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. His Edison Schools, he claimed, would grow into a corporate giant by educating children better and more cheaply than public schools. Teachers’ unions were initially skeptical, then increasingly critical as the results came in. But Whittle attracted both enthusiastic investors and support from politicians like Republican Governors George Bush, Tom Ridge and William Weld. After Edison went public in 1999, its stock price doubled in two years.
But by 2002 Edison was on the ropes. Its stock had crashed from $37 to as little as 14 cents. Whittle had long since abandoned his original, controversial goal of building a network of private, for-profit schools, but even the strategy of contracting to privately manage public and charter schools proved flawed. 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 collapse would have been a major embarrassment for boosters of educational privatization–that is, if an unlikely white knight hadn’t come to the rescue, purchasing the company for $182 million. 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, which public employee unions oppose as a threat to jobs and the pensions of its members. But neither public employees nor their unions had a voice in the matter.
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. “The politics smells and, more to the point, so does the bottom line,” the Palm Beach Post editorialized last October. Florida Governor Jeb Bush is an ardent promoter of privatization and school vouchers, and the Florida Education Association was a leader in fighting his re-election in 2002. Although there is no direct evidence of Governor Bush’s personal involvement, a closely linked network of Republican politicians and contributors, pension officials, lobbyists and investment managers had an interest in pleasing the Governor and saving Edison. This web of relationships appears to have facilitated the buyout, in which Liberty Partners betrayed both the principles and the financial interests of the public employees it was supposed to serve.
When Edison manages a public school, it implements a standard curriculum (mostly drawn from widely used programs), lengthens the school day and year, tests students repeatedly, and often provides extras, such as computers. The company is theoretically paid the average per pupil funds spent in public schools. But Edison negotiates contracts in a way that usually gives the company more money per student than in comparable schools, and Edison also shifts many support costs, such as busing, back to public authorities. Critics say Edison also cuts support staff (at times increasing discipline problems), avoids handicapped students and pushes out problem students. Edison’s strategy often pushes out experienced teachers; relies heavily on lower-cost, newer teachers whom Edison trains; and increases teacher turnover–raising costs and undercutting teaching.