New skepticism of for-profit companies managing public schools

JACKSON, Miss. — When state officials here tried last year to recruit a for-profit company to manage schools in rural Tate County, the community outcry was swift. Concerned residents spoke out in the media, argued their case to lawmakers and circulated a petition against the “privatization” of Tate County Schools.

Patricia Johnson, whose son attends a public high school in the county, described the proposal as “crazy.” For-profit companies, she said, shouldn’t be “getting paid” to run things when parents are having to buy copy paper for teachers in cash-strapped schools.

At first glance, Mississippi would seem an unlikely source of resistance to school privatization. But this year, a coalition of lawmakers and community groups is fighting vigorously against the prospect of for-profit companies opening up charter schools.

“I think people have been astounded that anyone can make money off of public education,” said Nancy Loome, executive director of The Parents’ Campaign, which lobbies for public education in Mississippi. “Our schools struggle to make it on the resources they are provided. If [for-profit management is] trying to make a profit and pay shareholders, they aren’t going to be investing very much in educating children.”

This fierce resistance in Mississippi is but the latest example of waning interest in for-profit school managers across the country. Charter schools of all types continue to spread rapidly. But schools managed by for-profit companies make up a smaller share than they did just a few years ago.

In Mississippi, the debate comes as lawmakers are poised to approve a major expansion of charter schools later this month. At the same time, renewed attention to the state’s lagging test scores and overall woeful performance in education is fueling debate about alternative ways of running schools.

Rick Hess, a scholar at the conservative American Enterprise Institute, said states should at least consider the potential benefits of for-profits. “I think it’s crazy to discriminate against companies because they want to pay taxes,” he said. “The bemoaning of for-profits is one reason we wind up with a system that has enormous difficulty trimming costs, and growth of even successful schools moves at a snail’s pace.”

Charters can be divided into two broad groups: schools that are freestanding, and schools that are part of larger networks or chains. In 2007, about half of all network or chain charter schools were managed by for-profit companies. Just three years later, that figure had dropped to about 37 percent, according to the most recent data from the National Alliance for Public Charter Schools.

Some states, including New York, have banned for-profit companies from running charter schools. In other cases, companies like EdisonLearning, which used to focus primarily on managing schools, have shifted away from management after struggling to turn a profit or raising enough investment capital.

The number of for-profit companies has declined modestly, and the number of schools they operate has hit a plateau, said Gary Miron, a professor of education at Western Michigan University who studies charter schools. (At the same time, some of the schools’ enrollment continues to increase, Miron said, and the number of virtual schools is exploding.)

Education leaders say there are two main reasons for the increased wariness toward for-profit operators: philosophical objections to mixing public education and profit, particularly in low-income communities, and mounting skepticism over their record in some cities and states.

“The biases are deeply ingrained, especially in low-income neighborhoods where the notion of profit-making is not welcome and there’s this sense that competition and markets have not benefited these communities,” said Nina Rees, president of the National Alliance for Public Charter Schools.

Rees said there’s nothing inherently wrong with for-profit operators. She pointed to the National Heritage Academies, based in Michigan, which she says has managed to expand relatively successfully; the network now operates about 75 schools in states including Michigan, Ohio and North Carolina, according to its website. Meanwhile, a number of nonprofit operators have performed abysmally.

“The bottom line ought to be quality,” she said.

Advocacy groups find a role

But in Tate County, where nearly two-thirds of public-school students live in poverty, the specter of for-profit management has been greeted mostly with skepticism.

“When you draw off funding … it can cause some great concern. It’s basically taking money we don’t have,” said Steve Hale, a Democratic state senator from the county, who fielded residents’ concerns about for-profits last year. (Mississippi has only fully funded its K-12 system twice in the last decade.)

In the end, bids from management companies came in two and three times higher than the state wanted to spend on Tate County’s schools. All were declined, and the state continues to oversee the Tate district through an appointed “conservator”—-a public employee.

