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For-profit and nonprofit management in Philadelphia schools: what kind of management does better than the district-run schools?

Article Excerpt
The federal law No Child Left Behind (NCLB) requires states to "restructure" any school that fails for six years running to make Adequate Yearly Progress (AYP) toward full proficiency on the part of all students by the year 2014. The law provides a number of restructuring options, including turning over the school's management to a private for-profit or nonprofit entity. Only a few school districts nationwide have sought help from either type of organization in the management of low-performing schools. But in 2002 the School District of Philadelphia, at the request of the state of Pennsylvania, asked entities of both types to participate in a substantial restructuring of many of its lowest-performing schools. The restructuring initiative was directed by the Philadelphia School Reform Commission (SRC), which contracted with for-profit organizations to manage 30 elementary and middle schools and with nonprofit organizations to manage 16 schools.

The policy intervention in Philadelphia raises questions of general interest: Do students at schools assigned to for-profit or nonprofit managers learn more than would be expected had those schools remained under school district management? Is for-profit management more or less effective at raising achievement than nonprofit management?

Told most simply, the Philadelphia story provides a threefold answer to these questions: 1) for-profits outperform district-managed schools in math but not in reading; 2) nonprofits probably fall short of district schools in both reading and math instruction; and 3) for-profits outperform nonprofits in both subjects. However, the answers require both explication and qualification.

The Theoretical Debate

The distinction between for-profit and nonprofit management has been a topic of continuing discussion in the scholarly literature on school reform. Nobel Prize-winning economist Milton Friedman theorized that for-profit firms are more effective because they have clear economic incentives to lift student performance. The firm can build its reputation (and in the long run generate a profit) only if it becomes known for running effective schools. Others have suggested, however, that for-profit firms are likely to cut costs and thereby shortchange students in order to benefit the firm's owners and shareholders. The debate over nonprofit organizations takes a different form. Some have argued that nonprofit managers are likely to be effective because they have close ties to the community in which they are embedded and can enlist the energies of committed entrepreneurs, who devote all available resources to enhance student performance. But others caution that nonprofit managers may not have the experience, resources, or economic incentives necessary for building quality educational institutions.

The Intervention

Only after an intense political struggle did the Philadelphia school district ask for-profit and nonprofit managers to assume responsibility for a number of its schools. In 2001 Pennsylvania governor Tom Ridge, a Republican and school voucher supporter, indicated he would not support any increase in funding for the Philadelphia school district until an independent entity had assessed its financial practices and educational effectiveness. Philadelphia's mayor at the time, Democrat John Street, knowing the district was facing a $215 million deficit, agreed to the study, and the state department of education asked Edison Schools to carry it out. Edison, a for-profit firm that manages charters and other schools under contracts with school districts, reported that the Philadelphia school district had spent $10 billion over a decade without being held accountable for the results. Governor Ridge refused to distribute...