NCPA - National Center for Policy Analysis

Unions Challenge For-Profit Schools

September 25, 1997

Some private firms with contracts to run schools on a for-profit basis are scaling back plans to penetrate the $310 billion public-school market. Barriers such as legal challenges from teachers unions, school-system red tape and unclear state laws are taking their toll.

Last month, a Pennsylvania judge sided with a teachers' union claim that a local school board lacked authority to contract for the services of a for-profit education management firm. Baring a successful appeal, the company could lose its contract after the spring semester.

  • Only about one-quarter of states surveyed last year by the Wisconsin School Boards Association granted local school boards broad authority to contract out -- and many school boards in the remaining states are reportedly wary of testing state laws.
  • Local politics forced a New Jersey firm that operates schools for children with disabilities to lay off staff and cancel a Washington, D.C., project after spending $200,000 trying to open.
  • Even when companies are allowed to set up for-profit schools in districts, they often must staff the schools with local teachers' union members and then negotiate terms of employment.
  • Since some states -- such as Pennsylvania and New Hampshire -- prohibit for-profit groups from running charter schools, for-profit firms are concentrating on states like Arizona and Michigan, where state law makes it clear that profit is not a dirty word and for-profit charter schools are welcome.

Since for-profit education is in its infancy, there is still relatively little hard data available to demonstrate its superiority. Still, contractors have made inroads in specialized areas -- such as educating at-risk or disabled students. They now operate 10 percent of the 750 charter schools in the country.

Some observers say its only a matter of time before for-profit educational management catches on.

Source: Laura M. Litvan, "Running Schools as Businesses," Investor's Business Daily, September 25, 1997.


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