Yale - 2009 Fall - Readings - Public Schools Policy - Case IV Houston

Case IV: Private operation of public schools in Houston,
Texas
(10 February)
Yale University
Political Science Department
PLSC 240
Spring 2009
John Bryan Starr

Case IV: Private operation of public schools in Houston, Texas
Table of Contents
The case 3
Exhibit #1: For-profit schools in the United States 5
Exhibit #2: Public opinion regarding for-profit schools 6
Document #1: Julie Light, “The Education Industry: The Corporate 6

Takeover of Public Schools,” CorpWatch, July 8, 1998 at
www.corpwatch.org/issues/PID.jsp?articleid=889
Document #2: Alex Molnar, Giving kids the business: The commercialization of 9
America’s schools (Boulder, CO: Westview, 2001) Chapter IV, “Schools for
profit: Follow the yellow brick road”
Document #3: Alex Molnar, Gary Miron and Jessica Urschel, Profiles of For- 15
Profit Education Management Organizations: 2007-2008 (Tempe, AZ:
Commercialism in Education Research Union, College of Education,
Arizona State University, 2008)
Document #4: Henry M. Levin, “Potential of For-Profit Schools for 29

Educational Reform,” International Journal of Entrepreneurship Education (2003)
Document #5: Brian Hassel, “Friendly Competition,” Education Next 43

(Winter 2003)
Document #6: Government Accountability Office, “Comparison of 52

Achievement Results for Students Attending Privately Managed and
Traditional Schools In Six Cities,” (Washington, DC: GAO, 2003)
Document #7: Patricia Burch, Matthew Steinberg and Joseph Donovan 62

(University of Wisconsin—Madison), “Supplemental Educational Services
and NCLB: Policy Assumptions, Market Practices, Emerging Issues,”
Educational Evaluation and Policy Analysis 29:2 (June 2007).
Background information on Houston and its public schools 86
Exhibit #3: Population 86
Exhibit #4: School system statistics 89
Exhibit #5: Houston school governance 91
Document #8: Julie Bennett, “Brand-Name Charters,” Education Next 8:3 92

(Summer 2008)
1
Document #9: Steven F. Wilson, Learning on the Job: When Business Takes on 99
Public Schools (Cambridge, MA: Harvard University Press, 2006) Excerpts.
Document #10: Knowledge is Power Program (KIPP), KIPP: Report Card 117
2007 (available at http://www.kipp.org.)
Document #11: Jennifer Radcliffe and Gary Scharrer, “Decade of change 135
for charter schools; Experts say spotty success keeps them from competing
with traditional system,” Houston Chronicle, December 17, 2006.
Document #12: Jennifer Radcliffe and Ericka Mellon, “KIPP Academy 138
takes big step; Celebrated Houston charter to add 35 campuses in the area
over the next 10 years,” The Houston Chronicle, March 20, 2007.
Exhibit #6: KIPP Schools in Houston: Growth and Projected 142

Growth
Document #13: Editorial: “Gifted and Talented; KIPP expansion is great 142
news for 21,000 lucky youngsters and should be for others as well,” The
Houston Chronicle, March 25, 2007.
Document #14: Mike Tolson, “KIPP’s experiment moving to grand scale; 144
Charter school on way to major expansion thanks to donations,” The
Houston Chronicle, April 2, 2007.
Document #15: Ericka Mellon, “Can HISD copy success of charter 147
schools?; Longer day plan might work, but it would cost the district
millions,” The Houston Chronicle, April 29, 2007.
Document #16: Todd Hveem, “Principal teaches pupils to keep college in 149
mind; Daniel Caesar says developing character skills just as important,” The
Houston Chronicle, October 27, 2005.
Document #17: Ericka Mellon, “Finding principals gets tougher; The 151
competition intensifies as HISD is forced to battle charter schools for the
top candidates,” The Houston Chronicle, July 26, 2007.
Document #18: Jennifer Radcliffe, “They’re intrepid; KIPP’s newest 153

campus here welcomes 89 fifth-graders; 10th Houston school to be joined in
2009 by 4 more,” The Houston Chronicle, July 1, 2008.
Suggested Study Group Questions 154
Appendix #1: Last year’s clarifying questions 155
2
The case.
In our fourth foray into the troubled waters of school choice we look at the world of
EMO’s—“educational maintenance organizations”—that propose to make profits from
taking over the operation of some or all of the functions of a public school system.
We have encountered the arguments in support of privatization of public education in our

last two case studies. Education bureaucracies are bloated and inefficient. Private
education corporations will operate schools more efficiently and effectively because they
are in competition to attract a clientele. Economies of scale will allow large corporations
running many schools and even districts to provide quality education at lower cost.
Entering the educational arena anew, private corporations may succeed in loosening the
logjams created by years of deadlocked contract negotiations between school districts and
teachers unions.
Opponents of privatization argue that keeping school for profit is morally wrong because
it undercuts the civic purposes of public education. They question whether there is fat in
the public system that, once trimmed by privatization, will make school systems more
cost-efficient, and they point to the failure of private education companies to turn a profit
as confirmation of their opinion.
Those of a paranoid persuasion take these arguments one step further, contending that the
complex apparatus of the Bush administration’s “No Child Left Behind” legislation is
actually a covert scheme to discredit public schools and to replace them with voucher-
funded for-profit school systems.
As of school year 2007-08, 50 for-profit companies were operating 553 schools in 28

states, enrolling about 254,500 students, or 0.5% of public school students nationwide.
The case begins with a series of documents describing the scope of the work of EMO’s in
American public education. We will learn that there are several types of EMO’s. Some
are publicly owned corporations, others are privately owned. Some are for-profit
corporations, others are not-for-profit organizations. Some operate as direct service
providers from a central headquarters, others operate as a chain of franchises. This section
of the casebook also contains reports that attempt to evaluate privately-administered
schools against their public counterparts. Finally, an article describes a new niche market
for EMO’s—that of providing “Supplementary Educational Services” (SES) or after-
school tutoring to districts whose schools have failed to make “adequate yearly progress”
under the provisions of the No Child Left Behind Act.
The largest and most highly-publicized EMO is the Edison Project. Founded by
entrepreneur Chris Whittle in 1992 Edison attracted Yale President Benno Schmidt to
become its CEO. At the height of its growth in the 2000-03 the company operated 150
schools in 23 states with an enrollment of 132,000 students. The company has been in
operation for sixteen years and has yet to turn a profit. Indeed, from its founding through
June 2003 the company chalked up $282 million in losses, strongly calling into question
the idea that there is money to be made in the private operation of public schools.
3
Our case for this week involves one EMO—the Knowledge Is Power Program—and
focuses particularly in its burgeoning collection of schools in the Houston Independent
School District. Founded by Mike Feinberg and Dave Levin, a pair of frustrated fifth-
grade Teach for America teachers, KIPP involves a new, intensive teaching approach, that
the two pounded out “all in one night in the fall of 1993 while U2 played endlessly in the
1
background.” The pair opened their first charter schools—one in Houston, one in the
Bronx—in the fall of 1995. The schools feature an extended day and school year, a highly
structured curriculum, contracts to promote parent participation, and a strong emphasis on
setting students’ sights on college admission. Believing that school leadership is the key to
success, training potential principals is a major focus of the work of the national
organization. The organization has attracted major funding from foundations and operates
on a franchise basis. Beginning with middle schools, the organization has expanded
downward into pre-K through grade 6 schools, and upward into high schools. Of the 57
KIPP schools currently in operation (spanning 17 states and the District of Columbia), 55
are public charter schools, and two are district contract schools. Together, these schools
currently serve more than 14,000 students nationwide. As we will see, the improved
student learning that takes place within KIPP schools is impressive and has been sustained
over time.
The case raises several essential questions. Does the private management of these schools
in fact undermine their civic purpose as public schools? Does the highly structured KIPP
approach to education stifle students’ access to higher level thinking skills, or is it a
necessary remedy for the lack of discipline and preparation that many students bring with
them as they enter school? And, finally, do the KIPP schools constitute a threat to the
school districts within which they operate, or can they serve as models for how district
schools might be restructured to improve student performance?
• • •
1
Mike Tolson, “KIPP’s experiment moving to grand scale; Charter school on way to major expansion
thanks to donations,” The Houston Chronicle, April 2, 2007 (Document #14 below.)
4
Exhibit #1: For-profit schools in the United States2
School Number of Number of Number % of Approxi- % of

Year Companies States in of Schools mate Students
which Schools Nation- Number Nation-
companies wide of wide
operate Students
1998-99 13 15 135 0.1 61,000 0.1
1999-2000 20 21 230 0.2 104,000 0.2
2000-01 21 22 285 0.3 128,000 0.3
2001-02 36 25* 368 0.4 165,000 0.3
2002-03 54 25* 405 0.4 182,000 0.4
2003-04 51 28* 463 0.5 208,000 0.4
2004-05 59 25* 534 0.6 242,400 0.5
2005-06 51 29* 521 0.5 237,900 0.5
2006-07 48 31* 501 0.5 229,500 0.5
2007-08 50 28* 533 0.6 254,400 0.5
*Plus District of Columbia
Exhibit #2: Public opinion regarding for-profit schools
How much do you know about for-profit schools? Would you say you know very little,
some or a lot?3
General Parents Voucher Charter

Public Communities Communities
Very little/nothing 86 88 83 80
Some 12 10 14 11
A lot 2 2 3 9
2
Source: Molnar, Alex et al., Profiles of For-Profit Education Management Companies 2007-08 (Tempe, AZ:
Commercialism in Education Research Union, College of Education, Arizona State University, 2008).
3
Farkas, Steve, Johnson, Jean, and Foleno, Tony, On Thin Ice: How Advocates and Opponents Could Misread
the Public’s Views on Vouchers and Charter Schools (New York: Public Agenda, 1999)
5
Would you favor or oppose a plan in which your local school board would contract with
private profit-making corporations to run the entire operations of the public schools in
4
your community?
National Totals (%) No Children in Public School

School (%) Parents (%)
Would favor 31 31 30
Would oppose 65 64 67
Don’t know 4 5 3
42% of 18- to 20-year-olds would favor; 21% of those 50 and older

35% of Republicans would favor; 25% of Democrats
42% of urbanites would favor; 30% of suburbanites; and 22% of rural dwellers
We begin our case with two articles strongly critical of the intrusion of corporations into the realm of
public education. As we will see, this intrusion covers a broad spectrum of activities, from placing a
Coke® machine in a school cafeteria all the way to running entire schools with the hope of turning a
profit.
Document #1: Julie Light, “The Education Industry: The Corporate Takeover of Public
Schools,” CorpWatch, July 8, 1998 at www.corpwatch.org/issues/PID.jsp?articleid=889
If you want to get a sense of how pervasive corporate influence in U.S. education is, just
take a tour of your neighborhood school. Enter the cafeteria and you’ll probably find
wrappers from Taco Bell, Arby’s and Subway, fast food chains that provide school
lunches. The third grade class may be learning math by counting tootsie rolls. Science
curricula might well come from Dow Chemical, Proctor and Gamble, Dupont or Exxon.
If you live in Jefferson County, Colorado, Pepsi donated $2 million to build a school
football stadium—in exchange for exclusive rights to sell soft drinks in all 140 district
schools and to advertise in school gymnasiums and athletic fields. That deal is estimated to
earn the company $7.3 million over seven years. If your local high school is like 40
percent of secondary schools in the U.S., students get their current events from Channel
One, a twelve-minute television news program with two minutes of commercials. One
Texas school even rented its roof as advertising space aimed at airplanes flying overhead.
It doesn’t end there. Education in the U.S. has become big business. The “education
industry,” a term coined by EduVentures, an investment banking firm, is estimated to be
worth between $630 and $680 billion in the United States. The stock value of 30 publicly
traded educational companies is growing twice as fast as the Dow Jones Average.
4 Source: Rose, Lowell C., and Gallup, Alec M., The 34th Annual Phi Delta Kappa/Gallup Poll Of The Public
’s Attitudes Toward the Public Schools, Phi Delta Kappan (September 2002)
6
Brokerage firms like Lehman Brothers and Montgomery Securities have specialists seeking
out venture capital for the ‘education industry.’
“The timing for entry into the education and training market has never been better,”
glows a Montgomery Securities report. “The problems with American education have
elevated education reform to a high political priority and technology is demanding and
enabling a transformation in the delivery of education.”
Analysts at the conservative think tanks, like the Heritage Foundation, Hudson and
Pioneer Institutes, tell us that the problems in education stem from inefficient, bloated
school bureaucracies. Conservatives talk about “school choice,” referring to vouchers and
other public/private schemes. Free marketeers strike a chord with many parents when
they point out that families do not have the choices they deserve, especially in urban
school districts.
However, according to progressive school activists, the problems in education have their
roots in decades of unequal school funding. They say that as long as school districts are
financed through property taxes, kids in poor, urban districts will never receive an equal
education with suburban school kids. Wide disparities in school resources open the door
for corporations to fill the gap (and their pockets), especially in inner city schools.
Real choice, progressive school reformers argue, would mean that all schools were good.
Classroom innovation, computer technology, small classes and actively involved parents
would be the hallmark not only of a handful of the best public schools, but of the entire
education system. While conservatives and their corporate partners would have us leave
schoolchildren to the whims of the market, progressives advocate creating a more
equitable tax structure that would make corporations pay their fair share towards
education. Access to quality education should be a social issue for educators, parents and
activists. Instead, policy makers are increasingly framing the issue in terms of market
ideology.
The education industry has some heavy hitters on its side. Conservative economist Milton
Friedman, who first proposed school vouchers as early as 1955, argues that public
education needs to be radically overhauled to accommodate the free market. In a 1995
opinion piece in the Washington Post, Friedman suggests that “Such reconstruction can be
achieved only by privatizing a major segment of the educational system—i.e. by enabling a
private for-profit industry to develop that will offer effective competition to public
schools.” For Friedman, school vouchers, which allow parents to take tax dollars out of
local school budgets and spend them in private schools, are a critical step in dismantling
what he describes as the “public monopoly” on education.
The relationship between free enterprise and public education is certainly nothing new.
For over 100 years, education has been shaped to fit the needs of business. During the
industrial revolution, public education was designed to produce a factory ready,
disciplined, workforce. However, since then, public education has become a battleground
between elite business interests, and those school reformers who see it as an equalizing
force in society. Radical school activists in the 1960’s tried to bring about innovations that
would tackle institutional racism and make public schools more democratic. More
recently, however, free market advocates seem to be winning out. With the new
7
“knowledge-based” economy this means some kids will inevitably be left out; and they
are almost sure to be low-income children of color in poor school districts.
According to Libero Della Piana, Senior Research Associate at the Applied Research
Center, three tiers in U.S. education have emerged over the last decade. One tier prepares
an elite group of students for jobs in the high-tech, information economy, while another
prepares students for low-wage, service sector jobs. “What corporate educational reform is
about is retooling education to meet the needs of the new industrial revolution,” notes
Della Piana, in a CorpWatch interview.5 Della Piana further points out that at the bottom
there is a third tier: kids who will never work, but rather go straight from school to jail.
Since the beginning of the 1990’s several companies, dubbed “Educational Maintenance
Organizations” by Wall Street, have emerged. These for-profit companies, like Channel
One founder Chris Whittle’s Edison Project, contract with school districts around the
country, using taxpayer funds and some venture capital to run public schools. Often it is
poor school districts, where parents and school boards are the most desperate, that turn to
private companies. “The Edison project is brilliant at marketing,” observes Lindsay
Hershenhorn, a first grade teacher at a troubled San Francisco school that recently voted
to contract with the Edison Project. “They play on parents’ and teachers’ frustration with
the lack of money for education,” adds Hershenhorn who refuses to teach in a school run
by the Edison Project.
Some teachers and parents fear that, just as HMOs have made the financial bottom line the
standard for health care delivery, EMOs will be more accountable to investors than to
students. So far, EMO experiments have survived in less than one hundred schools. In
fact, these companies are not interested in running the entire school system. Providing a
universal service for all schoolchildren would not be profitable, and many of these young
companies have yet to pay dividends to their investors. However, they are bringing profit
oriented interests to bear on the educational system.
“The public benefit and the profitability (of EMOs) are two very different things,” Alex
Molnar, author of Giving Kids the Business, told CorpWatch. “A market by definition can’t
address issues of equity,” adds Molnar, Director of the Center for the Analysis of
Commercialism in Education. While the EMOs say they have invested millions in
curriculum development, critics charge that they are “cookie cutter schools,” whose lesson
plans are developed out of a central office. They worry that just as HMOs have
depersonalized health care, EMOs will provide one-size-fits-all education. And they say
that many of the teaching innovations promoted by the EMOs are already in use in some
public schools.
The defunding of public education is also part of a worldwide trend. In many countries it
is often a component of neo-liberal economic reform or structural adjustment mandated
by the World Bank or IMF. One of the first governments in the world to experiment
with school vouchers in the 1980’s was Chile’s military dictatorship. As Martin Carnoy
points out…, while the Chilean experiment did little for poor schoolchildren, it was part
of a broad trend towards privatization that included defunding other parts of the social
5
“Race and Classroom: The Corporate Connection,”
(http://www.corpwatch.org/issues/PID.jsp?articleid=892).
8
safety net, including social security. Some of the proposals tested by U.S. policy advisors in
Chile are now coming home to roost as legislation being debated in the U.S. Congress
and state houses across the country. Some Republicans have even proposed abolishing the
Department of Education.
“Privatizing public education is the center piece, the grand prize, of the right wing’s
overall agenda to dismantle social entitlements and government responsibility for social
needs,” explains education consultant Ann Bastian.6
For more than a decade conservatives have been organizing around school reform, tapping
into parents’ and teachers’ real concern with the lack of educational options. Corporations
have seized on the opening provided by educators’ and families’ frustration with the lack
of school resources. Parents, teachers and students can roll back the corporate take over of
education, but only if they offer an alternative vision. One in which corporations pay
taxes instead of getting free advertising and tax write-offs for donated promotional
materials; one in which school systems do not abandon students to for-profit companies,
and one in which educational choice is a basic right for all families, not just a few.
Alex Molnar is doubtless the most outspoken opponent of what he refers to as the “commercialization
of America’s public schools.” He heads a research unit at the University of Arizona devoted to the
issue. The unit describes itself on its Web site as follows: CERU is guided by the belief that
mixing commercial activities with public education raises fundamental issues of public policy,
curriculum content, the proper relationship of educators to the students entrusted to them, and the
values that the schools embody.” (http://www.asu.edu/educ/epsl/ceru.htm). Following is a chapter
from his 2001 book.
Document #2: Alex Molnar, Giving kids the business: The commercialization of America’s
schools (Boulder, CO: Westview, 2001) Chapter IV, “Schools for profit: Follow the yellow
brick road”
When Michael Milken, the junk-bond king, was let out of prison, he said that he wanted
to be involved in education because he considered it one of the biggest moneymakers for
7
American business. He isn’t alone in that opinion.
Minneapolis handed over the superintendency of its public school system to Public
Strategies, a private consulting firm, in 1993. In 1994, Education Alternatives, Inc., of
Bloomington, Minnesota, won a contract to run the entire Hartford, Connecticut, school
system. In 1995, Alternative Public Schools of Nashville, Tennessee, took over one of
three elementary schools in Wilkensburg, Pennsylvania; it was the first time the company
had run a school anywhere. Since 1990, these companies and the highly publicized Edison
Project founded by Chris Whittle have captured headlines by attempting to make money
running public schools. Other companies, such as Sylvan Learning Systems and
Huntington Learning Centers, contract with individuals and school districts to provide
8
more limited educational services.
6 “Lessons from the Voucher War,” ( http://www.corpwatch.org/issues/PID.jsp?articleid=877 )

7
Peter Applebome, “Class Notes,” New York Times, November, 16, 1994
8
Martha M. McCarthy, “External Challenges to Public Education: Values in Conflict” (paper presented at
the American Educational Research Association Annual Meeting, New Orleans, La., April 1994), p. 17.
9
Advocates of these attempts at privatization in public education (often called “public-

private partnerships”) claim they are the wave of the future, supported by a broad,
bipartisan political consensus. The Goals 2000: Educate America Act initiated under
Republican President George Bush, passed by a Democratic-controlled Congress, and
signed into law by Democratic President Bill Clinton in March 1994 seems to give
credence to the bipartisan claim. The law contains a provision allowing states to use
federal money to experiment with privatization.9
Much more open to question are supporters’ descriptions of public-private partnerships as

a bold new public policy initiative that will transform failed public school systems by
infusing them with competition and private sector know-how. Disciples either do not
know or, for good reason, would rather forget that privatization was widely tried in public
education in the late 1960s and early 1970s. It was called “performance contracting.”
The Nixon administration loved performance contracting. Then, as now, a good deal of
the performance contracting focused on schools attended by poor children. And then, as
now, it was argued that the knowledge and efficiency of private companies competing for
contracts would be the engine used to bring educational achievement to schools where it
had previously been elusive.
The Baltimore Sun’s William Salganik remembers the wave of enthusiasm for performance
contracting quite well:
More than 100 schools around the country tried performance contracts during the 1970-
71 school year. Companies large and small rushed in—as large as Westinghouse, as small as
a new company formed by football star Fran Tarkenton. The cover story in The American
School Board Journal m October 1971 was “Almost Everything You Need to Know
About Performance Contracting.”
Soon, everything you needed to know about performance contracting consisted of this:
First, a federal evaluation found that performance contracts worked no better than
traditional programs. Second, there was evidence of contractors cheating. In addition to
general shoddy work in a number of schools by some bottom-line-oriented contractors,
skeptical members of the teacher’s union in Providence, Rhode Island, found a contractor
teaching parts of the standardized test that was to be used to evaluate progress and
10
determine payment.
Salganik has his facts straight. After conducting a review of three years’ experience with
performance contracting, Gerald H. Wohlferd concluded that commercial firms were no
better at teaching children than public schools, that private firms required as much or
more money to do the job, and that some companies used questionable methods to make
a profit.11
9
Peter Schmidt, “Private Enterprise,” Education Week, May 25 1994 pp. 27-30.
10
M. William Salganik, “The Coming Scandal,” Baltimore Sun, December 11, 1993
11
G. H. Wohlferd, Performance Contracting Overview, 1972, ERIC document #ED079339.
10
The Office of Economic Opportunity (OEO) and the Rand Corporation studied the
performance of performance contracting and found little evidence to support the
enthusiastic claims of its proponents.12 A 1972 New York Times article might have been
used as an obituary for the idea:
The OEO pronounced a reluctant but blunt judgment of failure today on performance
contracting—the use in public schools of private concerns, teaching machines and
incentive payments in an effort to conquer slow-learning poor children.
Thomas K. Glennan Jr., OEO Director of Research, commented: “There is great value ...
in learning which basket we should not be putting our eggs in…Better to stop now, rather
13
than wait until hopes and spending have become enormously inflated.”
As quickly as it had appeared, performance contracting in education disappeared as a

serious educational policy alternative. But it was destined to return with enthusiastic fans
who are willing and eager to suspend disbelief.
Same Old Tune, Same Old Criticism
The 1980s produced a bumper crop of failed ideas packaged and sold as a “revolution.”
Among the “revolutionary” ideas pursued with enthusiasm, first by President Ronald
Reagan and then by President George Bush, was contracting out—in other words,
performance contracting. There was, it seemed, almost nothing that the government did
that the private sector could not do more cheaply and better according to the free-market
ideologues at the helm of the federal bureaucracy. Before long, private contractors instead
of civil servants were performing a wide range of governmental tasks.
The results of that “revolutionary” effort, however, were far from stellar. On December 2,
1992, a front-page New York Times article described the findings of a study prepared for
Richard Darman, the outgoing Bush administration director of the Office of Management
and Budget (OMB). The OMB study found that “after years of effort to transfer
Government work to private companies, the White House acknowledged today that
contractors were squandering vast sums.”
The Times story described the report as one of the
most incisive critiques ever published by the Government of a central tenet of the
Reagan-Bush era: the idea that private companies can do the Federal Government’s work
better and for less money…Although opponents have argued that many Government
responsibilities are inherently unsuitable for private enterprise. President Ronald Reagan
and President Bush pushed hard to increase Government contracts to private companies,
The Government spent $210 billion in the 1992 fiscal year on contracts for goods and
services, or roughly one-sixth of all Government spending…The White House
12
Office of Economic Opportunity, An Experiment in Performance Contracting (Washington, D.C.: Office of
Planning, Research, and Evaluation, 1972); The Evolution of Educational Performance Contracting in Five School
Districts, 1971-72: A Working Note (Santa Monica, Calif.: Rand Corporation, 1972).
13
J. Rosenthal, “Learning Plan Test Is Called a Failure,” New York Times February 1, 1972.
11
investigators said they were unsure just how much money was being wasted…But they
wrote that there was unsettling evidence that the problem was endemic across all the
civilian agencies. In almost every instance where auditors have looked closely at contracts,
14
they have found problems.
A little more than a year after the OMB report was released, the New York Times reported
that profiteers running private schools were looting federal coffers by taking educational
grant money and enriching themselves instead of educating their students. The Times
noted that
in the most dramatic cases in recent years, directors of for-profit trade schools and colleges
have looted the budgets of these loosely regulated Federal student aid programs to buy
themselves Mercedes-Benzes, travel the world, subsidize a drug habit, invest in religious
causes or pay themselves million dollar salaries. The profiteers especially harm poor
students who are enticed to ... enroll at for-profit, fly-by-night trade schools using Federal
loans, get no useful training, cannot find jobs and wind up defaulting on the loans, ruining
their credit rating and their hopes of escaping poverty. And it is the taxpayer who foots
15
the bill for those defaulted, federally guaranteed loans.
Privatization schemes are inevitably advanced in a deregulatory public policy

environment, at least in part promoted as cost-saving measures. But their proponents tend
to omit the essential element for realizing cost savings from such schemes—rigorous
oversight. That isn’t as surprising as it sounds. Rigorous oversight is expensive. When the
costs of oversight are added to the cost of a private contract, it is likely to mean that not
only will there will be no net savings, there also may well be increased costs. That’s why
proponents of privatization prefer to speak loudly (if not clearly) about how private sector
“expertise” will ensure quality and how “competition” will ensure efficiency and low cost
without the need for “interference” from government regulators.
The Mythical Crisis
Given the blind enthusiasm of top government officials for private enterprise in the
Reaganite political climate of the 1980s, it was only a matter of time before privatization
in public education was once again a serious topic of discussion. There was also another
important element pushing education to ward privatization—what David Berliner
describes as the myths about public education. He argues that myths “may…be misleading
the majority of the citizenry and undermining the American people’s confidence in one of
16
their most cherished institutions.”
Berliner is on to something. For example, it now has become the conventional wisdom
that a decline in the mean scores on the Scholastic Aptitude Test (SAT) since 1965 proves
there has been a decline in American educational standards. However, Berliner notes the
decline occurred between 1965 and 1975, and scores between 1975 and 1990 were quite
14
Keith Schneider, “U.S. Cites Waste in Its Contracts,” New York Times, December 2, 1992.
15
Michael Winerip, “Billions for Schools Are Lost in Fraud, Waste and Abuse,” New York Times, February
2, 1994.
16
David C. Berliner, “Mythology and the American System of Education,” Phi Delta Kappan 74, no. 8
(April 1993): 633.
12
stable. Further, the decline that alarmed so many people actually amounted to about five
fewer items answered correctly on the SAT. As Berliner writes:
Far from being ashamed of this loss, educators should celebrate it. Why? Because it is
explainable by the fact that much greater numbers of students in the bottom 60 percent of
their graduating classes have been taking the SAT since the 1960s. As educational
opportunities and higher education became available to rural Americans and to members
of traditionally underrepresented minorities, more of these students started taking the
SAT. Since they were frequently from impoverished communities and from schools that
offered a less rigorous academic curriculum and fewer advanced courses than wealthier
schools, it is not surprising that they tended to score lower than advantaged, suburban,
middle-class, white students. This is why the mean number of items correct is less than it
17
was.
Berliner thinks educators should be “filled with pride that we have played a major role in
the achievement of two of America’s most prized goals of the 1960s—a higher high school
graduation rate, particularly for minority children, and increased access to higher
education. We accomplished both goals with a loss of only a few correct answers on the
SAT.”18
Not only does the much lamented decline in the SAT tests evaporate when examined
closely, but the folks who design the test, the College Entrance Exam Board, also
specifically warn it is not designed nor can its results be used to draw the general
conclusions public school critics repeatedly cite.19 The SAT is taken by different kids every
year, the kids who take the test do so voluntarily, and the test measures only individual
performance at a specific point in time. Therefore, the test-makers say, it cannot be used
to form conclusions about school performance over time. However, critics of school
performance have never allowed such facts to cloud a good polemic.
Berliner also contests two other “myths”—that the public education system is a bloated
bureaucracy and that Americans spend more on their schools than citizens in any other
country and have little to show for it. With 14.5 employees for every administrator,
Berliner notes, education is leaner than, for example, the transportation industry (9.3 to 1),
the food products industry (8.4 to 1), the utilities industry (6.6 to 1), the construction
industry (6.3 to 1), and the communications industry (4.7 to 1). Central office
professionals plus principals, assistant principals, and supervisors in the public schools make
20
up a mere 4.5 percent of the total employee population of the schools.
Although Americans may pay more for higher education than any other nation, he says,
they certainly do not spend more on K-12 education. In 1988 dollars, the United States
ranked ninth among sixteen industrialized nations in per-pupil spending in grades K-12.
To match the average percentage of per-capita income spent by the other industrial
nations, the United States would have to spend $20 billion more per year than it does on
K-12 education. Add to that the fact that no other industrial country distributes spending
17
Ibid., p. 634
18
Ibid.
19
David C. Berliner and Bruce J. Biddle, The Manufactured Crisis (Reading Mass.: Addison-Wesley, 1995).
20
Berliner, “Mythology and the American System of Education,” p. 637.
13
on K-12 education so unequally and it becomes clear the myth that the United States
outspends and underperforms in K-12 education has no basis.21 In Berliner’s view, “We
are among the most cost-efficient nations in the world, with an amazingly high level of
productivity for the comparatively low level of investment that our society makes in K-12
education.”22
Berliner’s arguments about the cost of public education are bolstered by a 1995 Economic
23
Policy Institute Report. And his interpretation of school performance indicators is
supported by a detailed analysis of education statistics undertaken by Sandia National
Laboratories in 1991. The Sandia report’s authors reviewed every commonly used
measure of the performance of America’s schools—including dropout rates, standardized
test scores, educational funding, international comparisons, and future workforce
requirements. They admitted they were surprised that, instead of finding disastrous
declines in school performance, they found steady or slightly improving trends.24
Referring to the mismatch between the calls for radical education reform and the evidence
used to support them, Clark Kerr, president emeritus of the University of California,
comments: “Seldom in the course of policymaking in the U.S. have so many firm
convictions held by so many been based on so little convincing proof.”25 Ideological zeal
and a steady drumbeat of erroneous criticism helped prepare the ground for the most
recent privatization initiatives. However, that may not have been enough to get them
serious consideration without widespread acceptance of a master myth—the myth that
money doesn’t matter.
This myth is typically used to rationalize gross inequalities in the amount spent to educate
children who happen to live in different school districts and to defeat attempts to increase
educational spending. It has also helped produce the popular belief that the problems faced
by poor (especially urban) school districts are not the result of a lack of funds but primarily
the result of the schools’ inability to use the available money effectively. Some people
have grown fond of arguing that poor schools should not get any more money until they
perform better. This is a little like a doctor telling a patient that no medication will be
forthcoming until the patient’s condition improves.
In large part, the data used to underpin the assertion that money doesn’t matter come
26
from a series of articles by Eric A. Hanushek, published between 1981 and 1991, and
21
Ibid.
22
Ibid., p. 638
23
Richard Rothstein, Where’s the Money Gone? (Washington, DC: Economic Policy Institute, 1995).
24
C. C. Carson, R. M. Huelskamp, and T. D. Woodall, “Perspectives on Education in America: An
Annotated Briefing,” Journal of Educational Research 86, no. 5 (May-June, 1993): 259-311.
25
Ibid
26
E. A. Hanushek, “Throwing Money at Schools,” Journal of Policy Analysis and Management 1, no. 1 (1981):
19-41; E. A. Hanushek, “The Economics of Schooling: Production and Efficiency in Public Schools,”
Journal of Economic Literature 24, no. 3 (September 1986): 1141-1177; E. A. Hanushek, “The Impact of
Differential Expenditures on School Performance,” Educational Researcher 18, no. 4 (May 1989): 45-65; E. A.
Hanushek, “When School Finance ‘Reform’ May Not Be a Good Policy,” Harvard Journal on Legislation 28,
no. 2 (Summer 1991): 423-456.
14
from a book he coauthored in 1995, entitled Making Schools Work.27 Hanushek claims his
data show “there is no strong or systematic relationship between school expenditures and
student performance.28 However, University of Chicago researchers have reanalyzed those
data, using more powerful statistical methods, and they conclude, “The question of
whether more resources are needed to produce real improvement in our nation’s schools
can no longer be ignored. Relying on the data most often used to deny that resources are
related to achievement, we find that money does matter after all.”29
If public schools are not a disastrous failure, if money does indeed matter, and if
privatization has a history of failure, then what can possibly account for privatization’s
continuing attractiveness to policymakers?
There are several possible explanations. Perhaps increasing numbers of the governing elite
are now willing to write off large numbers of school children. Perhaps some people are
willing to believe that it really is possible to get something for nothing and others merely
think that education reform will be cheaper and easier if corporate America profits along
the way. Perhaps white suburbanites don’t want to invest more money in the education of
poor, black children in cities. Perhaps some urban school administrators feel trapped by
their circumstances and are willing to try anything championed by those who hold the real
power in their communities.
Document #3: Alex Molnar, Gary Miron and Jessica Urschel, Profiles of For-Profit
30
Education Management Organizations: 2007-2008 (Tempe, AZ: Commercialism in
Education Research Union, College of Education, Arizona State University, 2008)
Summary
In 2007-2008 the for-profit education management industry continued to grow slowly.

The number of schools managed by for-profit Education Management Organizations
(EMOs) remains relatively constant. Some large and medium-size EMOs are expanding
their businesses to include, in addition to school management, other education-related
products and services.
National Landscape
• The number of states in which for-profit EMOs operated declined from 31

in 2006- 2007 to 28 in 2007-2008.
27
Eric A. Hanushek, with Charles S. Benson ct al., Making Schools Work: Improving Performance and Controlling
Costs (Washington, D.C.: Brookings Institution, 1990).
28
Hanushek, “The Impact of Differential Expenditures on School Performance.”
29
Larry V. Hedges, Richard D. Laine, and Rob Greenwald, “Does Money Matter? A Meta-Analysis of
Studies of the Effects of Differential School Inputs on Student Outcomes,” Educational Researcher 23, no. 3
(April 1994): 5-14.
30
The authors would like to recognize and thank Stephanie Evergreen for assistance with data collection,
Sally Veeder for editing work, and Joe Fee and Shannon Berry for addressing technical problems that arose
with the project data base.
15
Companies
• Since the first Profiles report was produced for the 1997-1998 school year,
the number of for-profit EMOs profiled has increased from 14 to 50, and
the number of states in which EMOs are operating increased from 16 to
28. In the past year, however, the number of EMOs profiled has a net
increase of only 2 companies.
• While the number of companies has remained relatively stable over the past
few years, many of the large and medium size EMOs are expanding into
new service areas, such as supplemental education services.
• Edison Schools experienced the largest net decrease in the number of

schools it reported to managed, from 97 to 80 schools. It should be noted
that in July 2008, Edison announced a name change. The new company is
called Edison Learning, Inc. At the time of publication, the company’s new
Web site did not mention the management of public schools.
• Ohio-based White Hat Management experienced the largest net increase in

the number of schools managed, from 38 to 54 schools.
Schools
• Since the first Profiles report was produced for the 1997-1998 school year,
the number of schools managed by for-profit EMOs has increased from
131 to 553. In the past few year, however, the number of schools operated
by EMOs has leveled off.
• Eighty-four percent of the 533 schools profiled are operated by large

EMOs.
• Eighty-five percent of EMO-managed schools are charter schools, and 15

percent are district schools. The number of district schools operated by
EMOs declined slightly between 2006-2007 and 2007-2008.
• The majority (60%) of EMO-managed schools profiled are primary

schools.
• The number of virtual schools operated by EMOs increased to 40 in 2007-

2008, which is equivalent to 8 percent of all EMO-managed schools.
Students
• The number of students in EMO-managed schools increased by 16,444

over the last 2 years (i.e., since the 2005-2006 school year). This means
that even while the numbers of companies and the numbers of schools they
16
operate has been leveling off, the number of students in their schools
continue to grow as the average school size continues to grow.
• Large EMOs enroll 89 percent of all students in EMO-managed schools.
• Large EMOs tend to have a larger than average school enrollment than the
medium- and small-size EMOs.
Introduction and Background
The EMO Industry: Background and Rationale
Education management organizations, or EMOs, emerged in the early 1990s in the

context of widespread interest in so-called market-based school reform proposals. Wall
Street analysts coined the term EMO as an analogue to health maintenance organizations
(HMOs). Proponents of EMOs claim that they will bring a much needed dose of
entrepreneurial spirit and a competitive ethos to public education. Opponents worry that
outsourcing to EMOs will result in already limited school resources being redirected for
service fees and/or profits for another layer of administration. Opponents also have
expressed concerns about public bodies relinquishing control or ownership of schools.
The theory behind market-based school reform proposals is that, by being forced to
compete with other schools, existing public schools will necessarily improve or cease
operating. Competition under this theory generally comes in two forms: private schools,
with taxpayer-funded tuition vouchers, or charter schools, which operate largely
independent of the school district but have been chartered by a public entity or publicly
appointed entity so that they qualify for local and state taxpayer funds in the same way as
conventional district schools. In practice, voucher schools have remained a small part of
the market-reform arena, while charter schools now account for the lion’s share of
alternatives to traditional public schools.
While faith in market competition as an effective engine of reform provides a general

theoretical basis for both EMO-run district and charter public schools, the specifics of the
competition are somewhat different in each instance. Adherents of market-based school
reform favor charter schools in the belief that they provide competition that will force
existing public schools to improve their outcomes or be put out of operation. Support for
for-profit management of district schools, meanwhile, arises essentially from a belief that
private business models are more efficient and effective than nonprofit, government-
operated institutions. A for-profit company contracted to manage district public schools, it
is reasoned, will have incentives (making a profit in the short term and retaining a
profitable contract in the long term) to seek efficiencies and improve student outcomes
and achievement. The competition, in this context, takes place not among schools or
districts themselves, but among current or potential managers of schools.
17
Defining Education Management Organizations
We define an education management organization, or EMO, as an organization or firm

that manages schools that receive public funds, including district and charter public
schools. A contract details the terms under which executive authority to run one or more
schools is given to an EMO in return for a commitment to produce measurable outcomes
within a given time frame.
The EMOs profiled in this report operate under the same admissions rules as regular
public schools and are operated for profit. The term “education management
organization” and the acronym “EMO” are most commonly used to describe these private
organizations that manage public schools under contract. However, other names or labels
such as “education service providers” are sometimes used to describe these companies. An
important distinction should be made between EMOs that have executive authority over a
school and service contractors that are often referred to as “vendors.” Vendors provide
specific services for fee, such as accounting, payroll and benefits, transportation, financial
and legal advice, personnel recruitment, professional development, and special education.
EMOs vary on a number of dimensions, such as whether they have for-profit or nonprofit
status, whether they work with charter schools or district schools or both, or whether they
are a large regional or national franchise or a single-site operator. Historically, only a small
portion of EMOs have been nonprofits. In recent years, however, nonprofit EMOs
(sometimes referred to as CMOs—charter management organizations) have expanded
rapidly. The Profiles report does not track nonprofit EMOs. Also not tracked are EMOs
that operate for-profit private schools, including those that may receive public funds under
tuition voucher programs such as those that operate in Milwaukee, Cleveland, or the
District of Columbia.
The number of schools under EMO management, school enrollment, and other data
included in this report primarily are derived from company self-reports. In instances in
Profiles Report: Introduction Page 3 of 185 which a company failed to provide
information, we attempted to gather the necessary data from public sources. In these cases
our data are approximations. Nearly all the EMOs are privately held companies; thus,
there is no way to compel them to share information about their operations.
[…]
Purpose of this Report Profiles reports are comprehensive digests of data on education
management organizations. Analysis and interpretation of the data in this report are, for
the most part, limited to describing general trends over time. The report is intended for a
broad audience. Policymakers, educators, school district officials, and school board
members may use this information to learn more about current or potential contractors.
Investors, persons involved in the education industry, and employees of EMOs may find it
useful in tracking changes, strategizing for growth, and planning investments. Journalists
and researchers who study and seek to learn more about education management
organizations may also find much here to interest them.
18
Findings for 2007-2008
The Profiles of For-Profit Education Management Organizations: 2007-2008 is the tenth annual
Profiles report. Profiled EMOs are categorized by size. Small EMOs are those operating
three or fewer schools. Medium EMOs are those operating four to nine schools. Large
EMOs are those operating ten or more schools.
Number of Education Management Organizations Profiled
Table 1 presents growth trend data for large-, medium- and small-size EMOs. Since the
first Profiles report in 1999 the number of EMOs profiled has increased from 14 to 50. The
number of states in which EMOs operate has grown from 16 to 28.
Table 1. Number of EMOs Profiled by Size and Year
1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Large EMOs 5 7 8 9 10 13 13 14 14 15
Medium EMOs 5 8 10 9 8 8 8 9 9 7
Small EMOs 4 4 3 18 29 30 35 28 25 28
Total number of 14 19 21 36 47 51 59 51 48 50
EMOs
Number of states 16 21 22 24 25 29 25 29 31 28
with EMOs
Figure 1 illustrates the trends in the number of EMOs profiled over the past decade. The
total number of EMO profiles in each annual report is illustrated with the solid dark line.
Profiles reports have never fully captured the number of small EMOs. Small EMOs (i.e.,
companies that operate three or fewer schools) are more difficult to identify, and—as we
have learned over the years—they are more difficult to obtain information from.
Profiles reports from 2005-2006 and 2006-2007 did not include new small EMOs. The
2007-2008 report once again includes and updates the information about those small
EMOs included in past reports and adds small EMOs identified in the course of this year’s
research. We did not, however, engage in an exhaustive search for new small EMOs.
19
After the 2004-2005 school year, the number of large and medium-size EMOs leveled off.
It is possible that the number of small EMOs exceeds the combined total of large and
medium size EMOs. Based on what we know from states like Michigan and Arizona,
where most of the small-size EMOs are located, this category of company continues to
increase.
Our data suggest that the growth in the number of for-profit EMOs has slowed. It is
important to note, however, that many of the medium and large-size EMOs have been
diversifying and expanding into new service areas, such as the provision of supplemental
education services that is less regulated and shows growth potential. Some EMOs, such as
Edison, also have packaged and sold or leased their curricula, accountability, and inservice
training systems.
Number of Schools Managed by Education Management Organizations
Table 2 displays the number of schools managed by EMOs that were profiled from the
period 1998-1999 to 2007-2008. In 2007-2008, medium- and large-size EMOs managed
a total of 494 schools, up from 465 in 2006-2007. However, if an estimate of
Imaginemanaged schools (38) is added to the 2006-2007 total, the number of schools
managed by large- and medium-size EMOs has decreased from 503 in 2006-2007 to 494
in 2007-2008. Edison Schools is largely responsible for this change, experiencing a 17
school net decrease in schools under management from 97 to 80. The biggest net increase
20
in managed schools from 2006-2007 was for White Hat Management, which managed 38
schools in 2006-2007 and reported managing 54 schools in 2007-2008.
Table 2. Number of Schools Managed by Profiled EMOs, By EMO Size
1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Large EMOs 94 177 223 281 325 373 434 424 409 450
Medium EMOs 32 48 58 52 50 51 49 56 56 44
Small EMOs 5 5 4 35 42 39 51 41 36 39
Total number of 131 230 285 368 417 463 534 521 501 533
EMO schools
To accurately interpret these numbers it is important to note that in 2006-2007 Imagine

