Media reports chronicling the privatization of public schools in cities across the country suggest that a powerful trend may be taking root. In the 2002-2003 year, private firms operated approximately 417 of the nation’s public schools, according to a 2002-2003 school-year study conducted by the Commercialism in Education Research Unit (CERU) at Arizona State University. Of the 417 privately run schools noted in the study, 320 were charter schools and 97 were conventional public schools.

Relatively few conventional public schools have so far turned to educational management organizations or EMOs, a term adapted from the healthcare industry’s HMOs. But emerging educational issues may change this. For example, recent federal legislation referred to as No Child Left Behind (NCLB), aimed at improving the quality of public education, has led states and public school systems to ask EMOs to help reform failing schools. In moves perhaps related to legislated educational standards, some school systems are investigating how EMOs might help students at risk of dropping out. Finally, in at least one case, a healthy suburban school district has sought the services of an EMO to relieve crowding and manage growth.

Using an EMO to Reform Failing Schools

In 1997, Maryland passed legislation designed to“reconstitute” or reform failing schools. With the advent of federal NCLB legislation in 2001, the state altered its rules to reflect the more stringent federal standards. Under both state and federal legislation, programs designed to reform failing schools have been operating in Maryland since 1998, when the state took over the operation of three elementary schools in Baltimore City. Identified then as the worst performers in the state, the three schools are Montebello Elementary, Gilmor Elementary and Furman L. Templeton Elementary.

The Maryland State Department of Education managed the takeovers and hired New York-based Edison Schools, the nation’s largest EMO, to operate the three schools. Essentially, the state carved the schools and their funding out of the Baltimore public school system. The move wiped out all pre-existing agreements, including collective bargaining agreements with administrators and faculty in those schools. Edison proceeded to hire its own staff and faculty. Special rules ensure that Baltimore School System teachers transferring into the Edison operation will not be penalized for leaving the state retirement system. .

In short, under a strict, five-year contract, which the state may terminate at any time, the state gave the three schools to Edison to maintain and operate. .

Under the contract, the state monitors Edison’s progress toward goals or benchmarks that determine Edison’s compensation. Each year, after a 10-percent initial down payment, Maryland withholds 10 percent of the remaining funds until Edison delivers data proving that the year’s benchmarks have been met. To earn the withheld funds, Edison must consistently improve academic performance as measured by standardized tests; increasing percentages of faculty must meet goals for professional and paraprofessional certification and professional development hours; Edison’s financial records must survive state scrutiny every year; and parental participation in the Edison-run schools must increase annually..

In successive years, the contractual benchmarks have ratcheted higher. So far, Edison has performed satisfactorily, according to James Foran, director of high school and post-secondary education initiatives with the Maryland State Department of Education and Edison’s direct contract manager. .

Baltimore’s Other EMO School

Two years ago, Maryland identified Westport Elementary as a fourth failing school in Baltimore City and encouraged a takeover. School district officials, however, negotiated a deal allowing the local school system to manage the turnaround..

The result is a second approach to using a private EMO in a turnaround effort. In this case, the school system issued a request for proposal and eventually hired Victory Schools, Inc., of New York City.“This is not a top-down reform effort,” says Mark Sternberg, vice president of Victory Schools. “Instead, it’s a reform managed by the school system itself. We’re a partner with the district and also the Baltimore Teachers Union. In fact, the contract for this work is between these three parties.”

The contract has several unusual features. The teachers union agreed to extend the school day at Westport in return for an 11-percent pay raise for Westport teachers. While Edison manages its three schools outside of the school system, Victory works within the system. Westport administrators and faculty have remained in the employ of the school system but under Victory management. Victory contracts with the school system for transportation, facility management and food services. Victory personnel handle budgeting and financial administration.

“We focus most of our energy on instruction, professional development and providing leadership to the school,” Sternberg says. Is this more of a consulting relationship? “In a way,” Sternberg says. “But unlike consultants, we work in the building full time to manage the operation. I would describe our approach as collaboration among the school system, the teachers and Victory.”

While the State Department of Education has left most of Westport’s operational management up to the school system, the teachers and Victory, Foran still expects Westport to meet contractual benchmarks.

How has the Westport approach worked? “It’s too early to say,” Foran says. “We’ll have a better idea at the end of this year, Victory’s third year. There are no quick fixes for low-performing schools. We saw the greatest growth in performance at Edison’s three schools in year three of their contract. Victory is just starting year three. This is the year we expect to see significant progress. Certainly by the end of a five-year contract, you’ll be able to tell whether this kind of approach works.”

EMOs Attack Dropout Problems

Like most EMOs, White Hat Management, LLC of Akron, Ohio, has worked exclusively with charter schools. But, that may be changing. Since starting a program aimed at the dropout problem three years ago, 19 White Hat charter schools have graduated 20 to 30 percent of their students — and issued a total of 2,800 high school diplomas.

Recently, the Cleveland public school system, which has one of the lowest graduation rates in the nation, began referring its at-risk and dropout students to White Hat. In turn, White Hat has begun to investigate the possibility of moving beyond charter schools into managing conventional public schools set up to deal with dropout students.

White Hat CEO and President Mark Thimmig believes conventional public school economics favor such a move by charter school operators. Charter schools average $5,500 to $6,500 per pupil from state and federal grants, he says. By comparison, conventional public schools receive as much as $9,000 to $12,000 per pupil. “There is room for us to provide services for at-risk and dropout students on a contract basis for public schools and for public schools to retain a significant portion of per pupil revenue.” While it is too early to tell whether White Hat and other charter school operators will succeed in addressing dropout problems in conventional public school systems, the economics appear to favor experimentation.

Managing Growth With an EMO

EMOs inadvertently tar themselves with the brush they wield. Charter schools often attract lower performing students, while conventional public schools usually invite EMOs to manage schools where district methods have failed. In such cases, an EMO can outperform a district but receive little credit for boosting performance from terrible to so-so.

What happens when a successful district hires an EMO? The 13,000-student Metropolitan School District of Perry Township in Indianapolis is answering that question.

Two years ago, Perry Township needed two new elementary schools to relieve crowding in its existing facilities. “Traditionally, you build new buildings, redistrict and force people to send their children to the new schools,” says Dr. Douglas Williams, the district superintendent. “After working to tie parents into the schools, you tell them that now they have to send their kids to a different school. This isn’t a good idea. We wanted to do this in a way that parents could choose to move their kids into the new schools.”

Intrigued by the Edison School model that included a longer school day and year, technology for elementary students and foreign language instruction, Williams thought that new schools offering new programs might make parents want to send their kids to the new schools.

The district negotiated school day changes with the teacher’s union, put up two new buildings, hired Edison to implement and manage its program, and marketed the new schools to parents. Result: no more crowding and a waiting list for the new schools. “Once in a while, you develop a plan that works out just the way you want,” Williams says.

No one views EMOs as a panacea for all the ills afflicting public schools, but privatization may eventually become another tool in the toolbox that school districts use to repair problems in failing, as well as healthy, public schools.