Thomas Knudsen, the man who was temporarily put in charge of Philadelphia schools in January, was running late to last Monday's press conference.
He had been delivering the same presentation all day, and doomsday rumors had already leaked: The plan he was about to lay out would dismantle the central office and parcel out school management, at least in part, to private companies.
Knudsen, paid $150,000 to hold the newly created post of Chief Recovery Officer through June, made a point of shaking the hand of every single reporter in the room before beginning his presentation. "Philadelphia public schools is not the school district," he announced, laying out the five-year plan before the School Reform Commission (SRC). "There's a redefinition, and we'll get to that later."
He got to it, using terms like "portfolios," "modernization," "right-sizing," "entrepreneurialism" and "competition." In short, it was a plan to shutter 40 schools next year, and an additional six every year thereafter until 2017. The remaining schools would be herded into "achievement networks" of 20 to 30 schools; public and private groups would compete to manage the networks. And the central office would be reduced to a skeleton crew of about 200. (About 1,000-plus positions existed in 2010, and district HQ has already eliminated more than a third of those.) Charter schools, the plan projects, would teach an estimated 40 percent of students by 2017.
The plan is bold — after all, closing just eight schools this year prompted an uproar. It's also terrifying, says former Philadelphia School District superintendent David Hornbeck, considering the poor academic records and corruption at many charter schools. "What is being proposed, in effect, is 'charterizing' the whole district, when there is a lot of evidence that at best [charters] have no positive effect on student achievement, and there is a lot of evidence they cost more," he tells City Paper. And "charters in many instances, in Philadelphia and elsewhere, have served private interests — sometimes of public officials."
What's even more startling than the drastic overhaul proposal is who engineered it. The plan was prepared with the assistance of Boston Consulting Group, a major global-business consultancy and school "right-sizing" mastermind. Boston's previous accomplishments include recommending that New Orleans, which has decimated its teachers' union and put most schools under charter control, create the exact same species of achievement networks in 2006. Last year, Boston also recommended that Australian education leaders close schools and cut spending. Indeed, Boston recommendations seem like a forgone conclusion: Their website touts "reform" hallmarks like evaluating student achievement through standardized tests and undermining traditional teacher certification.
It's unclear what Boston Consulting Group actually did with the $1.5 million contract paid for by the William Penn Foundation, given their apparent cut-and-paste approach to tackling Philly's school problems. Indeed, a former Boston employee has publicly described the company's approach as merely "force-fit[ting] analysis to a conclusion" — in this case, the dismantling of the school system.
Another goal of Boston could be enriching its allies, or scoring them political victories. Former Boston executives and consultants now hold senior posts at charter-school networks like KIPP — which could well apply to manage a Philly achievement network — and Broad Center, an urban schools executive recruiter and trainer and a leading proponent of corporate-inspired reform.
Boston Consulting may describe itself as an innovator, with its private-sector-inspired experiments. But to longtime Philly public school watchers, this just looks like the latest attack on the city's public education. Since 2001 — when the commonwealth swooped in and took over, but did not fix, the district — Philly schools have suffered the blatant mismanagement of former Superintendent Arlene Ackerman, the corruption of charter operators, the unchecked greed of for-profit education companies and, in recent years, debilitating state budget cuts and a leadership vacuum from the district and the city. Each of these players has done damage; none has come close to addressing the district's core problems of insufficient funding and widespread poverty among students and families. If Philly's public school system does eventually crumble, all of these culprits will share a portion of the blame.
"Executive skills and experience." That was what Knudsen was supposed to bring to the table as chief recovery officer, according to SRC chairman Pedro Ramos. After all, he had turned around a financially troubled Philadelphia Gas Works. But "executive skills" might not be enough to heal the school district. Setting aside academic problems — only about 60 percent of students graduate; less than 60 percent score proficient in reading and math; and 80 percent are "economically disadvantaged," a key indicator of poor performance — the district's financial woes appear almost insurmountable. Philadelphia already raised property taxes 3.85 percent last year, to direct an estimated $53 million to city schools. Ultimately, Knudsen and his team will need to close a $218 million deficit for the coming year, part of a $1.1 billion cumulative deficit by 2017.
