But the Pembroke Pines Charter School isn't like most of Broward County's other elementary schools. The school's 20 classrooms are smaller, holding no more than 25 students. And they're heavily wired, with six computers in each room. In addition, to save money on staff and operations costs, the school was built with no large cafeteria and kitchen facility; a private contractor will deliver individually prepared lunches each day to a multi-purpose room and "warming" kitchen. Also absent is a large central library; instead, there's a small media room with computers and Internet access between classrooms.
Those design features aren't the only differences. From architecture to curriculum to hiring teachers to administration, the $5-million school (including a satellite facility east of the main campus) bears the stamp of Haskell Educational Services, the for-profit company that Pembroke Pines hired when it decided to found a charter school to help ease school overcrowding. "Our vision is to build a school that's not a Cadillac, but a Chevrolet," says Octavio
J. Visiedo, former superintendent of Miami-Dade Public Schools and now president of Haskell Educational. "It's adequate, but well-built, with a heavy technology influence."
Visiedo's company, based in Jacksonville, is at the forefront of a raft of firms, some from Florida, some from outside the state, that are trying to compete with public school district bureaucracies for the tax dollars that go to educate the state's children. The companies believe they can provide education better and more efficiently than school districts now deliver it - with room left over for profit. The finances of the Pembroke Pines school show that business success will be far from automatic. But it's very clear that education is about to join other traditional public sector services like utilities and corrections in experiencing, to some degree, the impact of marketplace competition.
The opening into the education market for Haskell Educational and its competitors comes via charter school legislation enacted by the state Legislature in 1996. The law permits local school districts to allow private groups to run schools under a "charter" that spells out the school's goals and educational strategy. While they're privately operated, charter schools are publicly funded: The district passes along a per-student financial allotment that the charter school group administers.
Typically, a group of parents and teachers founds a charter school to address a perceived need - at-risk children in grades K-4, for example, or overcrowding, as in Pembroke Pines. The schools tend to feature smaller classes and a back-to-the-basics approach stressing reading, writing and arithmetic. Children in most charter schools wear uniforms; parents sign an agreement to volunteer at the school.
Momentum behind the charter school approach has built quickly. Five charter schools opened in Florida in 1996. Last year, another 28 charter schools opened. This school year, a total of 72 charter schools are in session [see "Charter Schools in Florida," page 50]; many, such as Pembroke Pines, report more applicants than spaces. So far, most have been smaller schools, with enrollment of less than 100 students, that operate out of rented space in strip shopping centers. If the charter school movement gains steam, however, more charter schools are likely to be freestanding, newly built facilities. And charter groups and school districts will increasingly turn to companies like Haskell's to construct and operate them.
Further fueling the charter school momentum is a new state law, the only one in the country, that allows a company to open a publicly funded charter school at its workplace. The law also allows the company to limit enrollment to the children of their employees. Already, at least one large company, Miami-based Ryder System, has announced it will apply for a charter school. Ryder plans to build the school near its Miami headquarters as part of a joint venture with a for-profit school operator. [See "An Emerging Market," page 47.]
The potential for growth is strong enough to excite both entrepreneurs and Wall Street. Florida "is a hot, hot market," says Phil Geiger, president of Tesseract Group, a Minneapolis-based company that operates 12 charter schools in Arizona and is eyeing the Sunshine State. "I think you'll see us make a deal in Florida this year." Adds Jeffrey Hasse, a stock analyst who follows the education industry for Miami-based Catalyst Securities: "Everybody knows there will be successes in for-profit education. But nobody knows who it will be."
Strategy
Companies such as Tesseract and Haskell Educational take the classic approach to privatizing a traditional public sector service: They try to wring out inefficiencies inherent in the public sector, make a profit, and still deliver a quality service. Indeed, Haskell Educational completed Pembroke Pines Charter School in a breakneck seven months, in time for the 1998-99 school year. After more than 12 months under construction, two Broward County public elementary schools still weren't open when the school year began Aug. 31. Haskell Educational also did it cheaper: The cost of building the 52,000-square-foot Pembroke Pines Charter School and outfitting it with everything from desks, computers, textbooks and water fountains breaks down to about $8,600 for each of the school's 750 students. By comparison, the Broward County Public School district spends about $13,000 per student to build and outfit a comparably equipped school.
