The feelings expressed by both public and private s chool participants in this study testify to equally high degrees of autonomy. Issues that emerged from data analysis in this study which mitigate and shap e autonomy include the following: conflicting and contradictory demands, s hared beliefs, layers of protection, a system of laws, funding constraints a nd matters of size of the institution. These issues challenge oversimplified assertions that differences of any importance exist between the autonomy experi enced by professionals in public and private high schools. (Glass, 1997, p ara. 2)Image and Influence With such a spotty history, both for inve stors and for the communities whose children they proposed to educate, why have EMOs ma naged to grow so swiftly, attracting both investment dollars and new contract s to operate schools? One reason may be the success that indust ry participants have had in exaggerating their own accomplishments. Such exaggeration has al ready been shown in the preceding discussion of test scores. It is also reflected in other ways, particularly in their efforts to draw more capital from prospective investors. Ediso n Schools, for instance, has been criticized by the financial press for inflating the reported number of schools it manages and for the way in which it has calculated the prof itability of individual schools (Greenberg, 2000). Edison isn't alone. In reporting Advantage's quarterly profit for the first quarter of FY 2001, Wilson at first indicated that such was "a first for the education management organization industry." When it was poin ted out to him that five other such companies have been reported, either by themselves or by outside observers, to be profitable, he acknowledged that he had misspoken ( S. Wilson, personal communication, February 7, 2001). The industry has a financial stake in per petuating an image of success if it is to continue to win additional contracts. For that reas on, unverified claims of the EMOs' financial gains and prospects should be regarded wi th great skepticism. Unfortunately, outside observers to whom the public and investors might turn for an unbiased assessment of the industry also stand to gain or lo se from public impressions. For example, Merrill Lynch—the firm that predicted forprofits will within the next 15 years manage 10% or more of the funds to educate public s chool students—has managed offerings of Edison's stock ("Edison Schools Announ ces", 2000), a fact that demands that the claims of Merrill Lynch analysts about the industry's future be closely questioned. Any analyst whose company has a stake i n advancing the inevitability of a commercial trend appears to have an unavoidable con flict of interest, and for-profit EMOs are no exception. The fallout from the dot-com stock crash is instructive. As The New York Times recently observed, some securities analysts have a ppeared to be little more than cheerleaders for the companies whom their investment-banking colleagues were financing: "The fact is, although brokerage fi rm stock gurus are still called analysts, their day-to-day pursuits involve much le ss analysis and much more salesmanship than ever before" (Morgenson, 2000). In addition to their success at burnishin g their image for investors and for the casual reader of test scores, EMOs have repeatedly demonstrated their ability to write the rules under which they operate and get access t o the public purse. They have done so, moreover, while enjoying a relative lack of scr utiny for their actions. EMOs have benefited from close relationsh ips with government. Before founding

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9 of 17Advantage Schools in 1996 to operate charter school s in Massachusetts and other states, Wilson helped write the Massachusetts charter schoo l law as an aide to former Gov. William Weld (Wilson, personal curriculum vitae). I n Milwaukee, the administration of Mayor John Norquist—an outspoken proponent of vouch ers and charters—threw its political weight behind a $12.1 million tax-exempt bond issue for the Edison-run Milwaukee Academy of Science, despite the school's short tenure (five months) and high turnover in staff and students: the school has had three principals in its short history as well as losing a third of its teaching staff and hu ndreds of students ("Panel Backs Bonds", 2001). The bond issue required only the app roval of city agencies controlled by the