But even Boston's plan, to butcher and sell off the district for its parts, is predicated upon a reluctant City Council forking over $91 million in additional property-tax revenue. A separate ruling by the State Tax Equalization Board, which found the city's valuation methods to be illegal, could cost the district tens of millions more.
Mayor Michael Nutter has called on Council to approve the additional funding — and announced his support for Knudsen's plan. It is "stark but realistic," he said, suggesting that critics "grow up and deal with" it.
Philadelphia Federation of Teachers president Jerry Jordan, however, called it "a cynical, right-wing and market-driven plan to privatize public education." And New York University education historian Diane Ravitch said Knudsen's plan has no basis in research, and criticized Nutter for giving up on schools. "I think he should be advocating for public education," she told CP.
The plan cuts $156 million from personnel costs and $149 million from payments to charters. And Knudsen threatened to outsource all custodial, maintenance and transportation work to private companies unless union workers could underbid them. "There are other people out there who do these things, if not better, then at least less expensively," he said.
This seems to now be the mantra governing public education in cities like Philadelphia: Other people do these things maybe not better, but cheaper.
Last summer's $629 million shortfall, fueled by $1 billion in statewide budget cuts to education delivered by Republican legislators and Gov. Tom Corbett, led to the elimination of 3,800 teacher and staff positions, including 1,300 layoffs. Layoffs have continued this school year: About 100 nurses got pink slips, along with 90 school police officers and 43 bilingual counseling assistants. Advocates say the counselors are crucial to preventing violence at schools like South Philly High, where the district pledged big changes after attacks on Asian-American students in 2009. South Philly lost more than $1.5 million in funding this year.
Cuts have also forced districts statewide to depend evermore on property taxes, exacerbating the inequity between rich and poor municipalities.
CP asked Knudsen if the five-year plan would address the district's central problems: too few teachers, too few school police, too few extracurriculars, too few libraries.
"The things that other networks do in other parts of the country," said Knudsen, "is that these networks attract resources." It was a startling admission: Like high-end charters, Philly schools would panhandle for donations from rich people. On prodding, Knudsen conceded, philanthropy wasn't the only hope. The economy could also get better.
But by then Boston's decentralization plan will have irreparably transformed the district.
"There just isn't the political will to give the resources to people who aren't perceived as having political power," says Nijmie Dzurinko, former head of the Philadelphia Student Union (PSU). That has been true for decades. But this Sunday at Mother Bethel AME Church, a gathering of about 150 teachers, parents and community members — organized by the church-based advocacy group POWER — pledged a fight. "The mayor, the governor and the SRC are not making the right decisions for our children," Rev. Kevin Johnson of Bright Hope Baptist Church preached to the energized pews.
On Aug. 18, 2011, just four days before she would resign, Philadelphia Schools Superintendent Arlene Ackerman sauntered into an auditorium to the tune of Sade's "Is It a Crime?" and delivered a provocative defense of her controversial tenure to a group of district principals. "Is it a crime to stand up for children instead of stooping down into the political sandbox and selling our children for a politician's campaign victory?" She dared the SRC to fire her — knowing that her departure was already being arranged.
It was the capstone of a melodramatic, and traumatic, three-year tenure. CP would soon reveal that Ackerman spent taxpayer money on pro-Ackerman propaganda, including protest signs and a farewell tribute video produced by three communications staffers who collectively took home $440,000 in salaries.
Ackerman liked to pay administrators generously, but she said it paid off. That summer, Philadelphia schools celebrated their ninth straight year of test-score gains.
But the acrimony, protest and theater overshadowed a less entertaining problem. The month before, the Public School Notebook revealed that the state was investigating 29 Philadelphia schools (among 89 statewide) for cheating on standardized tests. By March 2012, the scope of the scandal had widened dramatically: Citywide, 56 schools — including one in five district schools — are under investigation, including 11 of the city's top-tier Vanguard Schools.