Schools Inc., the nation’s second largest EMO, reported that it had changed from a for-
profit to a nonprofit organization. As a result the company and the estimated 38 schools it
managed last year were not included in the 2006-2007 Profiles report. In researching the
2007-2008 report we learned that Imagine Schools Inc. was still operating as a for-profit
company because it has not yet received IRS approval to operate as a nonprofit. Imagine
Schools is, therefore, profiled in this year’s report. The inclusion of Imagine’s 43 schools
in 2007-2008 bumped the total number of EMO-managed schools profiled to a new high
of 533 schools. If Image Schools is excluded, the total number of schools managed by
EMOs actually declined by 11 in 2007-2008. At the same time the number of students
enrolled in schools managed by EMOs continues to increase, albeit more slowly as the
average school size increases.
Figure 2 illustrates the growth trends associated with the schools-under-management data
in Table 2. Note that large EMOs predominate. Although they have added relatively few
schools over the past several years, over the past decade, large EMOs have increased the
number of schools under management while the aggregate number of schools managed by
medium- and small-size EMOs has been relatively level.
21
Large EMOs (i.e., those that manage 10 or more schools) now account for 84.4 percent of
all EMO-managed schools, medium size EMOs account for 8.3 percent of all EMO-
operated schools and small EMOs account for an additional 7.3 percent. With regard to
the numbers of schools in operation by school type, Figure 3 illustrates that charter schools
continue to account for approximately 85 percent of all EMO-managed schools. Since
2003-2004, the number of district schools managed by EMOs has trended downward.
22
Figure 4 contrasts the number of EMO-managed “brick and mortar” schools to the
number of virtual schools managed by EMOs. A virtual school delivers its curriculum and
provides instruction via the Internet and electronic communication.
23
We have only collected data on virtual schools since the 2003- 2004 school year. In that
time, the number of virtual schools included in the Profiles reports has grown from 17 to
40, virtual schools accounted for only 4 percent of the EMO-managed schools in 2003-
2004. This year they accounted for 8 percent of EMO-managed schools. Because the
virtual schools tend to have much larger enrollments than traditional bricks and mortar
schools, the number of students they enroll—as a proportion of all students in EMO-
managed schools—accounts for 17.4 percent of all students in EMO-operated schools.
With only one exception, all of the virtual schools profiled are managed by large EMOs.
The exception is Pinnacle Education Inc., a medium-size EMO managing eight schools.
Pinnacle was classified as a large EMO in 2006-2007.
Two firms continue to dominate the virtual school industry: Connections Academy and
K12 Inc. Virtual schools operate under two different governing frameworks, usually
varying by state. Most are established under state charter school laws. K12’s 24 schools
include 22 established under charter regulations and 2 that are not. Connections
Academy’s 12 schools include 10 charter schools and 2 noncharter public schools. A small
number of virtual schools are operated under other arrangements—either directly under
control of a school district or provided for under state enabling legislation that is separate
from charter school laws. Table 3 displays a summary of current virtual school operations.
Table 3. Number of Managed Schools by School Type

2003- 2004- 2005- 2006- 2007-
2004 2005 2006 2007 2008
Number of brick & mortar schools 446 504 491 465 493
Number of Virtual Schools 17 30 30 36 40
Number of Students in Schools Managed by Profiled EMOs
In this section we describe current figures and overall trends in student enrollments. Large
EMOs tend to have larger average school enrollments than medium or small EMOs (see
Table 6). As a result, although large EMOs account for 85 percent of all EMOmanaged
schools, they enroll 89 percent of all students in EMO-managed schools (see Table 4).
Table 4. Number of Students in Schools Managed by EMOs, By EMO Size
2001- 2002- 2003- 2004- 2005- 2006- 2007-

2002 2003 2004 2005 2006 2007 2008
Large EMOs 135,000 166,464 178,670 214,205 209,495 198,583 225,050
Medium EMOs 15,057 14,168 11,665 13,535 15,971 20,092 15,758
Small EMOs 6,960 8,567 10,068 14,688 12,503 10,823 13,605
Total number of EMO students 157,017 189,199 200,403 242,428 237,969 229,498 254,413
Prior to 2001-2002, student enrollment data were not collected for Profiles reports. Figure
5 displays enrollment data for companies profiled for the period 2001-2002 to 2007-2008.
Also displayed is the calculated student enrollment trend estimate. The estimated
24
enrollment for the first three years is based on the number of schools and the mean
enrollment in schools for 2001-2002 and 2002-2003.
Each year since 2001-2002 the average school size for EMO-managed schools has
increased. This fact also is taken into account when we calculate our estimated
enrollments. The dip in overall enrollment in 2006-2007 is due to the exclusion of
Imagine Schools Inc., which was included again in 2007-2008.
The data in Table 5 display the number of EMO-managed schools and total enrollment of
those schools by school type the Common Core of Data definitions were used to classify
schools as either “primary,” “middle,” “high,” or “other” (see definitions in Appendix A).
Sixty percent of all EMO-managed schools are at the primary level in 2007-2008
compared with 58 percent in the previous year.
Table 5. Number of Schools and Students Enrolled in Schools Operated by

Profiled EMOs, By School Level (2006-2007 and 2007-2008)
2006-07 2006-07 2007-08 2007-08

Schools Enrollment Schools Enrollment
Primary 292 133,886 324 161,256
Middle 27 12,434 33 13,917
High 94 28,352 100 48,745
Other 88 54,826 76 30,495
25
Table 6 displays the 2007-2008 average and median enrollments for EMO-operated
schools, in terms of EMO size and instruction level. The data illustrate that schools run by
large EMOs have a larger median enrollments than do schools operated by medium or
small-sized EMOs. The data in Table 6 illustrate the predominance of the large size EMOs
both in terms of the number of schools they manage and the total number of students
enrolled in their schools. It also illustrates the extent to which large EMOs focus on
primary schools with relatively large enrollments.
Table 6. Numbers of Schools and Students Enrolled, by EMO Size and School
Level, 2007-2008
Number of Total Average Median

Schools Enrollment Enrollment Enrollment
Large EMOs Primary 270 140,966 522 439
Middle 30 12,711 424 413
High 86 45,672 531 402
Other 66 26,275 398 376
Medium EMOs Primary 27 10,096 374 400
Middle 2 948 474 474
High 11 2,599 236 97
Other 4 2,115 529 417
Small EMOs Primary 27 10,194 378 327
Middle 1 258 258 258
High 3 474 158 104
Other 6 2,105 351 319
Using the 2007-2008 Profiles Report
The data in the annual Profiles of For-Profit Education Management Organizations reports
describe general trends in the for-profit EMO industry over time. They are intended for a
broad audience including policymakers, educators, school district officials, and school
board members who may use this information to learn more about current or potential
contractors. Investors, persons involved in the education industry, and employees of
EMOs may use Profiles reports to track changes, strategize for growth, and plan
investments. Finally, Profiles reports are important resources for journalists, researchers, and
anyone who seeks to study and learn about education management organizations.
26
Large Company Summary
Summary of For-Profit Education Management Organizations Managing 10 or More

Schools, Listed Alphabetically by Company Name
Public Schools Managed

Company Name Company District Charter Total Total # of States Where
Location Enrollment Schools Are
Managed
Charter School Southfield, MI 0 14 14 7,096 4
Administrative Services
Charter Schools USA Fort 0 14 14 13,042 1
Lauderdale,
FL
Choice Schools Grand Rapids, 0 10 10 2,305 1
Associates, LLC MI
Connections Academy Baltimore, 2 10 12 8,615 11
MD
CS Partners, LLC Hartland, MI 0 10 10 3,024 1
Edison Schools New York, 49 31 80 48,609 17

NY
Helicon Associates Trenton, MI 0 12 12 3,627 1
Imagine Schools, Inc. Arlington, VA 0 43 43 19,045 11
K12 Inc. Herndon, VA 2 22 24 31,355 15
Leona Group, LLC Phoenix, AZ 0 54 54 16,648 5
Mosaica Education, Inc. New York, 0 36 36 12,505 8

NY
National Heritage Grand Rapids, 0 55 55 33,172 6
Academies MI
Non-Public Salem, MA 3 14 17 3,313 5
Educational Services,
Inc.
Victory Schools, Inc. New York, 6 9 15 6,290 3
NY
White Hat Akron, OH 0 54 54 16,404 6
Management
Large Company Totals 62 388 450 225,050 27
# of Large Companies = 15
Notes: Washington, DC is counted as a state.
27
Medium Company Summary

Summary of For-Profit Education Management Organizations Managing 4 to 9 Schools,
Listed Alphabetically by Company Name

Location Enrollment Schools Are Managed
AmeriSchools Tucson, AZ 0 4 4 727 1
Benjamin Franklin Gilbert, AZ 0 4 4 1,986 1
Charter School
Educational Services of Liberty, IL 0 7 7 583 1
America, Inc.
Global Educational Ann Arbor, 0 9 9 2,589 2
Excellence MI
Pinnacle Education, Tempe, AZ 0 8 8 2,473 1
Inc.
Romine Group, LLC Utica, MI 0 5 5 2,665 1
SABIS Educational Eden Prairie, 0 7 7 4,735 5
Systems MN
Medium Company Totals: 0 44 44 15,758 5
# of Medium Companies = 7
Small Company Summary

Summary of For-Profit Education Management Organizations Managing 3 or Fewer
Schools, Listed Alphabetically by Company Name

Location Enrollment Schools Are
Managed
Accelerated Learnng Phoenix, AZ 0 1 1 258 1
Center, Inc.
Allen-Cochran Chandler, AZ 0 1 1 331 1
Enterprises
Allsport Enterprises, Inc. Tucson, AZ 0 1 1 102 1
American Basic Schools, Mesa, AZ 0 1 1 702 1
LLC
Black Star Educational Detroit, MI 0 1 1 244 1
Management
Bright Beginnings Chandler, AZ 0 1 1 435 1
School, Inc.
Champion Schools, Inc. Phoenix, AZ 0 1 1 187 1
Compass High School, Tucson, AZ 0 1 1 350 1
Inc.
Cornerstone Charter Phoenix, AZ 0 1 1 233 1
School, Inc.
Country Gardens Laveen, AZ 0 1 1 327 1
Educational Services,
LLC
Desert Springs Academy Tucson, AZ 0 1 1 146 1
28
Eastpointe High School, Tucson, AZ 0 1 1 212 1

Inc.
EdFutures, Inc. Carlsbad, CA 0 2 2 574 2
Educational Impact, Inc. Tucson, AZ 0 1 1 104 1
GAR, LLC Tempe, AZ 0 1 1 113 1
Hamadeh Educational Dearborn, MI 0 3 3 2,024 1
Services, Inc.
Heritage Academy, Inc. Mesa, AZ 0 1 1 418 1
Innovative Teaching Southfield, 0 3 3 1,603 1
Solutions MI
Montessori Charter Flagstaff, AZ 0 1 1 268 1
School of Flagstaff, Inc.
Nobel Learning West Chester, 0 1 1 700 1
Communities, Inc. PA
Rose Management Tucson, AZ 0 3 3 825 1
Group
Schoolhouse Services and Detroit, MI 0 3 3 1,338 1
Staffing, Inc.
Self Development Mesa, AZ 0 1 1 278 1
Charter School
Smart Schools Traverse 0 1 1 920 1
Management City, MI
Southern Arizona Tucson, AZ 0 1 1 187 1
Community Academy,
Inc.
Synergy Training St. Clair 0 1 1 409 1
Solutions Shores, MI
TAG Elementary, Inc. Tucson, AZ 0 1 1 214 1
The Montessori Tucson, AZ 0 2 2 103 1
Schoolhouse of Tucson
Small Company Totals 0 39 39 13,605 5
# of Large Companies = 28
Henry Levin, who heads the National Center for the Study of Privatization in Education at
Teachers College in New York City, is skeptical that there is money to be made in for-profit public
schools and doubts that entrepreneurs were fully cognizant of what they were getting themselves in for.
Document #4: Henry M. Levin, “Potential of For-Profit Schools for Educational

Reform,” International Journal of Entrepreneurship Education (2003)31
Introduction
Private schools preceded public schools in American history. Although schooling was
often a cottage industry in colonial times in which an adult might provide tutoring for a
fee to one or more students in a household, private schools as organized institutions were
not designed to yield profits. School organizations were likely to be church-affiliated and
31
Prepared for ISEE Educational Entrepreneurship Think Tank, UCLA, June 6-7, 2002. The author is Director
of the National Center for the Study of Privatization in Education and the William Heard Kilpatrick Professor
of Economics and Education, Teachers College, Columbia University. He wishes to thank his colleagues Clive
Belfield and Janelle Scott for their reviews and suggestions. The author may be reached at hl361@columbia.edu
29
dedicated to particular educational, philosophical, and religious values. Only at the

beginning of the nineteenth century do we see the rise of what was ultimately to be called
the common or public school as each of the states adopted education as a constitutional
responsibility.
Towards the end of the nineteenth century, a system of Catholic schools was established
to shield Catholic students from the Protestant bias found in public schools and to provide
religious instruction (Tyack 1974: 84-86). In terms of sheer numbers of schools and
enrollments, the Catholic schools soon outnumbered the other independent schools in
enrollments, as they do today. At the same time, public schooling continued to expand,
and by the turn of the twentieth century almost all states had compulsory attendance laws.
A major controversy arose over whether independent or private schools could meet
compulsory attendance requirements. This issue was resolved by the U.S. Supreme Court
in 1925 in Pierce vs. Society of Sisters which declared that compulsory schooling laws could
be met in any independent school approved by the state.
What is notable in this brief historical flow is the absence of a significant presence of for-
profit schools in the development of the U.S. educational system. This raises the question
of whether there is something about education that does not lend itself well to for-profit
operations (Levin 2001). There are undoubtedly a relatively small number of family-run
schools or those operated by individuals or partnerships that provide a living to these
families or individuals. However, even these are not common, and there is little evidence
of substantial returns on investment. In general, long hours and constant attention to a
specific clientele seem to be needed to make these schools succeed, an experience that is
also common in privately-run pre-schools.
The last decade has seen the rise of for-profit companies in elementary and secondary
education, but few of them own schools. Rather, they have established businesses for
contracting with school districts or charter schools to operate their schools, functioning as
educational management organizations or EMO’s. These schools continue to function as
public schools even though they are run by private contractors. Charter schools are a
relatively recent phenomenon (Cookson & Berger 2002; Finn, Manno, & Vanourek 2000;
Murphy & Shiffman 2002). Such schools are given both specified public funding and
dispensation from most state and local rules and regulations in order to provide greater
autonomy in operations. In order to qualify as a charter school they must tender an
application to the charter school authorities in their state (typically school districts,
universities, or state departments of education) with a clear purpose (charter) that they will
address and the enrollment objectives, organization, staffing, and provisions for financial
accountability. Many groups establishing charter schools have had little or no experience
in operating schools, so they have sought assistance. Thus, it is hardly a surprise that the
growth of EMO’s has followed closely the growth of charter schools in the U.S., of which
there are about 2,400 in 2002 in 37 states and the District of Columbia enrolling some
32
600,000 students. Most charter schools are “start-ups”, that is newly established schools;
but some are conversions of existing public schools to charter status. Reinforcing this link,
charter schools also turn to EMO’s because charter funding structures tend to disadvantage
The Center for Educational Reform provides a continuous update of schools and enrollments. See
32
www.edreform.com
30
schools that do not have access to capital funds. EMO’s may provide access to start-up
capital.
In addition, EMO’s have been active in contracting with school districts to operate
specific schools within those districts, usually schools with poor educational results and
many challenges. The district provides a specified amount of funding, often a generous
arrangement for the EMO relative to the funding provided to comparable schools
operated by the district.33 In some cases the EMO’s have been able to get additional
funding from philanthropic organizations because of their commitment to school reform.
One advantage of contracting directly with school districts is the availability of a school
facility, an advantage also conferred upon some charter school conversions. In contrast, the
establishment of new charter schools requires a search for and financing of a proper facility
⎯and many states do not provide funding or adequate funding to pay for charter school
facilities.
It is appropriate to examine whether for-profit EMO’s have the potential to reform public
education. To answer that question one must ask two further questions. First, can EMO’s
succeed as a business, and under what conditions? Second, are EMO’s likely to stimulate
changes in elementary and secondary schools that will improve educational outcomes.
Clearly, if EMO’s are not adequately profitable, they are unlikely to have an educational
impact in the long run. Even if they prosper, the next question is whether they will
change education through innovation and competition.
Can For-Profit EMO’s Be Profitable?
It is useful to begin by setting out the early expectations of both the founders of EMO’s
and the investment community as to why this looked like a promising opportunity. In the
early 1990s, the climate for privatizing public services had been well-established. The
Reagan and Bush administrations had criticized government as the problem rather than
the solution and had praised the private sector, deregulation, and tax reduction as the
solution to inadequate public services. The Clinton and Gore administration followed up
this appeal with a variety of approaches to Reinventing Government, including
privatization of government services and continued support for privatization of health care
through Health Maintenance Organizations (HMO’s).
The specific appeal to the investment community for privatizing elementary and
secondary education was a sector spending almost one billion dollars a day, the largest
government sector that had been untouched by privatization. Wall Street firms went to
their investment communities with glossy presentations showing declines in test scores,
poor test results relative to those in other countries, rising educational expenditure, and
particular educational challenges in the inner cities (e.g. Merrill Lynch, 1999). Many of
these critiques were overstated, and the causes of the shortcomings were overly-simplified
as being the fruits of leaving education to government bureaucracies. In short, it was
33
A common arrangement is to provide the average per-student expenditure of the district even though the
district average includes services not provided by the contracted school. See Levin (1998: 383-384) and Miron
& Nelson (2002: 62-68) on the cost accounting issues when comparing the costs of public versus private
schools.
31
asserted that funding was spent inefficiently with too little being allocated to classrooms
and too much to central administrative headquarters of school districts. Educational
specialists in the investment industry argued that if the education sector were privatized, its
performance would rise, and the returns to investors would be substantial because of the
enormous gains in efficiency. Indeed, such investments were referred to as opportunities
to do well (high returns) by doing good (improving education), so they were both
economically and morally justified.
This wave of justification for privatization had one major down-side. Few of those who
decided to enter the business of education had studied carefully the economics or politics
of education. They failed to look carefully at resource allocation in existing public schools
and its underlying justification, primarily in the belief that whatever was being done was
highly inefficient and could be easily improved by the private sector. They assumed that
there were large economies of scale in running schools so that profitability would be an
increasing function of size of firm and the numbers of schools managed. They did not
understand the politics of education and the fact that when public dollars are financing the
enterprise it cannot be separated from political decision-making. At a time when large
fortunes were made on selling possibilities and dreams, due-diligence was in short supply
in the new economy.
What they did not realize is: (1) education is a tough business because it is regulated,
monitored, and subject to the demands of multiple audiences and layers of government on
the basis of public funding; (2) EMO’s are challenged by high marketing costs that public
schools do not face; (3) relatively short-term contracts (3-5 years) have their own risks in
amortizing investments at school sites⎯whether the EMO does well or poorly; (4) the
economies of scale that were anticipated do not exist; and (5) one size does not fit all,
creating a challenge for a uniform educational model, quality control from afar, and the
establishment of national and regional brands.
Education is a Tough Business
Ideally, a business would like to provide a concrete product or service with as few
restrictions as possible and delivered under stable conditions to a predictable clientele.
Risk, change, and uncertainty are unwelcome and require a premium in returns. As Cyrus
Driver has found in applying contract theory to school administration, education is
characterized by multiple goals and authorities with constant shifts in the relative
importance among each as political, demographic, and social trends intervene. Multiple
goals include establishing schools as safe and disciplined environments accommodating a
wide variety of student needs, ranging from those of gifted students to those of
handicapped students. Goals include developing student skills in a multitude of subjects
including reading, writing, speaking, mathematics, science, social studies, art, foreign
languages, and physical capacities. They also include development of creativity, character
(such as respect, honesty, judgment, and persistence), problem-solving, personal health and
hygiene, patriotism, and citizenship. From the standpoint of a productive enterprise, this is
a complicated production process because it is one in which many “products” must be
produced simultaneously and with limited resources that require continuous tradeoffs
32
among goals. Furthermore, student capabilities, motivations, and goals have a profound
influence on educational outcomes, factors that are often beyond the control of schools.
Schools are subject to the interventions and pressures of three government bodies and the
demands of their clientele. For example, contracted schools within school districts are
governed by federal, state, and local laws, regulations, and policies. These strictures and
guidelines are voluminous and often difficult to interpret or understand because of their
multitudinous details and complexity. The recently passed federal law, No Child Left
Behind, is more than one thousand pages, a single law among tens of thousands. It will be
translated into concrete procedures and regulations by federal agencies for transmission to
the states; each state will interpret these details and apply them to local districts, providing
hundreds of new regulations and thousands of pages of interpretation for school
authorities. Definitions of allowable achievement tests, testing frequency and procedures,
and the consequences of tests for students and schools will be determined for all schools
including charter schools. Three levels of government monitor contract schools in each
district. State chartering agencies monitor charter schools according to federal regulations
and to those state regulations that have not been relaxed.
In addition, the clientele and potential clientele for these schools provide pressure in a
variety of ways. For charter schools, families have the prerogative of choice and will leave
if they believe that the charter school has not delivered what they want. In addition, they
have access to the charter school board, charter school director, and individual staff to
press for the types of services they want for their children. Schools contracting with
EMO’s within school districts face similar pressures from parents and through the various
governing mechanisms. Finally, teacher and other professional organizations often set
restrictions on hiring and working conditions based upon either their collective bargaining
agreements or their political power.
The result of all of the government regulation and scrutiny and that of the choice options
and demands of clientele is that the EMO is subject to competing pressures and changes
from many sides, with little stability over time. It must somehow find a way to balance a
large number of competing claims, a phenomenon that does not lend itself well to a
standard schooling process that will allow substantial uniformity across different sites. Yet,
most of the EMO’s seek to establish national and regional brands that promote a uniform
model, one that is highly consistent from site-to-site and confers a brand image.
Marketing and Contracting Costs
EMO’s face costs that do not have to be borne by local school districts. The most
important are the marketing costs that are required to attract and sign charter schools and
districts to contracts. Not only are the EMO’s competing against other EMO’s, but there
is overall resistance by many citizens and educators to delegating schools to for-profit
management. To many, the disagreement is fundamental, the view that profits will come
from squeezing services rather than from greater efficiency. They believe that such schools
have incentives to select students who will be least problematic and require few services
outside of routinized instruction, leaving the more costly student needs to the regular
public schools. The result is that EMO’s must engage in substantial promotion and
33
marketing activities, from advertising to participating in the regional and national

conventions of education associations, and also to direct marketing of the EMO concept
and services to school districts. The last of these may consist of direct appeals to
administrators and school boards through expensive retreats at which the potential
decision-makers are provided with luxury accommodations, meals, and entertainment, as
well as presentations by the sponsoring EMO.
Marketing activity requires substantial personnel who solicit school districts and potential
charter school organizers or even offer to do all of the preparation of applying for charter
school status. For every contract that is obtained, the EMO may have to solicit intensively
among a much larger number of potential districts or charter school sponsors. Even when
there is overall agreement on establishing a contractual relation, the details must be
worked out by lawyers, accountants, and business executives on the EMO staff to assure
that the EMO obtains a beneficial contract. Both the marketing and contracting costs must
be funded ultimately from the operational revenues received from states or school districts,
excess expenses that are not intrinsic to school districts that operate their own schools.
Short-Term Contracts
Typical contracts between EMO’s and charter schools or school districts are only three to
five years. This means that overhead costs for establishing the contract and gearing up to
operate the school must be amortized over a relatively short period of time, especially
given the risks of contract non-renewal. Contracts may not be renewed for poor
performance, and many argue that it takes at least five years to turn around a failing school
or to get a new charter school on its feet. This means that the EMO risks losing contracts
before it can amortize appropriately its start-up expenses. But, the situation is also
precarious if the EMO succeeds. It is clear that districts seek for-profit EMO’s to operate
schools that are dysfunctional and performing poorly, not its better schools. Often these
dysfunctional schools have poor leadership, unqualified teachers, disruptive students, high
pupil mobility, and community factionalism. If the EMO is able to turn around the school
in five years to make it functional, the school district may have an incentive to take the
34
school back into its own operational fold.
Elusive Economies of Scale
Among the most seriously erroneous assumptions built into the business models was that
there are substantial economies of scale in education (e.g. Chubb 2001). The thinking
seemed to go something like this. The establishment of a for-profit company will entail a
large fixed expenditure for addressing all of the above issues and more. But, the amount
that will be received for each student will allow a fairly large surplus of revenues over costs
for operations at the school site. The logic seemed to be that there is considerable waste at
the school site in conventional public schools, although where substantial savings might be
made was never specifically identified. As in the appeals to investors, the assumption of
greater efficiency of the private sector was used to justify this claim. In order to offset the
high fixed costs of a central headquarters, it was only necessary to contract with enough
There is some evidence of this phenomenon in the recent announcement by the charter school’s board that it
34
would take over the Renaissance School from Edison Schools.
34
schools. In this way the high fixed costs would be spread over enough schools that a net
profit would be generated from school operations.
This meant that the high costs of getting started and establishing EMO’s were to be
expected, with attendant losses over the early period, and it justified large amounts of
investment capital prior to profitability. But, the business model suffered from one major
flaw. Not only had no one demonstrated the economies of scale that were counted on,
but the economics of education literature finds that economies of scale set in at fairly low
enrollments at both school sites and in school districts.35 Many EMO’s have already
expanded far beyond the most efficient scale in terms of enrollments. The reason is that
schools have very high variable costs. Each new school requires a facility; administrators,
teaching and support staff; equipment and supplies; maintenance; utilities; and other
resources. Since schools are labor intensive, virtually the only way to reduce costs
substantially is to use lower-cost staffing and labor-saving technology. But, teachers and
educational administrators are not highly paid relative to their responsibilities and to other
professional groups, so savings are limited by a restrictive teacher supply at lower
remuneration. Further, parents and state regulations oppose cutting back educational
qualifications to substitute less-skilled labor for professionals. And, educational technology
has historically represented added cost at school sites – without assurance of educational
benefits – rather than a guaranteed strategy for capital-labor substitution (Cuban 2001).
To reduce costs at school sites, the EMO’s have pursued three strategies. The first is to try
to save costs by hiring less experienced teachers. The problem with this strategy is that
younger teachers are more likely to leave to start families, return to college, seek better
positions, or accommodate changes in the career of a spouse. This turnover creates
additional costs for recruitment and training, and these may offset completely the salary
advantage. The second is to use standard operating procedures and low-cost educational
strategies that minimize the need for ancillary personnel and provide a bare-bones
pedagogy in which all teachers follow a standard script of instruction at each grade level.
This approach also has costs in terms of mobility of teachers who seek more creative
opportunities, as well as the further challenge that one approach may not fit all students at
all sites. In addition, such approaches with their emphasis on basic skills may not be
appropriate to the increasing sophistication of tests to measure higher order skills and
creativity.
The third strategy for reducing costs is to recruit and retain students who are least
demanding in terms of resources. It is no surprise that most EMO’s do not accommodate
moderate or severely handicapped students, but they can also discourage students with
even modest behavioral problems or learning needs. Or they can maintain strict
requirements on parental participation, discouraging single parent families and those who
face difficulties in taking on additional responsibilities. Strict discipline policies can be used
to suspend or expel disruptive students. In the long run scrutiny by local and state
35
In the latest review of the evidence on economies of scale, the authors conclude that: “Sizable potential cost
savings may exist by moving from a very small district (500 or less pupils) to a district with ca 2000-4000 pupils,
both in instructional and administrative costs. Per pupil costs may continue to decline slightly until an
enrollment of roughly 6,000, when diseconomies of scale start to set in (Andrews, Duncombe, and Yinger
2002):255).”.
35
education agencies and by communities will create resistance to these policies as well as
undermining public relations.
Overall, the strategy of large-scale expansion before becoming profitable is not a

promising one, based upon three decades of research on economies of scale. The most
recent summary of research on the topic (Andrews, Duncombe, and Younger 2002) finds
that the lowest average cost per student is reached with a school district enrolling about
6,000 students. The largest of the EMO’s, Edison Schools had about 130 schools and
75,000 students in the Spring of 2002. Yet it suffered $17 million in losses in its most
recent quarter (March 31, 2002) and cumulative losses since its founding in the early
nineties of about $200 million. It continued to premise its future on a large expansion that
would provide profitability based upon economies of scale, as have other EMO’s. Yet, its
present size is more than ten times the estimated size for an efficient school district.
Moreover, there is considerable evidence that the average cost per student of larger
districts rise considerably as supervision, monitoring, and communication become less
efficient and require more personnel relative to enrollments. Even this evidence refers to a
single school district. When one considers the long supply and communication lines when
schools are spread over many districts and large regions, the added costs of maintaining
such a large network are even higher than when concentrated in a single school district.
A Uniform Product
The business plans of the EMO’s push for a uniform educational product across their
school sites for several reasons. First, they seek to control costs by standardizing their use
of curriculum, pedagogy, and school inputs. A standard approach provides several
advantages. First, it means that the procedures for establishing and operating schools,
selecting and training personnel, and purchasing equipment and supplies can be routinized
and made uniform throughout the enterprise and the school network that it sponsors.
Personnel can be shifted among sites almost without disruption because of their
commitment to and familiarity with a single operation. Moreover, to the degree that it
obtains a common set of equipment and supplies for each school, it can benefit from
competitive bidding and discounts for large purchases (even though such cost savings will
be a modest part of the overall cost structure). Second, the uniformity of the educational
product contributes to the notion of a recognized brand of education for a particular
company. With national or regional aspirations, each EMO seeks to establish brand
identity based upon product differentiation.
But, educational needs can differ immensely from one community to another. In some
cases a majority of students are immigrants speaking a first language that is not English.
Differences in home backgrounds, handicaps, giftedness, ethnicity, poverty, and cultures
can create large variance in the types of educational programs and materials that will
benefit particular groups of students. Differences in local customs with respect to
educational organization can also be important. The states and school districts also set
different criteria among subjects to be taught and tested, so adjustments must be made to
meet these “standards.” Further, demographic characteristics of students and educational
content standards and testing programs change over time, sometimes very rapidly. All of
36
these factors contradict the assumption that a standard model, representing a branded
approach that changes little from site-to-site or over-time, is a sound business goal.
A Viable Business Model
It is highly dubious that the business model that has been pursued by many of the EMO’s
is viable economically. It appears that it is based more upon generic assumptions of greater
business efficiency than a careful study of the specific features of school operations.
Virtually all of these assumptions violate what is known about the economics and politics
of schools. Schools must deal with multiple governments with conflicting priorities and
constantly shifting objectives rather than a stable business context. EMO’s face large costs
of marketing and promotion and costs of contracting that do not seem to have been
anticipated. The relatively short-term contracts that the EMO’s are able to obtain do not
allow sufficient time to amortize investments at school sites if contract renewals are not
forthcoming. The substantial economies of scale that were anticipated in operations are
illusory. And, the notion of a uniform model that can be implanted anywhere under a
specific EMO brand does not comport with the reality of the different educational
conditions encountered.
Although several of the EMO’s have tried to make some adaptation over time, most have
held to models largely based upon these fallacious assumptions. The result is that large
operating losses have been continuing, and several have been unable to get continuous
access to capital to finance their operations and cover their losses (e.g. Advantage Schools,
Learn Now, Tesseract/EAI) and have gone out of business or merged with others. At this
point the viability of the predominant model for privatizing schools, that of the EMO,
36
seems highly dubious.
It is difficult to attribute these poor results to inadequate financial remuneration. In the

case of charter schools the EMO’s are working with contracts based upon the same
remuneration as the non-EMO charter schools, where most of the latter are able to
succeed. Moreover, some of the charter schools using EMO’s have been very successful in
obtaining philanthropic contributions, as have some of the EMO’s directly. Further, a
common practice of the EMO’s with respect to contracts with districts is to obtain a
37
contract based upon a full share of the average per-student expenditure. But, most of the
contract schools do not provide the full range of central office services that the district
must carry. Moreover, the contract schools are typically at the less expensive elementary
level rather than the more resource intensive secondary level; and the contract schools and
charter schools operated by EMO’s enroll few of the costly special education students, the
moderately and severely handicapped. Thus, the contractual payments typically exceed
what a comparable district school receives in resources.
36
There is a great deal of focus on when EMO’s might reach the break-even point as if that is the criterion of
success. But, the real issue is whether they can earn a substantial return on capital that will be competitive with
other investment opportunities
37
For a discussion of how to compare costs and the findings that suggest greater largesse received by EMO’s
than comparable school sites, see Miron and Nelson (2002: 62-68). For cost comparisons in Baltimore under an
EMO that operated nine schools, see Richards, Shore, & Sawicky (1996: Chap. 2).
37
Do EMO’s Contribute to Educational Reform?
Even if the existing business models of the EMO’s do not suggest economic viability, one
can still examine their educational approaches to ask if they contribute to educational
reform. There are two paths by which EMO’s could stimulate educational reform. The
first is to operate schools that make organizational or pedagogical breakthroughs that
might lead to their success and to emulation by public schools. The second is to create
competition between EMO’s and public schools that will stimulate public schools to
improve their operations. It is also possible that just the potential threat of EMO’s, as
opposed to direct competition, will spur the public schools to be more responsive to their
clientele.
No careful survey has been made of the strategies of the EMO’s, but descriptions of their
approaches are found in promotional materials. In addition, there have been studies of
particular schools (e.g. Miron & Nelson 2002). I have also visited a small number. So,
what follows is based upon a variety of sources, but not a systematic survey.
Pedagogical Approaches
There is little evidence of major new pedagogical approaches practiced by EMO’s. Many
EMO’s emphasize a back-to-basics approach that is heavy on traditional drill and practice
or what is called direct instruction. There are at least three reasons for reliance on this
traditional approach. The first is that there is at least some evidence that direct instruction
provides achievement gains in basic skills. Second, many school districts that are
contracting with EMO’s or charter schools are seeking traditional approaches and test
score gains in basic skills. And, third, this approach keeps down costs for the EMO’s
because it is truly a no-frills method without enrichment and often with minimal
instruction in the arts or areas outside of basic skills. The Edison Schools, the largest of the
EMO’s, rely largely upon standard curricula that can be purchased by any school district,
although it has developed some applications for its technology and has incorporated other
subjects. Edison relies heavily on a combination of direct instruction and broader
approaches. Many of the other EMO’s rely upon a “cookie-cutter” approach to the 3 R’s
(Miron & Nelson 2002).
Without question there is no evidence of “revolutionary” breakthroughs by EMO’s with

respect to curriculum, instructional strategies, or use of technologies. Virtually every aspect
of their pedagogical approaches can be found somewhere in existing public schools, and,
in many cases, in a large number of public schools. Perhaps it is too early to expect these
kinds of innovations or the funding is not adequate to create the incentives and
38
development that are needed.
Personnel and Organization
In the areas of personnel and organization, one finds definite departures from many
existing public schools. In particular, many of the EMO’s seem to do a more systematic
38
Brown (1992) provides an economic analysis of why private schools deviate so little from public schools in
their basic features
38
job than the average public school in creating an overall system of personnel selection and
training and curriculum consistency across the entire school. According to my
observations and inquiries, the EMO’s place more effort on selecting their school-site
administrators and teaching personnel and evaluating both. In some cases they also provide
more training and greater performance incentives. There is greater focus on accountability
of site administrators and school staff through sanctions and rewards. The EMO’s view
schools as a system to a greater degree than I have seen in public schools where the pieces
often lack coordination and “new” approaches are adopted helter-skelter.
This difference is especially notable in some of the inner-city environments where

traditional public schools are chaotic with high teacher and administrator turnover, high
student mobility, frequent shifts in curriculum approaches and pedagogies, uncoordinated
staff development, and haphazard use of educational technologies. Even the appearance of
the facility is unkempt and in need of repairs and renovations. In contrast the EMO’s have
a good record of attempting to select staff and immerse them in a more systematic
pedagogical approach with articulation from grade to grade. Staff are evaluated on their
success in implementing the curriculum and pedagogy and on student success, to the
degree that it is possible to measure the latter.
Perhaps the greatest visible strength is the ability to of EMO’s to accomplish the logistics
of school maintenance. In many cases, the EMO’s are able to physically transform school
facilities that have been unsightly, damaged, and compromised for years. Facilities are
painted and repaired, and custodial work is taken seriously. School appearance does not
necessarily improve test scores, but it is an important symbol of how seriously the school
authorities value educating the local population. The EMO’s seem to have a major
advantage in this area relative to the standard district administration.
Do EMO’s Outperform Conventional Schools?
At this time there is little rigorous evidence comparing EMO’s with comparable
conventional schools. Some EMO’s have reported superior results, but without the
documentation required to substantiate the claims. Typically, they have reported that test
scores have risen in most of their schools, but the specifics of which tests, how tests were
administered, and which students were included is not given. Moreover, public schools
have also raised tests in this new era of “standards” and high stakes testing and reporting in
the public schools—in many cases, concentrating on test preparation rather than learning.
So, the real issue is whether the test scores have risen in EMO schools at a faster rate than
in comparable public schools when test scores are viewed as the currency of the realm.
Gary Miron and colleagues have done two studies that attempt to provide preliminary
answers to this question. In their study of early Edison schools, they found about the same
pattern in test scores between Edison schools and matched public schools (Miron &
Applegate 2000). In their study of Michigan EMO’s they found that the non-EMO,
charter schools outscored those operated by EMO’s (Miron & Nelson 2002: 143-145).
Test scores are not the only indicators of success with respect to school reform, but there
is even less evidence on other indicators.
39
Do EMO’s Spur Competition?
Even if EMO’s do not directly create breakthroughs in educational practices and results,
they do offer an additional alternative to parents. Moreover, they may also spur
competition with public schools and non-EMO charter schools by creating a more
competitive environment. It is possible that they spur competition and improved results
for the educational system, although there is no direct evidence on this matter. Hess
(2002) has found that with more intense concentrations of charter schools and other
alternatives, there is at least some emulation by the public schools of practices that may
attract students. But, the overall results are fairly nominal, what Hess calls “revolution at
the margins”. In an analytic review of almost 40 econometric studies of competition,
Belfield and Levin (2001) found modest effects (about a .1 standard deviation
improvement in achievement for a one standard deviation increase in options). This
improvement is comparable to about 10 points on the verbal Scholastic Aptitude Test
(SAT), not a significant amount. Direct studies of the competitive effects of EMO’s on
student achievement or other outcomes are not available.
What Has Been Learned?
What has been learned in this first decade of for-profit EMO’s? What we have learned is
that contrary to the facile claims of their investment promoters, privatizing of operations
of public schools is not a business that is easily convertible to profitability. Whatever the
flaws of existing public school management and its poor performance in many urban areas,
it does not appear that privatization, alone, is an effective answer. For-profit EMO’s have
generally not been profitable, nor is there evidence of breakthroughs in educational
results. And, there is virtually no evidence that the quest for larger and larger numbers of
schools will solve the dilemma through economies of scale.
This does not mean that for-profit EMO’s or for-profit firms in elementary and secondary
education will always fail to succeed. What it does mean is that the present model is
unlikely to be the answer. In the spirit of experimentation, there are a number of
directions that might be more promising:
• Smaller firms with a few schools are more consistent with the literature on
economies of scale in education. Schools can be more easily managed and
adapted to local conditions and can focus on improving effectiveness in a
world of high variable costs. The single, for-profit school may hold
promise for those committed to educational entrepreneurship. Close
monitoring of costs and the needs of clientele are essential to make a profit
in this challenging industry. It may also be possible for this type of
endeavor to expand modestly with careful oversight.
• In the case of multiple schools, cost controls for central administration are
important. The claims of some EMO’s were that they could do a better job
educationally at lower cost by avoiding the “waste” of central
administration in public schools. The paradox is that their costs are
considerably higher because of generous staffing, salaries, and benefits in
40
their central headquarters—with stringent cost controls at school sites.