But Hale’s concerns haven’t gone away, and two charter bills are circulating. One would allow for-profits; the other would ban them. For-profit education providers K-12 Inc., Connections Education and E2020 spent $250,000 on Mississippi lobbyists in 2011 and 2012, with more spending expected this year. That doesn’t include money from numerous advocacy groups (such as the Black Alliance for Educational Options and the Mississippi Center for Public Policy) that have a track record of promoting school choice, including vouchers and charters.

In some cases, advocacy groups are funded directly by for-profits. K-12 Inc. and E2020 contributed to former Florida Gov. Jeb Bush’s Foundation for Excellence in Education, a group that over the past year has worked to craft education policy with Mississippi lawmakers and the Mississippi Department of Education.

Proponents say for-profit management of schools could actually save money. Republican John Moore, chairman of the House Education Committee in Mississippi, said privatization has led to cost savings in other governmental sectors.

“We have a system in place within our prison system where for-profit institutions actually have to do it for 10 percent less than the government is doing it,” said Moore.

But in a sign of just how controversial the issue has become, even Moore has compromised on for-profit charter school managers—voting in favor of an amendment offered this session to forbid them.

Lessons from Louisiana

Nationally, for-profit school management companies—as with charter schools more broadly—have a mixed track record, but limited evidence suggests they perform worse, on average, than their nonprofit counterparts.

One 2012 study from the National Education Policy Center found that nonprofit school operators outperformed for-profits on at least one measure: 48 percent of schools operated by for-profits met minimal expectations for academic growth, compared to 56 percent of those managed by nonprofits. But even Miron, a co-author of the study, said the growth targets (officially known as making “adequate yearly progress”) are a “crude” basis for comparison since they only capture part of a school’s relative success or failure.

New Orleans has become a prime example of how for-profit charter operators’ reach and influence have waned. Eighty percent of the city’s public-school students attend charters, the highest percentage in the country.

When public schools in the city reopened during the two years after Hurricane Katrina, for-profit companies were hired to manage five new charters. As of this school year, however, all of the for-profits managers had left the city. Some were fired or left in disgrace.

“Their track record in Louisiana is at best mediocre, and that’s probably being kind,” said Leslie Jacobs, a former state board of education member and charter-school advocate in New Orleans.

Jacobs said that the companies, which usually ask for between 10 and 15 percent of a school’s revenue, struggle to turn a profit while also offering a quality education program with limited funding. In New Orleans, average teacher salaries have gone up considerably since Katrina, adding to schools’ costs.

The for-profits themselves disagree. Michael Serpe of EdisonLearning, one of the largest for-profits in the country, said that requiring management fees while demanding quality isn’t problematic.

“Your bottom line is frankly the outcome and performance of the children in the school,” said Serpe.

The fees could be an even bigger issue in Mississippi, where per-pupil spending is lower than Louisiana.

But the greatest weakness of for-profits has been a failure to understand local needs, said Matt Candler, the founder of 4.0 Schools, a nonprofit that works to address a broad array of educational challenges in New Orleans.

“The behaviors of a few for-profits suggested that they were more interested in getting contracts than serving a community,” he said. Candler added that some for-profit companies, including the Michigan-based Leona Group, applied to manage several charter schools right after Katrina. “To even suggest you can take over seven schools in the wake of a disaster so large without anyone on the ground … sends a message about gaining market-share over understanding your customer,” he said.

Leona ultimately took the reins at only two charter schools. One closed down in 2009, and the board of directors at the second severed relations with the company.

Charter advocates like Candler and Jacobs say it’s not necessary to outlaw for-profit operators as long as there’s a rigorous charter authorization process and they can be fired quickly if they perform poorly. In Louisiana, for-profit companies cannot win charter contracts on their own; a nonprofit board gets the contract and then hires the company as a manager. That would likely be the case in Mississippi as well if the for-profit provision goes through. And many charter critics view the debate over for-profit vs. nonprofit as relatively meaningless since they believe all charter schools represent privatization of what should be a government-run enterprise.

If Mississippi does allow for-profits to manage charters, Miron says he’ll worry that the state will attract only the weakest companies because of its low per-pupil spending.

“The bottom-feeders will go in to any state,” he said. “They don’t have any problem with compromising their model because of limited funding.”

This story was coproduced by the Southern Education Desk, a consortium of public media stations reporting on education issues in the South.

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