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Firm Leaves Trail of Anger at Schools : Instruction: In six years, the private company has failed to turn a profit anywhere. It has also riled some teachers, parents and school board members.

December 22, 1992|WILLIAM TROMBLEY | TIMES STAFF WRITER

Education Alternatives Inc. has traveled a rough road to reach Baltimore.

The small Bloomington, Minn., company is trying to prove that private management of public schools can bring not only educational improvements but also financial profits. Since its start six years ago, however, the company has not had a profitable year--or even a profitable quarter--and had accumulated operating losses of $8.5 million by March, according to federal Securities and Exchange Commission documents.

The company also has left a trail of angry and disillusioned parents, teachers and school board members in many communities where it has operated.

Education Alternatives was founded in 1986, acquiring educational programs from Control Data Corp. when that computer manufacturer decided to sell off several of its smaller divisions.

"Control Data had some general ideas for putting up schools that would be better without costing more money, but it was all conjecture," said John T. Golle, who has sold computerized educational programs for Xerox and other companies and now is chairman and chief executive officer of Education Alternatives. "We decided to build one to see if it was true."

In 1987 and 1988, the company opened two private, for-profit schools in the affluent suburbs of Eagen, Minn., and Paradise Valley, Ariz. Although students in these schools have advanced an average 1.5 grade levels per year, neither school makes money.

Education Alternatives sold the Arizona and Minnesota private schools to another company headed by Golle and decided to concentrate on managing public schools.

In June, 1990, the company signed a five-year, $1.2-million consulting contract with the Dade County, Fla., school board to assist in managing the new South Pointe Elementary School, in a low-income, predominantly Latino section of Miami Beach.

This appears to be the company's outstanding success to date.

"I see a lot of progress just in one year," Principal Patricia Parham said in a telephone interview. "The children are reading and writing much better. Our attendance has improved. The teachers and parents are enthusiastic. We have a wonderful school."

Education Alternatives has been less successful elsewhere.

Last year, the company ran the troubled Duluth, Minn., school system for a four-month period, but its contract was not renewed.

"They had everybody up in arms," said a close observer of the Duluth experience. "They alienated the teachers, the school board and the general public."

Golle attributed the Duluth problem to "a clash of cultures," hinting darkly that "I'm not going to air dirty laundry, but we found practices and circumstances that were less than desirable. We showed them how to save $7 million on a $60-million annual budget but few of our recommendations were accepted."

In Green Brook, N.J., the school board was about to hire Education Alternatives last spring when voters booted out of office the board members who favored the contract.

In Winona, Minn., school board members rejected an Education Alternatives proposal to run one school this year after the district superintendent said it would have doubled the cost of running the school.

The SEC report, issued when Education Alternatives made a public stock offering last June, noted that the company depends on a handful of key people and warned that "if it is successful in obtaining significant school management and consulting contracts, the resulting growth in the company's business will place a strain on (its) management and operational resources."

Many observers believe that that is what has happened in Baltimore, where Education Alternatives obtained its largest contract to date: $133 million to manage nine Baltimore public schools, mostly in slum neighborhoods, for the next five years.

Many education experts doubt that Education Alternatives can make a go of managing public schools.

"The school culture is so skeptical of this idea that I can't see it succeeding in the near future," said Dennis Doyle of the Hudson Institute, a Washington think tank.

But Education Alternatives President David A. Bennett is confident.

"We really believe that 50% of the nation's school districts will be privately managed over the next 10 years," said Bennett, former superintendent of schools in St. Paul, Minn. "And we will manage the lion's share of it."

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