Global Policy Forum

by Doug Saunders

Students already have to worry about exams, essay deadlines and staying awake through math class. In Philadelphia, they have a new worry: What if your school becomes a victim of the stock market meltdown?

Facing an educational crisis last year, the city handed 20 of its worst-off high schools, in some of the most abject slums in the country, to a private, for-profit company called Edison Schools Inc. Now, those institutions appear to be going the way of Enron, Tyco and WorldCom. Edison, a high-flying firm that was the first school-management company traded on a stock exchange, promised to provide computers, books and new curriculums, and to raise test scores. In exchange, the school board would give the company $881 (U.S.) a student. Then came the crash. Over the summer, Edison's shares slid from the year's high of $21.68 to less than a dollar on the Nasdaq Stock Market. (The company traded yesterday at about 50 cents.)

In the classroom, this has had some bizarre effects.Days before classes were to begin in September, trucks arrived to take away most of the textbooks, computers, lab supplies and musical instruments the company had provided -- Edison had to sell them off for cash. Many students were left with decades-old books and no equipment.

A few weeks later, some of the company's executives moved into offices inside the schools so Edison could avoid paying the $8,750 monthly rent on its Philadelphia headquarters. They stayed only a few days, until the school board ordered them out.

As a final humiliation, Chris Whittle, the company's charismatic chief executive and founder, recently told a meeting of school principals that he'd thought up an ingenious solution to the company's financial woes: Take advantage of the free supply of child labor, and force each student to work an hour a day, presumably without pay, in the school offices."We could have less adult staff," Mr. Whittle reportedly said at a summit for employees and principals in Colorado Springs. "I think it's an important concept for education and economics." In a school with 600 students, he said, this unpaid work would be the equivalent of "75 adults" on salary. Although Mr. Whittle said he could have the child-labor plan in place by 2004, school board officials were quick to say they would have nothing to do with the proposal.

Mr. Whittle's past ventures included buying Esquire magazine in the 1970s and introducing Channel One, a commercial-sponsored educational television system, into public schools in the 1980s.But now he appears to have fallen on hard times, and has put up for sale his 4½-hectare estate in New York's Hamptons. The home, which was listed for $46-million, has eight bedrooms, a gym, an elevator, a pool, tennis and basketball courts, and guest house.

Edison operates 150 schools in 23 states, but Philadelphia is its largest and most visible challenge. Last year, the school board picked the 45 worst-managed schools and announced that it would privatize them. At first, Edison was to take control of them all; later, in the face of political protests, 25 of the schools were put into the hands of non-profit school companies.Edison officials were unable to implement some of their more innovative educational policies, including longer school days and years, because of Philadelphia's unions and low budgets.

School board officials in Philadelphia are now debating their options. "We want to make sure they have the financial resources to sustain [the schools] through the school year," said Paul Vallas, the board's chief executive.Mr. Vallas has taken a tough disciplinary stand with the company, withholding a $5-million payment to Edison this fall because the company was seven weeks late delivering its financial statements.

Edison executives say the company is sound, and that its schools will begin showing educational improvements."We are not going bankrupt. There is no threat of bankruptcy. It is simply, flatly not true," Edison president Chris Cert told Michigan school board officials last week. Mr. Whittle has predicted a profit of $20-million this year and announced Monday he intends to buy back 5.4 million of his company's shares, or 10 per cent.He also said that 84 per cent of his schools have seen "increased student performance," against 8 per cent registering declines. Test-score results for the Philadelphia schools are not yet available.