Public Schools ... Outsourcing to Charter Schools in a Michigan City

Make versus buy and outsourcing are two simple concepts and practices frequently found in successful businesses.

In simple terms, they mean nothing more nor less than making a determination with respect to who's best positioned to provide the desired product or service. If an outside company or independent contractor in the form of person A is better able to deliver that product or service than the company or person who would otherwise provide it and needs or wants it, then it's "bought" or "outsourced." The idea is that both cost and quality are improved as a result.

In other words, equal or better products or services will be provided at an equal or better cost and quality than could be secured in-house.

Michigan City Outsources All of Its Schools tells the story of outsourcing public schools to charters:

"The public school district in this hard-luck city has come up with a radical answer for its troubled education system: It is outsourcing all of it.

Highland Park School District, one of the state's lowest-performing academically, says it will turn over its three schools and nearly 1,000 students to a private, for-profit charter school company—the second district in Michigan to take such a drastic step to avert financial collapse.

The abrupt news last week sparked concern—and in some cases, relief— from parents and other residents who packed a Wednesday night meeting in the faded industrial city, which is nearly surrounded by Detroit.

The parents came to hear from the charter company, Leona Group LLC, which promises to improve the learning environment and boost student performance in a district where only 22% of third graders passed state reading exams last school year and just 10% passed math. The results were even worse for high-schoolers: About 10% were proficient in reading, and none in math. . . .

Districts nationwide are trying radical approaches to shake up financially and academically troubled schools, including dismissing the entire staff or turning several schools over to outside groups to run.

A few districts in Georgia have converted into charter districts in an effort to get out from under state class-size and teacher-salary schedules. In those cases, the district administration generally remains in place and oversees schools, but each school creates a council of teachers and parents that make hiring and budget decisions. New Orleans has taken one of the most extreme approaches by converting most of its schools to charters and allowing students to use state-funded vouchers to attend private schools.

Charter schools—public schools run by outside entities using taxpayer funds—are free from many administrative constraints, including union contracts, and typically spend less than traditional schools per student.

Proponents say the move could offer a lifeline to other school districts in crisis. In 2011, 48 of Michigan's 793 districts ran deficits that totaled $429 million, compared with 18 districts with $59 million in combined deficits in 2004-2005, according to the most recent state data.

"This could be the new model for public education," said Jeanne Allen, president of the Center for Education Reform, a national research and advocacy group that supports school choice. "It stands to be a lab of innovation where people can see that thinking outside the box is not so scary."

But opponents say the plan is designed to kill off unions and lacks the public's input. "Where's the accountability to the community?" asked Katrina Henry, president of American Federation of Teachers union Local 684, which represents the district's teachers.

Highland Park decided to privatize its schools after years of enrollment decline, poor fiscal stewardship and allegations that a board member stole more than $125,000 by submitting false invoices; the charges against the member are pending.

During the 2010-2011 school year, the district spent $16,508 per student. By comparison, Michigan districts on average spent $9,202 per pupil that year. In the process, Highland Park ran up an $11.3 million deficit over its $18.9 million school budget. . . .

The district got itself into financial trouble, in part, because it didn't cut staff as fast as its enrollment declined along with the city's population, leaving it with higher per-pupil expenditures . . .

"The financial problems were immense and we had to look at nontraditional ways to get the district back on track,". . .

Phoenix-based Leona will receive $7,110 per pupil in state funding, plus an as-yet-undetermined amount of federal funds for low-income and special education students. In addition, the Highland Park district will pay Leona a $780,000 annual management fee.

Unions have been sidelined after the district's entire professional staff was laid off, as allowed by the state emergency law, but teachers can apply for jobs with Leona. Leona has budgeted about $36,000 a year for Highland Park teachers on average, the company said—compared with almost $65,000 a year the teachers received in the 2010-11 school year.

In a typical school it takes over, Leona has hired back about 70% of the teachers, the company said. Leona also will lease the Highland Park district's buildings.

Under the five-year contract with Leona, the new city charter board will monitor the company's progress in improving student performance.

Leona runs 54 schools in five states. Students in almost half of them fail state academic benchmarks. But of its 22 Michigan schools, 19 meet the mark, Leona officials said.

Leona Chief Executive William Coats said the company had no incentive to cut corners in Highland Park. "As we build equity, we give that back to the schools," he said during Wednesday's meeting when an audience member raised doubts about the for-profit approach. "We're trying to manage this so you [the district] stay in business." . . ."

My Take

Teachers unions don't want charter schools for completely obvious reasons.

My bet, however, is that taxpayers, parents and students will be more than willing to give it a fair try, since what's happening now is both low quality and high cost.

Some teachers will want to maintain the status quo, but others will understand the issues and willingly go along with the changes.

For the city, parents, students and taxpayers, things will improve quickly as the changes are made

Costs will decrease and student performance will improve.

Change has to happen throughout our American system of public education, and charter schools are a definite part of the solution. So are vouchers.

Meanwhile, unions are part of the problem.

In Highland Park, Michigan, there's no downside to making the changes. The absolute worst that can happen is a big cost savings in a currently unaffordable environment.

Thanks. Bob.