Abstract

How Edison Survived

The author investigates the circumstances under which controversial private education company Edison Schools was saved from collapse by a pension fund for public school teachers. In the early 1990s media entrepreneur Chris Whittle became the darling of the free-market, antigovernment right by promising that private, for-profit businesses could manage schools better than public boards of education. Plagued by local opposition and severely criticized for its educational performance, Edison was hemorrhaging money ($354 million in twelve years), and had lost one-fourth of its contracts. Edison's savior, ironically, was the Florida Retirement System (FRS)--the pension fund for public employees, roughly half of them teachers, whose union has vigorously criticized both Edison and privatization. The purchase, made by Liberty Partners, an investment firm that made private equity investments exclusively with FRS money, not only put the retirement security of public employees at risk; it financially underwrote the cause of privatization. The deal was signed last July but only became public in September, when public employee unions, Florida Democratic legislators and several prominent newspapers criticized the deal, suggesting unsavory political motives. ' unions in cities like Peoria, Illinois, argue that tax money would be better spent on reforming public schools than on hiring Edison. The SEIU and other unions are campaigning to persuade public pension funds not to invest in companies that privatize public work.