Multiple-school companies will need to reverse this priority. Even so, it is
not clear that a company can provide a unified brand of education over a
large number of schools and school sites. Greater flexibility in school-site
operations is required to adapt to different needs and contexts— while
focusing the brand identification on goals and concepts rather than the
uniformity of operations.
• Containing marketing and promotional costs is crucial. One strategy is to

create outstanding demonstration schools, and to recruit new schools on
the basis of demonstrated performance at existing ones. This strategy would
call for a slower expansion, but one in which marketing costs could be
reduced and a learning curve could be used more beneficially to improve
operations.
• In the case of EMO’s it is important to seek longer contracts, if possible,

perhaps with performance benchmarks for each year on which payments
will be based. The contract should be long enough to amortize fixed costs
of starting-up at a site while providing reasonable assurance of completing
the contract. In some cases the EMO might set its costs on the promise of a
“turnkey” operation in which a dysfunctional school is returned to the
district as a functional one—with certain performance criteria and
incentives.
• Following successes in higher education, it is possible that the highest

returns will be in niche markets. This has been the case in higher education
where such firms as Apollo and its University of Phoenix division have
targeted older and fully employed workers providing conveniences such as
parking and child care, modular courses of a standardized nature,
practitioner teachers from the community at low cost, placement, and an
ambitious approach to evaluation and quality control. DeVry has developed
a profitable, niche market in providing preparation for technological
careers. In both cases the niche consists of filling the needs of a specific
clientele that is presently underserved, in a way that is attentive to costs and
results. It is not an attempt to compete with conventional higher
education. This fact alone reduces the political opposition that can be very
costly to overcome by those attempting for-profit incursions into
mainstream, public services.
• Niche markets can include special education where for-profit institutions

have been successful historically. They can also include other groups of
very high cost and at-risk students such as dropouts who are induced to
return to school. But, in addition, they can include areas that are already
profitable to some providers such as professional development, after-school
services, counseling, administrative support (e.g. payroll, insurance,
maintenance), and professional support services such as provision of
curriculum, case studies, and software as some e-learning companies are
41
doing. While these may sound less ambitious and less promising
economically because they do not replace public schools, they can be
highly profitable.
Two facts should give pause to those who believe that it will be easy to create a large for-
profit network of EMO schools. The first is the dearth of for-profit schools that have
entered the market historically among independent schools. This is probably less a matter
of ignorance on the option of for-profit operation than of careful analysis. Elite private
schools in the major metropolitan areas charge tuitions that are greater than $20,000 a
year, two to three times what is spent for each pupil in the surrounding public schools.
Yet, the for-profit sector has not been able to show a presence. Further, in addition to
tuition, almost all independent schools engage in considerable fund-raising, with the
highest tuition schools raising the most additional funding. (The same is found for private
universities). Why haven’t for-profit schools broken into this potential market in
significant numbers to show what can be done with market incentives? This is worth
contemplating by those who see large profits in operating or owning elementary and
secondary schools.
Finally, this analysis is premised on existing methods of financing education. It is not clear
how it might change if educational vouchers or tuition tax credits were to become
widespread. My intuition tells me that a large enterprise with multiple schools would
remain problematic. Certainly, this is the lesson to be learned from countries that have
large for-profit sectors in elementary and secondary education such as Chile and the Asian
39
countries with large numbers of for-profit schools. To my knowledge, no corporate
entity has become a major factor in private education in those countries.
Sources
Andrews, M. , Duncombe, W., & Yinger J. (2002) “Revisiting Economies of Size in American
Education: Are We Any Closer to a Consensus?” Economics of Education Review, 21(3), pp. 245-62.
Belfield, C. & Levin, H. M. (2001) “The Effects of Competition on Educational Outcomes: A Review of
the US Evidence,” Occasional Paper 35, National Center for the Study of Privatization in Education,
Teachers College, Columbia University, www.ncspe.org.
Brown, B. (1992) “Why Governments Run Schools,” Economics of Education Review, 11(4), pp. 287-300.
Carnoy, M. & McEwan, P. (2001) “Privatization Through Vouchers in Developing Countries: The Cases
of Chile and Colombia,” In Privatizing Education, H. M. Levin, ed. (Boulder, CO: Westview).
Chubb, J. E. (2001) “The Profit Motive: The Private Can Be Public,” Education Matters (Spring 2001), pp.
6, 8, 10, 12, 14.
Cookson, P. W., Jr. & Berger, K. (2002) Expect Miracles: Charter Schools and the Politics of Hope and Despair
(Boulder, Co: Westview).
Cuban, L. (2001) Oversold and Underused: Computers in the Classroom (Cambridge, MA: Harvard University
Press).
39
For Chile see Carnoy & McEwan (2001).
42
Driver, C. (2002) Towards an Economic Model of School Principal Accountability, Unpublished doctoral
dissertation (Stanford, CA: School of Education, Stanford University).
Finn, C. E., Jr, Manno, B. V. & Vanourek, G. (2000) Charter Schools in Action (Princeton: Princeton
University Press).
Hess, F. M. (2002) Revolution at the Margins: The Impact of Competition on Urban School Systems (Washington,
D.C.: The Brookings Institution).
Levin, H. M. (1998) “Educational Vouchers: Effectiveness, Choice, and Costs,” Journal of Policy Analysis and
Management, 17(3), pp. 373-392.
Levin, H. M. (2001) “The Profit Motive: Bear Market,” Education Matters (Spring 2001), pp. 6, 9, 11, 13,
15.
Merrill Lynch (1999) The Book of Knowledge: Investing in the Growing Education and Training Industry, In-depth
Report (New York: Merrill Lynch & Co.)
Miron, G. & Applegate, B. (2000) An Evaluation of Student Achievement in Edison Schools Opened in 1995 and
1996 (Kalamazoo, MI: The Evaluation Center, Western Michigan University).
Miron G. & Nelson, C. (2002) What’s Public About Charter Schools (Thousand Oaks, CA: Corwin Press).
Murphy, J. & Shiffman, C. D. (2002) Understanding and Assessing the Charter School Movement (New York:
Teachers College Press).
Richards, C. E., Shore, R. & Sawicky, M. B. (1996) Risky Business: Private Management of Schools
(Washington, D.C.: Economic Policy Institute).
Tyack, D. (1974) The One Best System (Cambridge, MA: Harvard University Press).
In an issue of Education Next devoted to the charter school movement, Brian Hassel talks about
the role of education management organizations in the world of “mom and pop” charter schools. He
points out that the resources available to the EMO help it overcome some of the fiscal problems
encountered in starting up and operating a charter school—problems we first considered last week.
Document #5: Brian Hassel, “Friendly Competition,” Education Next (Winter 2003)40
Everyone has read the ubiquitous feature story about a charter school—Jane and John Q.
Public and their friends, sitting around somebody’s kitchen table, dream up a different
kind of school for their kids. Putting in hours of sweat equity, charging start-up costs to
their credit cards, maybe even mortgaging their homes to bring their dream to reality.
Making the economics work by taking parent involvement to a whole new level—parents
driving buses, cleaning school bathrooms, mastering the intricacies of state financial
reporting requirements.
Charter schools with origins like these can be compelling and unique, models of the
outside-the-box approaches these schools are supposed to pilot. And most of the dramatic
40
Bryan C. Hassel is president of Public Impact, a consulting firm based in Chapel Hill, North Carolina.
43
success stories from the charter world come from schools founded by teachers or
community members. For example:
• KIPP Academy, Houston. At KIPP, a middle school founded by two former Teach
for America members, one recent class entered with passing rates of 35 and 33
percent on state math and reading tests. The following year, the class’s rates rose to
93 and 92 percent.
• The Accelerated School, Los Angeles. Opened by two teachers in 1994 and named
Time magazine’s “Elementary School of the Year” in 2001, the school reports that
its scores on the Stanford Achievement test have jumped 97 percent since 1997.
• North Star Academy, Newark, New Jersey. Based on preliminary results from the
spring 2000 state test, 88 percent of the school’s first 8th grade class scored
proficient or above in language arts (compared with 47 percent citywide), and 66
percent scored proficient or above in math (versus 21 percent citywide).
Numbers like these are eye-catching. But can these stand-alone, typically small charter
schools serve as the basis for a sustainable, large-scale movement for change in education?
Or are they likely to remain the exception rather than the rule? After all, starting an
innovative, successful charter school is extraordinarily difficult, and few entrepreneurs
seem cut out for the job.
Small Businesses
There are certainly reasons to think of successful stand-alone charter schools as an
interesting but ultimately marginal phenomenon. Starting a public school from scratch is,
in a word, difficult. It has become a cliché that charter schools, in addition to being
educational institutions, have to succeed as small businesses—balancing their budgets;
negotiating leases, financing packages, and contracts; and making payroll. Individuals and
small teams—often teachers, parents, or community activists who have never run
schools—are apt to possess some but not all of these skills and backgrounds.
Opening a new school also requires capital. Most charter schools receive federally funded
start-up grants of $10,000 to $150,000 for one to three years. Beyond that, they cannot
expect any public funds to flow until, if they’re lucky, the July before they open.
However, expenses can’t wait. Principals need to be hired a few months before school
starts. Ideally, teachers start at least a few weeks before students arrive. Then there are
books and bookshelves, desks and desktop computers, and all the other supplies that need
to be purchased. And all of that doesn’t include the big kahuna of start-up costs: the
charter school facility.
The first decade of charter schools has unearthed entrepreneurs who are willing and, in
some cases, able to take on these herculean tasks. They’ve proven themselves able to
secure the requisite start-up capital—by becoming enterprising fundraisers, by
“partnering” with others who have deeper pockets, by finding creative ways to keep start-
up costs down, or by going without amenities that are standard-issue in the typical district
school. Even with all these challenges, approximately 2,700 charter schools will be open
during the 2002–’03 school year, educating some 700,000 students.
44
This supply of entrepreneurs can work if we’re talking about a reform that captures just 1
percent of the nation’s public school market share. But what if we’re interested in creating
a set of schools that educate 10 percent, 20 percent, or an even greater share of American
students? Are there enough social entrepreneurs out there to do that?
Let’s consider this question. Nationally, the growth of charter schools was dramatic in the
years following the passage of the initial charter laws (see Figure 1). In 2001 and 2002,
however, the number of new charter schools opening in the fall actually declined
compared with the previous year.
Statutory caps on charter schools have caused some of this leveling, but not all of it. Even
in jurisdictions with few restrictions on new starts, the numbers tend to decline over time.
It appears that within a given geographical area lives a limited supply of entrepreneurs
willing to undertake starting a charter school, a supply that peters out over time. Not to
zero, but to what amounts to a drop in the bucket of public schooling in a city or state.
.
Enter the EMOs

“Education management organizations,” or EMOs, are sometimes touted as the solution
to these challenges. According to the Center for Education Reform, 19 of these
companies ran 350 charter schools in 2001–’02, about 14 percent of the nation’s charter
schools. Since EMO-run schools are typically larger than the average charter school,
45
EMOs actually educate an even higher percentage of charter school students—perhaps 25

to 30 percent.
Most EMOs today are for-profit companies, such as Edison Schools and Nobel Learning
Communities, but not all. Aspire Public Schools, for example, is a nonprofit seeking to
operate a large chain of public schools, at least initially in California. The nonprofit New
Schools Venture Fund has established a “Charter Accelerator” initiative to invest in more
nonprofit EMOs.
EMOs offer many answers to the leadership supply question:
• Expertise and systems. Starting and operating a school requires expertise across a
range of fields—curriculum and instructional design, facilities management,
community relations. EMOs can hire experts in these areas or develop expertise
over time and then share knowledge and capacity with their constituent schools.
They can turn expertise into systems so that every school doesn’t have to reinvent
the wheel.
• Economies of scale. As they operate more and more schools, EMOs can use their
growing buying power to obtain favorable terms for goods and services. By
negotiating bulk purchase contracts with suppliers, they can reduce per-student
costs.
• Capital (for research and development and possibly facilities). At least for EMOs, the
prospects of long-term profitability make it possible to raise capital from venture
investors or, in a smaller number of cases, like Edison Schools, the public markets.
For nonprofits, philanthropic funds serve a similar purpose. This capital allows the
companies to make substantial investments in R&D—such as Edison’s multiyear
curriculum design project, which took place largely before the company operated
a single school. Some EMOs have also deployed capital to help meet the challenge
of financing facilities.
• Incentive and capacity to cultivate leaders. As important as a company’s expertise and

systems are to its schools, the quality of the school-level leadership is still critical
for the success of EMO-run schools. EMOs have strong incentives to seek out
high-potential leaders and develop their capabilities over time. And because they
operate multiple schools, they are in a position to develop a “farm system” and
create opportunities for career advancement that would not be possible in “mom-
and-pop” charters.
• Incentive and capacity to sustain schools over time. If a stand-alone charter school
experiences troubles, the founders or current leaders may try strenuously to get the
school back on course. But if they fail, no institution is likely to do the hard work
of saving the school. The school district may be glad to see the school go; the
charter authorizer may not have the capacity or the philosophical inclination to
intervene. But if an EMO school begins to sink, the EMO has strong incentives to
rescue it. And they may have the resources to do so, by sending in new leadership
or expertise.
46
The Dilemma of Scale

Nonetheless, it would be a mistake to rely on EMOs alone to sustain the charter school
sector over time, for three reasons.
First, though EMOs bring substantial monetary and human resources to the table, they are
not immune from financial and management challenges of their own. One of the major
national EMOs, National Heritage Academies, recently reported an annual profit. But
most of the scale players in the market have been for-profits only in the legal documents.
Investments in capacity and marketing have swamped revenues for the typical EMO.
Second, for-profit EMOs exacerbate the built-in political challenges of creating charter
schools. Under any circumstances, charter schools ignite political controversy...But when
they are operated by for-profit entities, they become even more of a lightning rod.
Grassroots organizations like ACORN, which have supported charter schools—even
started their own—have led vigorous campaigns against Edison Schools’ involvement in
troubled public systems like those of Philadelphia, New York, and San Francisco.
These experiences raise questions about the political viability of a charter school
movement that becomes largely composed of schools run by for-profit EMOs. Charter
school policies have attracted unlikely coalitions that include free-marketeers and business
leaders, but also community-based organizations, civil-rights groups, and other
nontraditional allies. It seems that the support of nonconservative charter advocates
depends, in part, on the fact that up to now the movement has been composed mostly of
grassroots, community-based schools—not franchises of profit-seeking companies.
Finally, and perhaps most important, EMOs may not be the most likely source of
innovation—and thus of the kind of dramatic gains in performance that we need to see in
schools. For several reasons, the drive for scale militates against out-of-the-box
approaches. To begin with, attracting sufficient enrollment is vital for EMOs; the need to
fill seats is bound to drive companies to appeal to the “median” consumer, who might
balk at strange new grade configurations or pedagogical approaches.
The companies’ internal dynamics also push toward the conventional. EMOs face the
substantial challenge of scaling up an educational and organizational model across multiple
sites, perhaps across a wide geography. It makes sense in that context to select the familiar,
the easily conveyed. The same goes for personnel. If a company needs 30 principals, the
average hire is more apt to resemble the typical principal than the renegade that a stand-
alone charter school might seek.
Herein lies a great dilemma facing the charter movement. To become a serious force for
change in education, charter schools as a group need to achieve greater scale. The most
obvious path to scale is the proliferation of chains of schools run by education
management organizations. For financial and political reasons, though, looking exclusively
to EMOs for scale is a poor strategy. In addition, the breakthrough innovations that are
part of the great promise of charter schools may be more likely to emerge from schools
that are, at least initially, single-site start-ups. But such schools are limited in number and
small in size—hardly the basis for a large-scale movement.
47
Resolving this dilemma requires thinking about “scale” in two new ways. First, what
would it take to enable more successful, stand-alone schools to “scale up”—by replicating
themselves or through other means? Second, what would it take to create an environment
in which much larger numbers of successful, stand-alone charter schools can form and
thrive?
Scaling Proven Models
Education is notorious for single-school
success stories that serve as fodder for 60
Minutes and feature films, but are never
“replicated” elsewhere. Within traditional
school systems, it’s not hard to see why.
The incentives to adopt good ideas from
other schools are weak, and the constraints
on change—from policy and culture—are
strong.
The charter school strategy has the
potential to overcome this conventional
failure by providing a space within which
it’s easier to scale up what works via the
creation of new schools. But most effective
charter schools remain single-site
successes. Charter leaders have their hands
full even several years into start-up. Their “model” may actually be heavily reliant on the
personal leadership of one or more founders and/or local ties and circumstances, which
are difficult or impossible to “bottle.”
Still, a small number of successful charter schools are beginning to explore scaling in one
way or another:
KIPP Academies. Based on the success of the two initial KIPP academies in Houston and
the Bronx, KIPP decided to scale up with support from the Pisces Foundation and other
philanthropists. KIPP’s approach to scale relies on developing leaders to open and operate
new public schools—both charter and district-based. The highly selective Fisher Fellows
program inducts 20 to 25 aspiring school founders per year and provides them with a
summer training program that includes classroom instruction at Berkeley’s Haas School of
Business—half focused on business matters, and half on academic and school issues.
Fellows then do a four-month residency in an existing KIPP Network school. By spring,
fellows go to work founding a school—with intensive assistance from KIPP national.
Support continues over three years, ending with an “inspection” to assess how well the
school lives up to KIPP’s “five pillars”—the general principles that define a KIPP school.
By 2010, KIPP aims to have started a total of 200 schools nationally. If successful, the
resulting network will be an interesting model. It won’t be an EMO—each school will be
an independent entity, subscribing to the five pillars, but each unique. But it will capture
some of the advantages of scale, primarily in the start-up phase. At this point, KIPP does
48
not seem focused on reaping other potential values of scale, such as the power of joint
purchasing or the centralization of certain routine functions.
Minnesota New Country School/EdVisions. Minnesota New Country School in Henderson,
Minnesota, is unique in two respects. First, its learning program is very unusual. Almost all
of its high-school instruction takes place through personalized project-based inquiry,
facilitated by teachers and relying heavily on the computers sitting on nearly every child’s
desk. More traditional forms of instruction are used as well, but only as needed to ensure
the mastery of basic skills. Second, the school is run by a cooperative of teachers, who
make all the key decisions about the school—from the learning program to the budget to
hiring and firing. With funding from the Bill and Melinda Gates Foundation, the
EdVisions cooperative is now seeking to spread this dual model to 15 new secondary
schools over five years. Gates funding will go both to the new sites and to EdVisions
central, which will provide intensive start-up assistance. Six sites are currently involved at
different stages.
High Tech High. Founded by tech industry leaders and educators in San Diego, High Tech
High is undertaking various efforts to scale up its design, which offers a rigorous,
personalized program focusing on math, science, and technology, and providing extensive
connections to the “adult” world through internships and other means. Like KIPP and
EdVisions, part of High Tech High’s scale-up work involves helping others found similar
schools in nine sites around the country. This initiative is also funded by the Gates
Foundation. But High Tech’s approach includes other elements as well. It has developed a
Learning Resource Center, a detailed online source of information about the school’s
approach that allows anyone in the world to access and use the school’s resources. It is
engaged in various initiatives to prepare teachers to use its approaches in their own
schools. And it is participating in a local effort to design 14 new high schools to be built in
San Diego over the next decade.
Nevertheless, expanding beyond a single campus or city presents added challenges—
challenges that so far have prevented most successful charter schools from seriously
pursuing scale. What’s needed is a new infrastructure that makes scale-up more feasible—a
diverse range of service providers capable of helping schools with a whole array of needs.
If such a system existed, it would be easier for successful schools to scale up, just as it
would be easier for brand-new stand-alone schools to start.
Service Providers
Presently, starting a new school from scratch is just too difficult and painful, even for
people who are capable of pulling it off. Much of the work goes into activities such as
transportation, food service, accounting, regulatory compliance, zoning battles, mortgages,
and the like, activities that are not where education needs innovative, fresh thinking. It
seems likely that there is a large reservoir of entrepreneurial educators and non-educators
who would be willing to engage in school start-up—if it were not such a nightmare.
Part of the answer certainly lies in the policy arena—giving charter schools equitable
access to funding (including capital funds), cutting unnecessary regulations, ensuring that
institutions other than local school boards can issue charters in every jurisdiction.
49
But just as important are internal or “supply side” solutions. Stand-alone charter schools
need access to the same high-quality, pooled expertise that the best school systems and
EMOs provide to their schools. They need a set of institutions that can shoulder the
burdens of school start-up and management, allowing entrepreneurs to focus on building
an excellent educational program. However, to retain their independence, stand-alone
schools need to come to these service providers as voluntary, paying customers—not as
units controlled by a larger system.
The creative challenge, then, is to imagine a “system” of providers that can deliver this
kind of service. Within such a system three attributes, besides quality, seem most
important: scope, intensity, and diversity.
Scope. Since operating a school is a complex undertaking, the service infrastructure needs
to cover a wide range of issues on which charter school operators may need help. In many
service areas, an industry of providers already exists—because school districts and private
schools already demand the service. Prime examples include textbook and software
publishers, information-management systems, developers of curricula and “comprehensive
school reform models,” and transportation providers. In other areas, like accounting,
payroll, legal services, and facilities development and financing, a host of general-purpose
providers already serve nonprofits and small businesses. Many of these companies see great
potential in the charter school market and have already begun offering their products and
services to charter school customers.
However, even where a sector of service providers already exists, its offerings may not be
well tailored to the charter context. Charter schools tend to be small, to have limited
budgets, and to face uncertain futures due to the vicissitudes of the market and the threat
of nonrenewal or revocation of their charters. As a result, conventional providers may find
charter schools unattractive in the end. Facilities financing stands out as one illustration,
but the same holds true for many curriculum and “whole school reform” providers. While
learning programs like Core Knowledge and Expeditionary Learning/Outward Bound
have seen real opportunities in the charter sector, others have shied away.
New institutions will need to arise—both to meet needs that are unique to charter schools
and to design service packages in older service areas that make sense for charter schools.
Intensity. Every state with charter schools has at least one “technical assistance center” for
charter schools, and many have more. These organizations tend to provide assistance to
charter schools on all the issues they may face. Charter schools call them with every
question imaginable. They publish handbooks, newsletters, and websites that seek to
address charter schools’ concerns, from soup to nuts. One, the California Charter School
Development Center, runs “boot camps” for new charter school leaders, running them
through a litany of topics.
However, helpful as they are, technical-assistance organizations often are not able to
provide intensive services to many schools. With their limited resources and broad mandate
to serve all schools, it’s not possible for most of them to roll up their sleeves day in and
day out or to provide full services, like accounting or special education, to charter schools.
50
Several answers to the need for intense start-up help are emerging in the marketplace.
One is the charter school “incubator,” exemplified by the Education Resource Center
(ERC) in Dayton, Ohio. ERC gets more involved in schools’ start-up efforts than most
providers of technical assistance, serving as temporary adjunct staff. It is also more
selective. Like a venture-capital firm, it sizes up a client’s prospects diligently before
providing help. Incubators have succeeded in the small-business world, but charter
incubators are too new to show results. Another avenue is a growing number of fee-for-
service start-up providers, such as the Minnesota-based nonprofit SchoolStart. Charter
entrepreneurs contract with these organizations to provide all-purpose help in the start-up
phase—help in preparing the charter application, writing the budget, finding a facility,
selecting an appropriate learning program, and hiring teachers. The Education
Performance Network (EPN), the professional-services affiliate of New American Schools,
is taking a different tack by creating an “education management support organization.”
EPN offers clients a menu of services including data management, accountability and
evaluation, program design, and charter start-up and implementation. A key aim of EPN
is to help build charter schools’ ability to manage themselves over time.
A third trend is the emergence of leadership development programs for would-be charter
entrepreneurs. Examples include the Fisher Fellowship program, New Leaders for New
Schools, and the Massachusetts Charter School Resource Center’s Leadership Institute.
These organizations seek to provide in-depth training to potential school leaders,
including both classroom and on-the-job components. Some follow up the learning with
hands-on start-up assistance for graduates.
Finally, several national organizations have begun to help their local affiliates start charter
schools. The YMCA is one. Another is the National Council of La Raza, a leading
Hispanic advocacy and development organization. La Raza has put together the most
intensive package of services—including hands-on consulting for community-based
groups starting charter schools, joint professional development opportunities, and the
creation of national partnerships that can be useful to all of the network’s schools—which
La Raza hopes will number 50 by 2005.
Diversity. Third, schools needs access to a variety of providers so they can shop around for
the best quality, fit, and prices. In contrast to district-based service systems, in which the
central office or its chosen contractors provide all services to schools, the essence of the
charter school service system must be diversity and choice.
On this front, early trends are promising. Across the different domains of service, many
different types of providers are emerging. Besides the for-profit and nonprofit providers
already mentioned, charter schools in some places have formed cooperatives and
associations to take advantage of economies of scale. Special education has been an
especially fertile area for charter cooperatives, with models emerging in the District of
Columbia, Texas, Minnesota, and Indianapolis. For example, the D.C. Public Charter
School Cooperative, with 21 members, aims to provide information to members about
the complexities of special education, hire and make available specialized staff that no
school would want to employ alone, and develop a Medicaid billing system to increase
reimbursements for special education services.
51
Developing the range of service providers necessary to expand the charter movement will
require investment on the part of firms, philanthropists, and governments at the local,
state, and national level. If this comes to pass, we can imagine a charter school sector
characterized by both scale and a diversity of entrepreneurial schools, a future in which
grassroots charter schools remain the heart of the movement, but in a sustainable fashion.
In 2003 the Government Accountability engaged in a study comparing student achievement in

privately and publicly managed schools in six large urban districts. The study revealed no compelling
evidence that private management produces enhanced student performance results.
Document #6: Government Accountability Office, “Comparison of Achievement

Results for Students Attending Privately Managed and Traditional Schools In Six
Cities,” (Washington, DC: GAO, 2003)
What GAO Found
The number of public schools managed by private companies has tripled in the last 5 years
according to data compiled by university researchers, although such schools comprise less
than 0.5 percent of all public schools. In the 2002-03 school year, nearly 50 private
companies managed over 400 public schools nationwide. These companies managed
schools in 25 states and the District of Columbia, with about one-half of the schools
located in Arizona and Michigan. Information on student achievement at these schools
was available in the form of state- or district-issued school report cards and annual reports
issued by the management companies. Although these reports provided valuable
descriptive information, they were generally not designed to answer research questions
about the relative effectiveness of privately managed schools compared with traditional
schools in raising student achievement. Consequently, GAO conducted test score analyses
that provide further insight into student achievement in these schools
GAO’s analyses of student test scores in 6 cities yielded mixed results. Scores for 5th grade
students in Denver and San Francisco were significantly higher in both reading and math
in two privately managed schools when compared with traditional schools serving similar
th
students. However, 4 grade scores in reading and math were significantly lower in a
th
privately managed public school in Cleveland, as were 5 grade scores in two privately
managed schools in St. Paul. In Detroit, where eight privately managed schools were
studied, reading and math scores of 5th graders in privately managed schools were generally
lower. In Phoenix, GAO found no significant differences. GAO’s results are limited to the
schools and grade levels examined and may not be indicative of performance at other
schools.
Results in brief
The number of public schools managed by private companies has tripled in the last 5
years, according to data compiled by university researchers. Nevertheless, only slightly
52
more than 400 public schools were privately managed in the 2002-03 school year,
considerably less than 1 percent of all public schools. Managed by 47 private companies,
these schools were located in 25 states and the District of Columbia, with about one-half
located in Arizona and Michigan. Descriptive information about achievement at individual
schools was widely available in the form of school report cards that identified the
proficiency levels or achievement scores of students tested in the current year, relative to
state standards and state or district averages. Three company reports presented information
on changes in achievement over time for all their schools in one or more states. While
providing useful information on student achievement, these reports were generally not
designed to answer research questions about the relative effectiveness of privately managed
schools compared with traditional schools.
Our analyses of scores on state reading and mathematics tests in selected grades did not
show a consistent pattern of superior student performance between schools managed by
private companies and demographically similar traditional public schools in six cities. In
two cities, Denver and San Francisco, students at the privately managed schools had on
average significantly higher reading and mathematics scores than students at similar
traditional public schools. Students at these privately managed schools also demonstrated
greater academic gains over multiple years. However, in two other cities, Cleveland and
St. Paul, student scores in reading and math were significantly lower in schools managed
by private companies compared with similar traditional schools. In Detroit, results were
somewhat mixed, although scores tended to be lower in the privately managed schools—
reading scores were lower in 6 of the 8 privately managed schools and math scores were
lower in 7 of the 8 privately managed schools, compared with similar traditional schools.
In Phoenix, there were no significant differences in either reading or math between
students at the two types of schools. Our results are limited to the schools and grade levels
examined and may not be indicative of performance at other schools.
Background
The role of for-profit private companies in managing public schools is a fairly recent
phenomenon. Until the early 1990’s, school districts contracted with private companies
largely to provide noninstructional services, such as transportation, building maintenance,
or school lunches. By the 1994-95 school year, however, the role of private companies
had expanded to include instructional services in four school districts, as we reported in a
41
1996 GAO study. These early decisions by school districts to contract with private
companies often followed years of frustration with low student achievement in these
schools. Since that time, the growth of private for-profit educational management
companies has been aided by financial support from the business community and by the
opportunities states have offered for greater flexibility in the provision of education
services.
Private for-profit management companies supply a wide array of educational and

management services that may include providing the curriculum, educational materials,
41
See U.S. General Accounting Office, Private Management of Public Schools: Early Experiences in Four School
Districts, GAO/HEHS-96-3 (Washington, D.C.: Apr. 19, 1996).
53
and key staff as well as payroll processing, busing, and building maintenance. The range
and type of services vary by company, and to some extent by school within the
company, as some companies have adapted their educational programs to the needs and
interests of local areas. According to a study of for-profit educational management
companies by Arizona State University, three-quarters of schools operated by private
for-profit management companies in school year 2002-03 served elementary grade
students in kindergarten through fifth grade and in some cases continued to serve
students in higher grades. The size of schools operated by private management
companies varied from an enrollment of fewer than 100 students to more than 1,000
students, but averaged about 450. Several of the major companies reportedly served a
predominantly low-income, urban, and minority student population.
Private companies operate both traditional public schools and public charter schools. Some
states or districts contract with companies to manage traditional public schools—often
poorly performing public schools. These schools are generally subject to the same set of
requirements that govern traditional schools within the district. More commonly,
companies manage charter schools —public schools that operate under agreements that
exempt them from some state and district regulations but hold them accountable for
improving pupil outcomes. Enrollment in charter schools generally is not limited to
defined neighborhoods, but may draw from larger geographic areas than is the case for
most traditional schools and must be open to all, without discrimination, up to enrollment
limits. Like traditional public schools, charter schools receive public funds and may not
charge tuition for regular school programs and services, but may charge for before- and
after-school services, extended day kindergarten, or pre-kindergarten classes.
Public schools operated by private management companies, both traditional and charter,
are subject to requirements of the NCLBA, including expanded testing requirements.
Under this law, states must establish standards for student achievement and goals for
schools’ performance. Results must be measured every year by testing all students in each
of elementary grades three through five and middle school grades six through eight,
42
starting in school year 2005-06, , and by assessing how schools have progressed in terms of
improving the performance of their students. Information from these tests must be made
available in annual reports that include the performance of specific student subgroups, as
defined by certain demographic and other characteristics. During the school years covered
in our study, states were only required to test students in one elementary, one middle
school, and one high school grade. Table 1 identifies the different state testing schedules
and instruments for the elementary grades in school year 2001-2002 in the cities where we
made test score comparisons.
42
This requirement takes effect as long as specified amounts of federal funding are provided for test
administration. For more on this subject, see U.S. General Accounting Office, Title
I: Characteristics of Tests Will Influence Expenses; Information Sharing May Help States Realize Efficiencies, GAO-
03-389 (Washington, D.C.: May 8, 2003).
54
Infrequent state testing is one of several factors that have hampered efforts to evaluate the
impact of privately managed public schools on student achievement. To assess the impact
of school management, researchers must isolate the effects of private management from the
effects of other factors that could influence students’ test scores, such as school resources or
student ability. Ideally, this would be accomplished by randomly assigning students to
either a privately managed school or a traditionally managed school, resulting in two
groups of students generally equivalent except for the type of school assigned. However,
random assignment is rarely practical, and researchers usually employ less scientifically
rigorous methods to find a generally equivalent comparison group. For instance, in some
cases, schools may be matched on school-wide student demographic characteristics such as
race or socioeconomic status. When such characteristics can be obtained for individual
students in the study, validity is improved. In addition, validity is further improved when
the progress of students can be followed over several years. However, if the data on
individual student characteristics are unreliable or unavailable, as has often been the case,
researchers experience difficulties developing valid comparison groups. Similarly, if
individual test scores are available only for one grade rather than successive grades,
researchers cannot reliably track the progress of student groups over time and compare the
gains made by the two groups. In our 2002 report that examined research on schools
managed by some of the largest education management companies, we found that
insufficient rigorous research existed to clearly address the question of their impact on
student achievement.43 Part of the reason that so few rigorous studies are available may
stem from the difficulties inherent in this research.
Number of Schools Managed by Education Management Companies Is

Increasing; Descriptive Information on Achievement Widely Available
Although the number of public schools operated by private, for-profit management

companies has risen rapidly in recent years, these schools still comprise a very small
proportion of all public schools nationwide. Largely charter schools, the 417 privately
43
See U.S. General Accounting Office, Public Schools: Insufficient Research to Determine Effectiveness of Selected
Private Education Companies, GAO-03-11 (Washington, D.C.: Oct. 29, 2002).
55
managed schools were located in 25 states and the District of Columbia in school year
2002-03, with about one-half in Arizona and Michigan. These schools were operated by
47 private management companies. Descriptive information about achievement in these
schools was widely available in the form of individual school report cards that often
provided comparisons with state or district averages, but often not with similar traditional
schools. Three management company reports summarized achievement gains over time
for all their schools in one or more states, using various methodologies to illustrate student
performance. School and company reports provided useful information on student
achievement, but generally were not designed to answer research questions about the
effectiveness of privately managed schools compared with traditional schools.
While Numbers Are Increasing, the Percentage of Public Schools Managed by

Private Companies Remains Small
In school year 2002-03, at least 417 public schools were operated by private for-profit
44
management companies, according to Arizona State University researchers. This figure
was three times greater than the number of schools operated by private management
companies just 4 years earlier, when there were only 135 schools, as shown in figure 1.
Over three-quarters of the 417 schools were charter schools, and they comprised about 12
percent of charter schools nationwide. Despite the sharp rise in the number of public
schools operated by management companies, they represented a small proportion of all
charter and traditional schools in 2002-03. About one-half of 1 percent of all schools
nationwide were privately managed schools.
Over the same 5 years, public schools operated by private management companies have
also become more geographically widespread, according to data from the Arizona State
University study. Figure 2 shows that in school year 1998-99, private management
44
Arizona State University researchers list only schools operated by management companies that the
researchers can positively identify as for-profits, but additional schools and companies may exist that the
researchers cannot positively identify. The researchers count as a single school the grades in one or more
buildings that are under the supervision of a single principal.
56
companies operated public schools in 15 states. By school year 2002-03, the companies
had schools in 25 states and the District of Columbia, with about 48 percent of the
privately managed schools in Arizona and Michigan. Florida, Ohio, and Pennsylvania also
had large numbers of schools as indicated by the map in figure 2, which shows the
location of public schools operated by private management companies in school year
2002-03.
The number of private management companies identified by the Arizona State

University researchers also increased over the same period, but the companies varied
greatly in terms of the number of schools they operated. As shown in figure 3, the
number of companies increased from 13 in school year 1998-99 to 47 in school year
2002-03. Most of these companies were founded in the decade of the 1990’s, but since
their founding, some companies have been consolidated or have gone out of business and
have been succeeded by newly formed companies. In school year 2002-03, most of the
companies were small, operating 15 or fewer schools each. Five medium-sized
companies—Chancellor Beacon Academies; The Leona Group; Mosaica Education, Inc.;
National Heritage Academies; and White Hat Management—operated from 21 to 44
schools each. The single largest company, Edison Schools, operated 116 schools.
57
According to the Arizona Sate University report, 43 of the 47 companies operating in

school year 2002-03 managed only charter schools.45 Charter schools have greater
autonomy and decision-making ability in such areas as purchasing and hiring compared
with traditional schools that are generally subject to district requirements, including labor
agreements. Arizona researchers noted that state charter school laws have provided
opportunities for private management that were not present earlier, and Western
Michigan University researchers indicated that the growth of private educational
management companies occurred soon after charter schools reforms were enacted in that
state. They explained that some charter holders started their own private management
companies and other charter holders sought the acumen and financial resources of
46
management companies already established in the business.
Individual School Reports Describe Achievement Levels, and Some Company

Reports Describe Gains Compared to State or District Averages
Two kinds of reports available to the public —school reports and company reports —
described student achievement at privately managed schools relative to national, state, or
district averages in school year 2002-03. Referred to as school report cards, the detailed
individual school reports generally provided a snapshot of how well students attending the
school did in meeting state achievement standards for the year. These report cards were
issued by states, school districts, and by some of the larger companies, like the Leona
47
Group for its schools in Michigan. Often available through the Internet, the report cards
for individual schools generally described results of state tests in terms of the proficiency
levels or achievement scores for the school overall, by grade level, subject matter, or in
some cases, minority group or other subgroup.48 Some report cards also provided
historical information on the school’s performance over several preceding years. School
45
Most of the schools managed by two of the other companies were charter schools, but less than one-third
of the schools operated by Edison Schools and Victory Schools, Inc., were charter schools.
46
See Jerry Horn and Gary Miron, An Evaluation of the Michigan Charter School Initiative: Performance,
Accountability, and Impact, (Western Michigan University: July 2000).
47
Individual school reports are also available from GreatSchools.net and from Standard & Poors for a
limited number of schools.
48
NCLBA requires that report cards issued by states and districts include this information, but scores for very
small subgroups may be withheld to protect the privacy of individual students whose scores might otherwise
be inferred
58
characteristics, such as the size, demographics, staffing, and finances, were included in
many cases along with the proficiency levels or achievement scores. in the state or school
district, which allowed parents to see how well their children’s school was doing—not
just in relation to state standards but also in relation to the performance of all other public
schools in the state or district. However, these report cards were primarily designed to
provide descriptive information for parents and to give an indication of school
performance, not to evaluate the relative effectiveness of one school versus another.
Report cards usually did not directly compare the performance of one school against
other similar schools, and when they did, the comparison schools selected were, by
49
necessity, matched at the school level, rather than the individual student level. Thus,
differences in school performance at any particular grade might be due to differences in
the students in that grade, as the reports released by the Leona Group warned, rather than
due to factors related to the management or educational strategies of the school. For this
reason, report cards, while useful to parents, are not the best source of information if the
goal is to evaluate the effectiveness of one school compared with another.
Company reports, a second source of school performance information, tended to provide

a summary of how well students at all the company’s schools in one or more states were
doing over a period of several years. Generally available through the Internet, reports from
three companies— Mosaica Education, Inc.; the National Heritage Academies; and Edison
Schools – emphasized broad patterns, such as gains in achievement test scores or
proficiency levels that were averaged across schools, grades, and subjects tested. Our
descriptions of the companies’ findings are based on their public reports and not on our
independent review of their methodologies or conclusions.
Both the Mosaica and National Heritage Academies reports compared student
performance to national norms or state averages. The Mosaica Education, Inc., report
summarized student gains on tests administered from the fall of school year 1999-2000
through the spring of 2001-02 at its 18 schools in 5 states and the District of
Columbia.50 According to the report, there was sustained growth in average
achievement scores over time, with an increase in the proportion of Mosaica students
scoring as well or better than the average student on a nationally normed test and a
commensurate decrease in the proportion scoring at or below the 25th percentile. On
the basis of these test results, the report stated that about a third of Mosaica’s students
ranked in the top one-half of the nation’s students in school year 2001-02.
The National Heritage Academies report used individual student performance on the
state’s achievement tests to compare two groups of students attending the company’s 22
schools in Michigan in school year 2000-01—veteran students who took the test at least 2
years after they applied to the school and newcomers who took the test less than 2 years
49
California compares each individual school’s rating with the ratings for a set of 100 other schools matched
on certain demographic and other characteristics. The comparison schools selected by the state are not
required to be within the same geographic area, so that, for example, a school in San Francisco might be
matched with a school in San Diego. Colorado compares each individual school’s rating with those of other
schools in the neighborhood that are selected for their geographic proximity rather than specially matched
for demographic and other characteristics.
50
See R. William Cash, Mosaica Education Annual Report: Testing Results 1998-2002 (WestEd: Nov.
2002).
59
after they applied.51 The study found a relationship between time associated with the
company’s schools and higher performance, with veteran students outperforming
newcomers across all subjects and grades tested and also outperforming state averages on 8
out of 10 tests. The report cautioned, however, that such evidence is not proof of
causation and that some other factors not accounted for in the study might be responsible
for the results.
The Mosaica and National Heritage Academies reports both provided a broad view of
overall company performance that, along with school report cards, could give parents
more information on which to base their decisions about their children’s schooling.
However, like school report cards, these two company studies were not designed to more
directly assess school effectiveness. Neither company report included comparisons with
students at similar traditional schools or addressed the question of whether the patterns of
achievement that they identified might also be found in other schools as well.
Edison’s annual report for 2001-02 used a methodology that went further toward assessing
52
school effectiveness than other company reports we examined. In addition to providing a
summary of how well its students were doing over time, Edison compared some of its
schools with traditional schools. Generally, the report summarized trends in performance
at 94 of Edison’s 112 school sites in multiple states over several years, compared to state
and district averages.53 According to the report, most schools had low levels of
achievement at the time Edison assumed management, but achievement levels
subsequently increased at most of its school sites. Trends were also provided for several
subsets of its schools, including a comparison of 66 of the 94 Edison schools that could be
matched with 1,102 traditional schools on two demographic variables. Traditional schools
selected as matches were those considered similar in terms of the percentages of students
who were African-American and/or Hispanic and who were eligible for the free and
reduced-price school lunch program, an indicator of low income.54 Edison compared the
average scores of students in Edison schools with average scores of students in the
traditional schools and found that its schools averaged gains that were about 2 percentage
points or 3 percentiles higher per year than those of traditional schools and that about 40
of its 66 schools outperformed the traditional schools.
51
See Gary Wolfram, PhD, Making the (Better) Grade: A Detailed Statistical Analysis of the Effect of National
Heritage Academies on Student MEAP Scores, undated, www.heritageacademies.com/hillsdale.pdf,
(downloaded June 30, 2003). Because enrollment dates were not available, application dates were used as
a proxy for enrollment. Furthermore, because raw scores were not available, the analysis was based on the
proficiency levels attained, ranging from 2 possible levels on the writing tests to 4 possible levels on the
social studies tests. Other than gender, demographic data also were not available.
52
See Fifth Annual Report on School Performance: 2001-2002 (Edison: Feb. 2003).
53
The report explains that 18 schools were excluded due to lack of data for two points in time. For the
remaining 94 schools, trends were calculated from various beginning dates through 2001-02. The beginning
dates varied by school, depending on when Edison assumed management, and ranged from school year
1995-1996 to school year 2000-01.
54
For the comparison, all traditional schools in a district were considered similar and included if their
enrollment was within 10 percentage points of the Edison school on both student characteristics. If no
traditional schools were that close, then they were considered similar and included if their enrollment was
within 10 percentage points on one characteristic and 30 percentage points on the other characteristic.
60
However, the Edison analysis was limited by the fact that it was conducted using
aggregated, school-level data and did not control for differences in the individual students
55
being compared. Edison noted that it has taken steps to strengthen the way it evaluates
the progress of its students and schools by commissioning a study by RAND, a nonprofit
research organization that has evaluated educational reforms. The study began in 2000 and
is scheduled for release in the summer of 2004. Where possible, RAND plans to compare
the scores of individual Edison students to those of traditional public school students with
similar characteristics.56
No Consistent Pattern of Differences in Scores on State Tests Found between