mayor; by contrast, public school districts see king similar financing are required under Wisconsin law to seek the approval of distric t voters in a referendum. A central tenet of democratic institution s is that they be held accountable to those whom they serve and those who pay the bill. In the case of publicly funded schools, accountability should not stop with the parents who se children attend them, but ultimately rests with all taxpayers who contribute financially to their operation and have a stake in their success. In particular, opportunit ies to profit privately from the public sector demand strict scrutiny, as the administratio n of President George H. W. Bush learned nearly a decade ago. As the administration prepared to leave office in December 1992, The New York Times recounting a study for the Office of Management a nd Budget, reported that "after years of effort to tra nsfer Government work to private companies, the White House acknowledged… that contr actors were squandering vast sums" (Schneider, 1992). A year later, evidence eme rged that for-profit trade schools were enriching themselves on federal grant money th at they were to have used to educate their students (Winerip, 1994). The literature on charter schools run by for-profit EMOs offers plenty of evidence that they lack accountability, however. We have alr eady noted the secrecy with which a contract was terminated in the case of at least one charter school. There are other signs as well. The review of California charter schools— both for-profit and non-profit—discussed earlier found that the state h ad not lived up to its goal of clear accountability for charter school outcomes. "We see little evidence that the student outcome side of the accountability equation is play ing out the way proponents have claimed," the authors of that report wrote. (Wells, 1998) In Ohio, the founder and CEO of Akron-bas ed White Hat Management, David Brennan, contributed $1 million to Republican legis lators and other office holders and has seen White Hat benefit repeatedly from exceptio ns in the laws and policies governing charter schools in that state, according to the Akron Beacon Journal (Oplinger & Willard, 1999). Yet White Hat's method of operati on has landed the for-profit company in trouble with the US Internal Revenue Ser vice. The IRS denied tax-exempt status to purportedly non-profit schools managed by White Hat on the grounds that the company's contracts with the schools "appeared to b enefit White Hat to the detriment of the nonprofit school," the Beacon Journal reported (Oplinger & Willard, 2000). In Michigan, Horn and Miron found "a numb er of questionable practices in the financial management of some of the schools or grou ps of schools" (Horn & Miron, 2000, p. 49) operated by EMOs, including: Sale or resale of land to the school, or leasing pr operty to the school at above market rates Using operational costs to pay for private faciliti es/property Fees for school founders/leaders for special servic es (legal, consulting, etc.)

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10 of 17Self-employment and employment of family and friend s (nepotism) Making purchases for the private company through th e school board to take advantage of tax-exempt status (p. 49). In Massachusetts, the state Inspector Gen eral reviewed a contract between the Somerville Charter School's board of trustees and S ABIS Inc. and concluded that the board had given SABIS too much control, in the proc ess limiting the board's own ability to control the public funds for which it was respon sible and limiting as well its ability to oversee SABIS's performance (Danseyar, 2001). The i nspector general's report recommended that the trustees hire their own staff to oversee the school's business operations, including the contract with SABIS, and recommended as well either not renewing the contract when it expires in 2001, or p utting it up for competitive bid, and in the process giving the board greater control ove r school resources and operations (Danseyar, 2001). Some state authorities may be exercising a bit more skepticism about the promises that for-profits are making when charter schools ar e proposed. For example, in Worcester, Mass., the Massachusetts Department of E ducation denied a charter to a school that would have been run by Beacon Education Management. The denial came after it was pointed out that the community's regul ar public schools