By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
"Is that fair?" Garrett asks. "It has been extremely divisive for our district."
The fleecing, he explains, occurred since the school district surrendered the Edison schools' share of administrative funding -- but didn't cut central office staff accordingly. That means SISD essentially paid to retain duplicate managers for each Edison school. Dallas taxpayers, he warns, will also take a serious bath on this count.
"I have looked at the Dallas contract," Garrett says, "and our financial arrangements are a lot more advantageous."
In contrast, Edison defends its record and points to modestly higher scores on the TAAS at Washington.
"We saw gains in reading and math," Rivera says. "The children are happy, they are doing well, and there is a tremendously high level of parent involvement."
Rivera says Edison reimbursed the district for administration costs. And he insists Edison was forced to eat other expenses: Computers and other equipment depreciated substantially, and the town spends so little on its students (it is, after all, a small town) that Edison had to pump a great amount of cash into the system just to keep it operational.
If you listen to Rivera, Edison was the true loser in Sherman -- to the tune of $6 million.
A possible silver lining for Edison's local critics and an outcome not discussed by Dallas' school leaders is that a debt-swollen Edison may go bust in the not-too-distant future, leaving DISD in the lurch. On Wall Street, rank-and-file investors don't share the enthusiasm of Rojas and white-shoe firms for Edison Schools Inc. The company, saddled with $110 million in debt and a falling share price, is seen as a turkey by many analysts and armchair stock pickers.
"Dead money" and "the biggest joke ever" are two recent assessments of Edison stock by traders on a Yahoo! Finance message board. Even Rojas admits the company will suffer financially until it achieves an economy of scale, which is estimated at anywhere from 200 to 300 schools.
"I'm sticking with Janus Technology Funds," he jokes when asked whether he would invest in Edison.
In a recent U.S. News and World Report article, one analyst says, "If Edison's pace in signing new contracts slows, the whole thing will be dead in the water." Edison claims it has made headway toward profits by reducing its debt-per-student ratio from $3,927 in 1996 to $603 last year, and says it could earn profits now if it stopped expanding.
Nevertheless, the failure of hype to match reality is a familiar theme for Edison and its founder. Media entrepreneur Chris Whittle, creator of the controversial Channel One in-school news service, founded the company in 1991. He initially sought to build 1,000 for-profit private schools to target the middle class, announcing plans to open 200 schools within five years at an estimated cost of $2.5 billion. But the numbers didn't add up, so he redirected Edison (then called the Edison Project) toward managing public schools, scaling back his ambitions to open a mere four schools in 1995.
A former part-owner of Esquire magazine, Whittle is best known for his high-profile, glitzy attempts to launch new businesses with novel concepts, such as publishing books with ads in them and beaming medical news into doctors' offices. He's renowned for securing large sums of money from venture capitalists for his schemes, but less so for returning profits on (or, for that matter, returning) their investments.
Whittle first appeared on schools' radar when his namesake company unveiled Channel One, a business that provides schools with free satellite TV equipment in exchange for a direct link to students' tender minds. That is, schools keep the free goodies so long as students are parked in front of the TVs each morning to watch a 12-minute news program featuring two minutes of commercials.
In 1994, shaky finances forced Whittle to sell his company and Channel One, which is now owned by Primedia Inc. Both Time Inc. and Philips Electronics -- which together put $360 million into the venture -- reportedly wrote off their entire investments (although Philips cashed in by selling TVs to Edison). Seen by more than 8 million demographically desirable students in nearly 12,000 schools, Channel One continues to generate ire from educators, media critics, and religious groups who don't like captive students watching ads for candy bars and risqué teenybopper TV shows.
To win credibility for his Edison venture, Whittle recruited former Yale University president Benno C. Schmidt to lead an all-star group of educators, scholars, and business executives in formulating Edison's curriculum and design.
As with Channel One, investors lined up to pour money into the venture despite Whittle's past flameouts. Indeed, Whittle's raw promotional talent is perhaps the most potent reason for Edison's appeal to financiers. According to a recent Education Week article, he believes public education is an industry that will soon be "branded" like Coke or Pepsi and envisions schools as an area where Edison and other providers will develop the name-recognition cachet of companies such as the Gap and Wal-Mart.
"Ten years from now, when you think about who does the best schools, we want there to be only one word that comes to mind -- Edison," he said.
Actually, the K-12 management market still is a big risk.