What we said to the 12 Governor, what we said, and I think we said this the first day we came here was that we wouldn't give anything that we wouldn't sign up for. We wouldn't give a plan, a set of recommendations that we wouldn't be prepared to implement ourselves. So The answer to that is yes.
So the fact according to the State Commission Standard and Core Study, spending per pupil in Philadelphia is percent less than 21 the state average and this would reduce that still 22 further -- 23
That's not true. What it 24 would do it actually increase it. There would be 150 million new dollars coming in, you know, a 132 11/8/01 - EDUCATION - RES. 010642 little less than percent. So actually it would cut the distance almost in half between the standard of Poors numbers that I heard you guys talk about earlier. Our recommendation was that Some of that gap be closed. And We heard that from a lot of you in meetings. And you said, Hey, how can you come in here and tell us that we need to make changes and that we don't need more money? So part of what we are seeing here is our company saying to the Commonwealth, Commonwealth, there are some investments that have to be made here. Now, how that gets done is a political decision. But We did in our analysis lay that out. And that's fact.
Mr. Wayde, I'm looking at the Governor's plan. The Governor's plan has some increases in educational expenditures, some money for your management fees, some additional spending for debt service for the deficit financing fund, some money set away for a rainy day fund. And balanced against that is $170 million of additional and State and City money, hoped for $10 million a year in addition federal money and 225 million of cuts, 830 million over the five year plan, which is 12 percent of the current spending base. So That is 133 11/8/01 - EDUCATION - RES. 010642 two Governor's plan. If you come in as central system manager, is that your plan?
Well, I tell you what. When you talk as cuts as if we're going slash things, what the bulk of that is actually reprogramming. What we've done, if you dig into the plan, what we tried to propose here is that we reprogram the way spending is done. And so we talk about that in the plan. So It's not cuts. It's actually --
No, it is cuts. You can't do the math. There is an absolute proposed reduction in expenditure. If you reprogram a dollar for one use to another and if you do not cut 225 million in current spending -- now, maybe by efficiency only with no harm to the educational program, right? But if you do not reduce current expenditures 225 million, you don't achieve the balanced budget in the Governor's.
So you believe that even though -- because you're proposed increase in educational spending is not reprogramming that whole 225. It looks to me like it's about 25 percent of 134 11/8/01 - EDUCATION - RES. 010642 that. The rest is just an absolute expenditure reduction. Right.
So basically, your conclusion is we really have too many dollars here in Philadelphia and the plan we should adopt is not one where we reprogram all of that money; if we can't realize efficiencies, we should just spend less even though we already spend much less than the statewide average.
That part of your conclusion is incorrect, in my view. There's a simultaneous equation here involving three things and it's actually how we did our work. The first thing we did is we said, what are things that need to be spent in this District that currently aren't being spent to improve to education in the District? That was one bucket of work that we were assigned to do. The second piece was, what dollars are currently being spent that are not as efficiently spent as they might be? And that's the particular bucket that you're focusing on. And the third piece is, what are new 135 11/8/01 - EDUCATION - RES. 010642 revenues that is might be realized? It's the combination of those three items that actually wind up as the total. And If you look at it, the total revenues coming to the City of Philadelphia in this plan is considerably greater than it currently is. And the reason is, today, the City has spent -- not the City, but the District is spending money it doesn't have. And So we have proposed 160 million, if you take the 75, 75, 10, of new revenues to the District.
Right, absolutely. There's no question that there's proposal for additional spending. Unfortunately, a lot of it goes into things that don't seem to translate to increases in spending to improve education. The majority of the cuts are going to get used in other ways. My concern is, the time I've spent looking at the budget of the School District, I believe -- and you've heard from the interim CEO and you've heard from the CFO and you've met with the CFO. We believe there are cuts that can be made responsibly, not as deep as you're proposing, but they ought to get made. But the delima is there are, as you say, many areas in which we're absolutely not spending 136 11/8/01 - EDUCATION - RES. 010642 enough now. And a trade off of three dollars in absolute spending reductions for every one dollar in increased investment in education seems to be the Governor's plan, and I just want to understand whether all other things being equal you think that that is the plan that you would want to endorse if you were the central office manager.
Can I do one more? REPRESENTATIVE WASHINGTON: One more question.