already offered the programs that exceeded what was promised for the ch arter, and that Beacon's fees amounted to 12% of the school's revenues and were, under terms of the proposal, slated to double over a two year period, reaching $377,303 in 2004 (McFarlane, 2001). These and other examples only reinforce t he sensible conclusion that prudence demands that if we turn over some portion of the pu blicly funded education system to private profit, we must have strict and thorough ov ersight. Yet to provide such oversight will require an expensive and potentially unwieldy new bureaucracy. This was pointed out by Levin, writing about a system of publicly fu nded school vouchers: If schools are to be accredited for vouchers on the basis of meeting the requirements for producing public benefits, a monit oring agency will be required. Even in the absence of these provisions, the cost of record-keeping will rise as a central agency must keep track of student attendance, voucher eligibility, and redemption of vouchers on a statew ide basis. … In summary, educational vouchers would promote higher efficienc y at the school site, but the costs of infrastructure to support such a syste m would be considerably higher than that of the present system. (Levin, 200 0, p. 19-20) Indeed, some dissatisfied school district s have already reported that for-profit managers may cost money, rather than saving money a s promised. When the Sherman, Texas school district officials decided not to rene w Edison's contract to run Washington Elementary School there in June 2000, they cited $4 million in "hidden costs" arising from the company's operation of Washington and anot her Sherman school. The district's assistant superintendent for administration and ins truction said those costs included two layers of administration—Edison's plus the district 's—as well as expenses for which the company allegedly failed to reimburse the district, including education services for handicapped students (Fox, 2000, p.1). Finally, however, there are critical inte rnal contradictions in the premise of a for-profit company purporting to be able to operate a public school and do so more efficiently than a not-for-profit entity: simply pu t, the corporation must be able to extract enough money from the system to provide shareholder s with a return on their

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11 of 17investment. A for-profit education management organiz ation that did succeed in operating long enough to demonstrate true success for student s in terms that might be universally agreed upon could not survive in the long term. Pub lic schools who observe its operation and its techniques would be expected to replicate t hem and deliver them without having to pay shareholders, thereby either saving taxpayer s money or delivering an even more enriched education. Given those circumstances, logi c dictates that for-profit education can only succeed if it has managed to put not-for-p rofit education out of business or else sufficiently hobbled it—for instance, by offloading onto the public sector the task of educating the most difficult and challenging of sch ool populations—so that the non-profit schools cannot compete. There's some indication that that is prec isely what is going on. The relatively poor test scores of Michigan charter schools relative to public schools that Horn and Miron found would appear to suggest that, contrary to the fears of some, the charters are not siphoning off higher-achieving students. The Michig an study did suggest, however, various ways in which for-profit companies target t heir enrollment efforts at students who are less costly to teach. "While the students a re clearly from the public domain, the selection processes and the mechanisms in place to structure learning communities can often resemble practices in private schools," Horn and Miron write, pointing to a drop in the proportion of minorities enrolled in charters a s well as indications that charters are gravitating to the suburbs (Horn & Miron, 2000, p, 48). The researchers also found that a number of the charters' students—typically those re quiring special education services—end up returning to their home districts. Yet when that happens, the charters come out ahead, because the money that followed tho se students to the charters stays with the charters rather than returning to the home districts with the students (Horn & Miron, 2000). They add: Many of the more efficient EMOs seem to be keenly a ware of the characteristics of the students, parents, staff, an d board members they wish to involve/include in the school. The ability level of students and their readiness to learn will affect both overall costs a s well as overall performance of the school on standardized tests. Th e level of involvement of the students' parents and the resources these pa rents can bring to the school are also important and can affect the school 's resources negatively or positively. (p.48) In his 1998 New York Times report, Winerip put it a different way. After observing several elementary schools in Jersey City where charter schools were enrolling parents eager to improve their children's schooling, he concluded: "The poorest, most troubled parents aren't running aroun d looking for charters. The mother of the boy in [an inner-city, public school third-grad e classroom] who hasn't answered 17 notes home isn't shopping for charter schools. [Ano ther family who was] being evicted from the projects isn't shopping for charters. That is precisely one of the attractions of charters for motivated parents" (Winerip, 1998). Fo r-profit companies, in short, appear to be doing what they can to avoid serving the chil dren of the families he describes—the most costly to educate because of the severe challe nges they face in their home lives. Cobb and Glass provide additional evidenc e of biased selection processes in charter schools. In their 1999 study of the ethnic composition of charter schools in Arizona, they found that, "Although Arizona's chart er schools are required to admit all students for whom they have room, there is some deg ree of selectivity" (Cobb & Glass,

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12 of 171999). The selectivity was expressed in such practi ces as requiring charter-initiated parent contracts and the need for parents to provid e transportation. As a result of such practices, nearly half of the charter schools studi ed exhibited evidence of substantial ethnic separation. Enrollment in these schools refl ected a greater proportion of white students compared with the nearby traditional publi c schools (Cobb & Glass, 1999). As an education policy initiative, the fo r-profit operation of public schools is an idea that has not proven itself to be economically viable or academically important. Indeed, the inherent characteristics of the enterpr ise and the track record so far strongly suggest that for-profit management companies are un likely to ever succeed in improving the overall quality of public education. The for-pr ofits do, however, seem quite capable of harming existing public schools.ReferencesAckerman, A. (2001). Edison Charter Academy: Prelim inary Report of Findings. San Francisco: San Francisco Unified School District. E xecutive summary available at: http://www.sfusd.edu/news/pdf/edison_rpt.pdf Comple te report available at: http://orb.sfusd.edu/PDFS/edison_rpt_comp.pdfAdvantage Schools news release (2001, March 28). "A dvantage Schools Announces Strong System-Wide Gains in Academic Results as Mea sured by National Standardized Tests." Available:http://www.advantage-schools.com/news/Annual%20Repo rt%202001%20pr.htm. Byron, C. (1999). A lesson in corporate values for Edison Schools TheStreet.com. Available: http://www.thestreet.com.The Center for Education Reform: Making schools wor k better for all children. (2000, November 28). Center for Education Reform. Availabl e: http://www.edreform.com/pubs/chglance.htm.Charter school management agreement between the Boa rd of Education of the San Francisco United School District and the Edison Pro ject L. P. (1998). Chubb, J. E. & Moe, T. M. (1990). Politics, markets, and America's schools Washington, DC: The Brookings Institution.Cobb, C. D., & Glass, G. V. (1999). Ethnic Segregat ion in Arizona Charter Schools. Education Policy Analysis Archives, 7 (1). Available: http://epaa.asu.edu/epaa/v7n1/. Dallas Public Schools, Committee of the Whole Evalu ation, Accountability & Information Systems. (2001). Interim Evaluation Report on Edison Dallas, Tex.: Dallas Public Schools.Danseyar, S. M. (2001, February 21). Report: Oversi ght lacking at charter school Somerville Journal Doclar, M. (2000, March 2). The Edison enigma Fort Worth Star Telegram, pp. 1.

