America鈥檚 Choice School Design, a school improvement program that has enlisted 547 schools in 16 states in its brand of comprehensive reform, plans to announce this week that it is loosening its nonprofit moorings and changing to a for-profit company.
The purpose is to raise capital and attract talent that will fuel plans for development and growth, say officials at the nonprofit National Center on Education and the Economy, the research organization here that developed and operates America鈥檚 Choice.
鈥淭his will no longer be a boutique operation,鈥� said Marc S. Tucker, the president and founder of the NCEE, which will have majority control of the new company.
Like other nonprofit initiatives involved in comprehensive school reform, America鈥檚 Choice no longer can attract the large sums of money that foundations and the federal government once lavished on it for research and development. Instead, it sees its future tied to the delivery of services to help schools improve, a demand stoked by the federal No Child Left Behind Act that other school reform programs are also experiencing.
That growing market niche for services has been richly supported by federal grants and by funding distributed by states.
Federal grants for comprehensive school reform, for instance, made $320 million available to school districts for the 2004 budget year, according to Hugh Burkett, the director of the national comprehensive-school- reform clearinghouse at Learning Point Associates, an education research group based in Naperville, Ill. The selection of providers has been left to districts, but federal law requires that schools meet 11 different criteria for receiving such money.
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By far the greatest contributor to the growth of the educational services sector is the federal Title I program, which received $12.3 billion for fiscal 2004, and can be used for whole-school programs benefiting disadvantaged students.
At the same time, some states have endorsed and steered districts toward specific improvement programs or lists of programs.
Mississippi, for example, has a contract with America鈥檚 Choice to help in planning for school improvement efforts, said Susan M. Rucker, the associate state superintendent for innovation and school improvement. However, she said, districts can make their own choices about which programs to use. (鈥淎t State鈥檚 Urging, Mississippi Schools Use Reform Model,鈥� Oct. 13, 2004.)
Justifying the Move
America鈥檚 Choice needs new money to develop its standards-based curriculum and training materials, Mr. Tucker said in explaining the reasons for the move to for-profit status in an interview at the NCEE鈥檚 headquarters in Washington.
Equally important, he said, as a $40 million-a-year operation, the program needed the management and marketing prowess that it could not attract without offering talented executives an equity stake, which the NCEE could not do as a nonprofit.
The highest-profile addition to the board is Thomas H. Kean, a former New Jersey governor and the chairman of the federal 9/11 Commission. Mr. Kean, the president of Drew University in Madison, N.J., also was the chairman of the New American Schools Development Corp., a business-backed group that selected the NCEE鈥檚 prototype for America鈥檚 Choice to receive start-up funds in 1995.
Mr. Kean鈥檚 New York City investment firm, Quad Ventures LLC, typically adds up to $6 million to the education companies it invests in.
With money and personnel now in place, the for-profit program could expand to serve thousands of schools rather than hundreds, Mr. Tucker said.
Some other experts in the field agree with that analysis.
America鈥檚 Choice is one of the most enterprising of the dozens of comprehensive-reform programs operating in this marketplace, according to Henry Levin, the founder of a popular nonprofit school reform program called Accelerated Schools.
鈥淭hey really are very well organized in terms of regional offices and so on鈥攖hey鈥檝e gotten huge amounts of both federal and foundation money as a nonprofit,鈥� said Mr. Levin, the director of the National Center for the Study of Privatization of Education, at Teachers College, Columbia University.
In the database that the Southwest Educational Development Laboratory in Austin, Texas, maintains on comprehensive-school-reform awards, America鈥檚 Choice is listed as the fourth-largest program in number of participating schools. Success for All, a nonprofit initiative, is the largest; followed by Lightspan, a for-profit program purchased a year ago by Plato Learning Inc.; and Accelerated Schools.
