Country's largest for-profit educator stirring controversy

NORRISTOWN, Pa. -- Jordan Feltes is 3. He likes playing with plastic helicopters, singing Wheels on the Bus and listing his favorite animals in flawless Spanish.

In a neighboring room, Shannon Smith's kindergarten class is sorting colors and shapes on a computer spreadsheet and learning phonics.

Jordan and Shannon are two of the brightest students at the 110- pupil Chesterbrook Academy in suburban Philadelphia. Their progress is monitored by their parents, teachers and thousands of stockholders who have invested in Nobel Education Dynamics, the largest for- profit school operator in the country. Nobel, based in Media, Pa., runs 130 schools in 13 states, with capacity to educate about 20,000 pupils from preschool through eighth grade. Throughout the country, there are about 1,100 private, for- profit schools for that age group -- or less than 1 percent of all schools. There are about 83,000 public schools and about 27,000 private nonprofit schools. Nobel's advanced curriculum and long hours -- schools are open from 6 a.m. to 6 p.m. -- make it popular with middle-income working parents. Tuition ranges from $4,500 to $6,000 a year; and classes always have fewer than 20 students. "I never even thought about it (being for-profit) or even knew about it," said Karen Smith, whose daughter, Shannon, has attended Chesterbrook since she was 9 weeks old. "She's just getting an excellent education. She wouldn't be getting this at another preschool or at public school." Despite Smith's enthusiasm, educators say bringing capitalism to the classroom could ruin learning as we know it. "With a not-for- profit, the decisions are going to be made based on what is best for the institution and what is best for the students... (not based) on which way the financial winds are blowing," said Margaret Goldsborough, spokeswoman for the National Association of Independent Schools, which only represents nonprofit schools. Goldsborough warned that while profits are high, students will have the best teachers, most up-to-date textbooks and highest quality lessons. If stocks drop, education could be compromised, she said. "Nobody knows if they can provide a quality education," said Jack Jennings, director of the Center on National Education Policy in Washington. "Do they have to shift costs in some way? ... Maybe there's some things where you can't rely on market principles." But advocates of for-profit schools say education should run like a business. If customers -- i.e. parents -- are dissatisfied or finances run amok, the business should fold, they say. "Every aspect of education... everything the schools need to operate is done on a free-market basis except for the actual teaching of children and management of schools," said John McLaughlin, director of the Education Industry Group, which tracks 25 publicly traded education companies, only a handful of which run schools. "That's an accepted way of doing business in every other facet of our life and I don't see why it cannot play out in education." Nobel education director Barbara Presseisen said having stockholders keeps school managers accountable. "It makes you more efficient. It makes you more conscious of spending, makes you look through textbook catalogs carefully. Makes you be a wise buyer and a smart purchaser." At Nobel, lesson plans and textbooks are chosen by a six-person national advisory board -- five education experts and one member of Nobel's board of directors. The curriculum is discussed at the company's annual meeting, and stockholders are invited to open houses at Nobel schools about three times a year. "Sometimes I'll hear from individual stockholders who may ask advice or suggest computer programs to use in the curriculum," Presseisen said. Few for-profit schools consistently post a profit, said Lois Gerber, chairwoman of the 120-member National Independent Private Schools Association, which represents only for-profit schools. She estimated that on average, NIPSA schools make a 7 percent to 8 percent profit. Nobel is the only publicly traded NIPSA member. It reported net losses in 1997 of $844,577 on revenues of $81 million. The company took $2.45 million in extraordinary and restructuring charges, citing the closures of facilities in Maine and Indiana. Nobel stock dropped to $4.50 per share on the Nasdaq exchange last fall, down from more than $15 in early 1996. It has since rebounded to about $8.35 per share. An investment group that includes Michael R. Milken and Laurence J. Ellison, chief executive of Oracle, bought a 21.2 percent stake in Nobel in January -- leaving analysts optimistic about Nobel's future. "That is a very strong indication of some faith in the companies from a couple of major investment groups," McLaughlin said. "They have done very well and are strongly on their way back." Nobel's success or failure could be the beginning of a major change in the U.S. education. "It's part of this overall feeling that public institutions are not operating well enough, so you bring in market principles to have it operate better," Jennings said. "If they are successful, public schools should emulate the for- profit schools. If they are not successful, they should blow away."

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