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13 of 17Drew, D. P., & Lonetree, A. (2001, January 9). Char ter schools face a tougher test Minneapolis StarTribune, pp. 1A. The Edison question—Does school serve kids? (2001, February 4). San Francisco Chronicle Fox, J. (2000, January 27). No class Dallas Observer, pp. 28-37. Glass, S. R. (1997). Markets and myths: Autonomy in public and private schools. Education Policy Analysis Archives, 5 (1). Available: http://olam.ed.asu.edu/epaa/v5n1.html.Greenberg, H. (2000). Lessons on profitability (or the lack thereof) from Edison Schools Available: http://www.thestreet.com.Guthrie, J. (2001, January 5). S.F. School Board ma y move to yank Edison's charter: Test scores have soared but majority of teachers le ft last year San Francisco Chronicle Horn, J., & Miron, G. (2000). An evaluation of the Michigan charter school initia tive: Performance, accountability, and impact Kalamazoo, Mich.: The Evaluation Center, Western Michigan University.Inkster schools face state takeover again. (2001). American School Board Journal (asbj.com) Levin, H. (2000). The public-private nexus in education New York: National Study for the Study of Privatization in Education, Teachers C ollege, Columbia University. Mauldin, R. (2001, February 7). Telephone interview McFarlane, C. (2001, February 23). Charter high sch ool application denied Worcester Telegram & Gazette Miron, G., & Applegate, B. (2000). An evaluation of student achievement in Edison Schools opened in 1995 and 1996 Kalamazoo, Mich.: The Evaluation Center, Western Michigan University.Moe, M. (1999). The book of knowledge: Investing in the growing edu cation and training industry New York: Merrill Lynch & Co. Molnar, A., Morales, J., & Vander Wyst, A. (2000). Profiles of For-Profit Education Management Companies, 2000-2001 Milwaukee, Wis.: Center for Education Research, Analysis, and Innovation, University of Wisconsin-M ilwaukee. Morgenson, G. (2000, December 31). How did so many get it so wrong? New York Times Oplinger, D., & Willard, D. (1999, December 13). Da vid Brennan's white hat management changes the way business, politics and s chool vouchers mix Akron Beacon

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14 of 17Journal Oplinger, D., & Willard, D. (2000, March 7). 14 Cha rter schools on hold Akron Beacon Journal Panel backs bonds for charter school. (2001, Februa ry 16). Milwaukee Journal Sentinel Roth, G. (2000, July 19, 2000). Testing the limits San Francisco Bay Guardian Sanders, S. (2001, January 26). Telephone interview Schneider, K. (1992, December 2). US cites waste in its contracts New York Times Silber, J. (2001, February 1). Telephone interview.Vulcan ventures to sell shares of Edison Schools. ( 2000, December 28). NewsTraders.com. Available: http://www.newstraders. com/newstraders_vd/65698.htm. Wells, A. S. (1998). Beyond the rhetoric of charter school reform: A stu dy of 10 California districts Los Angeles, Calif.: University of California L os Angeles, Graduate School of Education and Information Scienc e. Wilson, S. (2001, February 7). Telephone interview.Winerip, M. (1994, February 2). Billions for school s are lost in fraud, waste, and abuse New York Times Winerip, M. (1998, June 14). Schools for sale New York Times Woodward, T. (2000, July 14). Edison exodus: Will a teacher revolt spell an end to the school privatization experiment? San Francisco Bay Guardian Woodward, T. (2001, February 7). Full court press Edison school chain's PR blitz gets help from the media San Francisco Bay Guardian Wyatt, E. (2001, April 1). Defeat aside, Edison pla ns to expand New York Times Wyatt, E. (2001, March 23). Founder of Edison Schoo ls sells some of his stock in company New York Times Wyatt, E., & Goodnough, A. (2001, March 31). As bid to privatize schools ends, supporters second-guess effort New York Times Yanoshak, H. (2001, April 11). Mosaica board critic al of firm Bucks County Courier Times [a] (2001, April 18). Mosaica votes to oust Calif. firm Bucks County Courier Times. [b]About the Author