In addition to the profit Haskell Educational earned from designing and building the school, the company got a $185,000 fee for helping the city prepare its charter school proposal and for developing the school's curriculum. Haskell Educational will also receive $170,000 a year for providing educational support services to Pembroke Pines.
The two men who have charted Haskell Educational's approach in the school-for-profit market are an unlikely pair: Visiedo, 47, is an energetic Cuban-American who worked his way up from being a school-bus aide to head the Miami-Dade school system, the nation's fourth largest, by the age of 39. Preston Haskell is a lanky, Princeton-educated Alabaman who collects contemporary art and has built The Haskell Co., the educational firm's parent company, into Florida's largest contractor, with annual revenues of $400 million. Haskell's firm is a "design-build'' company; he maintains a staff of 125 architects and engineers who design most of the warehouses, industrial complexes, office buildings and schools that The Haskell Co. constructs. By controlling the entire building process, Haskell executives say they can complete projects faster and cheaper. Several years ago, for example, The Haskell Co. designed and built a $4 million, 400-bed minimum security jail in Jacksonville in just four months.
A businessman with a keen intellect and a Harvard MBA, Haskell studies demographic trends and isn't afraid to take a chance on new ventures. (In addition to Haskell Educational Services, the parent company also has a division that's developing and managing retirement communities in California, Virginia, Washington, D.C., and Jacksonville.) He had followed early efforts to inject the private sector into public education, including Tennessee media entrepreneur Chris Whittle's Edison Project, an ambitious, but yet unrealized, venture to operate a chain of high-quality public schools. And, like many other Florida businessmen, Haskell took notice when the state enacted its charter school legislation in 1996.
So when Visiedo came calling in late 1996 about forming a venture to build a charter school for the city of Pembroke Pines, Haskell was ready to talk. The combination made sense to both men. Haskell had the construction expertise and financial muscle. Visiedo and his colleague, Alan Olkes, who served as Visiedo's chief of staff at Dade County Schools, brought years of experience in public school administration and a solid reputation within Florida's education circles. Perhaps most important, they all believed they could make money. "I knew charter schools could be run more efficiently than public schools," says Visiedo. Adds Haskell, who now calls Visiedo "O.V.": "We see a huge demand for educational services."
The market
Haskell and Visiedo expect the Pembroke Pines Charter School to be just the first of many charter school deals for Haskell Educational. Pembroke Pines already has commissioned a charter middle school that Haskell is building, and the city is discussing whether to build a charter high school. Other Florida cities considering charter schools include Coral Springs and Davie in Broward County, Lake Park in Palm Beach County and North Miami in Dade County. Haskell executives say they'll bid on most of the contracts.
Haskell Educational also expects additional business as big employers such as Ryder take advantage of the 1998 revision in the charter school law that lets them operate charter schools for the children of their employees. Ryder is applying to the Miami-Dade Public Schools to open a charter elementary school next year. If approved, the Ryder school will be Florida's first charter school in the workplace. Located next to Ryder's Miami headquarters where 1,500 people work, the charter school will enroll 300 in grades K-3 in the first year, adding another 200 students in grades 4-5 the next year.
The law also allows clusters of employers, in a business park for example, to operate charter schools exclusively for their employees' children. State education officials think interest in worksite charter schools is so keen that they organized a charter school seminar this month for 10 of Florida's biggest employers, including NationsBank, USAA and Publix Super Markets.
Charter school proponents also expect at least some of Florida's 15 "satellite" public elementary schools to convert to charter schools. Satellite school facilities are located on property owned by private companies, but are operated by local school districts. As examples, there are satellite elementary schools at NationsBank's suburban business park in Jacksonville and at American Bankers Insurance Group of Florida in Miami. "Where people work in corporate America is more racially and economically diverse than where we live or can afford to live," says Tracey Bailey, who supervises charter schools for the Department of Education. Bailey, a past winner of the prestigious national teacher-of-the-year award, says he expects corporate involvement in charter schools to accelerate in the coming year.
Charter school operators expect yet another big market for their services from developers of residential communities. Homebuilders, they believe, will see charter schools as anchors for their communities; developers may try to use them to reduce impact fees and meet concurrency regulations that require new schools to match population growth. The St. Joe Co.'s Arvida recently hired John Murphy, former superintendent of public schools in Charlotte, N.C., to design schools for the company's residential communities. And in south Florida, homebuilder Fernando Zulueta organized Somerset Neighborhood School for his 2,000-home Somerset community in Miramar last year. The school had 50 students last year and anticipates 100 this year.
No easy money
Yet despite the momentum behind charter schools, profits won't be automatic for the private operators. For one thing, Haskell Educational and the other companies have little control over per-student revenue, which the state establishes. In Broward County, for example, elementary schools receive about $3,400 a year from the state for each child. (Schools get slightly more money to educate children with special needs such as learning disabilities.)
In addition, charter schools don't even get the full per-student amount: Local school districts take 5% of the per-student allotment off the top before passing the money along to the charter school; among other things, the money compensates the district for administering specialized tests. And some charter school officials say the county school boards can be very slow at passing that money along. "Last year we got no cooperation from Broward County," says Maggie Fresen, administrator of the Somerset Neighborhood School. "Sometimes checks came in three months late." Broward County school officials did not return repeated calls for comment, but Fresen says the district has added personnel to its charter school department, and she says she's hopeful things will improve this year.
The nature of the revenue stream makes operating efficiencies a paramount concern. Smaller charter elementary schools often go without a principal, choosing to assign some of the administrative chores to a lead teacher. Most eschew guidance counselors. To maintain its limit of 12 students to a class, Seaside Charter School in Walton County pinches pennies, even going so far as to forage for free furniture and computers in a state government surplus warehouse in Tallahassee. "There's not a lot of fat here," says Billy Buzzett, a Walton County attorney and president of Seaside Charter School. "We're down to muscle."
Seaside and other charters also rely on donations. Liberty City Charter School in Miami, which was organized by Jeb Bush and the Miami Urban League, has received financial aid from the Foundation for Florida's Future, a non-profit research and public policy organization that Bush founded, and also from the Urban League.
Shortfall?
The financial particulars of Pembroke Pines Charter School show just how tricky the business of for-profit education will be, and how it depends on special considerations in the law. The city estimates that it will receive about $2.7 million for its 750 students; that figure includes additional allocations for special-needs students. As they spend that money, city officials and Haskell Educational executives will be able to hold down costs in a variety of ways. Teacher salaries will be lower than at most Broward County public schools because Pembroke Pines has hired, on average, teachers with fewer years of experience. The charter school also will benefit from being able to pay less in retirement costs. County schools must pay 16.5% of a teacher's salary into Florida's public pension fund. But the charter school legislation allows charter schools to strike their own deals with teachers. Pembroke Pines, for example, pays about 5% of its teachers' salaries into a 401(k) plan.
Visiedo and Olkes, whose low-key demeanor complements Visiedo's lively salesmanship, also don't have to play by pubic sector rules governing procurement of supplies and equipment. When buying Dell computers for the classrooms, the pair could haggle aggressively with the computer maker. "We told them this is the start of an industry and don't treat us like a one-time buyer," Visiedo says.
Still, even after all of the squeezing, revenues from the state fall $400,000 short of covering all the school's expenses, which include everything from teacher salaries, utilities and insurance to Haskell's fee and yearly debt payments. The city, which borrowed the money from NationsBank at 4.63% interest to build the new school, says it will be able to make up the difference with revenues collected from before- and after-school care and summer programs at the school.
Some Pembroke Pines residents aren't as confident, however. Phil McConaghey, an electrical engineer and an active member of the community, questions the wisdom of building a new schoolhouse and has doubts about whether the extracurricular operations will generate enough revenue to cover the debt. "How in the world are they going to pay back the principal and interest?" he asks. "There's a real question that unless someone comes along with contributions, they'll have to use tax money."
Pembroke Pines Mayor Alex Fekete promises that the city will not use municipal or property tax dollars to make up any financial shortfall. "We know we're under the microscope," he says. "We're being extremely careful. We want to be a model alternative to public education."