Public Schools Managed by Private Companies and Comparable, Traditional
Elementary Schools
Differences in student performance on state assessments between privately managed public

schools and comparable, traditional public schools varied by metropolitan areas for the
grade levels in our study. Average student scores were significantly higher in both reading
and math for fifth graders in 2 privately managed schools, 1 in Denver and 1 in San
Francisco, compared with similar traditional public schools, as were gains over time when
we examined a previous year’s scores for these students. However, fourth grade scores in
the privately managed school in Cleveland and fifth grade scores at 2 privately managed
schools in St. Paul were significantly lower compared with scores in the similar traditional
schools. In Detroit, average fifth grade reading scores were significantly lower in 6 of the 8
privately managed schools, and math scores were lower in all but 1 privately managed
school. No significant differences in reading or math scores were found between the
privately managed school and comparison schools in Phoenix.
[…]
Concluding observations
As opportunities increase for parents to exercise choice in the public education arena,
information on school performance, such as that found in school report cards produced by
many states, becomes more important. Such information can be useful to parents in
making school choices by providing a variety of information about schools, including how
they are performing in terms of students meeting state achievement standards or relative to
statewide averages.
However, educators and policymakers often want to know not only how well schools are
performing but also the factors that contribute to their high or low performance so that
successful strategies can be emulated. Answering this kind of evaluative question requires
a different kind of methodology and more complex analyses to isolate the effects of the
particular strategies of interest—educational practices, management techniques, and so
on— from the many other factors that could affect student achievement. Although not a
comprehensive impact evaluation, our study investigates the effect of school management
by comparing traditional and privately managed schools and by controlling for differences
55
An Edison official told GAO that the company did not have access to individual data on students at
traditional public schools used for the comparison, so it was not able to conduct such an analysis
56
[The study was completed and the report is available at http://www.rand.org/pubs/monographs/MG351/ ]
61
in the characteristics of students attending the schools. In this way, our study provides a
different type of information than that typically found in school report cards.
While our study explores the role of school management, it has certain important
limitations, as discussed earlier… Among these are data issues commonly encountered by
educational researchers, for instance, lack of test score data for successive years and
unreliable demographic data for individual students in some sites. However, with the
implementation of NCLBA, more rigorous studies should be possible, as annual testing of
all grades is phased in and with expected improvements in the quality of demographic data
resulting from requirements to report progress for various subpopulations of students,
based on such characteristics as race and low-income status.
Finally, our mixed results may be evidence of the complexity of the factor under study.
Our study analyzed differences between 2 categories of schools, grouped by whether they
were traditional, district-managed schools or managed by a private company. However,
these schools may have differed in other ways not included in our study—for example
curricula, staff composition and qualifications, and funding levels—and these factors may
also have affected student achievement. Any of these factors or combination of factors
could account for the differences we found or may have masked the effects of differences
we otherwise would have found.
As noted in the introduction to the case, several EMO’s have turned from the uncertain profitability
(or, perhaps better, the “certain unprofitability”) of running schools and districts to the much more
reliable source of a steady income found in the NCLB provision requiring districts to provide
“supplemental education services”—after-school tutoring—for students in failing schools. A study
conducted at the University of Wisconsin—Madison in 2007 concludes that the for-profit providers of
SES are ineffectively monitored and have produced less-than-stellar student growth.
Document #7: Patricia Burch, Matthew Steinberg and Joseph Donovan (University of
Wisconsin—Madison), “Supplemental Educational Services and NCLB: Policy
Assumptions, Market Practices, Emerging Issues,” Educational Evaluation and Policy
Analysis 29:2 (June 2007).
Abstract. The supplemental educational services (SES) provision of No Child Left Behind
introduces a federally mandated after-school tutoring intervention in schools that fail to make adequate
yearly progress. This article examines market dynamics in relationship to the law’s goals of expanding
access to and improving the quality of after-school programming. Analysis of operational and financial
data from seven SES providers suggest that relative to smaller local firms, national firms are
positioned to capture more of the SES market. Analysis of data on SES provider activity (from 2004
to 2006) within an urban district suggests that firms gaining market share charge higher hourly rates
and have larger class sizes. Survey data from 30 state administrators reveal the limited capacity of
states to monitor providers. This analysis points to a mismatch between the implementation of SES
and the concerns for quality and equity that are claimed as priorities within federal law. Keywords:
supplemental educational services, privatization, educational policy, No Child Left Behind, market-
based reforms
62
Introduction Supplemental educational services (SES) is a core provision of the No

Child Left Behind Act of 2001 that introduces a federally mandated intervention for
schools that fail to meet yearly progress benchmarks. In most cases, children from low-
income families enrolled in Title I schools and districts that have not made adequate yearly
progress (AYP) for 3 years or more can receive SES, including tutoring, remediation, and
other academic instruction. These services must be provided outside of the regular school
day. Supplemental education services may include tutoring and after-school services and
may take the form of public or private sector providers approved by the state, such as local
education agencies, educational service agencies, private companies, and faith-based
organizations. Private sector providers may be either not-for-profit or for-profit entities.
Furthermore, public schools and districts that have not met AYP for 3 consecutive years,
designated as In Need of Improvement, are required under the law to provide
57
supplemental education services to students. 1 With NCLB now entering its 6th year and
up for reauthorization in 2007, evidence is just beginning to surface about the potential
benefits and costs of the SES program (Steinberg, 2006; Sunderman & Kim, 2004).58
Much of this scholarship has focused on how local governmental agencies are responding
to the law. To date, there have been little in-depth analyses of private sector behavior
under SES. This is ironic given the dramatic growth of the SES industry in an
environment of very limited regulation. This article begins to address the silence in the
policy discourse by examining how the SES industry is evolving as increasing numbers of
children become eligible for supplemental education services. What are the supply side
characteristics of the industry as SES moves into full implementation? What are state
education agencies currently doing to monitor and regulate activity within the industry,
and what constraints do they face in doing so? What do these patterns suggest might be
problematic or promising about a market-based approach to supplemental education
services? Finally, what issues for state and federal policy makers are suggested by these
patterns as NCLB nears reauthorization?
NCLB designers claim that SES will increase students’ access to after-school programming
and the quality of remedial instruction by increasing competition across providers. In our
analysis, we find that at least in the early years of implementation, the SES market exhibits
anticompetitive forces. There may be low barriers to entry for firms as reflected in the
exponential increase in the number of approved providers nationally. However, a small
percentage of these providers are positioned to capture most of the market as reflected in
the size of their revenue increases, merger and acquisition activity, and interstate
marketing strategies. Analysis of data on SES provider activity (from 2004 to 2006) within
57
Some major urban school districts (Chicago, Boston) were given federal waivers so that they might
become providers of supplemental services.
58
Senator Judd Gregg (R-NH) incorporated this idea of “portability”—that federal dollars follow the child
in the form of per pupil spending—into his proposal to reauthorize the Elementary and Secondary
Education Act (ESEA) and Title I during the 106th Congress in 1999-2000. Although Gregg’s proposal was
defeated, No Child Left Behind (NCLB) retained the idea of supplemental education services (SES) as a
policy initiative. The inclusion of SES into NCLB was born as a Congressional compromise between
conservative lawmakers who viewed vouchers as their policy instrument of choice and liberals who
adamantly opposed a national voucher that amounted to an abandonment of failing local schools. House
Republicans settled on the idea of supplemental services in NCLB to avoid losing all school choice options
from the new policy (Peterson, 2005).
63
a large urban school district suggests that firms gaining market share in the district charge
on average higher hourly rates and have larger class sizes. In addition, although garnering
significant revenue under SES, these firms are not offering services that are accessible to
students with special needs, specifically special education and English language learner
(ELL) students. Survey data from 30 state Title I administrators further reveal the limited
capacity of state agencies to monitor industry leaders in ways that hold them accountable
to students’ needs. This combined analysis points to a mismatch between the
implementation dynamics of SES and the concerns for quality, access, and equity that are
claimed as priorities within federal law.
Framing Ideas
Our analysis of supplemental education services builds on two strands of scholarship: the
nascent scholarship on the implementation of supplemental education services and the
considerable body of scholarship on the privatization of governmental services.
Research on Supplemental Educational Services Is Limited
Because the supplemental education services provision of NCLB is a very new

development in education policy, in-depth analytic work on its character and effects
remains limited. The research that does exist on supplemental educational services tends to
fall into one of four categories, namely, (a) internal performance evaluations by SES
provider companies, (b) evaluation studies by third parties (i.e., nondistrict, nonprovider
entities), (c) evaluation studies conducted by local school districts, and (d) academic and
scholarly research (Burch, 2007).
Internal performance evaluations, such as those performed by SmartChoice, aim to

demonstrate program effectiveness in the implementation of their proprietary online
59
curriculum and assessment programs. Evaluation studies conducted by third-party
evaluators provide a broad overview of the implementation patterns occurring in local
60
school districts, including issues of district capacity and the role of providers. Evaluation
studies, such as those conducted by Chicago and Minneapolis school districts, provide a
more detailed analysis of the companies providing supplemental services, undertaking a
more rigorous methodological approach to evaluating the treatment effect of the SES
provision on student achievement and test score gains. The existing scholarly research on
supplemental education services (see e.g., Farkas & Durham, 2006; Peterson, 2005;
Sunderman & Kim, 2004) broadly addresses the implications of the SES provision on
student achievement, primarily addressing the consequences of this nascent education
policy on the targeted student population, namely, low-income and minority students.
Although the emerging literature provides a cross-section of approaches for studying and
evaluating the SES market, two critical limitations exist. First, with a few exceptions,
59
All names are pseudonyms. This includes the names of private firms and the local education agency.
Substituting pseudonyms for the names of SES firms at the national and local level was necessary to protect
the confidentiality of the case study district.
60
For examples of third-party evaluations studies, see Anderson and Laguarda (2005), Casserly (2004), and
Center on Education Policy (2005).
64
much of the literature appears to analyze the implementation of SES independently from
its ideological origins—namely, market-based education policy on August 20, 2008 and its
translation into reform and policy proposals with terms such as parental choice, school
vouchers, and charter schools. A second and related limitation of the literature is that the
studies represented tend to focus exclusively on either supply side dynamics or demand
side responses. This is problematic because the SES provision of NCLB represents for both
the private sector providers and public administrators a radical departure from categorical
programs of the past. With the introduction of NCLB, policy implementation in
subsystems such as state departments of education and local school districts have become
inextricably linked to the market. This is because unlike prior reauthorizations of the
Elementary and Secondary Education Act (ESEA), the No Child Left Behind Act of 2001
includes provisions that explicitly require schools and districts to contract with private
firms. It also ties education policy closer to the marketplace through mandates and
consequences surrounding standardized testing, test reporting, and analysis (Burch, 2006).
What Have We Learned From Prior Analyses of Public Sector Outsourcing
Since the 1980s, political support both in the United States and abroad has grown for the
idea that government contracts with the private sector are the key to improved public
sector performance (Apple, 2001; Ball, 1993; Savas, 1987). Supplemental educational
services are part of this trend. Political arguments for outsourcing are based on the idea
that market strategies of choice and competition are a necessary and sufficient condition
for improving the quality of services while reducing costs. However, prior research on the
benefits and limitations of government contracting with the private sector suggests the
problematic nature of these claims (Sclar, 2001). First, scholars of government outsourcing
have suggested that the market for government contracts for public service delivery is
rarely as open as it appears. The promise of substantial government revenues quickly lures
large and powerful companies into the marketplace. As these firms compete and gain
market share, the market increasingly can begin to resemble an oligopoly. In these
situations, market dynamics—more than public or social needs—drive pricing and product
61
availability.
Building on this work, we examine how the market for supplemental educational services
is unfolding as reflected in the behavior of those large national-level firms with SES
contracts in multiple districts and states. We also consider the direct and indirect
consequences of these dynamics for NCLB’s intended beneficiaries through an analysis of
SES supply and demand patterns in a large urban school district.
Second, based on meta-analyses of privatization of services such as firefighting and garbage

collection, some scholars of educational privatization have argued market failures in
government contracting derive in part from the behavior of governmental agencies (e.g.,
Savas, 1987; Sclar, 2001). In privatization, public revenues flow to private firms but public
agencies typically retain formal responsibility for selecting suppliers and monitoring their
performance. Analyses of government contracting in other sectors suggest government
agencies rarely possess the financial or staffing resources to perform this role effectively.
61
By market dynamics we mean the interactions across suppliers, providers, and regulators within and across
particular segments of the market and the evolution of these dynamics over time.
65
Furthermore, in new and rapidly growing areas of privatization, such as supplemental

educational services, issues of pricing and how to gauge product quality lack transparency.
Attending to these dynamics, we extend our analysis beyond supply side dynamics and
examine the capacity of state departments of education in both the selection and
monitoring of supplemental education service providers.
Research Design
A Survey
To examine the state-level implementation issues in the supplemental education services

market, we conducted a national survey of state administrators who were identified as
having primary responsibility for the selection, coordination, and monitoring of SES
providers by the Supplemental Education Services Quality Center. The survey, which was
administered by mail and online between September 2005 and January 2006, asked state
coordinators to describe policy developments within their state and to share their
experiences and views on initial work. The survey included the following six parts: (a) the
professional background of state administrators; (b) state activities around screening,
monitoring, and evaluating providers; (c) state activities to disseminate information on
providers to parents; (d) state activities to regulate the format and content of SES services;
(e) state activities to provide districts with training and technical support around SES; and
(f) state participation (if any) in the creation of Department of Education guidance
documents. A total of 30 out of 50 state administrators, evenly represented across
geographic areas of the United States, responded to the survey for a response rate of 60%.
Respondents came from across the United States and included respondents from each of
the four U.S. census regions: West (24% of the states that responded), Midwest (31% of
the states that responded), South (28% of the states that responded), and Northeast (17% of
the states that responded). We analyzed the survey data to identify dominant patterns in
state activity in each of these areas.
TABLE 1:
Sample of Supplemental Educational Services (SES) Providers
b
SES Number of Sector Curriculum Staffing and training
provider states practices
a
approved
SmartChoice 45 Public Computer-based Regular school teachers

instruction support deliver of
guided SmartChoice curriculum
by teachers
Reading 40 Private A combination of Regular school teachers
Club computer- and implement curriculum
teacher-directed
lessons
Growth 37 Private Individual Bachelor’s degree
Network (franchise instruction at off- required, teachers
66
owned) site center certification not required

Norfolk 36 Private Small-group Regular school teachers
instruction in deliver after-school
school instruction
Arise 33 Public Small-group Teachers meet all state
instruction in specifications related to
school (6-8 NCLB’s “highly qualified
students) teachers” requirements
Learning 29 Public Small-group Learning Advantage
Advantage instruction in provides its own teachers
school (6-8 for SES programs
students)
Lincoln, Inc. 13 Public Small group Lincoln instructors who
instruction in pass Lincoln’s Teacher
school Development Program
a
Source: www.tutorsforkids.org
b
Refers to whether the SES provider is a public-traded or privately held company
Archival Research on Approved SES Providers
We identified all companies who were approved to provide services in at least 10 states for
the 2005-2006 school year. These data were drawn from the Tutors for Kids Web site. Of
the 33 companies approved in at least 10 states, we selected and analyzed the top 5
companies by states approved; these included 2 publicly traded companies (SmartChoice
and Arise) and 3 privately held companies (Reading Club, Growth Network, and
Norfolk). In addition to the top 5 companies approved by states, we then selected and
analyzed the remaining 2 public companies (Learning Advantage and Lincoln; see Table 1)
among the 33 approved in at least 10 states. We chose to include the remaining 2 public
companies based on the availability of financial and operational data in publicly filed and
audited financial statements.
Publicly Available Operational and Financial Data
For each public company, we examined the operational and financial data from publicly
62
available financial statements from fiscal year 2001 to fiscal year 2005. In evaluating a
company’s financial data, we analyzed the annual revenues earned from providing
supplemental educational services. The revenues earned by a company represent the total
dollar value earned from providing supplemental education services under NCLB. For
each public company, we identified SES revenues that were either explicitly listed in the
income statement or attributed to the SES market in the company notes to the annual
financial statements. We then explored trends in SES revenues to determine how the
growing pool of SES funds affected the financial performance of these companies. We
supplemented this data with semi-structured interviews with two senior staff in two public
62
Publicly available statements that were analyzed included company annual reports (form 10-K) and
quarterly financial statements (form 10-Q)
67
companies. These interviews focused on respondents’ perceptions of the SES market,

including its promise and potential challenges. We summarize the trend analysis of SES
revenues in Table 2.
TABLE 2
Operational and Financial Trends of Supplemental Educational Services (SES) Providers
SES Market Strategy Revenue Trends

Provider
SmartChoice Merger/acquisition of online education Revenues increased by 226%

a
platforms to expand software business from 2002 to 2005
Teach, Inc. Created Arise in 2002-03 to meet in- Revenues for Arise increased by
b
school demand for SES provision 502% from 2003 to 2005
Learning Integrating existing business platforms Revenues increased by 117%

Advantage to meet demand for SES from 2004 to 2005 c
Lincoln, Inc. Targeted states with largest share of SES n/a d

allocation; approved in 7 of 10 states
with largest SES allocation (of the 13
states approved)
a
Revenues for Smart Choice are attributed to their services business division, of which revenues from
supplemental educational services are a part.
b
Revenues for Arise business only. These revenues come from Title I funds set-aside for supplemental
educational services. (Source: Teach, Inc. Annual Report, form 10-K, dated 3/16/2006). Data for 2002 is
unavailable because Arise first reported revenue earnings from SES operations in 2003.
c
Revenue trend for Learning Advantage directly attributable to revenues earned from providing SES. The
company first booked revenue from SES in fiscal year 2004.
d
Revenues are for Lincoln’s Supplemental Education division, which encompasses a broad range of
education services. Furthermore, the size and scope of this division, coupled with the aggregation of
revenue data, does not allow us to disaggregate Lincoln’s revenues attributable to supplemental educational
services tied to NCLB.
Private companies are not required to file publicly available financial statements; therefore,
we were unable to perform the same financial analysis for the private companies as we did
with the publicly traded companies in the sample. To examine business operations and
financial data of private companies, we conducted interviews with individuals occupying
senior management positions within two private firms represented in our sample. We also
analyzed data on the performance of these firms provided by industry analysts, industry
associations representing the firms, and trade publications.
Drawing on these data, we evaluated operational data from both the public and private
companies to analyze how (if at all) the growing demand for SES has shaped each
company’s business strategy. In evaluating a company’s operational data, we used publicly
available financial statements (annual reports and quarterly financial statements) and
company Web sites to examine the market strategies employed by companies, reports by
68
industry analysts, business media such as The Wall Street Journal, and data from online trade
publications such as Converge and Wired.
SES Case Study: Large Urban School District
To understand the role of SES market dynamics in a local context, we examined SES
service delivery patterns in a large urban school district. Our data sources included end-of-
year reports for the years 2004-2005 and 2005-2006 that were provided by SES providers
to the state department of education. These reports itemized the following for each
calendar year: (a) the total number of students applying for and receiving full or partial
services, (b) the number of students reported making academic progress, and (c) the
different costs charged by each provider (measured either by hourly cost per student or a
total charge for a day’s worth of services). Among the companies that provided services
during the 2004-2005 or 2005-2006 school year, we identified companies that provided
supplemental education services to at least one student. Of these providers, we then
identified the largest SES providers by total number of students served. For these
providers, we compared the costs charged by each company for supplemental education
services, the reported pupil-teacher ratios, the availability of the services to special needs
and ELL students, the numbers of parents who selected the provider for their children,
and student enrollment levels. To supplement these data, we conducted structured
interviews with six district officials involved in administering the SES program. The
interviews focused on district-level processes for administering the SES program and the
challenges and strategies viewed as central to their work.
Supplemental Educational Services: Sector Characteristics
The supplemental education services market is a rapidly growing industry that offers firms
the promise of sizeable revenues that are likely to grow over time. There has been for
many years a relatively healthy market for after-school tutoring among middle-class and
upper-class parents. Since the enactment of NCLB however, the market for after-school
tutoring has experienced very rapid growth, and the customer base with the most market
potential has been transformed. No longer primarily marketed to middle- class and
wealthy parents, after-school tutoring is now available to parents of children attending
schools with high percentages of children in poverty. In the SES market, firms can expect
the availability of public revenues to increase over time. Between fiscal years (FY) 2001
and 2005, the amount of federal funds available (though not necessary used) for
supplemental education services increased by 45%, from $1.75 billion in FY 2001 to
63
approximately $2.55 billion in FY 2005. The promise of sizeable economic returns has
contributed to an expansion in the number of providers operating nationally. Nationwide,
the number of approved providers increased from 997 in late April 2003 to 1,890 in early
May 2004, an increase of 90% (Tutors for Kids, 2004).
The 2001 reauthorization of the Elementary and Secondary Education Act has been the
key policy driver of the growth in the SES market. NCLB introduced (for the first time)
covenants requiring districts to contract with private firms to provide after-school tutoring
63
Total Title I allocations have increased by 45%, from $8.76 billion in 2001 to $12.74 billion in 2005 (U.S.
Department of Education, 2005).
69
and remediation to students in schools that have not made AYP for 3 consecutive years or
more.
In a prior study, Burch (2006) found that in the 3 years following the passage of NCLB,
the percentage increase for annual reported revenues for one of the largest providers of
supplemental education services was 300%, compared to 86% in the 3 years preceding the
enactment of the law. Hentschke (2005) provided additional evidence of the ways in
which NCLB is driving growth in the tutoring market. Between 2001 and 2004, the first
3 years of NCLB’s implementation, the tutoring services industry enjoyed the highest
growth rates in the combined pre-K and K-12 education industry. The average annual
growth rate for tutoring services was estimated at 13.8% (Hentschke, 2005). Given the
progressive nature of sanctions, the level of available revenue can be expected to grow as
more schools and districts fail to meet AYP for consecutive years and are required by
federal law to use some of the 20% set aside to buy after-school tutoring services from
private providers.
The market also is highly segmented geographically. The level of available SES revenues is
higher in some regions of the United States than in others. For example, the Southwest
region experienced a 63% increase in SES funds available from FY 2001 to FY 2005. The
West region experienced a 52% increase in SES funds available from FY 2001 to FY 2005.
During this same time period, the New England region and the South region experienced
growth in SES funds of 33% and 47 %, respectively. A total of 10 states (California, New
York, Texas, Florida, Illinois, Pennsylvania, Puerto Rico, Michigan, Georgia, and Ohio)
64
accounted for 59% of the nearly $2.5 billion in available SES funds in FY 2005.
In summary, the SES market is a very new market where hundreds of firms are flocking to
take advantage of the promise of sizeable revenues. The attractiveness of the market for
firms further is enhanced by the promise of an increasing revenue base over time, although
the level of revenue is higher in some regions of the United States than in others, offering
an advantage to firms that have the capacity for national and regional marketing.
The Market for Supplemental Educational Services: Emerging Trends
In public statements, federal education officials have characterized the SES market as an
open market that can support the activity of a wide range of providers—from small faith-
65
based organizations to large national providers. Current trends suggest an industry that is
beginning to bear little resemblance to the open market that federal officials envision and
64
Trend analysis calculated by the authors (U.S. Department of Education data on Title I allocations).
65
9For example, in 2002, in a statement accompanying the release of guidance for including faith-based and
community organizations in SES, Secretary of Education Rod Paige noted that the guidance makes it very
clear that local school districts must provide equal opportunity and cannot discriminate against any
organization that wants to help children and is willing to do so under the law’s strict requirements. “We
must put the welfare of children first, and these measures will ensure that all hard-working and effective
organizations have the opportunity to help children in their communities,” Paige said. “Across our nation,
we see a great need for experienced and proven providers to step up to the plate and offer supplemental
services. Faith-based and community groups frequently have a strong track record—often developed on a
shoestring budget—of helping communities and community members succeed. It is critical that we all join
forces to ensure that no child is left behind. (President Bush Unveils New Guidance, 2002)
70
claim they want. Rather than a market where a wide spectrum of businesses reaps the
benefits of market-based education policy, a handful of large national firms are uniquely
positioned to capture market share and exert a significant influence on industry practices.
In the analysis that follows, we explore four indices of this trend.
Few SES Providers Approved in at Least 10 States
In many markets, including education, scale is important. Increasing the level of revenues
by for example expanding the number of contracts with districts and states while at the
same time keeping costs down contributes to healthy profit margins—which is the bottom
line of any forprofit firm, even when they are providing services and products defined as
in the public interest. Although the overall number of providers is expanding, a small
percentage of this growing market appears to be positioned to capture market share by
providing services across several states. Among the 1,859 providers approved to provide
supplemental education services nationally in 2005-2006, 2% of the firms are approved in
at least 10 states. Among the subgroup of firms approved to provide SES services in more
than 10 states, all were approved providers in states where potential revenue for SES
66
providers was the highest.
Revenue Increases Among Multidivisional Firms Are Accelerating Rapidly
That large SES firms are enjoying a hospitable climate for growth also is reflected in the
size of their revenue increases. The total funds available for SES have grown 45% from
2001 to 2005, whereas the pre-K-12 tutoring industry (as previously noted) has grown at
an average annual rate of 13.8%. Revenue growth greater than the growth in the size of
the market and relative to average industry growth trends indicates a greater than normal
increase in market share. Each of the publicly traded firms (where SES revenues were
discernible from audited financial statements) approved in at least 10 states in 2005-2006
have experienced increasing revenues since the implementation of the SES provision.
Teach, Inc. (owner of Arise) saw revenues increase for its in-school SES provider by 502%
from 2003 to 2005. Learning Advantage’s Test Preparation Services division, responsible
for delivering supplemental services, saw revenues increase by 117% from 2004 to 2005.
SmartChoice’s revenues increased by 226% from 2002 to 2005 (see Table 2).
66
10Analysis of firms approved in at least 10 states conducted by authors (Tutors for Kids Web site
(www.tutorsforkids.org).
71
TABLE 3
Patterns in Supplemental Educational Services (SES) Provider Activity: Midvale School
District 2004-06
% of all % of all % change Student- ELL SPED

students students in teacher services services
served served Number of ratio
(2004- (2005-06 students
05) served (04-
05
To 05-06)
Local
Merit 9 3 -67 5:1 N Y
Ballard 14 0 -362 15:1 N Y
Learn Group 14 15 3 6:1 N Y
Step Up 12 7 -39 5:1 Y Y
Urban 8 16 81 5:1 N N
National
Academic 4 1 -158 1:1 N N
online
Arise 7 30 300 8:1 N N
Norfolk 14 5 -62 10:1 Y N
Kingdom 12 9 70 3:1 N N
Although revenue measures are not available for the three privately traded firms in our
sample, the steep increase in reported number of district contracts among these firms also
suggest substantial revenue growth. For example, in 2002, as reported in interviews,
Growth Network had SES contracts in 10 districts mainly in the New York and New
Jersey region. By 2005, that number had increased to 126 districts including contracts
within large urban districts in other regions of the United States with high levels of SES
revenue, such as Florida and New Mexico.
High Level of Merger and Acquisition Activity
As the demand side of the SES market grows, reflected by increases in federal funding
available for choice and supplemental services, companies are positioning themselves to
gain a greater share of this expanding market. For example, in response to the SES
provision of NCLB, Teach, Inc. launched Arise in 2002, leveraging the “willingness of
school districts…to utilize third parties to provide supplemental education and specialized
67
support services to students,” matched with “increases in Title I spending.” Furthermore,
companies are leveraging and integrating existing businesses to compete for market share
and the increased revenue potential created by the SES market. In 2003, Learning
Advantage’s Test Preparation Services division teamed with their K-12 Services division to
provide supplemental services. The company used content and materials developed by the
67
Teach, Inc. 2004 Annual Report (form 10-K)3.3
72
K-12 Services division and human resources (teaching techniques and personnel) from the
Test Preparation Services division to gain traction in the SES market.
As Learning Advantage leveraged internal resources to enter the SES market, companies
like SmartChoice exercised an acquisition strategy. Between 2000 and 2003, SmartChoice
acquired six companies specializing in online instructional content; these companies
included a provider of science courseware; a standards-based curriculum company; and a
leading provider of Internetbased e-learning software and services; a developer of reading
and language programs for K-3 readers; and a provider of curriculum-based educational
software and online products and services used in elementary and secondary schools, at
home, and in community colleges. The acquisition of these companies enabled
SmartChoice to provide services across grade levels through proprietary online content
while also positioning the company to compete nationally in the SES market.
TABLE 4
National Survey of State Supplemental Educational Services (SES) Administrators
Survey item %a
A. Which of the following are used to monitor and/or evaluate supplemental educational services
(check all that apply)?
Site visits 53.3
Participation audits 30.0
Testing of students 50.0
Parental surveys 56.7
Student surveys 23.3
Surveys of school personnel 63.3
None 0.0
Other 33.3
B. Which of the following are considered by your state in determining if a provider can offer
supplemental educational services (check all that apply)?
Proof of financial solvency 90.0
Evidence of a research proven curriculum 96.7
Evidence of prior academic success 96.7
Provider must offer transportation 0.0
Provider must conduct background checks on instructors 93.3
Provider must provide or require specific training for its instructors 46.7
State requires specific instructor to student ratios 16.7
Disallow the use of certain recruitment tools 33.3
Other 46.7
C. Does your state require specific services for students with disabilities?
No 23.3
Yes 73.3
No answer 3.3
D. Does your state require specific services for English language learners?
Yes 13.3
No 83.3
No answer 3.3
E. Generally, how effective or ineffective do you feel your state’s supplemental education service
providers meet the needs of any enrolled students with special needs?
Don’t really know 40.0
Very effective 10.0
Somewhat effective 43.3
73
Somewhat ineffective 6.7

Very ineffective 0.0
F. How does your state make information available to the general public about providers (check all
that apply)
Through the department’s Web site 96.7
Through paper-based newsletters or letters sent to parents 20.0
Through e-mail newsletters that are sent to parents and others 13.3
Other 36.7
a
Data is based on responses from 30 state administrators across 30 states.
Indeed, the operational history of Teach, Inc. has been shaped by the SES market. The
company was founded in the wake of NCLB, when a private-equity- led group of
investors acquired the pre- K-12 educational services business of NoBel Education on
June 30, 2003. Prior to the company’s announcement of its intention to sell Arise, its in-
school tutoring service, the company acquired Watershed Learning Company in the first
quarter of 2005. Watershed Learning Company produces the “Hooked on Reading”
curriculum and will enable Teach, Inc. to launch sales of additional products and in-school
tutoring services by leveraging its existing foothold in the SES market alongside this
popular curricular platform (Bassett, Burdt, Jackson, Gallagher, & Pollroy, 2005).
Targeting States With the Greatest Revenues
We also found that the largest SES providers are using their size and national scope to
identify states with the greatest available SES funds and are targeting their services to these
states. We calculated the rates of state approval among the 33 largest SES providers in the
10 largest and 10 smallest states in terms of available SES funds. In the 10 largest states, the
average participation rate was 69.5%. This rate indicates that on average, each of these 33
providers was approved in approximately 7 of the 10 states with the greatest available SES
funds. In contrast, the average participation rate among the 33 providers in the smallest
states was 28.9%, indicating that on average, each provider was approved in approximately
3 of the 10 states with the least available SES funds. As providers target states based on
potential revenue, competition among large national providers can intensify. In California
and Florida, 27 of the top 33 providers are approved providers. In Michigan and Georgia,
25 of the 33 are approved providers.
These combined patterns point to important differences in the market envisioned under
SES and the dynamics that are actually unfolding at a national level. Although there may
be very low initial barriers to entry within the SES market (almost anyone can become an
approved provider), large national firms appear to possess a considerable advantage when it
comes to surviving in the market. These large firms are growing at a rate faster than the
rate of available SES capital; this coupled with national scope means they have positioned
themselves to acquire greater share of the market. Furthermore, their ability to leverage
existing business platforms enables these large companies to scale up operations at faster
rates and more cheaply than smaller local and regional tutoring firms.
There is nothing inherently surprising or unique about the dynamics unfolding in the SES
industry. We have seen them many times before in other industries. Motivated by the
promise of revenue, large firms are acquiring small firms, reaping significant revenues, and
74
attempting to establish a competitive advantage by capturing market share. Scholarship on

the privatization of government services suggests that the appearance of anticompetitive
forces is typical in new markets created by government privatization (Sclar, 2001).
However, it is important to remember that the dollars being spent in the SES market are
public dollars. More specifically, they are dollars that the federal government has
earmarked for high-needs children and families living in poor communities with under-
resourced schools. The explicit goal of SES is to improve the quality of instruction for all
students in schools with high failure rates—including students with special needs and
English language learners. That a handful of large national firms are receiving millions of
dollars of revenue from Title I and taking steps to secure an even greater share of revenue
in the future raises the question: How are these national firms leveraging their resources
and growing influence to enter local markets and develop their services to meet the needs
of low-performing students in highpoverty schools?
How Dynamics of the SES Market Unfold in a Local Community: The Case of
Midvale
To begin to investigate how the SES market is developing in local communities, we draw
on 2 years of SES implementation data within a large school district that we call Midvale.
Midvale shares many of the same characteristics of other large urban school districts in
terms of the demographics of its student population, school achievement patterns, and
significant levels of Title I funding. In this sense, investigating implementation patterns in
Midvale provides an early snapshot of likely problems and possibilities unfolding in other
large school systems around the country.
Setting
The Midvale School District (MSD) is one of the largest school districts in the United
States. Like other districts of its size, its student population is largely minority and poor. In
2002, more than half of the students enrolled in the district were African American.
Nearly 59% of schools in the district have a percentage of students eligible for free and
reduced-priced lunch exceeding 75%. As in other large urban districts, Title I under
NCLB represents an important funding stream for the district. During the 2004-2005
school year, 23 schools in Midvale were required to offer SES.
Large national firms gain market share. Mirroring the dynamics described earlier at the
national level, the market for SES services in MSD appears to be one increasingly
dominated by a handful of large providers. During the 2004-2005 school year, 79
providers reported serving at least one student in the district. Of the active providers, 71
were local in that they were headquartered in Midvale or the surrounding suburbs, and 8
were national-level providers, with contracts in multiple states and districts and
headquartered in other parts of the country.
During the 2004-2005 school year, 8 of the 79 providers served a total of 2,981 students,
which is 86% of the total number of students in the district receiving services. Of the
firms, 5 were locally owned; 4 were national for-profit firms with SES contracts in dozens
75
of districts across the United States. In 2004-2005, the 4 national for-profit firms
collectively served 37% of all eligible students. By the following year, the 4 national for-
profit firms had increased their market share to 45%. In addition, 2 of the 4 national firms,
Arise and Kingdom, served 39% of all students served. These 2 firms also reported that
36% or less of the students enrolled in their programs during the 2004-2005 school year
made academic progress. In contrast, the market share of the locally owned firms
represented among the top 8 decreased over the same time period from 57% to 41%. Of
the 3 that experienced significant decreases in enrollment, 1 reported that 71% of students
enrolled in its program made academic progress during the 2004-2005 school year.
Because SES providers are not competing against one another on the basis of price (and
are paid the same total per student allocation), this provides a competitive advantage to
larger firms who can spend more to gain access, crowding out smaller companies who do
not have the economic strength to sell and advertise their programs or to do so while
sustaining other hidden costs of being an SES provider, such as insurance and
administrative costs. These dynamics can create important contradictions in the market
assumptions underlying SES and its goals of expanded choice and improved quality of
services.
One might interpret the dominance of national firms in the Midvale market as reflective
of parents’ preferences for these firms. However, this assumption is not borne out by the
data. In Midvale, during the 2005-2006 school year, 4,219 parents selected an SES
provider of choice from the list of 185 approved providers in the state. Of these, 2,478
parents (58%) selected a local provider headquartered either in the same city in which
their student attended school or a nearby suburb, and 1,741 (41%) selected a national
provider headquartered in another state. Although a higher percentage of parents selected
a local provider as their SES provider of choice, the percentage of students served by
national providers exceeded that of local providers.
Market volatility. Mirroring patterns nationwide, demand for SES in Midvale is growing
slowly. For example, the number of students receiving SES from 2004 to 2006 in Midvale
rose only slightly, from 3,438 students to 3,462 students. Thus, in districts such as
Midvale, when a handful of firms capture greater market share in local communities, other
firms may experience a reduction in revenues. In Midvale, during the 2005-2006 school
year, two firms, Arise and Kingdom, achieved percentage increases in the number of
students served of 300% and 70%, respectively. That same year, five of the top eight firms
experienced significant declines in the number of students served, from 39% to 362%.
Three of the five were locally owned. Large national firms can weather market volatility
because they have contracts in other states and revenue streams outside of SES. Small
locally owned firms are less well positioned to remain active in the market in the face of
rapidly fluctuating enrollments. In addition to the cost of providing services, there are
other costs such as insurance, research, and in some situations, the cost of renting facilities.
As reported in interviews with district officials administering the SES program in Midvale,
small local firms in Midvale typically are not aware of these costs when they become
approved vendors. District officials reported multiple instances of small firms determining
that they lacked the resources to absorb the transaction costs involved in serving SES
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students in the district and requested that their firm be removed from the state list of
approved providers.
Quality of services: Teacher/pupil ratio. Supplemental educational services also are based on
the principle that competition in the marketplace spurs innovation and higher quality
services. However, as anticompetitive forces are set in motion within a market, these
forces can have the counter-effect of diminishing the quality of services provided.
Drawing on data from Midvale, we hypothesize that this can happen in the following
manner: As demonstrated earlier, rising selling and administrative expenses cause SES
providers to face the challenge of maintaining profits in the context of rising costs. There
are significant stakes for providers in terms of their competitiveness in the market if they
fail to keep their costs down. One way that SES providers can remain competitive is by
charging higher hourly tutoring rates for services provided. So for example, if two SES
providers contract with the same district to provide SES services to 100 students, each
provider receives $200,000 in revenue. However, because each SES provider receives the
same per pupil allocation, providers are competing around costs rather than price. (In this
case, the per pupil allocation is the market “price.”)
To keep costs down in the context of the same revenue, SES providers can charge higher
hourly tutoring rates. In Midvale, during the 2004-2005 school year, the average hourly
rate charged by SES providers serving at least one student in the district was $46 an hour.
Among the subgroup of eight providers serving the majority of students in the district,
four out of the eight charged hourly rates above this average. The four SES providers
charging greater than $46 an hour include Academic ($50/hour), Arise ($60/hour), Learn
Group ($65/hour), and Merit ($60/hour). The only national provider (of the two in our
sample of eight firms) that did not charge above the average hourly rate was Norfolk
($31/hour).
No federal regulations exist to determine the optimal size of instruction necessary to

maintain the efficacy of tutoring services, giving providers considerable leeway for staffing
ratios. In a context of rising administrative expenses, large firms appear to be taking
advantage of policy flexibility. During the 2004-2005 school year, four out of the seven
firms serving more than 250 students advertised student-teacher ratios from 1 to 8 to 1 to
10. Two of these four were national for-profit firms. These ratios exceed those identified
as effective practices in prior research on supplemental instruction under Title I. Relative
to large national firms, locally owned firms that served from 1 to 10 students under SES all
had student ratios lower than the national providers serving hundreds more students and
receiving thousands more dollars in revenue. The student-teacher ratios of small locally
owned providers serving 1 to 10 students ranged from 1 to 1 to 1 to 5. All seven providers
serving fewer than 10 students during the 2004-2005 school year advertised lower
student-teacher ratios, ranging from 1 on 1 instruction to 5 students to 1 teacher.
High student enrollment levels do not necessitate lower teacher-pupil ratios. For example,
if Provider A provides services to 10 students, it receives $20,000 in revenue. This is equal
approximately to one part-time teacher. If Provider B provides services to 250 students, it
receives $500,000 in revenue. This is equal to approximately 25 part-time teachers. Thus,
77
based on revenues, Provider B (serving many students) has as much capacity as Provider A
(serving a handful) to create small class sizes and high teacher-pupil ratios.
Quality of service: Individualization of curriculum. Individualization of curriculum refers to the

extent to which the instructional program being delivered is appropriate to learners’ needs.
Under federal policy, all providers are expected to develop an instructional program that is
individualized to students’ needs. In some respects, large national providers are well
positioned to provide supplemental education services that are individualized. First, they
have other educational divisions and in this way have the capacity to integrate SES with
other services and products. For example, large multidivisional firms in our sample also
contract with districts for regular-day special education services, curriculum, test score
analysis, and professional development. They already have the technology and staff to
diagnose students’ needs and to pair students with special services. As explored earlier,
they also have sizeable and multiple revenue streams that they might potentially invest in
developing innovative approaches to making supplemental education services accessible to
ELL students and special needs students.
Evidence from Midvale suggests however that based on this principle, as on others, the
benefits of a market-based approach to supplemental education instruction have yet to
materialize. In Midvale, as revenues for large providers accelerate, products and services
for serving disenfranchised students, particularly ELL and special education students,
remain flat. Among the top eight providers serving 86% of the market in 2004-2005, only
one, Norfolk, reported having Spanish-speaking staff—a critical condition if services are to
be accessible to students with limited English proficiency.
None of the national firms represented among the top eight providers in 2004-2005
reported offering services appropriate to students with special needs. To be sure, the gap
between principles of individualized curriculum and provider activity extends beyond the
behavior of large national firms. For example, only 1 of the 10 firms serving 1 to 10
students in 2004-2005 offered services and products for Spanish speakers. Relative to small
locally owned firms (which typically earn less than $20,000 in revenue per year in Midvale
under SES), national large providers in Midvale (which earn between $400,000 and
$2,000,000 annually) possess both greater financial capacity and therefore greater
responsibility to use their revenues to develop products and services that meet the special
needs of the population they are serving. The patterns discussed are based on the
experience of one district and providers’ self-reports. However, when considered
alongside national patterns, they suggest several problems with the claim that privatization
of remedial after-school instruction will lead to improved quality and access to services for
low-income students. In Midvale, a handful of national firms are earning substantial SES
revenues. For example, the annual revenues generated by one firm in Midvale totaled
slightly more than $2 million. In the course of a 2- hour tutoring session, a large national
firm such as Arise potentially earns $92,000 in revenue from student participation in SES
as estimated based on the firm’s hourly rates and the number of students enrolled in its
program.
While garnering significant revenue from the requirements of federal policy, large national
firms simultaneously are charging Midvale higher hourly rates for their services. They are
78
providing services in the context of lower teacher-pupil ratios and in most instances failing
to make services available to ELL and special education students. These patterns hold
potential risks for the quality of SES programming provided to eligible students in
Midvale. When providers charge higher hourly rates, they can provide fewer hours of
services to students. When class sizes are larger, students may not derive the benefits of
remedial instruction. When SES services are inaccessible to ELL and special education
students, educational opportunity may become further stratified.
Developing from scholarship on governmental contracting however, a premise of our

analysis is that whether and if privatization of government service contributes to the public
interest depends not only on the market but also the ability of local government agencies
to monitor developments in the industry and hold providers accountable for the outcomes
promised by privatization’s proponents. Under NCLB, state-level agencies are primarily
responsible for ensuring that SES contracts with providers translate into improved services
for students. To investigate state activity and capacity to perform this role, we surveyed
state administrators of supplemental education services programs about various aspects of
their responsibilities in the selection, monitoring, and evaluation of supplemental
education services.
Our analysis indicates that although most states are taking some steps to hold providers
more accountable, they are struggling to do so in a way that gives more than lip service to
private sector accountability. This situation in part has to do with long-standing issues of
state capacity (lack of staff to monitor performance, lack of knowledge to collect or
interpret data, weak relationships to local sites). The very design of federal regulations
however, while introduced with much rhetorical promise, provides little in the way of
impetus. Particularly in relation to the accountability policies targeting public school
administrators, SES accountability represents the weakest kind of policy design. It relies on
self-reported data from providers, is complaint driven, and provides no money for the
evaluation of the program. Given the limits of their capacity, states must rely on parents
and educators to report provider infractions. We explore the patterns in these procedures
next.
Screening, Monitoring, and Evaluating Providers
Although the design of federal regulations requires states to approve only providers with
scientifically based evidence of their effectiveness for targeted populations, only 15 states
responding to our survey reported using any form of student test score data to monitor the
quality of services provided. Instead, state-level monitoring activity appears to be primarily
focused on documenting providers’ compliance with reporting outcomes via occasional
visits and self-reports by school and district administrators. Only half of the states in our
sample reported that they kept a provider off their lists during the screening process or
forbade it from providing services as a result of infractions incurred.
For example, 90% of states responding to the survey required providers to prove their
financial solvency. These efforts may include the use of specific accounting standards,
assets, and general proof that the provider will not close midyear due to financial
problems. The survey showed that 96.7% required evidence of a research-proven
79
curriculum. This may include specific curricular methods or the use of specific curricular
resources and textbooks. Finally, 96.7% required some evidence of prior academic success.
This evidence may include prior years’ pre- and posttests or other illustration that the
providers’ services raised student achievement. Only 1 of 30 states reported that they do
not require proof of financial solvency, a research-proven curriculum, or evidence of prior
success.
A much smaller handful of states reported moving beyond basic screening processes and
adopting strategies aimed at protecting students’ and families’ rights to the best services in
the face of aggressive marketing. Specifically, 5 states require specific instructor-to-student
ratios, and 10 states disallowed the use of certain student recruitment tools including
giving cash or prizes to students with good attendance. Other states report requiring
providers to have insurance coverage, align their curriculum with state academic standards,
and report students’ progress to parents.
Services for English Language Learners and Special Needs Students
We also surveyed state directors about various aspects of the participation of English
language learners and students with special needs in supplemental education services
programs. Our analysis indicated that only seven states said their state did require specific
services for students with disabilities and that only four states said their state requires
specific services for English language learners. The potential exclusion of these students
from participation in the program is particularly significant given that school systems are
being held accountable for the improved performance of specific subgroups that include
ELL and special education students. Reflecting these concerns, only about half of
respondents, 53%, said they were “somewhat effective” or “very effective” in meeting the
needs of any enrolled students with special needs.
Communicating With Parents Although 90% of respondents reported communicating with

the public, including parents, about grades and/or districts served by providers, the most
common vehicle for that communication was the Internet and e-mail. In fact, the vast
majority of states, more than 96%, said they used their department’s Web site to inform
the public, including parents, about supplemental educational services. Another 13.3% of
respondents said that their states communicate through e-mail newsletters sent to parents.
This approach presents a challenge in communicating with parents, most notably low-
income parents, who often do not have regular access to the Internet or e-mail. Our
survey found that only 20% of state administrators said they used paper-based newsletters
or letters sent to parents.
In summary, in response to new regulatory guidance from the Department of Education,

the majority of states across the country are taking steps to develop accountability systems
to hold providers of supplemental education services more accountable for student
outcomes. Although the systems vary considerably by state, they share a number of
common characteristics. First, they are less focused on student performance. States are
encouraged to gather data from providers, of which only one small part is demonstrated
evidence of their program’s value to students. Second, in contrast to accountability systems
that hold public administrators more accountable for student outcomes, the accountability
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designs for supplemental services offer little in the way of significant consequences for
providers who fail to comply. Self-reports (by providers) are the weakest form of data and
essentially water down any state efforts at accountability. Furthermore, although recent
accountability systems increasingly appear to focus on performance indices collected at the
school level, the major focus of accountability designs for supplemental services is on the
district. States are interested in whether districts are monitoring the services of individual
providers; whether the quality and impact of services varies by school is not an issue.
Policy Recommendations
Several assumptions underlie the supplemental educational services provision of NCLB.

Among these is the assumption that requiring districts to contract with private firms to
provide remedial instruction to students in schools with high failure rates will expand
parents’ choices, lead to cost efficiencies, and ultimately improve instruction for students
including special education and ELL. Faith in these benefits has been advanced by recent
statements of federal education officials. This article has aimed to provide a more
grounded basis for considering the value of district outsourcing of supplemental education
services for improving instruction of disadvantaged youth. Building on the insights of
implementation studies of government contracting in other sectors, we offer several
proposals for strengthening state and federal policy about supplemental educational
services.
Failure to Provide Competition
First, one of the goals of SES is to inject the principles of competition and choice into
interventions and supplemental supports for low-income students in schools and in this
way create incentives for improved instructional quality. The design of the law allows for
equal access into the market on the part of new and small SES providers (initial barriers to
entry are relatively low); however, small locally owned firms face significant barriers to
remaining competitive in the market. Based on our analysis, a much more likely scenario
within the SES market is one in which a few providers reap most of the revenues and
whereby millions of children receive services from a handful of large brand name
providers.
Certainly, large national providers bring considerable strengths to the SES market that
conceivably could translate into benefits for eligible students. They are financially solvent,
they have the potential to provide more integrated services, and they have experience in
other states and districts that they can leverage for local customers. Preliminary evidence
from the field suggests however that as currently constructed, both the market and federal
policy provide few incentives for large firms to put their size and scale to work for
students.
The designers of NCLB place responsibility for protecting parents’ options primarily on
state departments of education. Current regulations frame the problem in terms of
protecting the attractiveness of local markets. The regulations state,
An SEA [state] should avoid setting uniform rates within the State, because this could ultimately
limit parents’ choices of providers or reduce services provided to students. Uniform hourly rates do
81
not accommodate local variations in charges and payment schedules, and may result in rates that
underpay providers in more expensive markets and overpay them in less expensive ones. (U.S.
Department of Education, 2005, p. 5)
Implicit in these guidelines is that the most highly valued firms in terms of students’ and
parents’ needs are large firms that operate across jurisdictions and that develop business
strategies based on the relative attractiveness of markets in different districts and states. Our
analysis points to the problematic nature of these assumptions. For example, in Midvale,
parents were more likely to select a local provider as their first choice rather than a
national provider. These local providers on average had lower hourly rates within the
range of acceptable prices.
To date, actions taken by the administration to protect parent choice have focused on
disseminating information to faith-based organizations to encourage their application as
SES providers. Based on our analysis, the issue is not one simply of encouraging entry into
the market but also taking steps to help small locally owned organizations (if they
demonstrate evidence of effectiveness) to compete effectively within the market. To do
so, the federal government should consider creating incentive grants for smaller locally
owned SES providers to form consortia with community-based organizations. The
consortia would serve the purpose of allowing smaller locally owned firms to pool
resources, for example, to offset the costs of insurance and marketing, and in this way
expand their durability within the market. Under the current design of the law, there is
nothing that prevents small organizations from taking this approach. Neither is there
anything in the law that encourages collaboration across community-based organizations as
a means of leveling the playing field in the market and protecting parents’ rights to a full
range of options. States also can play a role in helping to level the playing field for small
providers by ensuring that districts provide information on program possibilities to local
firms and by taking all necessary steps to make sure local firms, given their dependence on
SES revenues, are paid promptly.
Ensuring Equal Opportunity for Special Education and ELL Students
A second contradiction in the goals of SES provisions of NCLB and market dynamics rests
in the treatment of special needs students and ELL students. Under current regulations,
states and districts must ensure that eligible students with disabilities are provided with
access to supplemental educational services and necessary accommodations but not
necessarily from each provider. Here again, the underlying intent of the law appears to be
directed toward not placing undue costs or barriers on providers rather than ensuring an
adequate supply of services and accommodations for special needs students. In a market in
which large national suppliers are capturing market share, federal requirements offer little
in the way of adequate protection to these students. Furthermore, as suggested by state-
level survey data, states currently lack the capacity to monitor the scope and quality of
supplemental educational services available to students, making a stronger federal role and
guidelines in this area much more necessary. Left to its own devices, the market will not
correct itself to protect and serve special needs students. In a new and rapidly growing
market in which most SES providers are competing to keep costs down and have little
experience serving ELL and special needs students, eligible students with special needs and
82
with limited English skills face the possibility of indirect exclusion from supplemental
education programs because the services provided assume a set of skills they currently lack.
In this context, the federal government may want to consider stronger language and
regulations regarding both state and provider responsibilities toward special needs and ELL
students. All SES providers, but particularly those that are reaping significant financial
benefits from SES, should be required to provide services appropriate to special education
students and ELL students and to provide necessary accommodations. More specifically,
the federal government may also want to consider instituting provisions that make
evidence of providers’ ability to serve special needs students and ELL students required
68
criteria of selection and approval on state lists.
Establishing Conditions for Creation of an SES Research Base
The third contradiction in the law relates to claims and expectations about the quality and
demonstrated effectiveness of supplemental education services given the market dynamics
described earlier. Under the current design of the law, states are primarily responsible for
ensuring that providers have a demonstrated record of effectiveness in increasing student
academic achievement, Section 1116(e)(12)(B)(i), and in using instructional strategies that
are high quality, based on research, and designed to increase student academic
achievement. States are not provided with additional resources to do so. Whereas
monitoring program quality is an appropriate role for states, states lack any meaningful
experience in the kind of monitoring required by NCLB. Namely, they have never been
asked to monitor the activities of private providers and to judge the effectiveness of this
kind of instructional activity. To add to the problem, states are being asked to perform this
function in a situation of unequal power dynamics whereby large national firms are
gaining market share and political capital to protect their financial interests. States are
being asked to assume responsibility for monitoring performance in a context of shrinking
resources and rising demands.
Providing a rigorous research base on SES is an appropriate role for the federal
government. Given that many providers work across state and district jurisdictions, the
federal government might consider creating a standardized template that states could use to
monitor and evaluate providers. Under the current design of the law, providers are able to
use their own assessments or standardized assessments given by the state or the district.
When a provider uses its own assessments, states or districts have no way of correlating
reported student gains with regular assessment data that is necessary to evaluate the
significance of providers’ self-reports. Following in the footsteps of states such as Illinois,
the federal government may require providers to use state-level assessments to ensure both
the rigor and significance of the data provided.
68
12For example, the federal government also could take steps to correct the lack of incentives for larger
providers in developing instructional programs to meet the needs of these students. Currently, large
providers have few incentives to meet the needs of special education students and English language learners
because the costs of providing appropriate services to these students are higher than the per pupil allocation.
The federal government may want to consider a higher per pupil allocation for students with special needs as
an incentive to large SES providers to develop services that meet the needs of these students. Finally, the
federal government also might consider instituting a set of provisions that identify certain categories of
providers, in particular public agencies, as preferable providers of SES to students with special needs
83
Furthermore, as discussed earlier, market dynamics, not just state monitoring, are likely to
play a significant role in the quality of services provided to students. As part of their effort
to hold providers accountable for student outcomes, states should carefully monitor the
relative costs of tutoring services among those firms providing SES services within a
district. One possible option would be to require large providers to justify administrative
costs over a certain level or potentially to limit administrative costs deemed exorbitant.
These strategies would strengthen state-level action to better couple systems for tracking
SES participation and student academic achievement data with state-level systems for
tracking expenditures.
On balance, we believe in the potential value of supplemental educational services for

Title I students. There is a strong research base supporting the value of wrap-around
instructional supports for students with low test scores. In addition, there is the ethical
imperative of expanding access to services (after-school tutoring) that already are available
to wealthier students. However, the design of supplemental educational services under
NCLB—in particular the reliance on the market coupled with limited regulation of the
market—deserves very careful scrutiny. As the law moves into full implementation,
anticompetitive forces within the SES market have emerged. Analysis of implementation
data from a case study school district further suggest that the manner in which SES is
unfolding in the market runs the risk of shortchanging rather than expanding opportunity
for the very students NCLB aims to benefit. Furthermore, states report being limited to
hold providers accountable for outcomes and cost efficiencies. In addition to these
problems, there is virtually no research on the effectiveness of SES. These combined
factors suggest the need for significant revisions to the program that will address the
fundamental issues of access and quality when NCLB is reauthorized.
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• • •
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And so, with that background information on EMO’s under our belts, we turn to the case at hand:
KIPP schools in the Houston Independent School District.
Background information on Houston and its public schools.
69
Exhibit #3: Population.
Population (2006) 2,074,828
Ethnic and racial composition:70

White 52.7%
African American 24.7
Asian American 5.1
Native American 0.4
71
Other 17.1
Hispanic (of any race) 41.9
Median household income (1999) $39,682
It is worth noting that Houston’s population increased by six percent between 2000 and 2006.
The proportion of White residents increased by 18.2%; the proportion of African Americans
decreased by 19.3%; and the proportion of Hispanics (of any race) increased by 76.1%.
History: “The first European settlement in the area, Harrisburg (1824), was destroyed
in 1836 by the advancing Mexican Army in the Texas Revolution. That same year,
Augustus C. Allen and John K. Allen laid out Houston. The Allen brothers persuaded
the legislature to designate the site as the temporary state capital, because the present
capital, Austin, was close to the fighting during the revolution. Houston served as the
capital from 1837 until the permanent capital was returned to Austin in 1839. The
legislature granted incorporation to Houston on June 5, 1837, and that same year it
became the county seat of Harrisburg County (renamed Harris County in 1839).
“From the early days of the city, businesspeople counted upon Buffalo Bayou, which
served as a point of connection to Galveston, to encourage trade and growth. However,
69
Source: U.S. Census Bureau (http://www.census.gov)
70
Those who identify themselves as of Hispanic origin may be of any race. As a result, the percentages add
up to more than 100%.
71
Includes those who identify themselves as of a race not listed above and those who identify themselves as
of more than one race.
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the Bayou was difficult to navigate. Various efforts were mounted to dredge a better
canal, and a turning basin was created in 1881. The Houston Ship Channel, which
created an inland ocean port, opened in 1914. Since then the channel has been widened
and deepened, making Houston a deep-water port that is among the busiest in the
United States. Houston residents also built railroads into the outlands, which
complemented the water route. The Houston and Texas Central Railroad, a local
railroad, was completed in 1853, but the American Civil War (1861-1865) interrupted
further railroad construction, and the city did not join the national rail network until
1873, when the Houston and Texas Central met the Missouri, Kansas, and Texas
Railroad at Denison.
“The growth of Houston was also limited by the city’s climate and unhealthy coastal
environment. Yellow fever epidemics struck often in the mid-19th century. In 1839 the
disease killed approximately 12 percent of the city’s population. Despite coastal
quarantines after the Civil War, yellow fever was not controlled until widespread
spraying for mosquitoes began in 1900.
“Lack of potable water, another environmental problem, was not addressed satisfactorily
until the mid-20th century. Houston’s water supply had been improved in the 1880s
with the drilling of artesian wells and the replacement of bayou waters that had been
used to dispose of solid wastes, creosotes, and other impurities. Continued pumping
from the aquifer, however, led to the sinking of land in southeast Houston in the 1960s.
To correct this, the city turned to the Trinity and San Jacinto rivers for their water
supply. These actions did not solve all the problems, however, and surges of rainwater
into the bayous, rivers, and ship channel have caused pollution problems in Galveston
Bay. Severe floods in 1929 and 1935 led to the formation of the Harris County Flood
Control Districts. Houston and areas to the south still suffer from periodic flooding.
“The livelihood of the city depended on commerce and cotton throughout the 19th
century. Oil was discovered nearby at Spindletop in 1901, and the completion of the
ship channel in 1914 encouraged oil companies to locate refineries along the channel,
where they were safe from Gulf storms. By 1929, 40 oil companies had offices in the
city, but cotton was still the driving force behind the city’s economy until World War II
(1939-1945). The war created demand not only for oil and gasoline, but also for
synthetic rubber, explosives, ships, and other Gulf Coast products.
“Houston became the center for this wartime economic development. The city built
upon this base, becoming the largest city in the South and overseeing an industrial
complex of 250 interrelated refineries that extended from Corpus Christi, Texas, to Lake
Charles, Louisiana. The collapse of oil prices in the mid-1980s caused Houston to lose
population for the first decade in its history. However, as its economy diversified, the
city has returned to moderate growth.
“The city’s expansion into the suburbs and its reliance upon the automobile for primary
transportation resulted in the construction of more than…200 miles of freeways by
1990. This new infrastructure produced pollution, urban sprawl, and traffic jams, and it
changed the character of the region. The new freeways created a new opportunity for
commuting, which enabled members of the middle class (mainly whites) to move from
the city to the surrounding suburbs.
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“While this population shift lessened racial hostilities in Houston, separate residential
areas for blacks, Hispanics, and whites continued to exist until the civil rights movement
of the 1960s, and riots and confrontations between ethnic groups and the police were
common. However, as the city grew more multicultural and multi-ethnic, the city
leadership and institutions have become more sensitive to nonwhites and more
72
concerned about the livability of all the neighborhoods.”
Economy. “Situated near major petroleum and natural-gas fields, Houston is the center
of the national petroleum industry. The metropolitan region leads the nation in
petrochemical manufacturing and refining, and consequently ranks first in the manufacture
of agricultural chemicals, fertilizers, and pesticides. Houston is the world’s primary
producer of oil-field equipment. Although the U.S. market for offshore platforms and
drilling rigs has slumped badly, Houston manufacturing firms ship equipment to North
Sea sites, and, in limited amounts, to the Persian Gulf. Companies based in Houston and
other Texas cities have traditionally supplied technology and expertise to the petroleum
companies of the Middle East and have made similar connections to governments
involved in exploration and drilling in Southeast Asia. Other important manufactures in
Houston include paper products, electrical and electronic machinery, and iron and steel.
Houston also has mills for rice grown in the surrounding area.
“Houston’s specialized education and training facilities provide an extraordinary economic

resource. Most economists consider the expansion of technological research and the
growth of the medical complexes to be the result of the collapse of petroleum prices in the
1980s and the resulting forced diversification of the region’s economic base. The city’s
centers of research and technology include the Texas Medical Center, which is world-
renowned for its pioneering work in organ transplants. The center comprises 13 hospitals
and two medical schools. Other local facilities are the Lyndon B. Johnson Space Center,
administered by the National Aeronautics and Space Administration (NASA); Houston
Advanced Research Center, an organization funded by grants, which links technology to
commercial uses; and the nearby Texas A&M University at Galveston, which along with
the university’s main campus in College Station, has carried out important work in marine
biology, oceanography, and other marine-related sciences.
“The service and trade sectors account for the largest percentages of total employment,
while government ranks third. The Houston Port is among the nation’s busiest for total
exports and foreign trade, with petroleum, petrochemicals, and organic chemicals leading
the list of exports. The Houston Ship Channel, which runs a length of 84 km (52 mi),
connects the city to the primary shipping lanes of the world through the Bay of Galveston,
the Gulf portion of the Intracoastal Waterway, and the Gulf of Mexico. The North
American Free Trade Agreement (NAFTA), which took effect in 1994 and eliminates
most tariffs on trade between the United States, Mexico, and Canada, enhanced the port’s
73
importance.”
72
Microsoft® Encarta® Encyclopedia 2003. © 1993-2002 Microsoft Corporation. All rights reserved.
73
Loc. cit.
88
Politics. “Houston’s government consists of a mayor, a 14-member city council, and a

city controller, all elected to two-year terms. The mayor serves as the city’s chief
executive, the city council is Houston’s legislative body, and the controller is responsible
for the city’s financial transactions. The mayor, the controller, and five council members
are chosen in citywide elections, and the other nine council members are chosen in
74
elections within individual districts.”
Exhibit #4: School system statistics75
Student population (January 2008) 199,534
Ethnic composition:
White 8.0%
African American 28.4
Asian American 3.2
Native American 0.1
Hispanic 60.3
Teachers 12,612
Teacher to student ratio 1:15.8
School budget (2004-05) $1,558,696,433
Per student expenditure $7,812
Sources of school funding:

Federal 2.5
State 36.8
Local 60.7
74
Loc. cit.
75
Source: Houston Independent School District, Facts and Figures, January 2006
http://www.houstonisd.org/HISD/portal/article/front/0,2731,20856_2071870,00.html
89
Student performance on state reading and math tests76
Student performance on state reading and math tests over time77
76
School Data Direct (http://www.schooldatadirect.com)
77
Loc. cit.
90
Exhibit #5: Houston School Governance
Texas State Legislature Governor

(Republicans a majority in both Rick Perry, (R)
houses.)
Texas Education Agency

Robert Scott,
Board of Education Commissioner of Education
Mayor
(9 members, elected from
Bill White, (D)
geographic districts)
Superintendent
(Appointed by Board of Education)
Abelardo Saavedra
Regional Feeder Schools
Schools
(306 “campuses and other programs”)
Shared Decision-making Committees
(Principal, Teachers, Parents,
Community Members)
91
In her article for Education Next last summer, Julie Bennett introduces us to the franchise as a sub-
species of the genus EMO.
Document #8: Julie Bennett, “Brand-Name Charters,” Education Next 8:3 (Summer
78
2008)
If you had been a 10-year-old on the streets of San Lorenzo, California, in the summer of
2003, you would have had a hard time avoiding Jason Singer and Cathy Cowan. Singer,
now 37, had enlisted Cowan, a teacher, to help him recruit 5th-grade students for the
charter middle school he planned to open in just a few weeks.
“We talked to children in parks and churches,” says Cowan, now 48, “sitting on park
benches or playing in their own yards. If we spotted a likely child, we’d follow him home,
then ring the doorbell and talk to his parents.”
The pair were unlikely stalkers. After college Singer had spent two years in Trinidad as a
Fulbright scholar studying the impact of race on imagination. As part of the Mississippi
Teacher Corps, he’d taught literature to high school students in Greenwood, then
launched a nonprofit youth employment organization and a for-profit airline ticket
exchange. Cowan, who holds an undergraduate degree in business and a master’s in
education, had left a corporate job to join the New York City Teaching Fellows program.
Singer had just spent a year as a Fisher Fellow in a program run by the KIPP (Knowledge
Is Power Program) Foundation in San Francisco, training designed to turn him into a
school principal with an entrepreneur’s skill set. He’d spent weeks in college classrooms
learning business practices and months in KIPP schools seeing how they are run. Then he
landed in San Lorenzo, a racially diverse, low-income city about 15 miles south of
Oakland, to start KIPP Summit Academy from scratch.
KIPP was founded in 1994 by Teach For America alums Michael Feinberg and David
Levin, who now run KIPP schools in Houston and the South Bronx. In 2000, Gap
founders Doris and Don Fisher donated $15 million to start the KIPP Foundation, with a
goal of replicating Feinberg and Levin’s charter school model across the country. Since
then, more than 50 founding principals like Singer have launched 57 KIPP schools in 17
states, plus Washington, D.C., serving over 14,000 students. Another 13 Fisher Fellows
are now searching for sites and teachers for schools they will open in 2008. CEO Richard
Barth says the network expects to have about 100 KIPP schools operating by 2011.
That rate of expansion is rare in today’s charter school world. Beginning in the late 1990s,
for-profit education management organizations (EMOs) like New York City-based
Edison Schools began expanding at what Steven F. Wilson, author of Learning on the Job,
called a “dizzying pace.” Edison, founded by publishing millionaire Christopher Whittle
in 1992, grew to 51 schools in just four years; Advantage, which Wilson started in 1997,
was managing 16 charter schools within two years. But even that pace was not fast
enough, and only a handful of EMOs became profitable before their capital ran out and
78
Julie Bennett is the author of Franchise Times Guide to Selecting, Buying, & Owning a Franchise (Sterling
Publishing, 2007).
92
they had to close some of the schools they had just opened. Edison spent a disastrous two
years as a public company and now operates 31 charter schools and provides management
services to 54 district schools. Advantage was merged into Mosaica, which runs 35 charter
schools in eight states and the District of Columbia.
The great majority of charter schools are single institutions, founded by local education
reformers. According to “Quantity Counts: The Growth of Charter School Management
Organizations,” published in August 2007 by the National Charter School Research
Project (NCSRP) at the University of Washington in Seattle, of the 3,600 charter schools,
which served over 1 million students in the 2006–07 school year, only 9 percent were
operated or managed by a nonprofit charter management organization (CMO) or for-
profit EMO. According to the NCSRP, the country now has 24 EMOs and about 30
CMOs. Most of these organizations are controlled from a central office and are growing
slowly because their headquarters staff can only manage the complicated task of opening
schools one at a time. “Those who thought that proven models could be rapidly scaled up
have concluded that they underestimated the difficulty of creating substantially better
schools from scratch,” the NCSRP report explains. The entire charter school movement,
once hailed as a vehicle for transforming education, serves less than 3 percent of the
nation’s schoolchildren, less than the percentage who are schooled at home.
Growing Charters
If the charter movement is to fulfill its promise, high-quality schools must be replicated
quickly. In the business world, when the owners of restaurants or retail stores want to
expand, they choose between two models: corporate-style growth with central
management or franchising. Chains like Starbucks scale up corporately; each of its 7,087
U.S. stores is owned by and managed from its Seattle headquarters. Others, like
McDonald’s, follow a franchise model. Though they look and feel much the same, the
vast majority of the 14,000 McDonald’s restaurants in the United States are operated by a
founding franchisee. The advantage of franchising is that it allows an organization to grow
rapidly without putting its own intellectual and financial capital at risk. While franchisees
are building individual units, the central organization can spend its resources on promoting
the brand and developing new products and services.
KIPP has adapted the franchise model to its goal of preparing disadvantaged urban
children to succeed in college and beyond. The process Singer and KIPP’s other founding
principals use to locate sites, raise funds, and find their young customers is very similar to
the efforts of America’s 900,000 franchisees, operators of the nation’s restaurants, print
shops, and senior-care services. Each KIPP school pays 1 percent of its annual revenues to
the KIPP Foundation; business format franchisees pay a percentage of their revenues,
called royalties, to their franchisor in exchange for using its brand name, products, and
support system. If a business franchisee fails to pass inspections or falls behind in payments,
the franchisor has the right to pull its name, but in most cases the franchisee keeps the
business premises. If a KIPP school fails to pass an annual inspection or meet its enrollment
goals, or if its students fail to achieve, KIPP, too, will take away its name and support, but
the school itself may remain open.
Unlike a typical business franchisor, KIPP grants its new schools considerable freedom in
deciding how they will earn and keep the KIPP brand. Choices regarding specific
93
curricula, for example, are made by local school leaders. Nor does KIPP have specific
requirements for its facilities, and KIPP schools operate in everything from new buildings
to leased space in shopping centers. KIPP LEAD College Prep in Gary, Indiana, for
example, rents classrooms from the local YMCA.
The majority of CMOs, however, opt for greater control over each site and take a
corporate approach to growth. The leaders of corporate-model CMOs oversee the
building and operation of each new school themselves. The trade-off for the slower
growth is the assurance that each new school replicates the CMO’s standards for building
design, staffing, and programs.
Even centrally managed CMOs, though, come in different flavors. Mike Ronan, CEO of
Lighthouse Academies in Framingham, Massachusetts, says he has tight control over his
organization’s 11 schools. “I’m literally in every school at least once a month,” Ronan
says. “I sit on all our boards and I like visiting with our school leaders.” Lighthouse
schools all look alike, with bright blue and yellow walls; use the same educational
resources; and share a culture that Chrissy Hart, 29, a former KIPP teacher who is now
principal of the Lighthouse Intermediate School in Gary, Indiana, calls “arts-infused,
warm, and lightly responsive.” Procedures for tasks like paying bills and ordering supplies
are spelled out in operations manuals. Hart and her fellow principals can hire and fire
teachers, but if student scores start slipping, Ronan and his corporate staff will replace the
principal and keep the school.
New Haven–based Achievement First, with 12 charter academies in central Brooklyn and
the state of Connecticut, and 3 more opening this year, can be characterized as providing
“central support,” says CEO Doug McCurry. “Our model is evolving. We don’t see it as
a cookie-cutter thing, but we do have common benchmarks, a common scope, and an
emerging set of best practices. We provide a robust back office to take the heavy lifting—
budget, initial teacher recruiting and screening, curriculum development, and
operations—off our principals so they can focus on academics.”
Uncommon Schools, with a home office in Manhattan, follows yet a different corporate
model, with its nine schools arranged in five geographic networks in New York and New
Jersey, plus two “associate” schools in Boston that participate in professional development
activities but are not managed by the CMO. CEO Norman Atkins says that each network
has its own managing director and that the configuration will enable Uncommon Schools
to grow “reasonably” to 30 schools in the next few years.
Such reasonable growth is supported by the NewSchools Venture Fund in San Francisco,
which announced in 2007 that it would focus its current wave of funding on
Achievement First, Lighthouse Academies, Uncommon Schools, and a handful of other
centrally managed CMOs that are growing within specific geographic areas. CMOs that
are replicating their original schools in targeted cities—New York, Chicago, Los Angeles,
Washington, D.C., and Oakland—provide a consistent design and are “opening slowly, to
make sure they get each one right,” says Julie Peterson, communications director for the
fund.
The organization’s reluctance to support a franchise model hinges on the issue of
leadership. Kim Smith, cofounder of the NewSchools Venture Fund says, “The KIPP
94
model works as long as you have really exceptional leaders to replicate the network’s high
quality. Over time they will be more difficult to find.”
KIPP leaders and those of two other franchise ventures, the Big Picture Company in
Providence, Rhode Island, and EdVisions Schools in Henderson, Minnesota, insist the
franchise approach to growth can work. Darryl Cobb, KIPP’s chief academic officer,
explains: “We are building a bench of leadership capacity throughout the network. Our
Fisher Fellowship training program receives about 500 applications a year to fill 8 to 15
places.” Melissa Gonzales, 28, was a founding teacher of KIPP Heartwood Academy
middle school when it opened in San Jose in 2003; today she’s a Fisher Fellow preparing
to open a high school there in 2008. “Now 70 percent of our fellows are coming out of
KIPP schools,” Cobb says.
“We have a design that we are looking to make happen wherever we can,” says Dennis
Littky, one of the cofounders who started the Big Picture Company with “the Met” (the
Metropolitan Regional Career and Technical Center) in 1996 in Providence. That design
replaces traditional coursework with a curriculum individualized to each student for the
three days they are in school. The other two days, students serve internships in
community workplaces. In 2000, Bill Gates toured the Met and “loved what he saw so
much, he gave us money to build 12 more like it,” Littky says. Today there are 51 Big
Picture schools in this country, 7 in the Netherlands, 1 in Australia, “and we could create
50 more,” he says.
Littky’s partner, Elliot Washor, who operates out of an office in San Diego, says, “We are
a loose franchise model and think of ourselves as the mother ship. We help new charters
with building and facilities design, pedagogy, community relations, and principal
development, and employ eight coaches who act as school consultants.” Instead of
collecting a set percentage of each school’s revenues, Big Picture Company is exploring
charging established schools fees for specific services. One challenge facing Big Picture is
that current college admission standards are not compatible with that organization’s style
of personalized, real-world learning. Washor says, “One of our next ventures is to open
our own college.”
EdVisions is even more educationally progressive. Students in each of the 50 EdVisions
schools started since 2000 (44 are charters) take only math classes—all other learning
comes from standards-based projects they complete during the school year. Schools are led
not by principals, but by founding teachers, and all pay fees for services. “If we help a
school from the start, we charge them $75,000 over the first three years,” CEO Doug
Thomas says. Fifty more schools are in EdVisions’s pipeline, ten of which should open
soon. EdVisions assigns a coach to each school, explains Thomas, who visits on a regular
basis, and provides a summer institute and professional development days for all its
teachers. “We have an evaluation system to hold schools accountable to our design and
practices,” Thomas adds.
Some CMOs that initially adopted a franchise model changed course when unable to
grow the brand while maintaining quality. In 2000, Larry Rosenstock started the first
High Tech High in San Diego, a small school that combined rigorous courses with
technology-based projects and community internships. Like Big Picture, the school
attracted national attention and a replication grant from the Gates Foundation. By 2004
95
Rosenstock had created a network of 16 more urban High Tech High charter schools, in
California, Arizona, Illinois, New Mexico, Massachusetts, Oregon, and Pennsylvania. A
2004 Forbes article, titled “Where Everyone Can Overachieve,” says each affiliate paid
Rosenstock’s organization 8 percent of its operating budget for services ranging from
building management to charter compliance work.
Two years later, Rosenstock dismantled the network and retrenched, focusing on opening
and operating schools near his original San Diego facility. “Basically, the problems with a
network strategy are distance, the differing charter laws in each state, different political
environments, and different theories of action [for running a school],” Rosenstock says
today.
Getting It Right
The history of business franchising is rich with failures. Franchising as a business model has
been around since the Middle Ages, but gained traction in the United States in the 1950s
when McDonald’s, Burger King, and Kentucky Fried Chicken began their inexorable
march along our highways. For many years, franchising thrived in a “Wild West” fashion,
with no laws to fence out scoundrels and no guidelines for conscientious franchisors to
follow. The Federal Trade Commission reined in the industry in the 1970s by establishing
rules for what franchisors must disclose to prospective franchisees before signing them on.
By then, the franchisors still standing had developed their own strategies and procedures
that now represent the industry’s best practices.
Despite the obvious differences between serving hamburgers and providing public
education, the best practices of the franchise-model CMOs look remarkably similar to
those of business franchising.
First, successful franchisors carefully select and train their franchisees. “The secret of
making a franchise system sustainable is selecting good franchisees and preparing them
well,” says Darrell Johnson, president of FRANdata, a franchise-research firm in
Arlington, Virginia. Industry leader McDonald’s screens all applicants through written and
in-person interviews and requires all its franchise candidates to spend 2,000 hours working
in existing restaurants and several more weeks in classrooms at Hamburger University in
Oak Brook, Illinois. Most franchisors offer classroom and hands-on training programs that
last one to five weeks.
Applicants to KIPP’s yearlong Fisher Fellowship program must have at least four years of
teaching experience, strong communication skills, and critical thinking abilities. KIPP’s
recruiting staff screens candidates through written applications and telephone and in-
person interviews; selected candidates travel to California for a final round of interviews.
Glenn Davis, 26, who teaches 6th-grade math at KIPP LEAD in Gary, Indiana, says he’ll
apply to the Fisher Fellowship program in two years, because he hopes to start a high
school for his current students. Davis and his principal, April Goble, 32, are both alumni
of Teach For America (TFA), as are a majority of KIPP’s teachers and leaders. That
pipeline will get larger; TFA, which has 5,000 teachers working in urban and rural schools
this year, plans to expand to 7,500 by 2010.
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Thomas Carroll, chairman of the Brighter Choice Charter Schools and the Brighter
Choice Foundation, a charter school developer in Albany, New York, says that CMOs
wishing to adopt a franchise model could create programs similar to KIPP’s fellowship to
train their own crops of education entrepreneurs. “It’s hard to protect intellectual property
in the charter school world; there’s no formula for a secret sauce. If someone wanted to
set up something similar to KIPP, no one could stop them.”
In fact, other organizations are adding to the ranks of potential charter school founders.
Building Excellent Schools, in Boston, has a fellowship program for independent charter
school leaders that is similar to KIPP’s. Fellows receive practice-based training and
guidance while they are designing, launching, and sustaining new charter schools. The
nonprofit New Leaders for New Schools, founded in New York City in 2000, has trained
431 principals who are now serving as leaders in urban schools and plans to build a 2,000-
person national principal corps by 2018. A pilot master’s program at Hunter College
bypasses traditional education courses and focuses on coursework specific to the needs of
teachers and principals who will work in urban locations. KIPP, Uncommon Schools, and
Achievement First are all providing support and instructors to the program.
Second, experienced franchisors provide specific instructions for launching the business.
Commercial franchisors send new franchisees off with thick operating manuals, detailing
exactly what their unit should look like and how they must prepare their products or
deliver their services.
At KIPP schools, what must be replicated is the culture, says Ryan Hill, 31, director of
KIPP’s regional office in Newark, New Jersey. “There’s no overseer who says we must do
things a certain way, but when you visit our schools you’ll see similarities.” Although they
are 2,000 miles apart, the atmospheres in KIPP Summit and KIPP LEAD feel almost
identical. Students move quietly down the halls in straight lines. In class, their eyes stay
focused on the teacher; when a question is asked, students’ hands shoot up to show they
know the answer. Ask a 5th-grade class in any KIPP school when they’ll start college and
they’ll all chant “2015.”
Third, successful franchisors perfect their prototypes before replicating them. In Time to
Make the Donuts, the late William Rosenberg reported that he spent five years tinkering
with the layout, beverage menu, and donut varieties of his first five stores before launching
the franchise program for Dunkin’ Donuts in 1954. Like Rosenberg, the founders of
KIPP and Big Picture spent years working on their prototype schools before opening
more schools. High Tech High’s Rosenstock, however, expanded quickly, without
conducting a long-term test of his prototype.
And fourth, the most successful franchise systems grow carefully, within one geographic
area at a time. When Fred DeLuca started Subway in 1965, his goal was to have 32
sandwich shops in ten years. His first store was in Bridgeport, Connecticut, and all his
early franchisees came from nearby towns. McDonald’s founder Ray Kroc was less
cautious and sold early franchises near his prototype in Illinois and in California, where the
McDonald brothers had launched the original 15-cent hamburger restaurant. “The
California franchisees were impossible to control,” says John Love in his book
McDonald’s: Behind the Arches. Kroc suspended franchising on the West Coast and
97
“concentrated closer to home, beginning in Illinois and fanning out to neighboring

states,” Love says.
Steven Wilson says that early on scattershot expansion—building a charter school
wherever a group of local citizens wanted one—weakened EMOs because corporate
personnel were always “shuttling to far-flung schools.” Most EdVisions growth is in the
Midwest, but Big Picture Company would like to paint a nationwide canvas with its
schools. KIPP’s director of network growth, Mike Wright, says that the network’s future
expansion will be limited to target cities (there are 14 for the 2009-10 school year) or
within one of eight designated regions where elementary, middle, and high schools are
being built in clusters.
A Quality Brand
The charter school movement began nearly two decades ago with tremendous potential
for narrowing the achievement gap by improving education for disadvantaged students.
Two decades from now, charter schools will still be too few to have fulfilled their
promise, unless the franchise model for growth takes hold. Even some corporate-model
CMOs could adopt a franchise model for future expansion. These CMOs could still guide
facilities design, pedagogy, principal and teacher development, and community relations,
while trusting local leaders like Singer and Cowan to open and run their schools.
Together, KIPP, EdVisions, and Big Picture are seeding new charter schools at a pace that
far outdistances the corporate-model CMOs. The danger, of course, is that expansion will
outstrip quality. Wright admits he and other executives at the KIPP Foundation grapple
with the problem of closing schools that don’t make the grade. “How do we balance
autonomy with collaboration and with oversight?” he asks. “Thus far, we’ve attracted
highly educated entrepreneurs who have made us into a great franchise model. If we
transitioned to a wholly owned and operated model, we would lose what makes KIPP
what it is today.”
Franchisors must protect the value of their brands by terminating franchisees who fail to
maintain the system’s quality. The franchise-model CMOs have built in some safeguards:
day-to-day decisions are managed by an entrepreneurial principal who has the flexibility to
change programs that may not be working and to expand those that are. KIPP sends an
inspection team of financial, academic, real estate, and legal personnel to each new school
on an annual basis, and EdVisions and the Big Picture Company require visits from their
own evaluation teams. EdVisions has removed its name from half a dozen schools, says
CEO Thomas. Since 2000, KIPP has closed four schools—in Atlanta; Chicago; Asheville,
North Carolina; and Edgewater, Maryland—and “deKIPPed” three more that are still
operating although under different names.
Of course, KIPP’s brand name did not mean much to the San Lorenzo parents Singer and
Cowan approached in 2003. Interest sparked, says Cowan, “when we told them about our
longer school day, from 7:30 AM to 5 PM, Saturday classes, and four more weeks of
school in the summer, time we’d use to improve their children’s skills and prepare them
for college. The city has high rates of crime and teen pregnancy, and parents were
thankful we were offering a place where their children would be safe and productive,
rather than being home alone.”
98
KIPP Summit opened in fall 2003 with a full roster of 5th graders, and added a grade and
more students for each of the next three years until reaching its present status of 359 5th to
8th graders and a waiting list. Two years ago, Singer started the process all over again,
raising money and interest in KIPP King Collegiate, the charter network’s first West Coast
high school. Cowan prepared to become Summit’s principal by joining the Fisher Fellows
program, and in fall 2007 Singer welcomed his new school’s first crop of 9th graders.
The bottom line? Done right, franchising can quickly provide hundreds more classrooms
full of 5th graders chanting out the year they, too, will be ready for college.
Steven Wilson was one of the founders of Advantage Schools, a company that started business in
1996 and opened two elementary schools the following year. Although by the fall of 2000 they were
educating nearly 10,000 students, the company continued to lose money and Wilson lost his job.
“Turning a profit running schools had proven must more difficult than any of us had expected,” he
writes. Interested in learning more about this conundrum, Wilson undertook a study of seven
EMO’s including his own Advantage Schools. Following are excerpts from his book that describe the
design, culture, leadership and outcomes of the KIPP schools.
Document #9: Steven F. Wilson, Learning on the Job: When Business Takes on Public Schools
(Cambridge, MA: Harvard University Press, 2006) Excerpts.
The Organizations
KIPP, which stands for the Knowledge Is Power Program, is unique among the seven
organizations [studied in Wilson’s research] in two essential regards. First, only KIPP is
operated as a nonprofit. Second, and at least as significantly, KIPP was conceived not as a
national initiative, but as two small schools; only many years later came the plan for a
nationwide network of upper elementary and middle schools for disadvantaged and
minority students. The schools would attempt to replicate the success of the first two sites
by adhering to their central principles.
Founders Michael Feinberg and David Levin met in the summer of 1992 when they both
enlisted with Teach for America (TFA), the teacher-training program that places recent
college graduates in urban and rural schools serving disadvantaged students. Levin had just
graduated from Yale and Feinberg a year earlier from the University of Pennsylvania. On
a long drive together from their TFA initiation, they talked about their notions of good
teaching: “We had big ideas and big plans. We talked the whole drive about the perfect
school and the perfect system and what it would take to create them. Even then, before
we had taught, we had the right instincts, I think, about the nature of good teaching, the
need for hard work, and the effect on kids of high expectations.”79
But their first year in the classroom was even harder than they expected. Feinberg said,
“To be honest, I got my ass kicked.” Levin said that his initial experience was “complete
chaos” and the “kids were out of control.” In an experienced educator, Harriett Ball,
Feinberg and Levin found a mentor with whom they credit teaching them everything
79
Stig Leschly, “KIPP National, 1999 (A): Designing a School Network,” case study, Harvard Business
School, March 21, 2003. Much of the material in this section was drawn from the case study.
99
they know about teaching children. “We adopted her use of chants and rhymes, her ways
of relating to kids, and her views of discipline and community accountability.” From Rafe
Esquith, the celebrated middle school teacher in Los Angeles, they adopted the credo of
“there are no shortcuts.” Extraordinary results required a total commitment by both
teachers and students, demanding expectations, and a very long school day.80
Despite their difficult first year, Ball motivated the team to stay in education and “do
everything possible to ensure that their students were achieving at the highest possible
levels in the classroom.”81 After a long battle with the Houston school district, Feinberg
and Levin obtained permission to open the first KIPP classroom in 1994 and coteach fifty
fifth-graders, nearly all poor, Hispanic, and with limited English skills. “We worked until
we dropped,” Levin recalled. “After the KIPPsters went home, we spent nights figuring
out what we could do better. I remember one entire evening spent arguing with Mike
over how best to write an equation on the board ... We had asked these kids and their
parents to believe, to make a commitment, and to join the KIPP family. We had painted
82
them a picture of the mountaintop. We had to deliver.”
The results at the end of the first year were astonishing. Half of the students in the KIPP
classroom began the year with failing scores in math and English on the Texas state
standardized tests; by the end of the year 98 percent of students had passed both tests. The
following year, Feinberg opened the KIPP Academy in Houston; Levin opened a second
KIPP Academy in New York City’s South Bronx. Admission was by lottery. Both schools
began with fifth grade and over time expanded to serve students through the eighth grade.
As Mike Feinberg tells the story,
If we’re going to try to make a large impact, there is no quick, easy, magical solution. We
had our fifth graders come to us from 7:30 in the morning to 5:00 in the afternoon, plus
four hours on Saturdays, for a month during the summer. And we gave them two hours of
homework every night. It wound up being very successful, but we still felt that one year
was The Organizations 69 not enough. So we convinced both the Houston district, as
well as the New York Board of Education, to let us open up KIPP as schools, still starting
in fifth grade but now keeping the kids throughout the turbulent middle school years,
83
bridging the gap between elementary and high school.
At both schools, staff and students had to commit in writing to the nearly fanatical
demands of the program. Teachers, who often began at seven in the morning and worked
into the evening, carried cell phones and pagers to field questions from students about
homework. Parents had to check homework every night, or they would see their child
expelled from school. In Houston, students who misbehaved were “porched”—required
to wear their uniforms inside out for days or even weeks, to not speak with other students,
and to study in separate areas under a banner that read, “If you can’t run with the big
dogs, stay on the porch.”
80
The quotation and credo are in ibid.
81
KIPP Web site., http://www.kipp.org, accessed August 12, 2002.
82
Leschly, “KIPP National, 1999 (A),” 5.
83
Interview with Michael Feinberg, Doyle Report, October 13, 2003.
100
The two schools sustained the remarkable results of the first KIPP classroom. In Houston,
on tests of grade-level proficiency, the school’s first fifth-grade class progressed over four
years on average 7.3 grade levels in each subject area; in math, they gained ten grade levels
and left eighth grade performing better in math than the average American high school
graduate. In New York, 95 percent of students in Levin’s first graduating class were
84
admitted to the city’s top magnet and parochial high schools.
The national media, from the New York Times to the Washington Post, flocked to the new
schools. When 60 Minutes aired its story in September 1999, KIPP was deluged with calls
from politicians, reporters, and educators. Feinberg recalls one California superintendent
who phoned to say, “Mr. Feinberg, please, I want to order 15 KIPP schools for next
year.”85
When Scott Hamilton, then managing director of the Pisces Foundation, an education
philanthropy, visited KIPP in both Houston and Dallas in 1999, he was impressed: “These
schools are remarkable,” he thought. “They are built on simple and powerful insights
about hard work and the capacity of all students to succeed in rigorous yet supportive
academic environments. They confront convincingly the myth of social determinism, this
false and cruel idea that race and class bind the academic and intellectual prospects of
children.”86 Hamilton would later join KIPP National as cofounder and president.
The Pisces Foundation was funded by Donald and Doris Fisher, founders of the Gap retail
chain. Prior to joining Pisces, Hamilton had overseen the launch of charter schools in
Massachusetts as associate commissioner of education and had worked for two U.S.
secretaries of education. At Pisces, Hamilton was interested in creating national school
networks that would move beyond the reach of one-off charter schools, which were, in
his experience, often educationally ill-conceived.87
Feinberg, Levin, and Hamilton developed a plan to roll out hundreds of KIPP schools and
have a national impact on school reform. The Fishers donated $15 million to create a new
entity, based in San Francisco, to “replicate the success of the new schools” on the
conviction that “great schools need great leaders.” The new organization would select,
train, and support educators who would plan, open, and lead their own “KIPP-like”
88
schools. In addition to selecting and training as many as 150 KIPP “fellows” each year,
the national office would provide the fellows with curricular and operational support both
before and after their schools opened.
KIPP styles itself a school network and denies that it is, in fact, an education management
organization. The program’s purpose is not to duplicate the Houston and New York City
schools, but “rather to create a group of schools unified by their fundamental adherence to
The Five Pillars,” the principles evolved from Feinberg and Levin’s analysis of their first
two schools. These are stated as “High Expectations,” “Choice and Commitment,”
84
Leschly, “KIPP National, 1999 (A),” 11-12.
85
Ibid., 13.
86
Ibid.,14.
87
Ibid., 13.
88
KIPP Web site, http://www.kipp.org, accessed August 12,2002
101
“More Time,” “Power to Lead,” and “Focus on Results.” As Feinberg put it, “Given that
a big part of KIPP is culture, it cannot be bottled ... It is not simply buying specific
software or a specific curriculum and implementing that; the success of KIPP goes a lot
deeper.” The Bronx and the Houston schools, he noted, “do not use the same
curriculum, they do not follow the same teaching practices. So we took a long hard look
at what makes both schools successful. What kept them the same after seven years of
89
evolution. What kept them the same are the five pillars.”
By “High Expectations,” KIPP means clearly defined and observable standards for
academic achievement and conduct. “Choice and Commitment” refers to the fact that
neither staff nor students are assigned to a KIPP school; children and adults alike have
chosen to participate in the program and committed “to put in the time and effort
required to achieve success.” The third element, “More Time,” underscores a strongly
held tenet of the KIPP culture—that in school, as in life, there are no “shortcuts” to
success—and translates into a longer school day and year. The “Power to Lead” refers to
the centrality of the school leader to the KIPP formula, and the authority the leader has—
unlike conventional schools—over school budget and personnel. Finally, “Focus on
Results” captures KIPP’s “no excuses” culture and its explicit aim to prepare all students
for success in competitive high schools and colleges. High student performance is the
unrelenting focus, and KIPP embraces standardized tests without apology as an objective
90
measure of student attainment. As words on a page, the pillars may seem platitudinous.
But they accurately summarize the differences between KIPP schools and the typical
public middle school.
KIPP licenses its schools under an agreement similar to that used by national retail and
restaurant chains with their independently owned franchises. So serious is KIPP about the
pillars that schools that fail to adhere to them can lose their licenses and the right to call
themselves KIPP schools.
In its first three years, KIPP culled forty Fisher Fellows from among eight hundred
applicants to run KIPP schools. Once enrolled in the KIPP School Leadership Program,
candidates must complete a yearlong fellowship that includes six weeks at the University
of California, Berkeley’s Haas School of Business, and residencies at existing KIPP
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schools. Fellows are immersed in a curriculum that covers organizational leadership and
culture, academic leadership, operations management, and community development, and
learn through lectures, case studies, discussions, and role-playing. During “Start-Up Boot
Camp,” they prepare a detailed school implementation plan for turning their “original
vision” into a “viable, thriving school.” In the final seven months of the fellowship, the
fellows return to their communities to execute their plans, including hiring school staff,
recruiting students, building a board of directors, fundraising, and developing the school’s
curriculum. The fellows reconvene twice during the period and receive assistance and
89
Ibid.; quotation from Feinberg is from Michael Feinberg interview, Doyle Report.
90
KIPP Web site, http://www.kipp.org, accessed April 25, 2005.
91
Stig Leschly, “KIPP Nation, 2002 (B): Managing a School Network,” Harvard Business School, case
study, N9-803-125, February 23, 2003, 3; KIPP Web site: http://www.kipp.org accessed October 27,
2003.
102
guidance from KIPP staff and their peers. KIPP bears the full costs of the program and
pays a $50,000 annual stipend for each fellow.92
The first KIPP fellows were selected in the summer of 2000 and began the yearlong
training period. In the fall of 2001, three KIPP schools opened, followed by ten schools
the following year (one of these lost its KIPP license soon after). In 2003, seventeen
schools were successfully launched. KIPP’s plan called for launching twenty-five schools a
year from 2004 on, resulting in 235 schools by 2011-2012, the eleventh year of
replication. Even though the expansion plan had been scaled back, the schedule would
require raising over $100 million in philanthropic support over the period. The first three
replication schools posted strong gains on spring 2002 tests, and the KIPP brand remains
strong. But the organization faces challenges. The extraordinary commitment KIPP
demands of its school leaders and staff may not be sustainable. To sustain quality and
preserve its brand, KIPP National may be forced to parachute in to rescue struggling
schools. Can enough high-quality fellows be identified to meet KIPP’s ambitious agenda
for expansion? If launching and supporting many small schools proves more costly than
anticipated, will KIPP’s backers be willing to foot the bill?
[…]
School Designs
When it came to academic quality, private managers of public schools were quick to offer
extravagant promises…KIPP’s schools would equip students with the “knowledge, skills
and character needed to succeed in top-quality high schools, colleges, and the competitive
world beyond.”…
School structure
Whether became of board preferences or the constraints of available real estate, EMOs
contemplated opening somewhat smaller schools of approximately 350 students. Most
concluded these schools would not be financially viable. Revenues from the smaller
number of students could not cover the fixed expenses of administrative staff, specialist
teachers, and occupancy costs and such a school could not generate the “site
contribution,” or surplus at the school site level, to pay management fees…Of the seven
organizations, KIPP operates the smallest schools. Even at maturity, the schools enroll
only about 360 students…
KIPP believes its orderly environment permits large classes (occasionally with as many as
forty-five students) to be effective. David Levin explains, “Class size is not an issue if
93
teachers know how to manage kids.”
92
Ibid., accessed January 8, 2003.
93
Quoted in Abigail Thernstro and Stephen Thernstrom, No Excuses (New York: Simon & Schuster, 2003),
57.
103
Time
One of KIPP’s five pillars is “More Time.” As KIPP explains the philosophy, “There are
no shortcuts when it comes to success in academics and life. With an extended school day,
week, and year, students have more time in the classroom to acquire the academic
knowledge and skills that will prepare them for competitive high schools and colleges, as
well as more opportunities to engage in diverse extracurricular experiences.”94 At the
KIPP flagship school in the South Bronx, students begin their day at 7:25 and stay until
5:00; students often stay until 6:30 to do their homework. There is also a half-day of
instruction on Saturdays and three weeks of summer school. All told, the school provides
67 percent more time than regular schools. New KIPP schools are following suit. When
we visited the KIPP Ujima Village Academy in Baltimore during its first year, the
principal had to send along home some dozen children who at 6:45 were doing their
homework. They did not want to leave…
KIPP and other organizations dramatically increased the amount of time dedicated to
academic instruction, and most importantly, to language arts…
It is not clear that time reforms are in all cases scalable and sustainable. KIPP experienced
manageable turnover at its two original schools, but will it be able to retain teachers across
its network given the extraordinarily long hours it demands of them? KIPP teachers tend
to be young and idealistic. As the organization grows, will KIPP be able to recruit enough
teachers who are willing to make the expected commitment?...
Choice
“Choice and Commitment” is one of KIPP’s five pillars: “Students, their parents, and the
faculty of each KIPP School choose to participate in the program. No one is assigned or
forced to attend these schools. Everyone must make and uphold a commitment to the
95
school and to each other to put in the time and effort required to achieve success.”
Parents, students, and teachers are all required to sign a “Commitment to Excellence
Contract” that sets out their responsibilities. Parents agree to ensure their children’s
attendance during the school year—including summer sessions—and to assist with
homework. The contract warns that failure to adhere to the commitments can lead to
their child’s expulsion…
Management
KIPP’s pillar the “Power to Lead” underscores the organization’s emphasis on empowered
principals: “KIPP school leaders…have control over their school budget and personnel.
They are free to swiftly move dollars or make staffing changes, allowing them maximum
effectiveness in helping students learn.”96…
94
KIPP Web site, http://www.kipp.org, accessed November 11, 2003.
95
KIPP Web site, http://www.kipp.org, accessed November 11, 2003.
96
KIPP Web site, http://www.kipp.org, accessed April 18, 2005.
104
At KIPP schools, teachers make 15 to 20 percent more than teachers in surrounding

districts for working a longer school day and year. In addition, a privately funded program
awards $10,000 to one exceptional teacher at each school annually.
The EMOs and KIPP are free to fire underperforming staff, subject only to the constraints
that govern private-sector employment…
Because KIPP Bronx is a conversion charter school, its teachers remain protected, at least
in principle, by the district’s contract with the teachers union. But principal and KIPP
National cofounder Levin deployed his force of personality and the school’s
uncompromising expectations to induce underperforming teachers to leave the school.
Like other maverick principals, he also exploited emergency and temporary certification
97
provisions in hiring qualified, energetic teachers who lack formal credentials. …
Curriculum and pedagogy
KIPP did not impose curricula or instructional programs, but its schools shared a commo
conception of good teaching practice that was codified in instructional guidelines for
teachers…
School culture
Behavioral models
[In] KIPP’s token economy in its Washington DC school…students maintain a personal

account; “funds” are awarded or charged by teachers for good deeds or violations and can
be redeemed at the school for prizes. Such mechanical behavior systems are highly
effective in bringing order to often chaotic urban classrooms and in gaining educational
traction in a new school. But they can quickly become formulaic and artificial. They best
serve as scaffolding for the construction of a permanent and self-sustaining culture
Making the transition to a culture of academic excellence
KIPP truly stands out for [its] school cultures’ success in inducing good behavior and in
altering students’ perceptions of themselves and their futures.
Visitors to KIPP’s school in the South Bronx are struck by the level of student
engagement. Everyone is on task. Conversations with children reveal something still more
remarkable: students hold an image of their successful futures—an image that is decidedly
not the typical urban fantasy imprinted from popular culture (to become a basketball hero
or a hip-hop star). Except by the rarely talented, those dreams are unattainable, a truth that
the public schools, by their silence, are complicit in concealing. KIPPsters, as they are
affectionately called by the teachers, imagine themselves as college-educated professionals,
97
Stig Leschly, “KIPP National, 1999 (A): Designing a School Network,” case study, Harvard Business
School, March 21, 2003, 7.
105
and more importantly, can describe a realistic plan for getting there that is based not on
exceptional talent but on their own choices, knowledge, and diligence.98
LaToya is a short, bespectacled fifth-grader who was receiving oneon-one help during
lunch. When asked about her plans for high school, she said she wanted to go to a
boarding school. She aspired to be a lawyer or, as she said, “chief justice.” Kofi and Carlos
were eighth-graders eating lunch together in a classroom. Both will attend private high
schools next year. Carlos wants to go into computer graphics. Kofi, whose slight lisp and
glasses might make him vulnerable in other settings, says his plans include a double major
in math and science in order to become a doctor.99
Before they finish the eighth grade, all KIPP students have studied literature typically
taught at the high school level, including works by William Shakespeare, Richard Wright,
Mark Twain, and J. D. Salinger. By the end of that year, they also have completed two
years of high school algebra and the equivalent of four years of science. Throughout the
school building were displays that emphasized the value of hard work and celebrated
students’ academic achievements. In the hallway were posted some eighty letters of
acceptance to college preparatory high schools, many offering generous scholarships.100
The school’s achievements are incontestable. For seven years now, KIPP has been the
highest-performing public middle school in the Bronx on reading and math tests. For the
2002-2003 school year, the school’s eighth grade ranked 17th in reading and 20th in math
101
in New York City as a whole. In 2003-2004, 79 percent of graduating eighthgraders
who took the CTB in reading performed at or above grade level and 86 percent did so in
math, a remarkable result given that only 41 and 48 percent of these same students
performed at or above grade level in reading and math, respectively, in 1999-2000, the
year before they entered KIPP.102 Consider the performance of the students’ peers in
District 7 (Bronx) and the New York City schools as a whole. Twenty-five percent of
District 7 fourth-graders scored at or above grade level in reading in 1999-2000. By the
time they reached eighth grade, only 11 percent did. Math performance followed a similar
trend, falling from 27 percent to 17 percent. New York City students’ reading scores also
fell over the period; 42 percent of fourth-graders performed at or above grade level in
1999-2000. By eighth grade, only 36 percent did. In math, the drop was from 46 percent
to 42 percent.
KIPP’s latest results for its entering fifth grade are equally impressive. On average, the class
performed at the 28th percentile on the SAT-10 reading test on entering in September
2003; by May 2004, they scored at the 58th percentile. In math, they climbed from the
103
46th percentile to the 90th percentile. These data show that the school, even though it
enrolls students through a lottery, attracts a student population performing on arrival
98
Visit by the author to KIPP school in the South Bronx, May 13, 2002.
99
Interview with research assistant Lisa Cohen, April 24, 2003. The names of the students have been
changed.
100
Ibid.
101
KIPP New York Web site, http://www.kippny.org.
102
“KIPP’s Success in Reading and Math,” New York, KIPP company document, 2004.
103
“KIPP Academy New York Stanford 10 Results,” New York, KIPP New York school document, 2004.
106
above District 7 on average but similar to or somewhat below the city schools as a whole.
Critics like Richard Rothstein cite these differences as evidence of a selection effect and
conclude that schools like KIPP are “questionable models for raising the achievement of
104
lower-class blacks.” But the unusual expectations KIPP has for students and parents—
which no doubt put off some families—are precisely what make KIPP a model for urban
school improvement.
In their insightful discussion of KIPP’s success in New York City and in Houston,
political scientist Abigail Thernstrom and historian Stephan Thernstrom examine the
nature of culture in urban schools and minority families. Low-income parents, regardless
of background, hold “middle class” aspirations for their children’s future, including an
education, a strong marriage, and a steady job. What distinguishes the culture of children
of one background from another, the Thernstroms argue, are not their values but the skills
and habits they have to realize these aspirations. KIPP’s founders recognize this. When
children first arrive at school in the fifth grade, they are taught to “dress for success,” walk
down the halls briskly, sit properly in their chairs without delay, stand up to greet
someone, and look directly at a person when conversing. They are also taught how to
organize their classroom materials.105
Students chant the school’s rules, which include the acronym SLANT: Sit up, Listen, Ask
and answer questions, Nod your head so people know you are listening and
understanding, Track your speaker by keeping your eyes on the person. All the students
chant:
• We SLANT at all times
• We listen carefully at all times
• We follow the teachers’ instructions
• We answer when given the signal We stay focused to save time
•
106
We will always be nice and work hard.
In instructing students in basic social skills, and teaching them the connection between
hard work and achievement, KIPP is doing nothing less than providing its socially and
economically disadvantaged students with the keys to success. “We are fighting a battle
involving skills and values,” KIPP founder David Levin told the Thernstroms. “We are
not afraid to set social norms.”107
In KIPP schools, teachers relate the students’ behavioral choices to their futures. First,
KIPP teaches students that there are no excuses and few second chances in the world
104
Richard Rothstein, “Must Schools Fail?” New York Review of Books, December 2, 2004.
105
Thernstrom and Thernstrom, op. cit., 67-70. The Thernstroms attribute their analysis of culture to
George Farkas.
106
Ibid., 70.
107
Ibid., 67.
107
outside the school’s doors. If you break the rules or don’t do the work, the consequences
are swift and certain. The Thernstroms witnessed Levin refusing to compromise when a
student had failed to earn a ticket to a Yankee game. “You can’t argue your way into
108
privilege,” Levin explains to a class. “You’ve got to earn it stepby-step.”
Second, KIPP teaches that “earning privilege” is about gaining knowledge—a curiously
neglected word in the education establishment today, with its emphasis on “learning how
to learn.” At the KIPP Bronx school, the teacher asks, “What room is this?” In unison,
the students respond: “This is the room that has the kids who want to learn to read more
books to make a better tomorrow.” The KIPP Ujima Village school in Baltimore 180
Learning on the Job was early in its first year when the school’s twenty-something
director, Jason Botel, spoke to students. He was agitated. “We work hard to get you to
college,” he said of his faculty at the “life skills” meeting that ended another demanding
day. “We get frustrated when we don’t get your attention for your benefit. Is that clear?”
“Crystal,” the students responded.109
David Levin explained to the Thernstroms, “We are giving the kids the skills and
confidence to take them to someplace better.”110 KIPP is neither preaching abstract
“values” nor exhorting its students to excel. It is teaching every child that to gain
knowledge is to gain power—exactly as the KIPP name says. The Thernstroms conclude,
“It’s an optimistic message about America, and about the rules that govern social
mobility— the climb out of poverty to greater affluence. ‘There Are No Shortcuts’ on the
road to success, although doors are open for those determined to walk through them ...
111
Skills and persistence will pay off.”
KIPP Bronx’s dean of students, Jerome Myers, who grew up in Harlem, understands how
important it is to create a powerful alternative culture within the school’s walls. “I can
relate to the students here. I know what it’s like for them at home. And I tell them,
‘Don’t use excuses.’“ His students, he explains, face tremendous challenges: “We have
kids whose parents or siblings are incarcerated—some will be the first in their families to
graduate from high school. They have to fight to be successful because they are going in a
112
completely opposite direction from others in their lives.” But unlike in so many urban
public schools, the children’s backgrounds are not invoked to excuse weak teaching and
low student performance. “All those things that schools list as reasons they don’t
succeed—the home, the environment—we don’t care about that,” says Frederick
Shannon, KIPP’s master teacher.113
One of the most memorable aspects of a visit to KIPP Bronx is the school’s String and
Rhythm orchestra. Every child plays an instrument, and the results are dazzling. The
108
Ibid., 74-75.
109
Visit by research assistant Lisa Cohen to KIPP Ujima Village school, November 6, 2002.
110
Thernstrom and Thernstrom, op cit., 73.
111
Ibid., 75.
112
Quoted in Ellen R. Delisio and Diane Weaver Dunne, “More than Reading Scores and Stereotypes: The
Voices of City Teachers and Students,” Education World, 2001, www.education-world.com, accessed May 2,
2005.
113
As quoted in Sybil Fix, “Results Validate No-Nonsense Learning,” in “Building on Common Ground,”
special report, Charleston Post and Courier, November 26, 2000.
108
teacher, Jesus Concepción, who received his master’s degree in conducting from Julliard
and has taught at KIPP for three years, said that none of the students had received music
instruction before. Instruments are assigned, and students may take them home to practice,
but none of the children receive individual instruction at school or in private lessons
elsewhere. At one point, he tells the students to practice their parts independently for
thirty seconds, and a great din follows. A moment later, with his single clap, the room falls
silent, and the next phase of the rehearsal begins. “OK, now, let’s be musical,” he said.
“Violins, give it to me, let me feel your energy.” The force of the music, in the crowded
room, is overwhelming. As the conga players tackled their solos, we saw in their faces an
114
expression of pure joy.
After the class, Concepción explained: “In the class you just saw there is no ‘talent’—it is
all learned skills.” Yet the full orchestra has performed at Carnegie Hall, completed a
thirteen-city national tour, and performed at the inaugural ceremonies for Mayor Michael
Bloomberg. KIPP believes that the discipline and confidence developed in the orchestra is
transferable to the academic disciplines, and in turn, the students’ lives outside of school.
“The orchestra,” KIPP says, “provides a clearly observable example for the entire school
of the type of greatness that can be achieved if one is willing to put forth the required
desire, dedication, and discipline.”115
The seven organizations all tried to shape a permanent culture at its client schools that
would support high achievement. Elements of a best practice emerge from their
experiences: a code of conduct with clear and predictable consequences for misbehavior,
implemented consistently and fairly schoolwide; a behavior system that explicitly teaches
children good habits, recognizes and rewards good behavior, and serves as scaffolding
while the final element is constructed—a permanent and powerful school culture that
prizes academic achievement and endows each student with a vision of future success, in
college and beyond. Students need to learn that a better life is available to them through
dedication and discipline. Many school leaders understand that their task must include
reshaping students’ attitudes about themselves and their future. Only KIPP makes this goal
primary and has a specific and scalable plan for achieving it…
Execution
KIPP is opening new schools throughout the country but relies on millions in ongoing
philanthropic support and what may prove an unsustainable level of staff commitment…
Managing multiple jurisdictions
By [its] fourth year of operating schools,…KIPP [worked] in fourteen [states]… “It makes
it hard for us to give good advice or counsel when we don’t know their milieu,” Scott
116
Hamilton said of KIPP’s far-flung school founders.
114
Visit by author to KIPP school in the South Bronx, May 13, 2002.
115
“The KIPP String and Rhythm Orchestra,” San Francisco, KIPP company pamphlet, undated, in author’s
possession.
116
Scott Hamilton, interview with the author, May 7, 2004.
109
School Leaders
Principals: The Record
...KIPP forms new schools around KIPP fellows, individuals who apply to open KIPP-
affiliated schools and who participate in a yearlong training program before opening the
school’s doors to new students. The selection and development of leaders for new
member schools is the national organization’s primary activity; strong leadership is the key
to the “Power to Lead.” According to the KIPP Web site, “The principals of KIPP
Schools are effective academic and organizationl leaders who understand that great schools
require great school leaders.”117 When research has abundantly shown the connection
between powerful school leaders and high-quality schools, KIPP’s approach amounts to a
critical difference in strategy.
Daunting requirements
The requirements for school principals in education organizations are paradoxical. One
set of requirements argues for hiring “self-starters”—enterprising leaders who are
confident in their judgment and accustomed to exercising it. Especially when opening a
charter school, principals must function like entrepreneurs, rapidly hiring dozens of staff
members, overseeing the completing of the school building, appeasing impatient parents,
and generally lurching from one crisis to the next. The other set of requirements calls for
loyal, diligent managers who take pride in the care with which the implement the
company’s school design and protocols. The first type of candidate might bristle at being
told what to do or how to do it; the second might founder in an unstructured
environment where each day brings new problems for which there are no ready solutions.
While each EMO wrestled with these conflicting requirements, for KIPP the choice
between the two was clear. Scott Hamilton invoked Freud. “Most people in education
are ‘erotics,’” he lamented—people who want to be liked and avoid conflict. School
principals ought instead to be “narcissists,” driven leaders who want not to be loved but
admired and who, through their gifts of charisma and oratory, attract followers to their
bold plans. In education, narcissists are few and far between. “The people who are drawn
to this profession are not necessarily leaders who don’t give a rat’s ass about conformity,
118
about whether people like them or not,” says Hamilton. …
Kipp’s Solution: Loose-Tight
KIPP addresses the ownership problem with what might be termed a “loose-tight”
approach. KIPP recruits strong entrepreneurial leaders who are provided great latitude in
how they operate their schools. Yet each must adhere to KIPP’s core principles—
embodied in the five pillars—or lose their KIPP affiliation. Most notably, “Focus on
Results” requires KIPP schools to “relentlessly focus on high student performance on
standardized tests and other objective measures... Students are expected to achieve a level
117
KIPP Web site, http://www.kipp.org, accessed October 27, 2003
118
110
of academic performance that will enable them to succeed at the nation’s best high schools
and colleges.”119
At KIPP, quality is not assured through a line-management hierarchy. The organization

does not prescribe specific curricula or pedagogical methods, schedules, teacher
credentials, or other components of the school, and in no sense does the school leader
report to KIPP. (Under the contract for its school in Albany, New York, KIPP does not
have the explicit authority to terminate the school leader, although its broad authority to
dictate “corrective action” at an underperforming school could be interpreted to include
this right. KIPP also has the right to terminate the agreement and deny the school
continued use of the KIPP name if the school comes under the direction of a new leader
120
whom KIPP has not approved.) Instead, KIPP relies on its extraordinary care in
selecting and training the school’s initial leader, immersing each in the ideology and
practice of KIPP. KIPP’s claim to being something different is legitimate. Its “leadership
program,” the website explains, “provides aspiring school leaders with the knowledge,
skills, and support needed to successfully lead high performing public schools. Once
established, KIPP Schools receive continued support from KIPP’s national organization to
ensure they successfully adhere to KIPP’s core operating principles.”121 To evaluate each
school, KIPP hires an outside organization to conduct a multiday inspection, modeled on
the British school inspectorate system. The inspection at the end of the school’s second
year marks the end of the three-year KIPP Leadership Program.
The problem of ownership is greatly diminished in the KIPP model: school directors see
the schools as their own. Unlike at the EMOs, executives at KIPP National do not regard
school staff as their employees and do not describe the schools possessively. It helps that
the KIPP culture constantly underscores the primacy of the school’s leader, without a
trace of ambivalence.
While most EMOs approached the recruiting of the principal as just another execution
task (albeit a critical one), KIPP built its schools around its leaders. KIPP appears to be
succeeding academically because its highly educated teaching force functions effectively
with minimal direction. It is unclear whether the KIPP model would work were KIPP to
prescribe best practices in curriculum, schedule, and other aspects of the school…
From the six EMO’s experiences in hiring principals, a profile of the successful leader of a
managed school, serving primarily disadvantaged children, emerges. The effective
principal is a highly focused instructional leader who thrives on data, analysis, and
intervention. That leader is almost invariably a seasoned educator, having previously
served as an urban principal or assistant principal, with specific knowledge about the day-
to-day practice of running a school. KIPP’s principals are a notable exception. What they
lack in experience, they make up in idealism and drive. They will be tested a their schools
mature and enrollment is not sixty or eighty students, but several hundred. Will they,
119
KIPP Web site, http://www.kipp.org, accessed October 27, 2003.
120
“Trademark License Agreement between KIPP Foundation and KIPP Star College Preparatory Charter
School, Inc.,” San Francisco, KIPP, July 1, 2003, pp. 6-7, 9.
121
KIPP Web site, http://www.kipp.org, accessed October 27, 2003.
111
who have on average only five years of teaching a lack experience managing a staff be able
to mature quickly enough on the job to succeed?122 In any event, the KIPP school leader
profile would not be an option for most EMOs and their business models. Taking on a
school with five hundred or a thousand students and managing a staff of forty is a different
matter altogether; veteran urban teachers would not brook taking direction from a
principal twenty-five years their junior…
Regional directors
KIPP is reorganizing with the goal of better serving its schools. Previously, disparate
central office functions like operations and facilities maintained separate contacts with the
schools. “If you asked ‘how’s the school doing?” you couldn’t get an answer,” said John
Alford, KIPP’s national director of trailblazing. In the new structure, “school liaisons”
will each be responsible for a handful of schools. Expected to be “listeners” and
“problems solvers,” KIPP has charged them with walking a fine line with their school
directors: “We don’t want someone to tell them what to do, but yet [we do want the
liaison to] be aware of their strengths and weaknesses.” Will the KIPP culture sustain this
nuance? “The school director is king—or queen—is a belief that everyone respects,” says
123
Alford optimistically.
Academic Results
Evaluating Success: Kipp Education Program Evaluation
The Education Performance Network at New American Schools issued in October 2002
124
an evaluation ofKIPP’s first three replication schools in their first year of operation. At
the time, each served only the fifth grade. The three schools—in Washington, D.C.;
Gaston, North Carolina; and Houston, Texas—enrolled between seventy and eighty fifth-
graders. The schools served urban students from low-income families; the percentage of
students eligible for free or reduced-price lunch ranged from 80 to 86 percent.
Researchers Harold C. Doran and Barrel W. Drury asked, What percentage of students is
making normal educational growth each year? Have KIPP students made statistically
significant achievement gains as compared with gains made prior to enrollment? Have
KIPP students outperformed their traditional school counterparts? Because each school
administered different tests, the report offers only findings for schools individually. In each
case, the primary goal was to compare achievement gains shown by individual students
while at KIPP to gains they had made at the school previously attended. The researchers’
hypothesis was that any student gains from grades three to four would not be statistically
significant, while student gains from grades four to five would be.
At the KIPP DC/Key Academy in Washington, students gained 23.5 normal curve
equivalent (NCE) points in math and 12.1 NCE points in reading from the fall of 2001 to
122
Stig Leschly, “KIPP National, 1999 (B), op. cit.
123
John Alford, interview with the author, July 6, 2004.
124
Harold C. Doran and Darrel W. Drury, Evaluating Success: KIPP Education Program Evaluation, Education
Performance Network, New American Schools, October 2002. The report is available online at
http://www.kipp.org/Results/KIPP.Program.Evaluation.10.02.Full.pdf.
112
the spring of 2002 on the Stanford Achievement Test, Ninth Edition (SAT-9), exceeding
normal educational growth. DC/Key students showed larger gains than did students of
125
any other middle or junior high school within the district. There were no previous year
student-level test data for this portion of the study, however. The fifth-grade gains were
statistically significant, but because there were no previous gains to look at, only half of the
hypothesis is confirmed.
At the Gaston College Preparatory School in North Carolina, the percentage of students
who passed the state reading test increased dramatically from the previous year. Ninety-
three percent of students passed the test in 2002, whereas only 57 percent of the same
students had passed the test the year before, while at other schools. In math, 90 percent of
KIPP students passed the test in 2002, while only 81 percent of the same students had
passed the test the previous year. From an evaluation of gains, the researchers find support
for the hypothesis in the reading data (because the students made statistically significant
gains at KIPP and not previously), but not in the math data. Math gains were statistically
significant at the students’ previous schools as well as at KIPP.126
At the 3D Academy in Houston, Texas, 98 percent of the school’s students passed the
math portion of the 2002 Texas Assessment of Academic Skills (TAAS) compared to 89
percent of fifth-graders in the Houston Independent School District. In reading, 88
percent of KIPP’s students passed the test compared to 84 percent of students in the
district. On the SAT-9, scores of KIPP students exceeded those of the district students in
math, were the same in reading, and were slightly lower in language. Students made
statistically significant gains on the SAT-9 from grade four to grade five and prior to
attending KIPP; no support for the hypothesis was found.127
Limitations of the evaluations include missing data, the use of proxies for some baseline
data, and the relatively small sample sizes in each school. The three schools were studied
separately, and comparison groups varied. The KIPP evaluations also suffer from the
limitations of pretest-posttest evaluations without control groups. Even a large rise in
achievement may be attributable to factors other than program effectiveness.
The study concluded,
The first year data from all three schools provide positive evidence to support the
effectiveness of the KIPP instructional program. Observed academic gains exceed what
could have occurred by chance and exceed the performance of respective district
performance. Each school increased levels of academic achievement performance for
students, regardless of background or label... The results of the statistical analyses for
Gaston and 3D are statistically significant and indicate impressive academic gains for the
students enrolled. Although partial support for the a priori hypothesis was found at
Gaston, with no support at 3D, this does not disqualify the remarkable academic
achievement gains observed. Rather, it suggests that KIPP students continued to increase
128
in achievement at KIPP.
125
Ibid., 7.
126
Ibid.
127
Ibid., 8.
128
Ibid., 27-28.
113
As of 2004, KIPP was still in the planning stages of a second evaluation of its schools…
Business Results
KIPP’s approach has striking advantages for a school’s launch and operation. As a
nonprofit, KIPP has avoided the virulent political opposition that profit-making in public
education arouses. Second, KIPP took five years to build a powerful and distinctive brand
at its first two schools (prototypes, in effect) before attempting to roll out the program
nationally. That brand, in turn, attracts KIPP fellows who identify with its mission and
values. During a year of training and internships at KIPP schools, KIPP fellows reliably
assimilate the organization’s culture.
Choosing to open each school to just three classes in a single grade gave the school leader
time to find and finance a permanent facility and recruit exceptional staff. In short, it gave
the school several years to solve the problems that EMOs often confronted in a single
summer. Finding three classrooms—in a church basement, for example—is a trivial task
compared to building or improving a facility for hundreds of students— especially under
unreasonable pressures of time and budget.
KIPP’s fellows program has attracted young, enterprising school leaders from top
universities, who in turn hire a staff of highly educated teachers much like themselves.
The school’s principal can lavish great care on the selection of the first three teachers, who
set the tone for the school and drive its initial achievements. The small size and careful
selection of staff make possible the establishment of a radically new culture of high
expectations for students and facilitate a focus on academic results. Establishing an orderly
climate and building a school culture with ninety students is an entirely different challenge
from opening a school for five hundred. In the larger setting, the school leader’s focus will
be on averting crises and attempting to achieve stability, while in the small school it can be
directed from the start both to honing teaching and learning and to shaping the school
culture.
Finally, KIPP fellows have recruited to their boards mentors and community members
eager to be a part of the KIPP phenomenon and who can be expected to support the
school leader in bringing the lauded program to their community.
Early on, KIPP received invitations from communities around the country to open
schools. The Fishers and other philanthropists have given millions in support of its
mission. KIPP has created high academic expectations for its schools, and their boutique
size and elite teaching corps should permit them to deliver strong results.
But is KIPP sustainable? It may not be the network’s goal to become self-sustaining, but
can it rely indefinitely on millions of dollars in annual philanthropic support? And will
continued dependence on private largesse, by tilting the playing field, weaken its claim to
be a model for reforming public education?
114
If nothing else, KIPP’s financial model can illuminate the choices of emerging nonprofit
EMOs. KIPP’s 2002 financial projections called for its reliance on donations and grants to
129
be reduced from $15 million in school year 2003-2004 to $5.3 million in 2012. Without
changes to the model, that seems unlikely. The fees paid by schools are extremely low: 1
percent of school revenues in the first year, and just 3 percent of revenues subsequently.
Edison and National Heritage, by contrast, are generally entitled under their contracts to
keep the difference between their schools’ revenues and costs. For Edison this “gross
margin” is approximately 15 percent; for National Heritage it is probably higher.
Compounding the problem of low fees is KIPP’s small initial school size and slow
expansion. A typical school opening with 80 students and growing to 320 would pay just
$6,071 to KIPP in its first year and $60,854 by its fifth. Compensating for such low fees,
KIPP’s plan called for opening some 230 schools over a ten-year period. Even so, total
fees paid by the schools would come to only $10.6 million in the tenth year.130
Under that plan, twenty-five new schools were to be launched each year. That quickly
proved excessive, however, and KIPP scaled back the pace of its openings. In 2003, KIPP
opened seventeen schools with difficulty. “We realized we had no business doing 17
schools, and there was no way we could do 25,” said John Alford, who heads up new
school development.131 With just twenty KIPP fellows in training, KIPP said it was having
difficulty finding high-quality candidates among applicants. Even if positive media
coverage for its schools continues, KIPP will be challenged to identify and train the new
leaders it needs. Further, invitations to the organization to open KIPP schools have
132
slowed, and the charter market appears to be drying up, says Scott Hamilton. KIPP’s
nonprofit structure has not provided full immunity to political opposition in Lynn,
Massachusetts, the mayor, city council, school committee, and district administration all
spoke out against the KIPP Academy Lynn Charter School. The city council thwarted the
school’s opening by trying to establish a new permitting requirement for charter schools,
which eventually was ruled illegal.
To sustain even its current pace of new school openings, KIPP must scout for
opportunities throughout the country-with all the attendant challenges of a national roll-
out. Navigating the complexities of real estate acquisition, build-out, and financing will
require specialized skills that few of its young principals have. Even though the schools
start small, each will soon serve more than three hundred students and will face challenges,
similar to those faced by the EMOs, of securing permanent facility financing.
KIPP initially assumed that school leaders would themselves successfully take on, with the
benefit of a year of planning and a small initial size most tasks related to siting, building,
and operating their new schools But KIPP soon found that the national office in San
Francisco had to provide more support to its schools and needed a much larger staff than
the model anticipated or is found in most EMOs’ business development offices. By early
2003, a staff of six “trailblazers” worked regionally to locate opportunities to open schools
by developing relationships with state regulators, community leaders, politicians, and
129
Leschly, “KIPP National, 2002 (B),” op. cit., 22
130
Ibid.
131
John Alford, interview with the author, July 6, 2004.
132
115
district officials. The trailblazers prepared charter applications, identified facilities, built
community support for the new school, and met with school districts. The national office
also found itself providing extensive support to school leaders in the areas of academics,
organizational culture, community development, and especially, operations. Operations
staff assisted principals in opening and managing their schools, including addressing issues
133
of budgeting and finance, facilities, human resources, procurement, and compliance.
For these reasons, KIPP’s corporate office staff in 2002 was already about twice the size
projected in its earlier business plan. KIPP’s financial projections assume no growth in
national office support staff between the 2003-2004 school year and 2012, despite an
increase in the projected number of schools from 35 to 235. If all KIPP National provides
is pre-opening services and then over three years weans the sites of corporate support, this
assumption might be realistic. But schools will need ongoing support services. And if they
don’t, will they be willing to continue to pay fees?
The EMOs have had to intervene relentlessly in their schools, parachuting in supplemental
academic and operations support staff to maintain a standard of quality, ensure compliance,
and make good on their promises to the community. Even with the raw talents of the
typical KIPP fellow and the benefit of thorough training, a few KIPP principals will
stumble early on, and others will fail to develop the management skills to oversee the
school as it grows to more than three hundred students and $2 million in annual
134
expenses. KIPP National will have to intervene. Invoking KIPP’s contractual right to
revoke the license of the school for its failure to meet a detailed set of standards may not
prove a practicable quality-control strategy. The KIPP brand may not be insulated from
damage simply by decreeing that the school no longer has a legal affiliation with KIPP; the
board of the school and the community will look to KIPP to repair the school, not
disown it. Moreover, where KIPP National holds the contract with the school district, or
a charter with the state, KIPP will not have the option of separating itself from the school,
and closing it will be politically unacceptable.
KIPP’s culture would not stand for raising license fees, and even Scott Hamilton says it
135
would be wrong. But let’s consider what would be necessary if the organization decided
that, like for-profit EMOs, it had to become self-sustaining. To close the growing gap
between license fees from the school and likely levels of national office expenditures, a fee
of not 3 but perhaps 10 percent might prove necessary. KIPP’s value proposition,
comprised of a leadership development program and ongoing participation in the KIPP
network, would not justify such a fee at the outset, let alone one paid out in perpetuity,
well after most of the value has been received. An EMO that provides a comprehensive
curriculum, professional development, and central operational services, including financial
management and human resources, would not face such resistance.
133
Leschly, “Kipp National 2002 (B),” op. cit., 4-5.
134
Ibid., 23
135
Hamilton interview, May 8, 2004.
116
Following is KIPP’s own self-description, contained in their most recent annual report. Included are
the report cards for the seven KIPP schools operating in Houston during school year 2006-07.
Document #10: Knowledge is Power Program (KIPP), KIPP: Report Card 2007 (available
at http://www.kipp.org.)
Background On Kipp
KIPP Schools
KIPP schools are free, open-enrollment, college preparatory public schools where under-
served students develop the knowledge, skills, and character traits needed to succeed in
college and the competitive world beyond. Of the 57 KIPP schools currently in operation
(spanning 17 states and the District of Columbia), 55 are public charter schools, and two
are district contract schools. Together, these schools currently serve more than 14,000
students nationwide.
KIPP students are in school learning for 60 percent more time than average public school
students, typically from 7:30 a.m. until 5:00 p.m. on weekdays, every other Saturday, and
for three weeks during the summer. Rigorous college-preparatory instruction is balanced
with extracurricular activities, experiential field lessons, and character development. In
spite of the long hours, average daily attendance at KIPP schools is 97 percent.
Student Enrollment
Since our inception, KIPP has served students in educationally under-resourced and
economically disadvantaged communities. Students are accepted to KIPP schools
regardless of prior academic record, conduct, or socioeconomic background. School
leaders use a number of methods to notify parents in their communities about the
opportunity to enroll at KIPP. For example, school leaders and staff may hold afterschool
and evening programs, visit shopping centers, and go door-to-door in the neighborhoods
of these high-need communities to reach out to families directly.
In many communities where KIPP already exists, the demand for enrollment may exceed
the number of spaces available. For those schools, if the number of students who seek to
enroll is greater than the number of spaces available, students are granted admission based
on an open lottery process.
In all cases, the majority of students who enroll in KIPP begin their first year at least
one—and in many cases two or more—grade levels behind their peers in neighboring
schools. Consistently, over 90 percent of KIPP students are African American or
Hispanic/Latino, and more than 80 percent of KIPP students are eligible for the federal
free and reduced-price meals program.
KIPP Network
117
As of December 2007, there were 49 KIPP schools operating in the KIPP network that
were open during the 2006-07 school year. Eight additional KIPP schools opened in the
summer of 2007 but have not yet taken state or national accountability exams and are
therefore not included in this Report Card. KIPP schools included in the 2007 Report
Card can be classified into four categories:
• Middle school—More than 88 percent of KIPP schools featured in the

