Mixing profits and performance at alternative schools
At a conference held by School Board member Deborah Quazzo’s education investment firm Global Silicon Valley Advisors, fellow board member Mahalia Hines introduced Magic Johnson and highlighted Johnson’s visit to a Chicago alternative school that bears his name.
Hines said the former basketball superstar was moved to tears as he listened to a young man’s story of hardship. “The Magic I know was not afraid to cry,” Hines said. “Not only did he shed tears, he offered him a full [college] scholarship and beyond.”
When Hines handed Johnson the microphone at the conference last spring, his entire speech focused on how he has made money starting businesses in urban areas, returning bigger profits than expected in each case. He didn’t mention the schools for dropouts at all until he was asked a question about his education investments.
“I am an aggressive businessman,” he said, adding later that he cared about doing good while making money. “That is who I am.”
Like Johnson, the executives who run the companies that have opened a string of new alternative schools in Chicago cast their involvement as an altruistic mission to improve the lives of low-income teens. At a community breakfast this winter at the South Side location of Ombudsman, one of the schools, CEO Mark Claypool told the crowd that the school was about giving the students hope.
“It gives students hope and dignity that life can be better,” Claypool said. “It tells them, I can transcend.”
But as Chicago quickly and dramatically expands these schools—most of which rely heavily on online curricula and appeal to students’ desire to get a diploma quickly—it’s clear that altruism is heavily mixed with profit-making savvy. CPS has invested nearly $60 million in these companies in the past two years, leading to significant profits—including profit based on buying services and materials from the schools’ own affiliated enterprises.
Making money isn’t problematic in and of itself, as one Harvard University expert points out. But the schools raise another concern, he adds: There is no way to know whether the companies will deliver results given the complex goal of educating students and ensuring their diploma has value.
This last of three stories from a Catalyst Chicago/WBEZ investigation reports on a review of financial information for the four companies that have opened 15 schools in the past two years: Camelot Schools ; Ombudsman; EdisonLearning, which owns Magic Johnson Bridgescape Academy; and Pathways in Education-Illinois, the sole non-profit operator, although its executives own for-profit companies that do business with the non- profit.
The financial information is from audits and budgets obtained from CPS by Catalyst Chicago/WBEZ through a Freedom of Information Act request.
Part 1 reported on questions regarding the quality of the new schools. Part 2 reported on the impact of alternative school expansion on the district’s graduation rate.
While the companies were willing to talk generally about their finances, several of the executives refused to talk about their profits.
Public policy, private profit
Chicago’s expansion is part of a national trend of widespread growth in private, for-profit alternative schools. The four companies that have opened schools here operate more than 100 schools in at least 30 states. Other companies are also part of the mix: More than 15 responded to the request-for-proposals issued by CPS to carry out its expansion goals.
When Camelot Schools was acquired in 2011 by Riverside Company, a private equity firm, Riverside’s managing partner noted in a press release: “Alternative and special education has significant growth.”
In the past two years, the companies have received more than $10 million to launch in Chicago, plus about $50 million in per-pupil general funding.
According to Catalyst/WBEZ’s investigation:
- Company budgets include substantial money for overhead costs and buying services or materials from affiliated companies. As a result, half or less of their funding from CPS pays for teachers and other personnel.
- As mostly online ventures, the schools operate two or even three sessions a day and can enroll more students without having to pay additional teachers. The exception is Camelot, which has an eight-hour day and less online work.
- Since the companies are privately owned, the public has little or no way to know who is investing in them—and most importantly, whether or not the companies have any connections to district or city officials.
Issues like these worry critics. “It is very problematic to hand important public policy matters to Mixing profits and performance at alternative schools | Catalyst Chicago: