All Commentary
Monday, July 1, 1996

Mixing Public and Private

Halfway Measures to Reform Public Schools Are a Waste of Time

Is private, for-profit management compatible with tax-funded public schools?

The idea that business-savvy entrepreneurs might improve the operation and performance of public education is, on the surface, an attractive one: under contract with local school boards, private management firms would take over the schools, exert some financial discipline, promote innovative educational techniques, and boost student test scores in the process. Many public schools already save money and get value for tax dollars by contracting with private firms for food service, custodial work, transportation, and even certain instructional services. Why not go one step further and put private companies in charge of running the whole operation?

To school reformers who see the need for public education to be less bureaucratic and more responsive to customers, this form of “privatization” may appear to be a step in the right direction. And it might be precisely that if it worked so well that it prompted parents and taxpayers to see the virtue of separating school from state altogether. Unfortunately, the recent experiences of a prominent company pioneering in this field indicate that reforming public schools with halfway measures like private management is at best a frustrating exercise and, at worst, a waste of time. The root of the problem with government schools, these experiences suggest, is government itself.

Education Alternatives, Inc. (EAI), a Minnesota-based school management firm, made headlines when it signed a five-year contract in 1992 to operate nine inner-city schools in Baltimore, Maryland. As the first major experiment of its kind in the country, the arrangement put the company in charge of management, computer instruction, and administrative services. But on November 22, 1995, barely halfway into the life of the contract, Baltimore city officials canceled it. Apologists for public education seized on the news to claim that it spelled failure with a capital “F” for the cause of privatization in general. That interpretation was widespread but it was also superficial, self-serving, and dead-wrong.

In reality, the contract fell apart because EAI rejected an ultimatum it couldn’t possibly abide. City officials suddenly and arbitrarily demanded that the company accept $7 million less per year—16 percent of its $44 million-a-year contract—to help Baltimore close a deficit in its municipal budget. The politicians in Baltimore were saying this: “Our mismanagement of other budgets for such things as streets and sewers has put us in financial trouble. We decided to fix our problem by taking it out on the schools. Even though we have a contractual obligation to a private firm and are not claiming that it has failed to live up to the agreement, we decided to unilaterally rip them off for $7 million anyway. We can get away with this because we are the government.”

An analyst with Lehman Brothers told the New York Times, “Baltimore has been a success. . . . The schools that EAI took over were a disgrace, and today they’re schools that work.” Baltimore’s Superintendent of Schools, Walter G. Amprey, one of EAI’s strongest defenders, praised the company, saying it “established a model and a template for us that has changed the way we are doing business.” But the Baltimore Sun correctly chalked up the experience to the failures of government:


EAI ran into the cold reality of urban education and city politics. The company chose a struggling urban system to establish a beachhead, and it was handling nine of Baltimore’s most troubled schools. Mr. Golle (EAI president) signed a contract allowing the city to cancel with 90 days’ notice. The escape clause, which Mr. Golle said was a “mistake,” left EAI at the mercy of cost-cutting politics at a time of shrinking school resources.

Opponents of the Baltimore experiment with EAI, some of whom worked hard from the start to make sure it failed, claim that student performance as measured by test scores did not improve during the three year period of EAI’s contract. They are not very quick to point out that EAI “mainstreamed” many children that otherwise would have been labeled “learning disabled.” The company reduced the percentage of learning disabled in Baltimore from 25 percent (two and a half times the national average!) to just 12 percent. A University of Maryland report explained that this fact “almost certainly accounts for some of the lack of increase in test scores.”

More recent data put EAI’s work in an even more favorable light. According to the January 10, 1996, issue of Education Week, results from last spring’s Maryland School Performance Assessment Test became public in late December, weeks after the cancellation of EAI’s contract. They revealed “larger improvements in the nine schools run by EAI than in other city schools.” Baltimore’s officialdom can’t bring itself to apologize and reinstate what worked for the kids because, after all, it is the government and government knows best.

On January 23, 1996, EAI suffered another setback. Hartford, Connecticut, pulled the plug on its 16-month relationship with the company. More proof, opponents claimed, that privatization doesn’t work.

Closer inspection, once again, revealed politics as the real culprit. Teachers union agitators sabotaged the effort from the start, resisting every constructive move the company wanted to make. EAI was compelled to retain every employee and avoid any layoffs. It had to hire locally and submit to costly, nitpicking union work rules. Good business sense dictated a switch from one computer brand to another, but the company was prevented from doing so by the neanderthals opposed to change. The school board refused to get its act together and allow the company to straighten out its financial procedures as the contract stipulated. To top it all off, Hartford’s board of education imitated the reprehensible example of Baltimore: it decided to make up a budget deficit by simply not paying EAI for services rendered.

Perhaps some will say that we shouldn’t be quick to give up on the idea of private management of public schools, that the events in Baltimore and Hartford are isolated instances and nonrepeatable if we learn from the mistakes.

But, alas, a round peg doesn’t fit a square hole. The stronger argument would seem to belong to those who say the real mistake of Baltimore and Hartford was assuming that private management can be grafted on to government schools in the first place.

  • Lawrence W. Reed is FEE's President Emeritus, having previously served for nearly 11 years as FEE’s president (2008-2019). He is also FEE's Humphreys Family Senior Fellow and Ron Manners Global Ambassador for Liberty. His Facebook page is here and his personal website is