Report Card are middle schools. The KIPP middle school starts with a fifth
grade, and one grade is added each year with the goal of eventually serving
fifth through eighth grades.
• High school—There are three KIPP high schools included in the Report
Card with measurable results: KIPP Houston High School (Houston,
Texas), KIPP Pride High School (Gaston, North Carolina), and KIPP
Delta Collegiate (Helena, Arkansas). KIPP high schools begin with a
ninth grade and add one grade each year until they become full high
schools serving ninth through twelfth grades.
• Pre-k/elementary school—There are two prekindergarten (pre-

k)/elementary schools featured in the Report Card (KIPP DREAM Prep
and KIPP SHINE Prep), both of which are in Houston, Texas. KIPPpre-
k/ elementary schools typically begin with a pre-k class and one grade is
added each year until they eventually enroll pre-k through fourth grade
students.
• Pre-k through eighth grade school KIPP currently has one pre-k through
eighth grade school, which is included in the Report Card:
136
KIPPMcDonogh 15, School for the Creative Arts (New Orleans,
Louisiana). This school was inspired by the same leadership team and many
of the teachers who founded New Orleans West (NOW) College Prep, a
charter school in Houston, Texas, that opened for the two years following
Hurricane Katrina to serve approximately 400 evacuated New Orleans
students.
Across the network, the majority of KIPP schools operate, or will soon operate, in
“regions”. A KIPP region is a group of schools (two or more) in close geographic
proximity to one another that share one local governing board and are led by an
Executive Director. During the 2007-08 school year, 23 of KIPP’s 57 schools are part of a
dedicated region. In the 2008-09 school year, we expect to have 44 of our 66 schools (67
percent) operating as part of a larger region.
By sharing support and services, KIPP’s regional model contributes both to the quality and
sustainability of schools in the region, while providing a platform for growth across the
country.
136
Unlike most KIPP schools that begin with one grade and add one grade level per year, KIPP McDonogh
15 was founded in 2006 as a fully grown pre-K through eighth grade school.
118
Geographic Reach
Since 2000, KIPP has grown from two schools serving 600 students to a network of 57
schools serving over 14,000 students. Over the past two years, we have been focused on
opening additional schools in communities where KIPP schools already exist. Through a
national New Site Selection competition, we have identified communities for expansion
that have demonstrated both the support and resources necessary for success. Two new
sites were selected as priorities for KIPP’s expansion in 2008: Columbus, Ohio and the
Twin Cities, Minnesota; St. Louis, Missouri was selected for 2009. The map below
reflects our network of schools for the 2006-07 school year.
With schools in almost every major area of the country, KIPP has the most expansive
national network of college preparatory public schools in the U.S.
Origins of KIPP
KIPP began in 1994 when two teachers, Mike Feinberg and Dave Levin, launched a fifth
grade public school program in inner-city Houston, Texas, after completing their
commitment to Teach For America. In 1995, Feinberg remained in Houston to lead
KIPP Academy Middle School, and Levin returned home to New York City to establish
KIPP Academy New York in the South Bronx.
Since their founding, the original KIPP Academies have sustained track records of high
student achievement, and both have continued to be among the highest performing
schools in their respective communities. While fewer than one in five low-income
137
children growing up in America go to college , KIPP’s college matriculation rate stands
at over 80 percent for students who have completed the eighth grade at the two original
KIPP Academies. In 2007, more than 95 percent of KIPP middle school students
matriculated to college-preparatory high schools. Since 2000, KIPP students have earned
more than $25 million in scholarships to college-preparatory high schools.
KIPP Foundation
In 2000 Doris and Donald Fisher, co-founders of the Gap inc formed a unique partnership
with Feinberg and Levin to replicate the success of the two original KIPP Academies
through the non-profit KIPP Foundation. The KIPP Foundation focuses its efforts on
recruiting, training, and supporting outstanding leaders to open new, locally run KIPP
schools in high-need communities. The KIPP Foundation does not manage KIPP schools,
but does have the responsibility for supporting and monitoring school quality across the
network. Each KIPP school is run by a KIPP-trained school leader and governed by a
local board of directors.
137
U.S. Department of Education, National Center for Education Statistics, National Education Longitudinal
Study.
119
The KIPP Foundation trains prospective leaders through the year-long KIPP School
Leadership Program. This program includes intensive summer coursework in a university
setting, residencies at existing KIPP schools, and support from experienced KIPP staff.
Since 2000, the Foundation has recruited and trained more than 70 KIPP school leaders to
open new KIPP schools or succeed founding school leaders who have gone on to serve as
Executive Directors of a region.
While the KIPP Foundation was initially created for the sole purpose of recruiting and
training school leaders to open new KIPP schools, the Foundation’s purpose and function
has grown to provide support and expertise for existing schools. Programs and services
provided by the Foundation include:
• Network growth planning and new site selection
• Recruitment and selection of new school leaders
• KIPP School Leadership Program (which includes the following five

distinct Leadership Pathway Programs):
• Fisher Fellowship Program (training for leaders who will open new KIPP
schools)
• Miles Fellowship Program (training for aspiring Fisher Fellows)
• Principal Prep Program (training for principal successors)
• Leadership Team Program (training for deans and grade-level chairs)
• Teacher Leader Program (training for teachers taking the first step into a
leadership role)
• Research, evaluation, and analysis of school results
• Technology, legal, and real estate services
• Financial and operational support
• Communications and marketing support
• Development and fundraising
• Board development
In December 2005, Richard Barth was named CEO of the KIPP Foundation and set a
goal of expanding KIPP’s network to 100 schools serving 24,000 students by the year
2011. To achieve this objective, Barth began focusing the KIPP Foundation’s efforts on a
120
set of distinct goals and organizational imperatives. These imperatives range from our
fundamental commitment to deliver on the promises we make to KIPP students and their
families, to defining smart growth strategies and governance processes, to building a
world-class organization and operating model.
All of the efforts of the Foundation are driven by our mission:
To create a respected, influential, and national network of public schools that are
successful in helping students from educationally underserved communities develop the
knowledge, skills, character and habits needed to succeed in college and the competitive
world beyond.
KIPP’s Impact
Since our inception, KIPP has been completely focused on helping low-income and
minority students climb the mountain to college. With college graduates today earning
nearly twice the salary of high school graduate138, obtaining a college degree has never
mattered more. However, less than 13 percent of African Americans and less than nine
percent of Hispanics and Latinos earn a bachelor’s degree.139 Statistics also show that less
than 10 percent of students from low-income communities graduate from college.140
Because there are few examples of schools in America’s most under-resourced

communities providing students with an education that prepares them for success in
college and in life, today more than 75 percent of the American public believes that the
achievement gap results from societal issues—not from the quality of schooling.141
By focusing on building a high-quality network of public schools of choice that are

achieving results, KIPP is challenging the assumptions about what is possible in public
education. By recruiting, training, and motivating outstanding leaders and teachers, we are
establishing a pool of high-quality educators to sustain the success of our schools over the
long term. And by using the charter school model or other governance structures with
needed autonomy, we are operating with the flexibility and innovation necessary to bring
about change. In this way, KIPP’s impact is being realized on a dual scale:
1. By transforming the lives of the kids we serve in our current network of

schools; and
2. By inspiring others—as we continue to reach more students in more

communities—to reconsider what is possible in public education.
138
U.S. Census Bureau, Educational Attainment in the U.S., Current Population Surveys, 2006.
139
National Center for Education Statistics, Status and Trends in the Education of Racial and Ethnic
Minorities, 2005.
140
Mortenson, Tom, “Family Income and Higher Education Opportunity,” Postsecondary Education
Opportunity, 2005 (with updated figures from the author, 2006).
141
Phi Delta Kappa Educational Foundation, 38th Annual PDK/Gallup Poll of the Public’s Attitudes Toward the
Public Schools, 2006.
121
Both our direct and indirect imparts are helping us to continually pursue our vision of a
day when all students, no matter where they are born, have access to a high-quality
education.
And as we continue on our current trajectory—with a goal of 100 schools serving 24,000
students by 20,1—KIPP is committed to sharing all that we learn in hopes of inspiring
other communities to consider the five pillars that have made our schools successful:
1. Providing students with high expectations for achievement;
2. Giving students more time in school learning;
3. Understanding that attending KIPP is a choice and requires a fundamental

commitment;
4. Giving educators the power to lead and the freedom to innovate; and
5. Focusing on results to monitor and sustain high levels of achievement.
The 2007 Report Card is just one of the many ways that KIPP is sharing all that we learn
in an effort to serve as a model of high-performing public schools that others can mirror.
Report Card Methodology
In order to track the growth and development of the KIPP network, the KIPP
Foundation collects the following information from each locally run KIPP school.
Enrollment
The Report Card contains enrollment figures by school. In December 2007, there were
13,476 students enrolled at the 49 KIPP schools featured in the Report Card. An
additional 683 students are enrolled in the eight KIPP schools that opened in the summer
of 2007.
Student Demographics
The Report Card also graphically displays the percentage of students who qualify for the
federal free and reduced-price meals program (a proxy for family income), the gender and
race/ethnicity breakdown by school, and the percentage of students defined as having
special needs, as of December 2007. In the Report Card, we define special needs students
as those who have Individualized Education Programs (IEPs) or are otherwise defined as
having special needs. An IEP is a document prepared by a special needs teacher that, in
consultation with parents and other school staff, outlines the learning goals for the student
and the ways in which the school will accommodate and support the student’s special
needs.
122
Across the KIPP schools featured in the Report Card, 53 percent of students are female
and 47 percent are male, and 81 percent are eligible for the federal free and reduced-price
meals program. Sixty percent of KIPP students are AfricanAmerican, 35 percent are
Hispanic/Latino, two percent are Asian, two percent are white, and one percent
represents other or unknown ethnic/racial backgrounds. Eight percent of students are
defined as having special needs.
Funding
The Report Card provides the most accurate per-pupil funding estimates at the beginning
of the 2007-08 school year for all KIPP schools featured. As public schools, KIPP schools
are primarily funded by state and local tax dollars. Per-pupil funding levels vary widely
across the charter schools in the KIPP network, from a low of less than $5,000 per student
at a school in the Midwest, to a high of approximately $13,000 per student at some of our
schools on the East Coast.
More than 95 percent of schools in the KIPP network operate as public charter schools.
KIPP charter schools typically receive 60 to 90 percent of the overall public revenue and
142
none of the capital expenditure revenue of district public schools. Like all public schools
serving predominantly low-income students, most KIPP schools receive federal funding
through the Title I program and other categorical grants.
Analyzing KIPP school budgets nationwide, the KIPP Foundation estimates that schools
spend on average an additional $1,100 to $1,500 per student to cover above and beyond
costs, including the extended day, week, and year. This additional money also pays for
staff salaries, annual field trips, and, in many instances, facilities and transportation.
Facilities
The Report Card provides information on the current facility situation for each of the 49
KIPP schools profiled. For each school, the Report Card explains whether the current
building is owned or leased, along with the square footage of the facility and a photo of
the existing school site.
Facilities decisions are influenced both by the availability and the need for space. Because
KIPP schools typically start small with one grade of 80 students, they are initially housed
in a wide variety of facilities, including church basements, shopping malls, and entire
floors in traditional public school buildings. Since KIPP schools grow one grade at a time,
schools often relocate to new facilities in the initial years of operation.
Federal Accountability Adequate Yearly Progress (AYP)
Under federal law, schools are required to make adequate yearly progress (AYP). AYP is
an individual state’s measure of yearly progress toward achieving state academic
proficiency standards in reading and mathematics. AYP is the minimum level of
142
Speakman, Sheree, Bryan Hassel and Chester E. Finn, Jr., Charter School Funding: Inequity’s Next Frontier.
Thomas B. Fordham Institute, 2006.
123
improvement that states, school districts, and schools must achieve each year regardless of a
school’s entering scores.
The Report Card provides information on which KIPP schools made AYP this past year.
Of the 49 schools featured in the Report Card, 43 reported AYP ratings in 2007. Thirty-
seven of these 43 schools made AYP. Two schools in Texas (KIPP Liberation College
Prep and KIPP Spirit College Prep) did not receive a 2007 AYP rating, as Texas does not
assign AYP ratings to new schools. The two schools in Louisiana (KIPP McDonogh 15
and KIPP Believe College Prep) did not receive a 2007 AYP rating, as they were
considered severely hurricane-imparted schools. Finally, the AYP ratings for two pre-
k/elementary schools in Houston (KIPP SHINE Prep and KIPP DREAM Prep) are not
included since these ratings are based primarily on state accountability tests that begin in
the third grade, and thus do not reflect student learning or outcomes at these two schools.
This year, for the first time, the Report Card also contains state-wide information on the
overall percentage of public schools that made AYP. This information is included in an
effort to provide additional context concerning KIPP school performance with AYP as
compared to the general AYP performance of schools in a given state. State percentages
are provided only for those states where there is a KIPP school that reported an AYP
rating.
Student Achievement State Exams
Students enrolled at KIPP schools, like all other public schools, are required to take state
accountability exams under state and federal law. The state tests profiled in this Report
Card are ‘criterion-referenced exams,’ which means that the content reflects the academic
standards set by each state.
The Report Card provides school-level achievement for each grade level on all subject
matter tests required by the state. We compare these results with the state and district
averages for the corresponding grade level. We also report 2007 state ratings or
designations, when these results are available and applicable. Some states, but not all, use a
unique system for rating schools.
The following are the aggregate results for all KIPP middle schools that took state tests at
143
the end of the 2006-07 school year:
• Approximately two-thirds of KIPP fifth grade classes outperformed their

local districts in reading/English language arts (67 percent) and in
mathematics (63 percent), as measured by state exams.
143
These results only include middle schools that started with a fifth grade. In addition, Indiana gives its
end-of-the-year test in the fall instead of the spring of each year. Thus, we use the fall 2007 results for KIPP
Indianapolis College Preparatory and KIPP LEAD College Prep Charter School since that test reflects 2006-
07 learning.
124
• Fully 100 percent of KIPP eighth grade classes outperformed their district
averages in both reading/English language arts and in mathematics, as
measured by state exams.
• More than 93 percent of KIPP classes144 outperformed their district averages

in Algebra I, as measured by state exams.
Note that the chart below reflects student performance on tests taken at the end of the
school year, and therefore represents learning in a KIPP school. There is no entering, or
baseline, test given at the start of fifth grade.
Percent of KIPP Classes Outperforming Districts*
5th grade 6th grade 7th grade 8th grade Algebra I

Mathematics 63 89 90 100 93
Reading/English Language Arts 67 87 100 100 --
*Tests are administered at the end of each school year and therefore do not represent entering scores.
Student Achievement Nationally Norm-Referenced Exams
All KIPP students take norm-referenced achievement exams from first grade through
eighth grade. Prior to the 2007-08 school year, KIPP students were required to take these
exams in the ninth grade as well; this Report Card thus reflects the results of these exams
up to and including the ninth grade.
All KIPP schools administer both mathematics and reading tests and most also administer a
language test. Norm-referenced tests allow us to track the performance of students while
enrolled in KIPP as compared to their peers nationally. They also provide a way to
monitor student achievement longitudinally (over time) and to see the progress our
students are making on the road to college.
The average student enrolled in any school that administers a nationally norm-referenced
th
exam will score at the 50 percentile, which is considered to be on grade level. This
student is outperforming five out of ten students nationally. From one year to the next,
the average student will make one grade level of growth and not gain any percentile ranks,
meaning that he or she will stay at the 50th percentile from year to year. If a student’s
percentile increases on a nationally norm-referenced exam from year to year, it means that
the student has made more than one grade level of growth relative to his or her peers.
While KIPP schools are required by the KIPP Foundation to take a nationally norm-
referenced test, each school has the freedom to determine which test it wit! administer.
The majority of schools—44 out of 49 profiled in the Report Card—administered the
144
The majority of KIPP students take an Algebra I test in eighth grade; two schools, KIPP Heartwood
Academy (San Jose, California) and KIPP Academy Fresno (Fresno, California), administer the test to
seventh graders.
125
Stanford Achievement Test.145 Two schools took the TerraNova exam, and two schools
administered the Iowa Test of Basic Skills (ITBS).146 One pre-k/elementary school, KIPP
DREAM Prep, does not yet administer a norm-referenced exam.
As we did in last year’s Report Card, the KIPP Foundation is now able to use student-
level achievement results to report norm-referenced results. For middle schools, only
KIPP students who took both an entering test in the fall of fifth grade and the most recent
test (in the spring or fall) are included in the Report Card. This ‘apples to apples’
comparison, known as a matched cohort analysis, allows us to show growth in student
achievement over time for only those students who have been continuously enrolled in a
KIPP school.
The [figures] below [reflect] achievement results for fully grown KIPP middle schools in
operation between 2001 and 2007. This group includes students who started in fifth grade
at KIPP schools since 2001 and who took an exiting eighth grade spring exam during or
before 2007. Two schools currently in operation, KIPP Gaston College Preparatory
(Gaston, North Carolina) and KIPP Academy Middle School (Houston, Texas), are not
included because their students test on a fall-to-fall schedule and therefore do not take
exiting exams in the spring of eighth grade. KIPP schools have the option of testing on a
fall-to-fall schedule or a fall-to-spring schedule.
…[T]he average KIPP student who has been with KIPP for four years starts fifth grade at
the 40th percentile in mathematics and the 32nd percentile in reading, as measured by
norm-referenced exams. After four years in KIPP, these same students are performing at
the 82nd percentile in mathematics and the 6oth percentile in reading.147
Student Achievement—Other Assessments
Student achievement for both pre-k/elementary school and high school is often measured
using assessments other than the state and norm-referenced exams referenced above. KIPP
pre-k/elementary schools independently administer a variety of early childhood
assessments throughout the year. The National Education Goals Panel recommends that
high-stakes assessments not be given until the end of third grade, as these test scores for
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young children have high rates of error and lack reliability. Pre-k/elementary schools
featured in the Report Card highlight the progress of students based on key diagnostics
and benchmarks specific to early learners. In high school, KIPP students focus on college-
readiness preparatory and placement exams, such as the Preliminary Scholastic Assessment
Test (PSAT).the Scholastic Assessment Test (SAT), and subject-specific Advanced
Placement (AP) tests. Results of national norm-referenced exams for KIPP high schools
are provided up to and including the ninth grade only, while state criterion-referenced
exams are provided in subjects and/ or grades tested as required by each individual state.
145
Of the 44 schools that administered the Stanford Achievement Test, 42 administered the tenth edition
and two administered the ninth edition.
146
One school, KIPP Delta Collegiate (Helena, Arkansas), administered the ITBS to its eighth graders, but
the Stanford 10 to fifth through seventh grade.
147
The four-year growth statistic represents approximately 1,000 students from 25 schools.
148
http://govinfo.library.unt.edu/negp/reports/prinrec.pdf
126
Research
Since our inception, KIPP has commissioned several third-party reports. In 2006, a report
by the Educational Policy Institute (EPI) found that KIPP made “large and significant
gains” in mathematics and reading as compared to traditional urban public schools.149 A
2007 study by SRI International found that students at the five San Francisco Bay Area
KIPP schools score significantly higher on standardized tests than students at comparable
150
neighborhood public schools. In 2007, KIPP launched a Request for Proposal (RFP)
process to identify a leading national research firm to conduct a longitudinal study of the
impart of KIPP schools on student outcomes. Mathematica Policy Research was selected
to conduct this five-year evaluation, which will be sponsored by the KIPP Foundation
with substantial financial support from The Atlantic Philanthropies. The Mathematica and
KIPP partnership represents the driving external research focus for KIPP for the next five
years.
The National Evaluation of KIPP Middle Schools will examine how KIPP schools impart
student outcomes, both academic and non-academic, as well as whether KIPP graduates
appear to be on a path toward success in high school and college. The study has two
major components:
1. An experimental component, in which key outcomes among students who

enroll in KIPP schools through admissions lotteries are compared with
those of lottery participants who do not enroll due to space constraints
2. A quasi-experimental component, in which key outcomes of KIPP

students are compared with outcomes among a comparison group of
similar students selected from nearby public schools
Periodic updates of key findings and progress against the study goals will be shared
through public reports made available during the course of the five-year study. The final
report will be shared publicly at the conclusion of the study, though results for individual
schools will not be shared in either the periodic or the final public reports.
Based on the research, data and strategies implemented for this study, KIPP hopes to learn
more about the impart of the KIPP middle school model both in terms of understanding
current performance, and in identifying early indicators that students are being put on a
path toward persistence in school, and success in school and in life.
149
http://www.educationalpolicy.org/pdf/kipp.pdf
150
http://www.sri.com/policy/cep/pubs/choice/kippyearreport.pdf
127
We are excited about the new opportunities available to study the impart of the KIPP
program on our students over time. As we continue to grow, we will maintain our
commitment to monitoring and transparently reporting student achievement results for the
KIPP network.
128
Houston’s KIPP schools
KIPP Liberation College Preparatory

KIPP Academy Middle School
KIPP Houston High School
KIPP Spirit College Prep
All Houston Schools

KIPP DREAM Prep
KIPP SHINE Prep

KIPP 3d Academy
All Texas Schools

School
School Leader Dan Caesar Elliott Witney Claudia Macias Ken Estrella Tori Dugar Aaron Aaron
Brenner Boudreaux
Year Founded 2001 1995 2006 2004 2006 2004 2006
Grades Served 5-8 5-8 Pre-K - K 9-12 5-6 Pre-K - 2 5-6
# of full-time teachers 15 18 16 27 9 32 8
Made AYP Yes Yes n.a. Yes n.a. n.a. n.a.
State Rating151 Academically Academically n.a.154 Recognized n.a.155 n.a. n.a.20
Acceptable/ Acceptable/
Exemplary152 Recognized153
151
Texas rates all K-12 districts and schools as Exemplary, Recognized, Academically Acceptable, or Academically Unacceptable based on state test performance in
addition to completion and dropout rates.
152
Grade 5 of KIPP 3D Academy and DIPP DREAM Prep are recognized by the state under a single charter, while grades six through eight of KIPP 3D Academy
are recognized under a separate, single charter. Grade five of KIPP3D Academy received an Academically Acceptable state rating, while grades six through eight
of KIPP 3D academy received an Exemplary state rating.
153
Grade five of KIPP Academy Middle School and KIPP SHINE Prep are recognized by the state under a single charter, while grades six through eight of KIPP
Academy Middle School and KIPP Houston High School are recognized under a separate single charter. Grade five of KIPP Academy Middle School received and
Academically Acceptable state rating, while KIPP Academy Middle School/KIPP Houston High School received a Recognized state rating.
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Enrollment 339 348 231 370 158 574 147

% FRL 86 91 97 86 67 96 72
Race/Ethnicity (%):
African American 16 17 29 18 94 23 88
Hispanic/Latino 84 81 68 80 3 76 12
Asian 0 2 0 1 2 2 0
Caucasian 0 0 2 1 1 0 1
Other 0 0 0 0 0 0 0
Gender (%):
Male 46 42 47 45 62 47 39
Female 54 58 53 55 38 53 61
% SPED 6 5 4 5 3 6
Facilities/Lease Type District lease Lease from District lease Lease from Church Lease Church
KIPP, Inc. KIPP, Inc. Lease from Lease
KIPP, Inc.
Size of school space (sq. ft.) 84,000 33,921 37,544 47,000 16,613 47,000 11,000
Per-pupil funding $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500
State Criterion-Referenced Test156 n.a. 157 n.a.158
154
Grade 5 of KIPP 3D Academy and DIPP DREAM Prep are recognized by the state under a single charter, and thereford received a combined AYP and state
rating. Because AYP and state ratings are derived primarily from state accountability tests that begin in the third grade, and KIPP DREAM Prep serves grades pre-
K through K, the AYP and state ratings do not reflect KIPP DREAM Prep’s student achievement and are therefore not reported.
155
Texas does not assign AYP or accountability ratings to new schools.
156
Texas Assessment of Knowledge and Skills
157
KIPP Dream Prep administers a full battery of diagnostic tests designed to monitor the development of pre-reading skills; early literacy skills; early mathematical
concepts and operations; and other social emotion, and fine and gross motor skills in pre-Kindergarten. These assessment include but are not limited to the
Dynamic Indicators of Basic Early Literacy Skills (DIBELS), Doors to Discovery Literacy Assessments, and research-based early literacy assessments administered as
part of the Center for Improving the Readiness of Children for Learning and Education (CIRCLE) framework. More than 50% of KIPP DREAM Prep students
are considered LEP (limited English proficient) when they enter based on the Woodcock-Munoz assessment, which establishes language proficiency in English and
Spanish. The following highlights the progress of KIPP DREAM pre-kindergarten students:
• Based on a developmental writing continuum, students’ authentic writing was assessed throughout the year. At the end of the 2006-07 school year, pre-
K students were consistently using initial sounds to represent words in a sentence or a thought, and to communicate their ideas to others. Additionally,
many students were using vowel and ending sounds.
• By the end of the 2006-07 school year, pre-K students were able to recognize and produce 90% of initial sounds in an orally presented word, up from
21% of initial sounds at the beginning of the year, according to the DIBELS. Additionally, pre-K students performed above the mid-year K benchmark
on the DIBELS Letter Naming Fluency assessment
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Grade 5:
Mathematics 80 82 77 59 89 91
Reading 79 81 88 82 85 89
Science 43 63 63 43 71 77
Grade 6:
Mathematics 79 91 66 79
Reading 91 99 85 92
Grade 7:
Reading 94 98 77 85
Writing 100 99 90 93
Grade 8:
Reading 100 100 86 89
Science 85 90 56 70
Social Studies 100 100 83 87
Grade 9:
158
KIPP SHINE Prep administers a full battery of diagnostic tests designed to monitor the development of pre-reading skills; early literacy skills; early mathematical
concepts and operations; and other social emotion, and fine and gross motor skills in pre-Kindergarten. These assessment include but are not limited to the
Dynamic Indicators of Basic Early Literacy Skills (DIBELS), Doors to Discovery Literacy Assessments, and research-based early literacy assessments administered as
part of the Center for Improving the Readiness of Children for Learning and Education (CIRCLE) framework. KIPP SHINE Prep is a dual language school
where nearly 45% of students are considered LEP (limited English proficient) when they enter based on the Woodcock-Munoz assessment, which establishes
language proficiency in English and Spanish. Because KIPP SHINE Prep is a dual language school, all students take the Tejas Lee, the Spanish versio of the Texas
Primary Reading Inventory that measures students’ phonological awareness and comprehension skills in Spanish. The following highlights the progress of KIPP
SHINE pre-kindergarten and Kindergarten students:
• In 2006-07, pre-K students made gains in key literacy areas. By the end of the school year, students were reading at a level 3 (on average), as measured
by Reading A-Z running records. This is equivalent to a kindergarten level.
• At the end of 2006-07, students were performing at or above grade level on CIRCLE’s early literacy assessments. Ninety-seven percent of students
scored “full understanding in the rapid letter naming assessment, a predictor of later reading skills. Of those students, 46% met or exceeded the
benchmark for the end of kindergarten.
• By the end of the 2006-07 school year, Kindergarten students were reading at an early first grade level. This is based on a scale that begins at
Kindergarten (emergent readers) and goes through fifth grade (fluent readers).
• By the end of the 2006-07 school year, 99 percent of Kindergarten students performed at expected or mastery levels in all key Spanish literacy areas on
the Tejas Lee. Additionally, 80% of these students performed at the mastery level in all key literacy areas.
131
Mathematics 87 48 60
Reading 98 79 86
Grade 10:
English/Language Arts 97 75 84
Science 82 46 58
Social Studies 100 80 86
Grade 11:
English/Language Arts 100 85 90
Science 98 71 77
Social Studies 100 93 94
Nationally Norm-Referenced Test159
Grade 1:
Mathematics:
Entering Pre-K (2005) n.a.160
Fall 2nd (2007) 72
Reading:
Entering Pre-K (2005) n.a.
Fall 2nd (2007) 57
Language:
Entering Pre-K (2005) n.a.
Fall 2nd (2007) 64
Grade 5:
Mathematics:
Entering 5th (2006) 46 62 50 44
Spring 5th (2007) 64 73 36 43
Reading
Entering 5th (2006) 29 42 52 42
Spring 5th (2007) 40 47 37 36
Language
Entering 5th (2006) 41 54 54 49
Spring 5th (2007) 45 61 58 47
159
Stanford Achievement Test
160
Entering test not given since the Stanford 10 is not administered in pre-Kindergarten
132
Grade 6:
Mathematics:
Entering 5th (2005) 47 65
Spring 6th (2007) 78 77
Reading
Spring 6th (2007) 53 61
Language
Spring 6th (2007) 51 63
Grade 7:
Mathematics:
Spring 7th (2007) 86 78
Reading
Spring 7th (2007) 61 64
Language
Spring 7th (2007) 70 65
Grade 8:
Mathematics:
Spring 8th (2007) 93 82
Reading
Spring 8th (2007) 71 64
Language
Spring 8th (2007) 73 68
Grade 9:
Mathematics:
Entering 9th (2006) 83
Fall 10th (2007) 86
Reading
133
Fall 10th (2007) 67

Language
Fall 10th (2007) 63
134
The following series of articles are drawn from the Houton Chronicle and give some sense of
how the KIPP schools are received by the city and the district. The first gives us the context of
Texas’ charter law and describes the “spotty success” of most Texas charter schools.
Document #11: Jennifer Radcliffe and Gary Scharrer, “Decade of change for charter
schools; Experts say spotty success keeps them from competing with traditional system,”
Houston Chronicle, December 17, 2006.
When Texas opened its first charter schools a decade ago, some public school educators
feared that the radical new option would lure away the best and brightest students from
traditional public schools.
Ten years and 358 charter campuses later, that fear hasn’t been realized. Rather, most of
Texas’ charters—free public schools that don’t have to comply with some state
regulations—are catering to poor and minority students at risk of dropping out.
INCREASED OPTIONS
Texas lawmakers approved public charter schools in 1995 to increase options for
parents, attract new teachers to public schools, create competition for public
schools and encourage innovative learning methods.
Admission must be open to all students - except in some cases, including those
with documented criminal histories or discipline problems. Charters are not
allowed to charge tuition.
Today, 192 charter holders operate 358 campuses in Texas. Current legislation
limits the number of charters that can be issued by the State Board of Education to
215.
The dramatic shift in the target audience hasn’t been the only surprise in Texas’ charter
school experiment. Policy-makers have found it nearly impossible to close struggling
campuses, including Houston’s Gulf Shores Academy. On the other hand, even skeptics
applaud the successes of some charters, such as the Houston-based Knowledge Is Power
Program and YES Prep Public Schools.
For the movement to become a truly competitive force in public education, charter
school reform must be a top issue in the legislative session that starts in January, experts
said.
“We have to reward really good charters, and we need to close those schools that are
not meeting the needs of the students,” said Senate Education Chairwoman Florence
Shapiro, R-Plano.
A bill to be introduced this session would pull the plug on every Texas charter school in
the fall and then instantly reopen the strong campuses with perpetual licenses, said Rep.
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Rob Eissler, R-The Woodlands. The move could close 20 to 30 underperforming

schools, officials said.
“It kind of starts everything with a clean slate,” Eissler said. “The debate will be
interesting, and the results will be interesting.”
Despite the political attention it garners, Texas’ charter school movement is still in its
infancy.
About 90,000 of Texas’ 4.5 million public students attend state- or district-approved
charter schools, just 2 percent of the student population.
Houston presence
Even with a state-mandated charter cap, enrollment is growing by a robust 10 percent a

year. In the Houston area, charters may have a market share as high as 15 percent, said
Todd Ziebarth, a researcher with the National Alliance for Public Charter Schools.
HISD officials estimate that 12,000 to 13,000 children who live inside district
boundaries attend state-approved charter schools. Another 10,000 or so attend HISD
charter schools.
However, the disparity in the quality of education those children receive is wide. Texas
charter schools are more likely than traditional public schools to earn state ratings at the
very top and the very bottom of the scale.
This August, nearly 16 percent of Texas charter systems were deemed “unacceptable,”
compared with just 3 percent of traditional districts. Just 1.3 percent of traditional
districts earned “exemplary” ratings, compared with 3 percent of charter systems.
A handful of charters made headlines for serious financial and academic concerns. Three
former employees of the defunct Prepared Table Charter School in Houston were
sentenced to prison last year for helping defraud the government of $6 million. The
Gulf Shores Academy and Alphonso Crutch charter schools have owed the state as
much as $10.6 million and $1.6 million, respectively.
“The biggest problem that the high-performing charters have is perception, and the
perception the citizens of Texas have is of low-performing charters,” said John Pitts, a
Houston lobbyist who represents two charter school coalitions.
Marquette University professor Howard Fuller, chairman of the Black Alliance for
Educational Options, told more than 650 people at a charter school conference in
Houston last month that charter operators must be their own toughest critics. They
can’t make excuses for failing to educate their poor and minority students.
“That’s why charter schools were created—because we said, `It’s hard, but we can do
it,’ “ Fuller said. “Now that you are there, you can’t be whining and crying about how
hard it is. It’s supposed to be hard.”
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Charter schools that aren’t preparing students for college should be closed, he said.
“You cannot be committed to charter schools,” Fuller said. “You have to be committed
to the students who come to charter schools.”
Great expectations
More than 1,000 students are waiting for spots in KIPP’s southwest Houston schools.
The multischool campus houses KIPP Academy Middle School, one of Texas’ oldest
charters.
With 52 schools nationally, KIPP has produced results by extending the schoolday,
holding Saturday classes, mandating parental involvement and fostering a culture of high
expectations among its low-income students. College pennants line the walls, and the
names of the former KIPP students who now attend those universities are proudly listed
underneath.
The philosophical differences are not lost on students new to the school this year.
“At my old school, they didn’t care if we went to college,” said Guillermo Vizcardo, a
10-year-old who attended Petrosky Elementary in Alief last year.
Former HISD student Ivan Sepulveda, 10, added: “This school teaches more about
life—how we can get a good job and what to expect.”
Even with his school’s popularity, KIPP co-founder Mike Feinberg said he knows the
charter movement hasn’t rattled traditional schools.
“We’re not there yet. We’re not even close,” he said, adding the state must shut low-
performing schools before the movement can really take root.
Putting reforms on radar
HISD Superintendent Abelardo Saavedra said he doesn’t view charters as competition.
“You don’t have enough success with charters yet,” he said. “In the state of Texas, at
least, there’s been more failures than successes with the charters.”
Patsy O’Neill, executive director of the Resource Center for Charter Schools, however,
credits the state’s strongest charters with putting reforms such as school uniforms,
International Baccalaureate and a college-prep focus on the radar of traditional public
schools.
Educators took notice, for instance, when YES College Prep started requiring students
to earn college admission before receiving their high school diplomas. Just this year, the
Houston Independent School District released a draft college-going plan that asks all
high schoolers to fill out a Texas college application prior to graduation.
“The competition from YES and KIPP in Houston have probably made the HISD and
other traditional districts in Houston look harder at academics,” O’Neill said.
Others say that charters haven’t lived up to their billing as innovative alternatives.
137
“That’s been the problems with charter schools—very, very few of them have offered
anything unique other than their privatized management. Most of them are structured
like our neighborhood schools, they’re just not doing as good of a job,” said John
O’Sullivan, secretary for the Texas Federation of Teachers.
Though he supports charters, he says they don’t deserve credit for reforming traditional
schools.
“It’s a little bit irritating. Texas public schools have been on an upward curve in terms
of improving student achievement for 20 years, well before the advent of charter
schools,” he said. “It’s a little boisterous, I’d say, for charter schools to be claiming
credit for our successes. I think they need to focus on their own success, or lack
thereof.”
Full steam ahead
Since Minnesota penned the nation’s first charter school law in 1991, the movement has
attracted 1.1 million children throughout the U.S.
While especially active in Washington D.C., Chicago and New Orleans, charters are
just starting to gain steam in many areas.
It took California’s movement—the second-oldest in the country—10 years to get its

footing. The state’s 600 charter campuses serve nearly 220,000 students.
Good times predicted
“Between years 10 and 15, we’ve really seen a maturation in the movement,” said Gary
Larson, vice president of the California Charter Schools Association, who predicts that
the Texas’ movement will experience the same success in the next five years.
Finally, Larson said, public schools in Oakland and Los Angeles are starting to respond
to the increased market pressure. Strong charters should not be seen as a threat, he said.
“We need to prioritize the real threats, like dropouts and illiteracy,” Larson said.
Two years ago KIPP announced its plans for a major expansion of its work in Houston. The goal
is to operate a total of 42 KIPP schools in the city by 2019 and to raise $100 million to finance
that growth.
Document #12: Jennifer Radcliffe and Ericka Mellon, “KIPP Academy takes big step;
Celebrated Houston charter to add 35 campuses in the area over the next 10 years,” The
Houston Chronicle, March 20, 2007
The Knowledge is Power Program—the much-touted national charter school network

born in Houston more than a decade ago—will unveil a $100 million plan today to
expand its number of schools here fivefold, creating a system that could rival the
Houston Independent School District.
138
Within a decade or so, the Houston chain would grow to include 42 charter schools
with 21,000 students, a huge jump from the 1,700 students who currently attend KIPP’s
eight area schools.
The large number of campuses—more than many suburban districts, including Spring
and Galena Park—would give KIPP ample enrollment to prove whether its success at
preparing some of the nation’s poorest students for college is just a fluke, advocates said.
“Someone’s got to step up and do it. Frankly, why not KIPP? Why not Houston? Why
not now?” said Mike Feinberg, co-founder of the KIPP charter school system, which
serves 12,000 students at 52 schools nationally. “Houston is very fertile ground in the
country to do this work.”
The expansion could test the basic tenet of the charter school movement: Will the
influx of KIPP schools drive bad schools in the Houston area to get better, or will it
force some of them to close?
KIPP’s initial plan is to expand to 16 elementary, 16 middle and 10 high schools—

drawing low-income, at-risk students from several districts, including HISD, Alief and
North Forest.
Before enrolling, students and parents must sign contracts committing to KIPP’s
rigorous demands: longer school days, class every other Saturday and three weeks over
the summer.
Some HISD school board members said they welcome the competition and additional
choices for parents, while acknowledging that some of HISD’s less popular schools
could be in trouble.
“The market has become competitive, and we need to shape up,” trustee Larry Marshall
said.
Touted by Oprah
A 1995 Texas law paved the way for charters, publicly funded schools that don’t have
to comply with as many state mandates as their traditional counterparts. Today, roughly
70,000, or 1.6 percent, of Texas’ 4.5 million public school students attend one of 438
state-approved charter campuses. The majority of them are located in inner cities.
KIPP’s campuses have been among the state’s most successful. Its flagship Houston
middle school, for example, earned a “recognized” rating in 2005-06, a rare
accomplishment for an urban middle school.
More than any other public charter school system in America, KIPP has been held out
as a model for others to follow. The hype surrounding KIPP, with its mottos such as
“Work hard. Be nice” and its ability to raise test scores for low-income children,
reached its zenith last spring when Oprah Winfrey featured KIPP during a special report
titled American Schools in Crisis.
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That type of exposure helped KIPP in the “quiet” phase of its fundraising effort, which
collected about $65 million in less than eight months. That’s the largest collective
donation in the history of the charter school movement, KIPP officials said.
MAJOR DONORS TO KIPP’S $100 MILLION HOUSTON

