Word: profit
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This battle for students has had a bracing effect on public school systems. In Boston, a hotbed of for-profit schooling, the city has responded by launching 11 pilot schools to test innovative curriculums. "We want children to be educated in the best environment," says Albert Holland, a Boston public school official. "We don't mind the competition...
Once dismissed as the loony notion of free-market zealots, for-profit schools are fast winning support and jolting the $360 billion public school market, the last major sector of the U.S. economy to feel the lash of competition. The very notion seems heretical: public schools run by private companies that charge no tuition but operate classrooms for local school boards or independent chartering organizations using taxpayer money--some of which will go to shareholders as (gasp!) profit...
Today more than a dozen U.S. companies run some 250 for-profit public schools, with an enrollment of 120,000 students--there were no such classrooms a decade ago--and venture capitalists from Wall Street to Silicon Valley are eagerly pumping funds into educational start-ups. "We originally set out to raise $100 million," says financier Jeffrey Leeds, founder of one such fund. "But the demand [to invest] was so great that we raised our target to $250 million, and we intend to cap it at $300 million...
...even as they grow in clout, for-profit schools are still struggling to do what their name denotes--make money. That requires taking the same government funds that the average school district spends per pupil per year--the U.S. average is $6,500--and not only providing a superior education but also squeezing out a profit. That's a tough task in a field in which "the margins are more like McDonald's than Microsoft's," as Thomas Toch, a guest scholar at the Brookings Institution, puts...
...company illustrates the promise and pitfalls more clearly than Edison (1999 revenues: $133 million), the leading manager of for-profit schools, which pioneered the concept of for-profits in the early 1990s. Edison has since lost about $160 million while opening 79 schools with 38,000 students in 19 states. But parents are clamoring for its product. Last week the company signed deals to open a pair of schools this fall in Rochester, N.Y., and Milwaukee, Wis., and won a five-year contract to manage two schools in North Carolina...