The Green In The Little Red Schoolhouse

Painted in bright pastels, the new South Pointe Elementary School stands in startling contrast to the crumbling buildings and vacant lots around it. This is one of Miami Beach's poorest neighborhoods, and most of South Pointe's students are from newly arrived immigrant families. For over half, English is not their primary language. And a few exhibit the volatile personalities of children born addicted to crack. It's enough to make the most determined educator despair. But not John T. Golle.

The founder of Minneapolis' Education Alternatives Inc. is introducing into this public school an educational system developed by his public company. It's a unique, five-year experiment both for EAI and Florida's Dade County. It's also the first step toward EAI's goal: to manage public schools. If privatization works with prisons and highway systems, Golle asks, why not education? "We don't wish to compete with public schools," he says. "We want to become the public schools."

'TOOTHPASTE.' Pretty ambitious for a five-year-old company that has lost $6.6 million since its inception in 1986 and whose only experience is in running two private schools. Taking on the bureaucracy of the public system, with its unions, administrators, and other entrenched interests, is forbidding. The American Federation of Teachers doesn't object to South Pointe in particular, because EAI is using union teachers, says AFT's Bella H. Rosenberg. But the concept of a for-profit school, she worries, "makes education into a commodity like toothpaste or widgets."

Golle is unfazed: "Everyone who sells computers or pencils to the schools makes a profit," he counters. The appeal of EAI's approach persuaded David A. Bennett, former superintendent of schools for St. Paul, Minn., to join the company last spring as president. A public offering in April, at $5 per share, netted $5.5 million to pay down debt and cover operating costs. (The stock is now at 3.) And as word has spread about the Dade County contract, other school districts have opened negotiations.

What EAI is selling is an integrated system of tested educational programs and the training and support to implement them. The originator was Control Data Corp., which spent two years and $1 million devising a curriculum to operate schools. In 1986, Control Data sold its research to newly formed EAI. Golle, a Minneapolis businessman, had run his own consulting company, which had designed training programs for corporations for 20 years. He saw possibilities in adapting the research to a national network of private, for-profit schools.

Trademarking the program under the name Tesseract, EAI opened a private, 220-student elementary school in Eagan, Minn., in 1987 and another in Paradise Valley, Ariz., a year later. In the past two school years, standardized test results show the children have advanced a half grade higher than expected: A fifth grader, say, would score at the mid-sixth-grade level. But while the schools have suceeded academically, they've failed at profitability. Despite annual tuition of $5,000 to $6,000, the small enrollments haven't produced enough revenue to cover the up-front construction costs and ongoing operations.

Then, in 1989, a request by Dade County for innovative school proposals caught Golle's eye: Here was a chance for EAI to demonstrate its system, without the expense of building a new facility. At his invitation, officials from Dade County and the United Teachers of Dade visited the Minneapolis school. EAI submitted a proposal and in June, 1990, signed a contract to "consult" on South Pointe.

NO GRADES. EAI's original idea was to run the school outright. Under the current contract, however, Dade County still operates the 650-student school and contributes most of its $2.3 million budget. EAI covers the additional costs incurred to implement its methods: computers, teacher training, and the salaries of 24 student teachers from the University of Miami. These expenses, along with EAI's $1.2 million fee, will be financed through fund-raising. The goal is to raise $2.2 million from private donations over the next five years.

Essential to EAI's program is a student-teacher ratio of 15 to 1, vs. 30 to 1 in many Dade County schools. But Tesseract is more than small classes. The system emphasizes an individualized approach in which kids direct their own learning. Instead of receiving grades, students work toward the goals set in a "personal education plan" that teachers develop with each parent early in the year. South Pointe classes have no tests and few textbooks or formal lesson plans; teachers aren't lecturers, but guides. Explains third-grade teacher Beth Rosenthal: "They have to do math today, but how they do math is their choice"--anything from making applesauce to tutoring a fellow student to working on one of the many computers.

EAI now hopes to duplicate its programs in other schools. The Granite School District, outside Salt Lake City, has implemented its methods in two of its 63 elementary schools. Baltimore is considering an EAI proposal to manage two of its schools, at a fee of $5,000 per student, vs. the $4,225 the city spends now. "I'm concerned whether it would be effective," says City Schools Superintendent Walter G. Amprey. "It's definitely expensive."

SLIM MARGINS. Golle argues that it needn't be. The company can save money in a school district "by running it as a business," he says. Food services, custodial maintenance, and transportation could be contracted out, overhead and administrative costs trimmed.

Can EAI make money? Probably not in the short term. Its prospectus says the company expects continued operating losses for a period following completion of the offering. At the end of the current school year, the Minnesota private school will have lost $200,000, though EAI expects the one in Arizona to break even. And the South Pointe fund-raising drive has so far raised only $261,200 of $991,200 needed to cover expenses by June. But then, South Pointe isn't really intended to be a profit center. It's the showcase designed to lure more lucrative management contracts. Eventually, EAI projects that 60% of its operating revenues--which were $2.2 million in 1990--will come from such contracts, with the rest split evenly between consulting fees and sales of proprietary products. The margins aren't huge, Bennett concedes, but they exist.

EAI is not alone in seeing business prospects in education: Chris Whittle, the controversial founder of Whittle Communications Inc., says his company will invest $2.5 billion to build and operate 200 private schools over five years. Golle prefers a partnership approach with public schools. It can take an excruciatingly long time to convince a school district, but the rewards are bigger. At South Pointe, 9-year-old Marcus Fortson has a one-word answer when asked what makes the school so different: "Choices." And that, Golle contends, is what EAI is offering public schools.

                                Dade County  funds   EAI  funds   Total
      STAFF SALARIES             $1,285, 562         $258, 356  $1,543, 918
      FURNITURE, BOOKS,             330, 696           41, 510     372, 206
      TECHNOLOGICAL EQUIPMENT        73, 000           73, 896     146, 896
      TEACHER TRAINING                 --             315, 000     315, 000
      TOTAL                      $1,689, 258         $688, 762  $2,378, 020