And there was the financial problem: District chief financial officer Michael Masch and Ackerman did not like each other, and reportedly stopped discussing budgetary matters in spring 2010. That October, Masch reported that the district faced a shortfall of more than $250 million as stimulus money ran out. Yet by January 2011, he still insisted to the SRC: "We don't have a budget crisis."
At the same time, money was flying out the door. That month, the district paid out $63 million to Morgan Stanley Capital Services, Goldman Sachs Capital Markets and Wells Fargo Bank to cancel a budgetary gamble gone horribly wrong. In 2004, at the height of the pre-recession financial deregulation adventure, the district took out something called "interest-rate swaps" on a number of bonds. The swaps were supposed to protect the district from high interest rates. But interest rates crashed, and the district lost an astonishing $71.87 million, according to the liberal Pennsylvania Budget and Policy Center.
Then came Corbett's announcement of $1 billion in education cuts. The district's shortfall grew to $629 million. Critics pilloried Ackerman for poor planning and for spending money on pet projects. Ackerman, on her way out with a $900,000 severance package, blamed Masch.
The public memory of Ackerman is defined by her authoritarianism and grandstanding. Low points include accusations launched against Asian student victims at South Philly High, retaliation against whistleblowers speaking out on improper contracting, tumult following the removal of a popular principal at West Philly High, the persecution of Audenried teacher Hope Moffett, who spoke out against charter conversions, and, of course, the propaganda machine. Ackerman's legacy is still being hashed out: the Renaissance Schools turnaround program for low-performing schools, which turned some schools over to charters, is still in effect.
But, as that drama played out, most people forgot one important thing: The state, not the city, was in charge the entire time — and it still is.
On the morning of Nov. 29, 2001, hundreds of students walked out of class and into Philadelphia streets to protest the state takeover — enacted via the General Assembly in purported response to budget woes and poor performance — and a plan to put for-profit Edison Schools Inc. in charge of the central office and 60 low-performing schools.
The takeover, originally scheduled for Nov. 30, was pushed back to Dec. 21. But the walkouts, coordinated by PSU and Youth United for Change, continued on Dec. 18, and U.S Rep. Chaka Fattah sought, and failed to get, an injunction blocking Edison contract. He alleged a conflict of interest: Former Gov. Tom Ridge had contracted Edison to study privatization, they had recommended privatization and they were now poised to take the business.
Street, too, criticized the takeover, but he soon reached a new deal with Ridge's replacement, Gov. Mark Schweiker: The city would get $75 million in aid and two appointments, instead of one, to the five-member SRC; Edison would not take over district headquarters; and the number of schools turned over to them would be reduced.
Even scaled back, it would be American public education's greatest foray into privatization, and the largest state takeover, too.
The protests against the new SRC continued into 2002, and City Council, Philadelphia Federation of Teachers, PSU and NAACP filed more lawsuits. But on April 18, a student blockade couldn't stop privatization: Edison got 20 schools, and 22 schools were handed over to other private companies.
"I'm a corporate guy, and the bottom line is that you have a firm that has systemwide experience," said then-SRC chairman James Nevels at the time. "What we wanted to do was capture that experience." That experience included Chester Upland, where Nevels had served on the state-appointed Board of Control that gave Edison control of eight of nine district schools. Four years later, Edison left Chester. After a lackluster performance, the for-profit "educational management organizations" left Philly, too.
Former Mayor Ed Rendell, then running for governor, endorsed the takeover, but told the Inquirer, "We must not lose sight of what was the real issue . . . adequate funding for all of Pennsylvania's schools."
Of course, it's been a long time since Philly schools had close to adequate funding — and for the past decade, city leaders have not fought much to rectify that. Amid the tumult of protests, Street terminated Philly's last vocal demand for more money when he withdrew a federal lawsuit contending that state underfunding to Philadelphia schools constituted race discrimination.
The lawsuit, filed under feisty Superintendent David Hornbeck, tried to accomplish in federal court what had already failed at the state level. Pennsylvania Supreme Court had in 1999 ruled against two lawsuits — one filed by the Philadelphia School District, the city, the NAACP and parents; the second filed by the Association of Rural and Small Schools — contending that Harrisburg's inequitable funding violated the state constitution's requirement that the "General Assembly ... provide for the maintenance and support of a thorough and efficient system of public education to serve the needs of the Commonwealth."
The district faced an $80 million budget shortfall at the time, exacerbated by policy changes under Ridge and Gov. Robert Casey that reduced the share of education funding accorded to poor districts. The funding gap between Philly and suburban school districts had doubled in just six years, and Philly had needs that wealthy schools did not — involving day care, security, immigrant students who do not speak English and, most importantly, students who come to school with more problems and less preparation.
"It's not like prior to that Philadelphia got its fair share," Hornbeck tells CP from Baltimore, where he now lives. "It's just that they got even more gouged."
Hornbeck was a civil rights leader for Philadelphia's children: With Rendell's backing, he refused to make further cuts and threatened to let the schools shutdown. In fact, the initial move toward state takeover, 1998's Act 46, was the response of an angry legislature to block Hornbeck from carrying out this threat. In the process, teachers lost the right to strike. After Hornbeck's June 2000 resignation, there would be no serious demand for fair funding from a city or school district leader.
In 2001, Hornbeck took his fight statewide, founding Good Schools Pennsylvania to mobilize behind Gov. Rendell's plan for increased funding. Today, school and city leadership implement Corbett's plans instead of fighting them.
"The real culprit," says Hornbeck, "has less to do with any kind of mismanagement at the school district and much more to do with the continued shortchanging of the district in financial terms by the state. The biggest indictment that can be brought against folks in the city is the lack of advocacy, aggressiveness, on behalf of the kids."
In 2002, poor students of color became the talk of Washington. President George W. Bush signed No Child Left Behind (NCLB), requiring aggressive interventions at schools where students failed to make Adequate Yearly Progress on tests.
Testifying in favor of the law was Superintendent Paul Vallas, who took over Philly schools in 2002. Vallas broke with teachers' unions and superintendents across the state, who correctly predicted that the law would become a hated one. They foresaw that teachers would give up an ever-larger part of the school day to teach to the test (or as we now see, cheat to the test), while science, arts, social studies, physical education and recess were winnowed out.
Vallas eagerly embraced the new law. He turned over three schools — Shoemaker, Pickett and Thomas — to Mastery Charter Schools, a private nonprofit, and paid millions of dollars to Kaplan for a test-prep curriculum.
In recent years, President Barack Obama has doubled down on NCLB, despite criticizing the law during his 2008 campaign. His "Race to the Top" grants condition federal funding on increasing the importance of high-stakes tests, and on the removal of constraints on charter growth.
So the state took over Philly schools, and the federal government took on a growing role in classroom management. Neither, however, would take responsibility for funding the schools. Gov. Rendell, at least, did try. In June 2006, the legislature voted to ask an important question: Just how much money did Pennsylvania schools need, and how much were they receiving? Pennsylvania, according to the "costing out" study, needed to spend $4.6 billion more on schools per year, a 26.8 percent increase. Philly, with a poor tax base and dire needs, required nearly $1 billion more each year. Armed with data, Rendell in 2008 cajoled the legislature into directing resources to under-funded districts.
"That was my line in the sand every year in the budget," Rendell tells CP. "That's why in 2008 and 2009 we had the long budget deadlocks. And I eventually won."
However, as Corbett eagerly points out, the second year's funding was backed by $654 million in temporary stimulus dollars. His cuts have, for now, reversed that progress.
"He's dealing with the effects of the recession," says Rendell. And "dealing with the fact that he took a no-tax pledge. ... He told us exactly what he's going to do and he's living up to his word. For better or worse."
The state legislature passed a bill legalizing privately managed public schools in 1997. Since then, though, charter schools have failed to live up to their utopian promise. A Stanford University study found that students at almost half of Pennsylvania's charters performed "significantly worse" than their peers at traditional schools.