CAMPAIGN
Hines Interests Limited Partnership of Houston, $10 million
Laura and John Arnold of Houston, $10 million
The Houston Endowment, $10 million
The Bill & Melinda Gates Foundation, Seattle, $10 million
Doris & Donald Fisher Fund, San Francisco, $5.3 million
Walton Family Foundation, Bentonville, Ark., $8.7 million
“KIPP is an easy sell,” said Leo Linbeck III, a Houston executive and an adjunct
business professor at Rice and Stanford universities. “Their results are pretty spectacular,
not just in Houston, but around the country.”
Linbeck estimates that at least 40,000 more children will be entering school in the
Houston area over the next decade—plenty, he said, to sustain KIPP and HISD.
“There’s no reason to think this is going to be a battle for a fixed market share,” he said.
Charter schools already hold about 15 percent of the market share in Houston, but
KIPP’s expansion plan will mean that one chain is serving 10 percent of children.
“It’s a big deal. It’s huge,” said Todd Ziebarth, a researcher with the National Alliance
for Public Charter Schools. “Those are significant numbers for one charter school
network to have in a state, let alone a city.”
Advocates will watch to see how HISD—a shrinking district whose enrollment sunk
below 200,000 this year—responds to the pressure, he said.
HISD already has made several efforts to appeal to parents—creating specialized magnet
programs, a popular gifted program and opening its own charter schools.
“If we learn from (KIPP’s expansion), then it will be great for the district,” said HISD
trustee Harvin Moore, a former KIPP board member. “If we continue to treat them as
if it’s us against them and make excuses for why they do better than some public
schools, then we won’t learn from them.”
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HISD school board President Manuel Rodríguez Jr. said he wishes philanthropists
would invest their money in the traditional public school system.
“This is private monies, and I’m sorry they’re not coming to the public school system,”
he said. “It would be my hope that all the different facets of the community could come
together and work to make the public school system better.”
While charter schools are public schools, Rodríguez contends that they don’t face the
same funding shortages, high number of state and federal mandates, or struggles to get
parents involved as HISD.
The schools also will be vying for the best teachers. KIPP expects to hire about 1,000
over the next decade, and a spokeswoman said the salaries are about 20 percent higher
than those at traditional districts, though teachers work more hours.
Steven Seleznow, program director of state and district partnerships in education for the
Bill & Melinda Gates Foundation, said HISD shouldn’t see this expansion as a knock on
the traditional public school system.
“Our aim is to lift all boats,” he said of the Gates Foundation, which donated $10
million to the effort. “Our aim is to create more and better public, free options for
parents and children who need them the most ... We’re not at all abandoning HISD in
any way.”
Other donors include the Walton family of Wal-Mart fame, and Laura and John
Arnold. John Arnold, 33, is a former Enron energy trader who now runs Houston-
based Centaurus Energy.
Public school options
HISD’s high dropout rates and other shortcomings are driving parents to explore their
options. About 2,500 Houston students are on KIPP waiting lists, about five times the
number of new students KIPP schools can accept next year.
“I don’t want to keep telling them ‘No,’ “ Feinberg said.
The expansion will begin with two middle schools opening this summer: KIPP
Sharpstown Academy in Sharpstown and KIPP Polaris Academy for Boys in North
Forest.
Houston resident Sharon Simpson, whose children and grandson have all attended KIPP
campuses, said she’s thrilled that more families will have choices other than traditional
public schools.
“To me, it’s like a dream come true,” said Simpson, whose oldest son was so dismayed
at the idea of Saturday school that he purposely forgot to bring the KIPP enrollment
form home.
Still, Simpson was sold on the charter school’s rigid discipline and tough academic
standards.
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“This is one of the best decisions I’ve ever made,” she said, adding that her first-grade
grandson is already learning Spanish and rattling off vocabulary words like “altered.”
Exhibit #6: KIPP Schools in Houston: Growth and Projected Growth
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The Houston Chronicle welcomed the news of KIPP’s expansion plans while expressing regret
that the opportunity for a KIPP education would not be available for all of Houston’s children.
Document #13: Editorial: “Gifted and Talented; KIPP expansion is great news for
21,000 lucky youngsters and should be for others as well,” The Houston Chronicle, March
25, 2007.
Mike Feinberg, co-founder of the Knowledge is Power Program charter school, gets
mixed feelings when visitors think KIPP’s high-achieving, low-income students must
have been hand-picked for motivation. The nationally praised KIPP schools, he insists,
help create rather than just capitalize on ambition.
In the next decade, Houston will have a chance to see if this is true. Under a planned
$100 million expansion, KIPP schools—which, it should be stressed, are public
schools—will educate 21,000 at-risk children from the Houston Independent School
District. That alone is a phenomenal opportunity for a lot of children; informed parents
will be sure to grab it. Already, KIPP’s private-caliber education attracts four wait-listed
students for every one who can be accommodated.
Private donations will fund infrastructure. State funds allotted for each schoolchild will
cover day-to-day costs.
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But what about students whose parents aren’t engaged enough to grab places at the new
schools? There’s a legitimate concern that these youngsters, already burdened by
poverty and lack of family support, will now be marooned in bad schools devoid of
ambitious students’ influence.
That concern might be overblown. KIPP schools famously ask parents to commit to a
high level of involvement. But it finds most students by recruiting door to door in low-
income neighborhoods. Its “contract” is simply the school enrollment form; KIPP can’t
punish parents who don’t follow through. And since KIPP is a public school, it can’t
expel students for any reasons other than those in conventional HISD schools.
Considering that four-fifths of aspiring KIPP students remain in those conventional

schools, one might think they’d be achievers there, too. Yet HISD’s dropout rates and
achievement scores don’t reflect that.
Though it would be easy to see KIPP’s project as a threat, HISD administrators instead
should view it as a bracing challenge to their methods and assumptions.
While some KIPP features—above all, its treasure trove of superlative teachers—can’t
be easily copied, others can be adapted. For example, KIPP schools benefit from longer,
more numerous school days. HISD schools should consider waivers to experiment with
this approach.
KIPP also demands high involvement from parents. Yet it can’t enforce it. HISD also
should set higher standards for its parents, knowing that not all will comply. Similarly,
KIPP pays teachers up to 20 percent more for their long workdays—but argues that it’s
possible thanks to low overhead.
Finally, KIPP administrators enjoy striking freedom in exchange for delivering

measurably high performance.
Two years ago, some HISD parents missed a shining opportunity to see KIPP at work
in their local schools. Parents rejected KIPP’s offer to collaborate with HISD to
improve schools in the feeder pattern of dysfunctional Yates High School.
Though HISD mishandled the offers’ presentation, these parents robbed their children
of an education for which others in Houston now wait in line.
KIPP could have shown its methods work in an open-enrollment environment. HISD
could have proved its will to innovate and to raise expectations for teachers, parents and
students.
These remain the great challenges facing the two school models. Houston children need
both models to succeed.
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A month after KIPP’s announcement, the Chronicle ran yet another article, this one looking at
the expansion plan from the perspective of KIPP co-founder Mike Feinberg.
Document #14: Mike Tolson, “KIPP’s experiment moving to grand scale;

Charter school on way to major expansion thanks to donations,” The Houston Chronicle,
April 2, 2007.
The story of KIPP comes in a rush from Mike Feinberg, its edges worn smooth by years
of retelling.
There is the beginning: A pair of frustrated fifth-grade teachers devise a new, intensive
teaching approach, pounding it all out one night in the fall of 1993 while U2 played
endlessly in the background. They name it the Knowledge Is Power Program and
convince the Houston Independent School District to let them try it for a year.
And there is the middle: Emboldened by the success on a small scale with 50 students in
the same grade level, Feinberg and Dave Levin start two charter schools, one in
Houston and one in New York, targeting poor minority kids. Their students end up
outperforming their counterparts in traditional public schools.
And finally the end: The KIPP experiment, having proved itself, is repeated in cities
around the country, 52 of them in 17 states by 2007. Most are successful. Eight out of
10 KIPP students who left high school in 2004 and 2005 end up in four-year colleges.
KIPP becomes a hit with politicians and the media and even makes an appearance on
“The Oprah Winfrey Show.’’
As it turns out, though, the end is not the end at all, but merely a prelude for something
much bigger. The story Feinberg someday could end up telling over and over—or at
least the one he hopes to tell—might be nothing less than a tale of how a couple of
naive young teachers revolutionized public education in America’s traditionally
underserved and underperforming poor communities.
“It’s time for us to start replicating this to reach more kids,” Feinberg, 38, said of KIPP’s
recently announced expansion. “As it stands now, when the history of education is
written, KIPP would be remembered as a blip on the radar that appeared in the ‘90s and
helped a few kids get to college. We’re to a point where we can do more.”
Big plans cost big money. Coming up with $100 million to expand to a total of 42
Houston schools was ambitious beyond anything attempted by KIPP or any other
charter school network in the nation.
Charter schools are free and open to the public. State educational funds pay for the
students they enroll. However, the schools don’t get the extra $1,500 that goes to
traditional public schools for facilities. KIPP’s campuses may not be fancy, but they
aren’t free.
That meant they had to raise the money from scratch from many of the same
philanthropic sources they had tapped before.
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“You never know, when you have a big ambitious plan, how people will respond,” said
Shawn Hurwitz, who was chairman of the local KIPP board of directors when Feinberg
approached him with the notion of expanding.
The two figured to get a sense of that when they managed to snag Steve Seleznow,
director of education for the Bill and Melinda Gates Foundation, as he was changing
planes in Houston in early 2006. Seleznow had about an hour for Feinberg to make his
pitch in a hotel conference room next to the airport.
“He said he had a pretty bold idea for what he wanted to do in Houston,” Seleznow
said. “We didn’t know what he wanted to present, but when someone like Mike
Feinberg, with his track record and his passion, wants to talk to you, you want to
listen.”
‘Blown away’
What Seleznow heard was more than an idea. For months, Feinberg, Hurwitz and Leo
Linbeck III, a business owner, Rice University professor and ardent KIPP supporter,
had examined the plan point by point, mapping out every step and trying to pinpoint
each potential problem or challenge. What emerged was less a glossy presentation than a
hard-core business model.
“We were blown away by it—the planning, the vision and the level of detail,”
Seleznow said. “I think it was probably one of the most thorough and detailed plans for
growing and scaling KIPP or any charter network that I had seen. It was a concept that
has not been done anywhere before.”
Commitments began to roll in throughout last year. The Houston Endowment

promised $10 million, as did the Gates Foundation, Hines Interest Limited Partnership
and John and Laura Arnold, a young couple who have been involved with KIPP for
several years. The Walton Family Foundation (think Wal-Mart) added $8.7 million, and
the Donald and Doris Fisher Fund (think The Gap) will provide $5.3 million.
“I view it very much as social venture capital,” said Jeff Hines. “This is something that
could have a huge future impact if it’s successful. To do it on a larger scale is going to
be a challenge. But, if they can, the example could be profound.”
Jim McIngvale, owner of Gallery Furniture, chipped in $1 million. He has supported

KIPP since it was limited to one school on the north side.
“I’ve been a believer since 1995, now more than ever before,” McIngvale said. “I have
no doubt whatsoever (about the expansion). I judge people by their commitment. Their
commitment has never wavered, not for one second. There will be bumps in the road,
like there are in all things, but they will overcome them.”
By the time KIPP made its public announcement March 19, its leaders had secured $65
million in commitments in less than a year.
“We have been successful beyond our imagination,” Hurwitz said.
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The donations reflect a belief not just in Feinberg but in the principles upon which he
and Levin based their creation. Good teaching and lots of it, Feinberg likes to say, and
by lots he means lots—much longer days, every other Saturday, a month in the
summer. KIPP also stresses character development, seeing it as essential for long-term
success. Hence the KIPP slogan: Work hard. Be nice.
High hopes
KIPP depends on intense, committed teachers who give up much of their lives to the
cause. It’s that commitment that underpins another KIPP motto: no shortcuts.
Assuming it can find enough of those teachers, which cannot be taken for granted, there
may be no other obvious reason why its principles cannot be applied more broadly.
Not all of KIPP’s financial supporters were so sure when they first heard it, however.
John Arnold, a member of KIPP’s local board, was skeptical of the wisdom of the big
plan when he first heard it. The former Enron employee had seen companies with good
ideas grow too fast and lose their “magic.”
As he reviewed the model in detail, Arnold became convinced that it would work.
That’s when he got excited. Changing the lives of a few kids was one thing. Potentially
reaching 21,000 a year was something else entirely.
“With KIPP, the donor community is already seeing a return,” Arnold said. “What we
want to see now is whether it can prove itself to be successful essentially as a small-sized
district.”
And if it can?
“It would be something momentous,” Laura Arnold said. “This is an opportunity to

participate in something that can change the educational system.”
If nothing else, the expansion might give KIPP the opportunity to answer some of its
critics, who accuse them of skimming off, even if by accident, the best and most
motivated of minority students from traditional public schools.
Feinberg said KIPP doesn’t recruit any particular student and sets no admission criteria.
It does turn away far more students than it can accept at most of its schools, and, in
those cases, admission comes via lottery. The simple solution? Build more schools.
When they do, the world will find out if the critics have a point or whether, just
maybe, KIPP actually works as advertised.
“We’re trying to lead a little bit of a mutiny here,” Feinberg said.
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As we have seen in last week’s case as well as the current case, the question of the demonstration
effect of charter schools on traditional schools in their districts and state is an open one. The
following article explores the obstacles standing in the way of HISD emulating the positive
experience of the KIPP schools in their midst.
Document #15: Ericka Mellon, “Can HISD copy success of charter schools?; Longer
day plan might work, but it would cost the district millions,” The Houston Chronicle,
April 29, 2007.
It sounds like a simple formula to fix broken public schools: Require students to spend
more time in class. Ask parents to sign contracts committing to be involved. Hire
teachers who believe every child is college material.
Popular charter schools such as the Knowledge Is Power Program and YES Prep Public
Schools follow such rules, and both have waiting lists of students who want to attend.
With enrollment declining in the Houston Independent School District, the impending
expansion of successful charter schools here raises questions about whether traditional
districts could—or should—play copycat.
“I don’t think there’s anything we’re really doing that couldn’t be replicated in a
traditional ISD,” said Chris Barbic, the founder of Houston-based YES Prep.
Yet even Barbic acknowledges it would be difficult for traditional districts, which have
more students and more red tape, to make big changes. It also would require schools to
spend their money differently, on teacher salaries instead of football, perhaps.
But several changes, such as an extended school day, would be possible—at least legally.
HISD officials are now discussing the idea of requiring a longer day at some campuses,
particularly middle schools, said Karen Soehnge, the district’s chief academic officer.
Some schools currently hold after-school and Saturday tutorials, though they aren’t
mandatory.
“We do recognize that there’s value in additional time on task as long as that additional
time is meaningful,” she said. “I don’t think we’re at a point where we would require it
for everyone. For some students it may not be necessary, and it might not be what some
parents would want.”
Covering the costs
One major stumbling block to keeping students in school longer is finding enough
money to pay employees for the extra hours, Soehnge said. She’s unsure of the final
tally, but it’s obvious the cost would be great.
HISD estimates the hourly rate of a teacher is $33 on average. If the district’s 12,500
teachers worked an extra two hours a day, it could cost an additional $148.5 million a
year.
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Add in four hours for 20 Saturdays a year, and the tab approaches $215 million—a
nearly 15 percent increase to the district’s entire budget. HISD could eliminate its $170
million building maintenance and operations budget and still not have enough to pay
teachers for the extra hours. It might have enough if it also cut the school bus budget.
Gayle Fallon, the president of the district’s largest teachers union, said she’s not opposed
to the idea of longer hours. But teachers would have to be paid appropriately, she said,
and there would have to be fair options for teachers who couldn’t work the longer day.
More quality time
Nearly one-third of the nation’s 3,900 or so charter schools have a longer school day or
year than traditional schools, according to the Center for Education Reform…
At KIPP, which recently announced a $100 million plan to expand to 42 Houston-area

campuses in the next decade, students typically attend school from 7:30 a.m. to 5 p.m.
on weekdays. They also go to school every other Saturday and for three weeks during
the summer…
Just last week, the Bill & Melinda Gates Foundation and the Broad Foundation—two
education-focused charities—called for students to spend more quality time in school, as
part of a $60 million campaign to influence the agenda in the 2008 presidential election.
HISD school board President Manuel Rodríguez Jr. initially responded with a question
when asked whether he supports more time in school.
“Would the state be willing to pay for a longer school day and a longer school year?” he
asked.
Rodríguez then said he’s unsure whether the majority of parents would support the
idea, even if the money were available.
“It would probably have to be a vote of the public to see if they would want longer
school hours, including weekends,” he said. “We are currently offering after-school
tutorials and Saturday tutorials and we are not getting that much participation.”
Trimming athletics
Harvin Moore, another HISD board member and a former KIPP board member, said
he is open to experimenting with longer hours at some campuses if principals buy into
the idea.
“It does cost more money to have a longer school day and year, though we could use
our money slightly differently,” he said.
Moore didn’t have specific spending ideas, but he pointed out that charters “don’t try to
do everything.”
YES and KIPP schools don’t have football teams, for example.
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“We do the cheap sports like soccer and cross country,” Barbic said.
A cost-free similarity between YES and KIPP is that they require students, parents and
teachers to sign contracts committing personally, though not legally, to certain
behaviors.
“The form says parents and teachers will cooperate together,” said KIPP co-founder
Mike Feinberg. “It’s important to put that up front, but how you make that happen day
in and day out is where the magic happens.”
Motivated parents
A few HISD schools have similar contracts, at least with some struggling students and
parents, Soehnge said. But charter schools have another advantage, she said: Parents
choose to send their children there and are especially motivated to help their children
succeed.
When the first charter schools opened in Texas a decade ago, advocates hoped they
would serve as labs of innovation that would influence struggling schools. Today,
observers say, that hasn’t happened on a widespread basis. Though some charters have
been successful with students, others have been plagued by financial mismanagement
and poor test scores.
Feinberg acknowledges that charters have an advantage over traditional schools because
they get to start a program from scratch.
“But is it possible for there to be changes?” he asked. “Absolutely.”
Following is the view of the KIPP schools from the ground level, as the principal of Houston’s
KIPP 3D Academy describes his experiences.
Document #16: Todd Hveem, “Principal teaches pupils to keep college in mind;
Daniel Caesar says developing character skills just as important,” The Houston Chronicle,
October 27, 2005.
Principal Daniel Caesar looks back on his childhood and wishes he would have had the
educational opportunity he is promoting at Knowledge is Power Program 3D Academy
Middle School, 4610 East Crosstimbers.
“My mom and dad were divorced when I was 5 years old,” said Caesar, 32. “But
everyone has a sad story. It is what you do to overcome that sad story that really counts.
That is the message we talk about at KIPP 3D.”
The college preparatory charter middle school serves the fifth through eighth grades,
and is part of a network of similar, free, open-enrollment public schools in under-
resourced communities around the nation.
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KIPP 3D is a public school with open enrollment that began as a Houston ISD charter,
but has since become an independent charter with close ties to HISD.
The “3D” stands for desire, discipline and dedication.
Caesar grew up in Philadelphia and went to college at Tufts University in Boston. After
graduation, he decided to join “Teach for America,” a program that places recent
college graduates in classrooms in need of teachers all over the country.
“I wanted to do a service (to the community), so I decided to join,” he said.
Caesar moved to Donna, Texas, and taught fifth-grade math and social studies in the
Rio Grande Valley.
After two years, he was approached by Mike Feinberg, principal at KIPP Academy
Middle school in Houston.
“I saw the school and I fell in love with it,” he said.
Caesar moved to Houston and taught from 1997-99. “In 1999, Mike asked me if I
would be interested in starting a new KIPP 3D program,” he said. “I thought it was a
great opportunity.”
Caesar trained for one year, then helped open the new academy with 69 pupils. Today,
the school has 325 pupils and about 200 on the waiting list, he said.
Besides being the principal, Caesar also teaches a fifth-grade class two days a week.
“As we started to expand, he was a natural first choice (to help open the new school),”
said Feinberg, who is now the superintendent of the two KIPP academies. “I am really
proud of what he has done.”
Caesar said all pupils must also attend summer school. He said the pupils do two hours
of homework a night, and the parents, students and teachers sign commitment forms.
“We want all of our kids to go to college,” Caesar said. “We want them to have the
academic ability, intellectual habits, quality and character to make it to college. To do
that, we roll up our sleeves and get after it.”
Miguel Perez, an eighth-grader at the school, says his principal treats everyone fairly.
“He treats us all like a family. He is real nice. When we get in trouble, he doesn’t
scream at us. He explains it to us why it is wrong so we can understand better,” Perez
said.
Caesar said he still enjoys teaching.
“I feel is it important that I get to know them,” he said. “I have a lot more credibility if
I have taught them before. I know how well they read, write and what their family is
like.
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“But I also have grown to love relationships I have built with the other teachers. Our
teachers really make the difference.
“They also teach on Saturdays and go on week-long field trips with the kids.”
Caesar said the school’s goal is to have 100 percent of the students go to college.
“We won’t know how truly successful we are until our first group enters college in
2009,” he said.
A particularly unwelcome facet of the KIPP expansion is the competition it creates for school
leadership in Houston, though, as we have seen earlier, principals likely to succeed in a traditional
public school setting are very different from the principals KIPP seeks out and trains for its schools.
Document #17: Ericka Mellon, “Finding principals gets tougher; The competition
intensifies as HISD is forced to battle charter schools for the top candidates,” The
Houston Chronicle, July 26, 2007.
TORI Dugar, a veteran elementary school teacher, recalls parents routinely asking
when she would ascend into the principal’s office.
Maybe one day, she would say, but she was having fun in the classroom.
Two years ago, Dugar made the switch, leaving the Houston Independent School
District to open her own charter school through the Knowledge Is Power Program.
“The opportunity to start a school from scratch was just a lifetime dream of mine,” she
said.
HISD and other traditional school districts have long battled for good principals, but the
competition has gotten stiffer as popular charter schools attract eager candidates…
This summer, HISD lost two seasoned principals to KIPP: Alma Salman, who helped
turn Pilgrim Elementary into an exemplary-rated campus, and Lynn Barnes, the
founding principal of Briarmeadow, a small district-run charter school.
“We’ve lost a real good one,” HISD trustee Kevin Hoffman said of Salman, who took
over Black Middle School last year.
Salman and Barnes were attending KIPP’s principal training academy at Stanford
University in California this week and were not available for interviews. But Mike
Feinberg, a KIPP co-founder, said the two HISD employees approached KIPP about
applying for the yearlong training, which is required before they can open their own
campuses.
Feinberg and others across the nation who work to develop principals say they’re seeing
a small but growing number of entrepreneurial educators leave traditional schools for
charters—not for a bigger paycheck, but for less bureaucracy.
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“Certainly, the charter schools provide principals a higher degree of autonomy than
they’ve had in traditional public schools,” said Dick Flanary of the National Association
of Secondary School Principals.
Dugar looks back fondly on her time in HISD, but said she couldn’t pass up the chance
to create her own school. She chose everything from its name, KIPP Liberation College
Preparatory, to the structure of the classes, with students divided by gender. Students at
all KIPP schools also attend class for more hours a day and more days a year.
HISD retention of principals
Each year, the Houston ISD has to hire 30 to 45 principals, a task that’s increasingly
difficult for school systems nationwide as baby boomers retire and principals face
pressure to improve student achievement.
Superintendent Abelardo Saavedra has pushed several changes to improve the district’s
recruitment and retention of principals. Last school year, the district launched an
alternative certification program to begin training its own teachers to become principals,
and Saavedra said he is seeking private funding to open a comprehensive leadership
academy for principals next year.
The district also recently revamped its salary package for principals, and about a dozen
were paid more than $100,000 last year, records show.
“The principalship, in my opinion, is the most important administrative position in this

school district, bar none,” Saavedra said. “How the principal goes, the school goes.”
Saavedra said he has tried to hire more principals from other districts, in addition to
promoting from within, but it’s difficult.
Harvin Moore, vice president of the HISD board, said he would like the district to
more assertively recruit principals, as well as teachers, from the outside.
“You really have to get out and network,” Moore said. “ I’m not saying we don’t do
that at all. I’m saying we don’t do that enough.”
A major challenge
KIPP’s Feinberg said a big challenge is finding principals or aspiring principals with a
track record of helping poor and minority students succeed.
In March, KIPP announced a $100 million plan to expand its number of schools in
Houston fivefold over the next decade. The success of that plan, Feinberg said, depends
heavily on locating enough people to run the campuses.
This year, he found three qualified Houston-area candidates for the Fisher Fellowship
principal program: HISD’s Salman and Barnes, plus Carie-Anne Simmons, a current
KIPP employee.
“I certainly would have loved to have found a couple more,” Feinberg said.
152
“There’s three things that keep me up at night, in no particular order,” he continued.

“Where do we find 42 great school leaders? How do we find 1,200 great teachers? And
how do we create a central office that’s excellent instead of turning into the beast?”
Feinberg joked that he has a running contest with his young son: Who wakes up
screaming in the middle of the night more often?
“Right now,” he said, “I’m winning.”
The concluding document in this casebook describes the opening, last summer, of KIPP’s tenth
Houston school.
Document #18: Jennifer Radcliffe, “They’re intrepid; KIPP’s newest campus here
welcomes 89 fifth-graders; 10th Houston school to be joined in 2009 by 4 more,”
The Houston Chronicle, July 1, 2008
The Knowledge is Power Program debuted a new charter school in the East End on
Monday and announced plans to open at least four more campuses in Houston next
year as part of its $100 million expansion effort.
The rapid growth keeps KIPP on track with a plan officials announced last year to grow
to 42 Houston-area campuses with 21,000 students in the next decade. At that point,
roughly 10 percent of all Houston students would attend a KIPP school.
“It’s sort of crazy,” KIPP co-founder Mike Feinberg said.
The East End campus, called KIPP Intrepid, is the charter school system’s 10th Houston
campus. A new prekindergarten campus is set to open in Sharpstown in August,
increasing KIPP’s projected enrollment to about 3,300 students.
More than 16,000 students attend one of 65 schools in the nationwide charter system,
which is lauded for preparing low-income students for college.
Families sign contracts
During Monday’s opening of a nearly monthlong summer session, Intrepid Principal

Carie-Anne Simmons tried to explain to about 90 fifth-graders that they are not the
only children attending school in the middle of summer.
“The biggest message I hope they took away is that they’re now part of something
bigger than themselves,” she said. “I told them there are many other KIPP schools,
KIPP fifth-graders, just like them in other cities sitting in their seats today.”
East End families were thrilled to have another option in their neighborhood—
illustrated by the 89 students who turned out for summer class, Simmons said…
153
Critics argue that KIPP has an easier time posting high test scores because they cherry-
pick top students and return less successful students to traditional public schools.
Feinberg disputed those claims.
“We have no say with who comes in our doors,” he said. “And we’re doing a far better
job of holding on to our children” than a traditional public school.
Record growth
The demand for the schools and KIPP’s ability to hire four new principals prompted the
record growth planned for 2009. Four, possibly five, campuses will open in the
Houston area.
Three of the new schools slated to open in 2009 will start as prekindergarten or
kindergarten campuses, a relatively new model for KIPP, which historically focused on
middle schools.
“This is changing,” KIPP spokesman Steve Mancini said. “KIPP piloted the first pre-K
model in Houston in 2004, and now it is going national. Seventy percent of the new
schools we open in 2009 across America will be elementary schools.”
Houston’s elementary schools are located alongside existing KIPP middle schools in
Sunnyside, the Third Ward and the East End, officials said.
An all-girls middle school is slated to open in North Forest to compliment the all-boys
charter that opened there last year. A fifth campus may also open in Galveston in 2009,
but those plans aren’t final yet, officials said.
As KIPP expands, its biggest challenges are finding enough high-quality teachers and
principals. The charter system also is trying to develop an efficient central office system
and ensure the same culture of high expectations is duplicated at new campuses,
Feinberg said.
A little more than a year into its fundraising campaign, KIPP has about $70 million of
the $100 million it needs to construct the new schools, Feinberg said.
Feinberg said he’s confident he’ll be able to make huge strides if children attend KIPP
schools from the time they’re 3 until they graduate high school.
“Kids will be splitting the atom by that point,” he said.
Suggested Study Group Questions:
1. What is the problem(s) for which privatizing public schools is put forward as a
solution?
2. Critique the arguments raised by both sides as the proposal to privatize the Edison
School made its way through the political thickets in San Francisco.
154
3. There are several impediments to the operation of market forces in public

education. These include:
o constraints within the school (the “special” character of the product, lack of
control over the inputs, and constraints with respect to the labor force)
o constraints on the system (“interests of the state” that include state standards
and teacher certification, and “public benefits” that include civic education,
non-discrimination, and provision for special needs), and
o constraints on the consumer (including access to information and access to
the school)
“Privatized” schools are, for the most part, a special category of charter schools.
How do these impediments to the operation of market forces affect schools
operated by for-profit corporations?
4. How do for-profit corporations propose to do a better job of educating children

than public schools are doing? In what respects and to what degree are they
succeeding? In what respects and to what degree are they unsuccessful? Are the
data reliable?
5. Suppose, for the moment, that you are Abe Saavedra, Houston’s Superintendent.
What changes would you implement in the district’s schools (if any) in light of
KIPP’s expansion plans over the next ten years?
Appendix #1: Last year’s clarifying questions161
1. Do EMO’s have to show accounting records to a school district to demonstrate

whether or not they made a profit? (4) Only if the contract signed with the district calls
for that disclosure. Now that Edison has once again become a privately-owned corporation,
they are subject to even less public scrutiny of their financial records than they were as a public
corporation.
2. Do businesses (EMOs) receive tax breaks if they sponsor charter schools? (3) No.
3. Theoretically, how does an EMOs make a profit? (4) Where does the revenue for
EMOs come from? And in the eventual/theoretical model, which part would
increase? (2) Revenues come from public funds allotted on a per-student basis, as agreed
upon in the contract signed with the EMO. In theory, EMOs’ profit derives from economies
of scale. They argue that consolidating purchasing and services results in their being able to
operate schools more efficiently than public school districts can. Levin (casebook p. 24)
disputes this claim. But even the theory only holds if each EMO is running a very large
number of schools—a situation that has yet to materialize for any single company.
161
The case formerly treated an Edison school in San Francisco as its focus.
155
4. To what demographics are Edison schools most attractive as a choice for their own
kids? (2)According to Edison’s annual report for 2001-02 (Document #3 p. 34), “Edison
schools are successfully serving increasing percentages of African-American students. The
average percentage of African-American students in Edison schools has increased from
approximately 40 percent during the 1995–1996 school year to 58 percent in 2001–
2002.” In general, Edison schools appear to have a higher proportion of minority students
than other public schools in their districts.
5. Is there a (demographic or educational) pattern to which teachers are staying and

leaving? (2) I don’t have information about teachers who have left Edison schools.
6. Why did Henry Levin’s statistics not reflect what Edison reported in their Annual
Report? (2) The Edison report in the casebook was released after Levin wrote his article in
November 2002. With reference to earlier Edison annual reports, Levin appears to mistrust
their statistics. He says, (Document #2 p. 28f) “At this time there is little rigorous evidence
comparing EMO’s with comparable conventional schools. Some EMO’s have reported
superior results, but without the documentation required to substantiate the claims. Typically,
they have reported that test scores have risen in most of their schools, but the specifics of which
tests, how tests were administered, and which students were included is not given.” He goes
on to cite independent studies of Edison schools that dispute the company’s own statistics.
7. Were the Edison teachers unionized? (2) Were the Edison school teachers members
of the S.F. teachers union and/or did they have collective bargaining rights? (3)
Most were and are members of the union.
8. In a transition to being an Edison school, what happens to the teachers who were
at the school before? (2) Typically, teachers are given the option of staying or leaving.
9. Is there a difference (in terms of place on the pay scale in relation to qualifications,
particularly) between the people being hired by Edison and other schools? (2) Are
the teachers working at Edison schools required to be as qualified (with
certifications, advanced degrees, etc) as the neighboring public schools? (4) Edison
tends to match salaries in local public schools, but, as you know from the casebook, Edison
teachers are asked to teach longer hours each day and more school days per year, hence their
complaint over their salaries. Unless prevented from doing so by the terms of their contract
with the state or district, Edison could hire non-certified teachers.
10. What does R&D for Edison look like? (2) Take a look at the Edison Web site
(http://www.edisonproject.com) where they describe in some detail their “primary” and
“secondary” research, their findings, and ideas they found particularly useful in developing
their model.
11. How did the stock offering (and then its eventual drop in price) alter Edison’s
operations? (4) Besides Sept. 11 and the economic downturn of the year, were
there specific factors that contributed to the Edison stock decline from 2001 to
2002? Did the S.F. controversy play a role in the loss of consumer confidence? (3)
156
The stock offering provided Edison with capital with which to expand their operations and
cover their operating losses. The decline in the price of the stock is attributable to the
company’s continuing failure to realize a profit. I don’t know how the San Francisco
controversy in particular affected the price of the stock. The decline in the value of the stock
interfered with the company’s ability to seek additional capitalization.
12. How often are students tested compared to other local public schools? (4) Based on
the information in Edison’s annual report, it would appear that they are testing their
students annually.
13. Is there a difference between “class size” and “student:teacher” numbers? (4) There
could be, since some teachers—special education teachers, reading specialists, etc.—are
counted in the student:teacher ratio, but would not affect class size.
14. What was the final ruling on the Classroom Teacher Association of Dallas court
case that said that teachers cannot be employees of a private company and the
state? (3) I am unable to locate coverage of the outcome of the lawsuit.
157

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Case IV: Private operation of public schools in Houston,

John Bryan Starr

Exhibit #1: For-profit schools in the United States 5

Exhibit #2: Public opinion regarding for-profit schools 6

Document #1: Julie Light, “The Education Industry: The Corporate 6

Document #4: Henry M. Levin, “Potential of For-Profit Schools for 29

Document #5: Brian Hassel, “Friendly Competition,” Education Next 43

Document #6: Government Accountability Office, “Comparison of 52

Document #7: Patricia Burch, Matthew Steinberg and Joseph Donovan 62

Background information on Houston and its public schools 86

Exhibit #3: Population 86

Exhibit #4: School system statistics 89

Exhibit #5: Houston school governance 91

Document #8: Julie Bennett, “Brand-Name Charters,” Education Next 8:3 92

Exhibit #6: KIPP Schools in Houston: Growth and Projected 142

Document #18: Jennifer Radcliffe, “They’re intrepid; KIPP’s newest 153

Suggested Study Group Questions 154

Appendix #1: Last year’s clarifying questions 155

We have encountered the arguments in support of privatization of public education in our

As of school year 2007-08, 50 for-profit companies were operating 553 schools in 28

Exhibit #1: For-profit schools in the United States2

School Number of Number of Number % of Approxi- % of

*Plus District of Columbia

Exhibit #2: Public opinion regarding for-profit schools

General Parents Voucher Charter

National Totals (%) No Children in Public School

42% of 18- to 20-year-olds would favor; 21% of those 50 and older

6 “Lessons from the Voucher War,” ( http://www.corpwatch.org/issues/PID.jsp?articleid=877 )

Advocates of these attempts at privatization in public education (often called “public-

Much more open to question are supporters’ descriptions of public-private partnerships as

As quickly as it had appeared, performance contracting in education disappeared as a

Same Old Tune, Same Old Criticism

The Times story described the report as one of the

Privatization schemes are inevitably advanced in a deregulatory public policy

The Mythical Crisis

In 2007-2008 the for-profit education management industry continued to grow slowly.

• The number of states in which for-profit EMOs operated declined from 31

• Edison Schools experienced the largest net decrease in the number of

• Ohio-based White Hat Management experienced the largest net increase in

• Eighty-four percent of the 533 schools profiled are operated by large

• Eighty-five percent of EMO-managed schools are charter schools, and 15

• The majority (60%) of EMO-managed schools profiled are primary

• The number of virtual schools operated by EMOs increased to 40 in 2007-

• The number of students in EMO-managed schools increased by 16,444

• Large EMOs enroll 89 percent of all students in EMO-managed schools.

Introduction and Background

The EMO Industry: Background and Rationale

Education management organizations, or EMOs, emerged in the early 1990s in the

While faith in market competition as an effective engine of reform provides a general

Defining Education Management Organizations

We define an education management organization, or EMO, as an organization or firm

Findings for 2007-2008

Number of Education Management Organizations Profiled

Table 1. Number of EMOs Profiled by Size and Year

Number of Schools Managed by Education Management Organizations

Table 2. Number of Schools Managed by Profiled EMOs, By EMO Size

To accurately interpret these numbers it is important to note that in 2006-2007 Imagine

Table 3. Number of Managed Schools by School Type

Number of Students in Schools Managed by Profiled EMOs

Table 4. Number of Students in Schools Managed by EMOs, By EMO Size

2001- 2002- 2003- 2004- 2005- 2006- 2007-

Table 5. Number of Schools and Students Enrolled in Schools Operated by