A state panel charged with improving the Philadelphia school system says it will move forward with plans to transfer control of 20 failing city schools to Edison Schools Inc., the nation’s largest for-profit manager of public schools, despite an inquiry by the Securities and Exchange Commission that revealed questionable accounting practices by the company.

Edison is one of seven outside managers tapped by the panel to help the nation’s seventh largest school district overcome a $216 million budget deficit, chronic teacher shortages, crumbling buildings, and poor technology infrastructure. In all, 42 of the city’s schools will be under outside management come fall.

Edison bases a large part of its educational philosophy on the idea that technology can be used to enrich instruction and track student outcomes. But the company has become a lightning rod for controversy about the privatization movement in general, and its track record managing other schools shows mixed results.

According to Edison, test scores have risen in 84 percent of its schools since the company took control of them, and parents overwhelmingly give the company high marks. But critics say the company slants its data to improve its image, and Edison also has been accused of withholding key information and not being responsive enough to stakeholders.

The company’s troubles have grown worse in recent weeks, as its net loss surged to $16.9 million—or 31 cents a share—for the three-month period that ended March 31. On May 14, the SEC announced that Edison had provided inaccurate information by failing to disclose that half its reported revenue never reached the company, going instead to pay expenses in its school districts such as teacher salaries and other operating costs.

Edison neither admitted nor denied the allegations but agreed to refrain from future violations. It also agreed to hire an internal audit manager to strengthen its accounting practices. The company wasn’t fined and said the inquiry wouldn’t result in a restatement of any revenue or operating results.

Shares of the company’s stock were worth $1.75 at press time, down from $12.98 less than a month ago and as high as $28 a share in the past year.

Edison’s stock has plunged more than 80 percent since Philadelphia’s School Reform Commission put a dent in its expansion prospects by voting April 17 to give it control over 20 schools in the struggling district, instead of the more than 40 financial analysts had hoped for.

Carey Dearnley, a spokeswoman for the commission, said the district plans to move ahead as scheduled with the 20-school Edison contract, despite the company’s financial problems.

The issue is whether Edison has the financing to operate these schools, Dearnley said: “Stock and capital are two different things. I think we need to give Edison the benefit of the doubt until our lawyers have time to do a complete and thorough investigation.”

Edison says it has $45 million in cash and $15 million in undrawn credit with which to open schools in the fall and is in talks with an investor about $30 million to $50 million of additional capital.

Edison’s approach to school reform includes a longer school calendar, a uniform curriculum, and heavy investments in technology.

In Edison schools, the company says, technology is fully integrated into instruction and used to facilitate communication, research, writing, and analysis. Every teacher receives a laptop computer, and every family with a student in the third grade or higher reportedly gets a computer for use in the home.

Student work is produced electronically and saved in a digital portfolio, and each Edison school is connected through a computer network. Through this network, teachers and students can communicate with each other and tap into a large library of electronic resources.

Technology also is used to help school leaders make better decisions. Edison spokesman Adam Tucker said one of the company’s crowning technological achievements is a monthly computerized benchmarking system, which allows teachers and administrators to judge how well students are comprehending certain lessons and retaining necessary skills.

“This way, we know whether kids are understanding and digesting the materials that are being taught,” he said.

Two years ago, Baltimore turned to Edison to run three of its elementary schools. One of the schools, Montebello Elementary, scored impressive gains in math and reading scores after only a year, and Principal Sarah Horsey attributed the gains in large part to the school’s infusion of technology.

According to Horsey, 79 percent of students this year are reading at a proficient level, up from 63 percent in previous years. What’s more, 93 percent of first-graders scored proficient in reading and mathematics. The difference is that students are using computers and the internet to complete project-based assignments grounded in real-world applications, such as collecting and interpreting data about the Chesapeake Bay.

Horsey believes the technology provided by Edison has done more than improve test scores—it’s also encouraged students to look forward to learning more. “They’re doing all types of things on the computer. It is a big motivation,” she said.