Foundation Money Dries Up
Mr. Tucker said that the NCEE was confident in changing the status of America鈥檚 Choice after research鈥攏otably an extended study published in February by the Consortium for Policy Research in Education, based at the University of Pennsylvania鈥攊ndicated 鈥渢hat we were getting the effects we had set out to get in terms of student achievement.鈥� (鈥淪tudies Find Benefits From 鈥楢merica鈥檚 Choice鈥� Design,鈥� April 21, 2004.)
But despite positive research and loyalty among schools that have tried America鈥檚 Choice, he said, there have been 鈥渃louds on the horizon of the program,鈥� especially its declining support from foundations. The new for-profit approach should address such concerns, he said.
The program started developing its model in 1989, drawing on research into educational practices in other countries whose students fared well on international comparisons of academic achievement. Over the past 15 years, the NCEE has spent more than $100 million, provided by philanthropies such the John D. and Catherine T. MacArthur Foundation as well as the federal government, to develop its curriculum and training materials.
But over the past couple of years, those sources of money have largely dried up, Mr. Tucker said.
At the same time, the NCEE was finding itself hard-pressed to ramp up high-quality services to support its network of participating schools, which had doubled annually over its first four years.
Starting about six years ago, America鈥檚 Choice slowed the growth in the number of participating schools, stopped its marketing efforts, and developed a training program to prepare for large-scale future growth, Mr. Tucker said.
Impact Uncertain
The impact of a nonprofit operation becoming a for-profit venture is uncertain, said Mr. Levin of the center for the study of privatization.
鈥淭here are a lot of nonprofits that are generating huge surpluses, that then go into salaries and employee perks,鈥� he said. 鈥淭here are slick nonprofits that don鈥檛 operate very differently than for-profits.鈥�
Even so, he and other observers agree, there is a difference in perception.
鈥淧eople in education believe if any money goes to profit, that鈥檚 being taken away from operation of the school,鈥� Mr. Levin said.
What鈥檚 more, when things go wrong, for-profit status 鈥渃an be a lightning rod鈥� for criticism, said J. Mark Jackson, a senior analyst for Eduventures, a Cambridge, Mass.-based firm that tracks the education industry.
On the other hand, experts also point out that most of the companies schools do business with are profit-making enterprises, from textbook publishers to food-service providers and bus companies.
America鈥檚 Choice officials insist that their clients will not see a downside.
鈥淥ne hundred percent of our staff has signed up to continue, and we will not be raising prices because it鈥檚 for-profit,鈥� said Judy B. Codding, who will leave her post as the vice president of the NCEE to become the new chief executive officer of America鈥檚 Choice. 鈥淲e鈥檝e talked to all our major clients thus far, and not one has had a negative reaction.鈥�
鈥極n the Right Track鈥�
The agenda for America鈥檚 Choice Inc. will still focus on the development of its curriculum and teacher professional development in student literacy, and the completion of its materials on science 鈥渇rom a standards-based point of view,鈥� as well as the work it has done for its leadership-training programs, said Ms. Codding.
Mr. Tucker said the company would be 鈥渋n a position to start unbundling components and offering them independently鈥� from the overall program. For example, last year the program started offering its advanced-literacy materials separately.
In the future, math products might also be unbundled, Mr. Tucker said. He noted that breaking up the comprehensive program into independent elements requires more extensive marketing and development.
America鈥檚 Choice will also work to formalize relationships to help states and districts design and implement improvement strategies for poorly performing schools.
Michael J. Dolan, the new board chairman for America鈥檚 Choice and one of its investors, said that before putting money into it and becoming its chairman, he visited the 127,000-student Duval County, Fla., school system and interviewed the superintendent and 15 principals whose schools used America鈥檚 Choice.
鈥淚 came away convinced that [America鈥檚 Choice] is on the right track,鈥� said Mr. Dolan, a former CEO and chairman of Young & Rubicam, a New York City-based advertising agency.
Although he expects to turn a profit, he said he told other potential investors that 鈥渋f this isn鈥檛 something you feel intellectually and morally committed to, don鈥檛 do it.鈥�
