For-Profit Schools Making In-Roads
April 20, 2000
Only 250 out of 80,000 public schools nationwide are managed by for-profit companies. But school boards in many states are taking over poor-performing schools and experts say for-profit companies are best suited to run them.
The largest for-profit manager of public schools by far is Edison Schools, Inc., which already runs 79 public schools and is due to add many more this fall in 20 states and the District of Columbia. The company's founder, Christopher Whittle, projects the number of schools it manages could climb to 15,000 in 20 years.
While it is still too early to obtain hard data on student performance, parents whose children attend Whittle's schools are more than enthusiastic about their youngsters' progress.
- On the financial side, Edison is still losing money, but reported its first quarter of positive cash flow at the end of 1999 -- and when it went public last fall it raised $109 million, with investors so far putting in a total of $350 million.
- During start-up, administrative costs were 78 percent of revenues in 1996 -- but Whittle expects that figure to fall to 21 percent this year.
- Whittle projects that once the system is running at full strength, 79 percent of revenues will be spent on the classroom, 6 percent on capital costs and 8 percent on administrative costs -- leaving 7 percent for profit.
Some analysts predict the company will begin to show profits when Edison doubles the current number of schools it manages. It took a major step in that direction when it signed its first contract with a state government -- committing to run three troubled schools in the Baltimore, Maryland, area.
Source: Jay Mathews, "New School of Thought: Making Education Pay," Washington Post, April 19, 2000.
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