Other districts tell a different story. In York, Pa., Edison was trying to resolve a conflict with the York school board at press time. The board was threatening to revoke the charter for the Lincoln-Edison Charter School, which is under Edison control. District officials claim that Edison has refused to turn over auditing records and other documents verifying student achievement—some of which were due last October.

Robert Mitten, business manager for the York City Schools, said he is concerned about how forthcoming Edison has been with financial information and student achievement results. “Every time I ask a question, I never get the same answer twice,” he said.

Mitten also said Edison has yet to come through on delivering the computers it promised to parents and teachers when the contract began.

In response, Edison’s Tucker said families are eligible to receive free computers only if the parents agree to undergo training. It’s not the company’s fault if parents refuse to meet this requirement, he said: “That’s just crazy.”

Tucker admits that when Edison first began offering free computers to parents, there were “glitches” in the system. There were instances where many people did not receive the technology because they could not afford internet access at home, he said.

Today, he said, internet access and all necessary software is available at no charge to parents of Edison students.

The purported problems with Edison’s deployment of technology mirror criticisms of the company—and the privatization movement—in general: that a large company more concerned with the “big picture” can’t meet the needs of each individual community in a timely or effective manner.

Of Edison’s 65 contracts, 11 have been renewed and three have been terminated: Goldsboro, N.C.; Sherman, Texas; and Lansing, Mich. In mid-May, one of Edison’s first four charter schools, the Renaissance School in Boston, reportedly announced it will terminate its contract, effective July 1. Officials in Trenton and San Antonio say they plan to drop Edison when their contracts are up, and Wichita has reclaimed two of its four schools under Edison control. Recently, the company has come under fire in York and Inkster, Mich., for failing to document students’ results.

In Las Vegas, where Edison runs seven schools for the Clark County Board of Education, a school board spokesman has announced the district will withhold approximately $3 million from Edison, the Philadelphia Inquirer reported. In Edison’s contract with Clark County, the company reportedly promised to raise $4 million in philanthropic funds. So far, the company has raised $1.8 million, the newspaper said. When Edison missed a deadline to deliver another $1 million in donations, Clark County decided to withhold its quarterly payment to the company. Now, Edison reportedly has promised to raise the rest of the contributions by July. An Edison spokesman said fund-raising services are not typically part of the help Edison offers to schools, but he acknowledged fund raising was part of the Las Vegas deal.

Henry Levin, who heads the National Center for the Study of Privatization in Education at Columbia University, said he has not studied Edison Schools in particular, but privatization in general has shown only modest increases in educational improvement.

“We are seeing small improvements,” said Levin. “But if you are going to make major changes in a school, you want to see major improvements.”

Gary Miron, principal research associate for Western Michigan University’s Evaluation Center, directed one of the few studies to date that has examined the effectiveness of Edison schools versus other educational models.

Miron said he was surprised to find that Edison schools performed about as well or, in some cases, worse than locally controlled schools, given the Edison schools’ longer academic calendar.

Miron cited three factors that he found were detracting from Edison’s success in the classroom: the company’s retention rate of teachers is lower than the national average; its uniform curriculum does not always fall in line with individual state standards; and it operates under a very costly business model.

“In reality,” he said, “too much money goes to the control of the central office and not enough to the schools.”

According to Miron, money shortages have interfered with Edison’s ability to deliver on its core goals, including its commitment to technology.

Although Edison claims to achieve a consistent rate of educational improvement, Miron said the company’s enthusiasm has yet to be confirmed by researchers. That could change within a few years, as RAND is conducting a comprehensive, independent study of Edison’s achievements over time.

Data from the RAND study won’t be available for another two years. In the meantime, educators across the nation will be watching the Philadelphia experiment with keen interest. Observers say the city could serve as a test case for whether privatization can succeed on a larger scale.

“Edison has been very effective with the spin it has put on its results, but if we can’t verify those numbers, that’s not research—it’s public relations,” Miron said.


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