Pembroke Pines and Florida's other charter schools may get some additional financial help from another recent change in the law. In 1997, the Legislature set aside $200 million to cover charter school facility costs. The money, based on enrollment, is part of a larger funding effort called the School Infrastructure Thrift Fund that will pay for new school buildings. The money goes to school districts, which can elect to pass on all or some of the money to charter schools; most districts indicate they'll pass along anywhere from 40% to 60% of the money.
Not all for-private education management companies are eager to rush into Florida's charter school market. Glenn Schenenga, vice president of private education at Aramark Educational Services, which operates 28 private elementary schools around the nation, says his company is closely following the emergence of charter schools, but isn't ready to enter the market just yet. His main concern: politics. "I'm worried about where charter school will be in two years if the political climate changes." Elsewhere, J.C. Huizenga, a Grand Rapids, Mich., businessman who is Florida entrepreneur Wayne Huizenga's cousin and whose company manages 14 charter schools in Michigan, is looking to expand to North Carolina and Texas next year, but not Florida. That's because Florida's charter school legislation gives the local district the right to approve or reject new charter schools. "It's like having McDonald's approve charters to Burger King," Huizenga says.
Learning
Questions about profits aside, what about the children's education? Can for-profit companies, using the same per-student allocation now going to public schools, really deliver a better education? Naturally, charter school proponents say the answer is an unequivocal yes. Smaller classes, motivated teachers attracted by smaller classes and parental involvement are the tools to better learning, they say. In addition, charter schools aren't bound by the same collective bargaining rules that govern most school districts and can more readily fire unproductive teachers.
So far, evidence to either support or refute the claims of charter school proponents is scanty. Public accountability test reports from charter schools, as well as regular public schools, won't be available until Nov. 15. There is some indication that students at charter schools serving regular enrollment students are at least holding their own (About half of the 30 charter schools in operation last year concentrated on at-risk students; the balance served regular enrollment.) Last year, fourth graders and eighth graders attending regular-enrollment charter schools scored slightly higher than their public school counterparts on Florida Writes, the state's comprehensive reading and writing test, according to the Florida Department of Education. Evidence of broad success, however, is "anecdotal at this point,'' says Michael Strader, executive director of the Center for Education Entrepreneurs at the James Madison Institute in Tallahassee, a conservative non-profit center that was formed earlier this year to assist with the development of charter schools.
And not all of Florida's charter schools have performed to plan. Local school board officials have expressed concerns about the quality of the facility used by homebuilder Fernando Zulueta's Somerset Neighborhood School. And the Collier County School Board shut down Odyssey Middle School in Naples after one year because student test results fell far short of the targeted levels promised by the school's organizers. [See "Charter Casualty," page 49.] Odyssey's failure, charter school proponents answer, proves that there's accountability: Charter schools that can't live up to their contracts with local school districts won't last long, they say.
Other proponents say they have never pretended that charter schools are the ultimate solution to problems with public education, but could serve rather as a catalyst for broader reform. "The system needs to be shaken up," says Carolyn Herrington, associate professor of educational policy studies at the Learning Institute at Florida State University. "Charter schools have a role. They can provide a set of models. But they are only one tool in the box to promote change."
The teachers unions are taking a wait-and-see attitude toward charter schools. For example, the Florida Education Association (FEA), which represents 70,000 teachers and staffers in the state and is affiliated with the American Federation of Teachers, wants to see independent researchers compile several years' data on charter schools before passing any judgment. "The jury is still way out on this," says FEA spokesperson Gary Landry. Still, teachers unions officials say they are not blind to the growing appeal of charter schools. In fact, the National Education Association (NEA) has affiliated itself with five charter schools to learn more about them. "We're in the business to find new ways to govern schools," says Robert McClure, director of NEA's charter school initiative. "I think we have things we can learn."
Haskell says he realizes that the Broward County School Board will be watching closely the financial and educational performance of his charter schools in Pembroke Pines. The scrutiny doesn't phase him, he says. "The private sector can generally do anything better, faster and cheaper than the public sector. We've privatized corrections and water and sewer. Why not public education?"