Still, there are good charters. Hundreds of students enter a lottery each year for a seat at Center City's Independence Charter School, a top-tier school whose board is packed with well-connected, affluent members. This, presumably, is the sort of fundraising prowess that Knudsen hopes for.
But other charters depend on young and inexperienced teachers who are asked to work very, very hard. "The workload is really high," says one Mastery teacher, a Teach for America participant. This will not be his career. "Most of the teachers are under 35. That pace is not sustainable."
It may not be sustainable for the district either. Last month, Commonwealth Court ruled the district illegally capped enrollment at the Walter D. Palmer Learning Partners Charter School; it must pay out $1.3 million as a result. The implications could be disastrous: If the district can't negotiate charter growth, it cannot budget.
Chester upland public schools are going bankrupt. And so, this January, the school district joined civil rights groups and parents in filing a federal lawsuit against Corbett, demanding aid to schools that had been broke since Harrisburg ended 16 years of state control in 2010. Teachers pledged to work for free if necessary.
The judge forced the state to provide emergency aid. Two future trials will determine whether Corbett's cuts violated federal laws protecting special-education students, and whether the cuts were racially discriminatory, much as Philadelphia had alleged in 2001.
"Chester Upland is the canary of school districts," says Michael Churchill, a lawyer at the Public Interest Law Center representing the district. "They're just the first one to go. Most of the school districts around the state, except the rich suburban ones, are really suffering. And I don't see any solution that anyone is proposing in terms of legislative help. I don't see what the endgame is from the Corbett administration."
On the other hand, the outcome for Chester Community Charter School — which enrolls more than half the district's K-8 students — seems to be quite lucrative: $16.7 million of the charter's budget (more than 41 percent) will go to CSMI, the company that administers the school, according to the Inquirer. Where does that money go? Some point to the likes of CSMI's chief executive Vahan Gureghian — wealthy businessman, Montgomery County Republican Party powerhouse and a major Corbett donor. Last year, he spent $28.9 million on a Palm Beach oceanfront property.
CSMI's president, Jake Der Hagopian, is no better. He maintained numerous business ties to Leonardo Pelullo — described by the New Jersey State Commission of Investigation as a "key organized crime associate."
Der Hagopian, who did not respond to calls from CP, spent much of the 1980s and '90s in Miami as executive vice president of the Royale Group. Pelullo ran the firm, and was convicted of defrauding Royale and the American Savings and Loan bank of $2.2 million partly to pay off a debt to an associate of vicious Philly mob boss Nicky Scarfo.
There is more: In 1990, Pelullo and his associates were accused of stealing $1.8 million from Transcom Trucking soon after they took over. Transcom's assets were turned over to another company, PIE Nationwide, where Der Hagopian sat on the board. Der Hagopian was never indicted. But former Assistant U.S. Attorney Ronald G. Cole, who prosecuted Pelullo, says the two were close: "Pelullo ... would bring Der Hagopian to be his muscle. I don't care about his title. There wasn't really anything going on in the Royale Group."
Back at Chester Community Charter, the federal lawsuit also alleges it inflates the number of special-education students it serves to up its state funding. CSMI is scheduled to open a new charter in Camden this September.
Scandal is no stranger to Philadelphia-area charter schools: 18 have been the subject of federal investigations since 2008, according to the Inquirer. A 2010 City Controller investigation found the district's "Charter School Office is only providing minimal oversight of charter schools except during the time leading up to the charter renewal," making them "extremely vulnerable to fraud, waste and abuse."
Philadelphia charters spend hundreds of thousands of taxpayer dollars on undefined legal and accounting work, "purchases," "services" or just plain "other," according to data uncovered by Temple Law professor Susan DeJarnatt in a forthcoming article in the journal Urban Lawyer.
Hugh C. Clark, former head of Northwest Philly's New Media Charter School, last month pled guilty to stealing $522,000 in tax dollars. North Philly's Truebright Science Academy, part of a 130-school nationwide network headed by controversial Turkish imam M. Fetullah Gulen, is the subject of a federal investigation of potential forced employee kickbacks. The SRC has recommended that Truebright's charter not be renewed. And sketchy real estate practices abound: Multi-Cultural Academy, for example, paid rent to an entity controlled by founder Vuong Thuy, who was fired last year after complaints. The SRC, which also questioned whether the school was culling lower-performing students, nonetheless renewed the school's charter last Friday.
