1. What two effects does the invisible hand of the market have in private sector decisions that appear to not take place in traditional educational programs??

2. What is a social cost? Name two potential social costs resulting from the management of our schools by private companies such as Alternative Public Schools

Name Class Date 1C2 Aftezhac'iv'e Fadi'ic Sahara/s: Mikiltj Schaaf Wozk Part 1 Studying the Case It may surprise you to know the cost and size of public education in our country. Would you have guessed the cost to be $270 billion a year? How about a staff of 6 million people? Yet, despite the enormity of the personnel and expenditures, the system of education in this country is not in good shape. What kinds of problems face our schools? 0 Enrollment projections through the year 2000 appear to have underestimated the stu- dent population by 4 million learners. 0 School-related costs eat up more than one-third of state and local spending. - Only 52 cents of every dollar slated for education typically reaches the classroom. - Budget crunches don't allow for new technology purchases. more classrooms or staff to address overcrowding. and maintaining programs in art, music. and sports. According to the General Accounting Office, the United States needs to spend $112 billion more to repair or upgrade our schools. And. with per-pupil expenditures up more than 25 percent in the past ten years (adjusted for inflation) to more than $5,000 per student, school districts are looking for innovative solutions to help manage education in a way that makes economic sense. Cost and inefficiency are two big. but apparently not insurmountable, problems. For a growing number of school districts across the country. the answer is private. for-profit man- agement companies such as Nashville-based Alternative Public Schools. Inc. (APS). Corporations such _ = as APS marry management expertise to economically sound educational practices and sell their ser- vices to school districts. In school districts such as Milwaukee, Houston. and Baltimore, private sector businesses are being asked to jump-start public school reform. Here's one example. In 1995, Alternative Public Schools entered into a contract with the Wilkinsburg (Pennsylvania) School Board to administer the 400 students at Turner Elementary. The first step companies such as Alternative Public Schools take is obtaining better information on how the monies are spent in the schools. Productivity and quality in the classroom cannot be improved without accurate information about the way schools are currently operated. Once the management company sees how funds are spent. it can develop and implement practices that focus funds on the classroom and on meeting the identified objectives. By paying attention to this most basic economic principle regarding informa- tion and cost, schools will learn to make more economically sound social decisions. Where Your School's Buck Really Stops Instructional Support (Library, Counseling} 7.1 'l OpIrItlons (Maintenance and Classroom Transportation] (Salaries and Material 13.3% 52.0% Principals (and Other Supervisors) 6.6% Central Administration (Main Ofce Personnel) 16.0% Source: Business Week {April 1, 1995): 6?. C h o p I: e I' 6 Making Social Decisions 7 Alternative Public Schools' educational design team consists of principals who have previously managed schools in situations similar to Turner Elementary's. The company's educational plan for Turner includes increasing parental and community involvement, creating teams of teachers that work for two years in a row with the same students. and individualizing education plans for each student. The new schedule? Students and faculty will have a 212-day school year from September through July. Before- and after-school programs will actively involve students from 7 A.M. to 6 m. The contract between APS and the school board allows the management group to hire its own teachers and staff, makes APS accountable for increases in student achievement, and gives control of the school's budget to the people making the decisions. All this will be accomplished at approxi- mately the national per-pupil expenditure. Alternative Public Schools is not the only education management company nor is it the only type of program seeking to help the United States redefine its educational programs. For the first time. private sector companies are injecting competition into the school marketplace. The thinking is, "If competition pushes other businesses to innovate and to redefine themselves so that they survive. why not in education?" And. there are more alternatives to traditional public-school education such as charter schools (in which public schools receive state funding, attract their own candidates for admissions, and operate independently), vouchers (which allow students to spend the equivalent of their per-pupil expenditure on the private or public school of their choice). and school-business part- nerships (in which students graduate with better skills and a job). The result of all these options is that schools are changing how they operate to become more attractive to their customers. When schools compete with one another. they look for ways to bring down their overhead and operating costs, focusing more of their funds on their customersthe students themselves. The obvious question is, How efficient and successful will these management-company ventures be after the initial takeover? Early reports show that some companies are profitable. if management firms such as Alternative Public Schools are successful, we'll likely see more companies entering the market. Part 2 Analyzing the Economics Behind Alternative Pubiic Schools Directions: Answer the foliowing questions. Use a separate sheet of paper, if necessary. Then, as a class, discuss your answers. 1. What two effects does the "invisible hand" of the market have in private sector deci sions that appear not to take place in traditional educational programs? 2. What is a social cost? Name two potential social costs resulting from the management of our schools by private companies such as Alternative Public Schools. 3. What suggestions can you offer to get public education back on track during difficult economic times such as these? .- 8 Casebook Chapter 0 "m