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15 of 17 Alex MolnarSchool of EducationUniversity of Wisconsin-MilwaukeeEmail: alexm@uwm.eduAlex Molnar is a Professor of Education in the Univ ersity of Wisconsin-Milwaukee School of Education, in the Department of Curriculu m and Instruction. He has a B.A. in history, political science, and education, two Mast ers degrees, one in history and one in social welfare, a Specialist's Certificate in educa tional administration, and a Ph.D. in urban education. Molnar, currently the director of the Center for Education Research, Analysis, and Innovation (CERAI) (http://www.educationanalysis.org/) and the Center for the Analysis of Commercialism in Education (CAC E) (http://www.uwm.edu/Dept/CACE/) has been a professor in the School of Education a t UWM since 1972. Previously he taught social studies at a high school in the Chicago area. From 1993 to 1995, Professor Molnar served as chief of staff for the Wisconsin Department of Public Instruction's Urban Initiative a project that resulted in the creation of Wisconsin's Student Achievement Guarantee in Edu cation (SAGE) program. The statewide SAGE program is designed to increase the academic achievement of low-income children in grades K-3 by reducing class size, reforming the curriculum, providing professional development, and opening sch ools to morning and evening activities. Molnar is a member of the SAGE evaluati on team.Copyright 2001 by the Education Policy Analysis ArchivesThe World Wide Web address for the Education Policy Analysis Archives is epaa.asu.edu General questions about appropriateness of topics o r particular articles may be addressed to the Editor, Gene V Glass, glass@asu.edu or reach him at College of Education, Arizona State University, Tempe, AZ 8 5287-0211. (602-965-9644). The Commentary Editor is Casey D. C obb: casey.cobb@unh.edu .EPAA Editorial Board Michael W. Apple University of Wisconsin Greg Camilli Rutgers University John Covaleskie Northern Michigan University Alan Davis University of Colorado, Denver Sherman Dorn University of South Florida Mark E. Fetler California Commission on Teacher Credentialing Richard Garlikov hmwkhelp@scott.net Thomas F. Green Syracuse University Alison I. Griffith York University Arlen Gullickson Western Michigan University Ernest R. House University of Colorado Aimee Howley Ohio University

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16 of 17 Craig B. Howley Appalachia Educational Laboratory William Hunter University of Calgary Daniel Kalls Ume University Benjamin Levin University of Manitoba Thomas Mauhs-Pugh Green Mountain College Dewayne Matthews Western Interstate Commission for HigherEducation William McInerney Purdue University Mary McKeown-Moak MGT of America (Austin, TX) Les McLean University of Toronto Susan Bobbitt Nolen University of Washington Anne L. Pemberton apembert@pen.k12.va.us Hugh G. Petrie SUNY Buffalo Richard C. Richardson New York University Anthony G. Rud Jr. Purdue University Dennis Sayers Ann Leavenworth Centerfor Accelerated Learning Jay D. Scribner University of Texas at Austin Michael Scriven scriven@aol.com Robert E. Stake University of Illinois—UC Robert Stonehill U.S. Department of Education David D. Williams Brigham Young UniversityEPAA Spanish Language Editorial BoardAssociate Editor for Spanish Language Roberto Rodrguez Gmez Universidad Nacional Autnoma de Mxico roberto@servidor.unam.mx Adrin Acosta (Mxico) Universidad de Guadalajaraadrianacosta@compuserve.com J. Flix Angulo Rasco (Spain) Universidad de Cdizfelix.angulo@uca.es Teresa Bracho (Mxico) Centro de Investigacin y DocenciaEconmica-CIDEbracho dis1.cide.mx Alejandro Canales (Mxico) Universidad Nacional Autnoma deMxicocanalesa@servidor.unam.mx Ursula Casanova (U.S.A.) Arizona State Universitycasanova@asu.edu Jos Contreras Domingo Universitat de Barcelona Jose.Contreras@doe.d5.ub.es Erwin Epstein (U.S.A.) Loyola University of ChicagoEepstein@luc.edu Josu Gonzlez (U.S.A.) Arizona State Universityjosue@asu.edu Rollin Kent (Mxico)Departamento de InvestigacinEducativa-DIE/CINVESTAV Mara Beatriz Luce (Brazil)Universidad Federal de Rio Grande do Sul-UFRGS

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17 of 17 rkent@gemtel.com.mx kentr@data.net.mx lucemb@orion.ufrgs.brJavier Mendoza Rojas (Mxico)Universidad Nacional Autnoma deMxicojaviermr@servidor.unam.mxMarcela Mollis (Argentina)Universidad de Buenos Airesmmollis@filo.uba.ar Humberto Muoz Garca (Mxico) Universidad Nacional Autnoma deMxicohumberto@servidor.unam.mxAngel Ignacio Prez Gmez (Spain)Universidad de Mlagaaiperez@uma.es Daniel Schugurensky (Argentina-Canad)OISE/UT, Canadadschugurensky@oise.utoronto.ca Simon Schwartzman (Brazil)Fundao Instituto Brasileiro e Geografiae Estatstica simon@openlink.com.br Jurjo Torres Santom (Spain)Universidad de A Coruajurjo@udc.es Carlos Alberto Torres (U.S.A.)University of California, Los Angelestorres@gseisucla.edu


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