A charter can go so far as to totally collapse without prompting intervention. This February an employee of Frontier "virtual charter" school contacted Daily News reporter David Gambacorta: Teachers were working just 20 hours a week, and receiving only half pay. Many students were performing poorly or just not "attending" their online classes. A month later, the CEO laid off all the teachers. Neither the state nor the school district (which pays Frontier nearly $435,000 a year) has so far publicly intervened.
Cyber charters as a whole have been called a scam. The Stanford study found students at 100 percent of Pennsylvania's cyber charters performed significantly worse than counterparts at traditional schools. Five Pennsylvania cyber charters, according to DeJarnatt, receive $200 million in tax money each year. K12, the for-profit company that runs Agora Cyber Charter, made $31.6 million last year from state taxpayers. If this seems troubling, consider that K12's owners include billionaire Michael Milken, the convicted securities fraudster.
Corbett, a professed friend of the private sector, has deep political ties to the for-profit reform movement. Former Corbett adviser Jeanne Allen heads the Center for Education Reform and runs TAC Public Affairs, which has represented for-profit education firms like Kaplan and Charter Schools USA. The governor is now backing legislation that will dramatically decrease charter oversight, reduce local control, extend the charter period to 10 years, and grant automatic charter renewals.
As Philadelphia schools cut past the bone and spin beyond crisis, the movement to privatize them has grown fat. After 15 years of pellmell growth, 82 charter schools now educate 25 percent of district students, and will this year receive $525 million. The flight of children to charters has increased the price of educating those who remain in the district — a key reason the district is now pushing to close under-attended schools. Charters have also siphoned off many Catholic-school students, according to a Pew Foundation study, prompting a similar enrollment crisis for the Archdiocese of Philadelphia.
The Catholic Church has nonetheless eagerly joined conservatives to back school vouchers, or the use of tax dollars to fund private school tuition. The movement is a powerful one: Students First, a PAC backed by Bala Cynwyd hedge-fund managers, poured $5 million into the quixotic 2010 gubernatorial campaign of voucher proponent state Sen. Anthony Williams. Williams lost, but his candidacy prompted a political sea change when Democratic nominee Dan Onorato declared his support for vouchers. "It's no longer a partisan right-wing conversation," Williams told CP. "It's a conversation about what do you do about failing schools."
Last week, state Rep. James Roebuck, the ranking Democrat on the House Education Committee and a voucher opponent, narrowly fought off a primary challenge heavily funded by pro-voucher PAC money.
The pro-voucher funding stream appears unstoppable, with sources like the Bill and Melinda Gates Foundation, the Eli and Edythe Broad Foundation and the Walton Family Foundation. So it goes: The same political forces that have bled Philly schools for decades now decry their poor performance. The solution, of course, is the private sector.
"The leadership of Philadelphia," says Hornbeck, "ought to gather the leadership of not only of big districts but of rural areas that are also being disadvantaged by the state, and say to Harrisburg, 'We're just not going to take it anymore.' Instead, what's happening again is a tucking of tails, and saying, 'This is our fault here in Philadelphia. We're sorry, Harrisburg.'"
The impending crisis won't just affect Philadelphia and Chester. The budget crunch is statewide, where an estimated 27 percent of districts have passed extraordinary property tax increases to fund their schools. Public schools in wealthy townships will likely continue to provide a fantastic education. But the attacks on teachers' unions, the tests, the charters, the vouchers and the "right-sizing" are the endgame for politicians and businessmen that have long perpetuated a segregated, two-tier American public school system. If Knudsen's proposal goes through, the country's eighth-largest school district, in its fifth-largest city, will no longer exist in any meaningful sense. And neither will any remaining pretense that America offers everyone, regardless of race or class, an equal shot.