Last one. Mr. Whittle, I'm going to paraphrase because I don't have the article 16 in front of me. But in this month's Philadelphia Magazine, you set up a little hypothetical model. You said, you know, the School District spends about 8,000 a student and I'm not sure you what did for the class size. But let's say if you had 30 kids in a class, 8,000 a kid, that's $240,000. It only cost $60,000 for the teacher. "What do they do with all the rest of that money, I just can't understand it." So did you not read the School District's financial plan and not know that 3,000 of 137 11/8/01 - EDUCATION - RES. 010642 that is for debt service and special ed and that the actual number in a classroom is 5600. And is that 5600 enough to handle the utilities for our buildings, a Principal, a nurse, a counselor, a librarian, books, custodian, and the other things that is are not in the school budget like special programs for hospital and home-bound kids, specialty teachers for music and art and the rest? You asked the question in Philadelphia Magazine, "What did they do with all that money?" Are you telling me you don't know? (Applause.)
We do know, and we know very well because we run 136 schools.
We do know. We absolutely know the Philadelphia budget and in our budget. And we know it in line item detail down to levels that I think you would be surprised. And The reason I was stating that in the magazine, and I'll state again, is there are teachers in this room, and a point we often want to make and I was making it there and I will stand by it, is that money in public education 138 11/8/01 - EDUCATION - RES. 010642 is not getting to the classroom, full stop. U.S. Department of Education 120 days ago release a report that said 40 percent of U.S. education spending is in general and administrative cost. Compare that to any private sector. You will not see that number. Our mission is to get our central cost down to seven cents on the dollar and maybe lower. And The point I was making in the Philadelphia Magazine is to just show in a very easy way to understand how significant the problem is. Was I saying only Philadelphia did that, no. That's true in New York, it's true in Washington, it's true Baltimore. But it is a problem that we all need to attack and attack vigorously. And The way to do it is to streamline non classroom costs so you get more dollars to the classroom. And If you want to see two examples that we have proposed in that regard, we've proposed $7,500 raises to 1200 teachers in the school system and 30 percent performance bonuses to principals in this system. How did we do that?
We did that by looking for 139 11/8/01 - EDUCATION - RES. 010642 places that we didn't think were as efficiently done and moving them to teachers and principals where we believe children are educated. And we'll stand by that every day.
As you know, where we are is we have your assertion, we have the request for the backup detail, we will look forward to receiving it. Until we receive it, you understand our having some reasonable skepticism because the depth of the cuts that you're proposing in a district where the average level of spending is -- where the level of spending is so much less than the average, where we see so many un-met needs. Reprogramming, great; efficiency, great; we're for that. But What we see is a net reduction in the number of dollars that is go into education. How you would propose to do that, none of us here knows yet. So you understand that we've got to suspend judgment, but we want to get on the record now the magnitude of what's being asked for, which means we have a lot of due diligence to do.
Point of order. I think we need that detail now. I want to hear it now. 140 11/8/01 - EDUCATION - RES. 010642 (Applause.)
I want to hear it now. I want to hear how they're going to do those cuts. I want to hear how they're going to spend this money more efficiently. But I want to hear it now. I don't want to hear it when the takeover is afeta compli. I don't want the people of Philadelphia to wake up one day and say, "Well this is done. It's a done deal." The data has to be submitted so that the people of Philadelphia know what the details are. (Applause.)
Can I respond? We've reviewed the data with the district line by line. The Governor and the Mayor work on a process that will allow us to review in detail some detail -- and, in fact, I think the Board is familiar with at least my eagerness to get in the trenches with staff folks and actually get the work done at the staff level. So we're not -- Edison isn't withholding anything. (Inaudible question asked.) A couple things. One is we We reviewed the line by line budgets with the district. We 141 11/8/01 - EDUCATION - RES. 010642 started that process last Thursday. We continued the day before yesterday. The Governor and Mayor work on a process whereby we will continue that review in some detail with the staff. So It's not like we've been withholding it.
You make some assertions that are almost facts in your report. And obviously, you don't have the data in order to make those assertions. REPRESENTATIVE WASHINGTON: Pedro, would you like to respond just briefly? And then on to Councilman Nutter.
I just want to clarify the record a little bit. Are you saying that the School District at this point has received the documented detail?
No, I'm saying we've given you a P and L. We not have finished the exercise. And We have, obviously, more to go.
Did Edison ever make a commitment to Mayor Street that before the report was released that he would be have an opportunity to review it?
We said to the major to the 142 11/8/01 - EDUCATION - RES. 010642 extent possible we would come in and review with the major -- let me just finish. As part of that process our client ultimately was the Administration. And It was their decision that we put our plan together, give it to them and that they present it to the major.
Thank you, Madam Chair. I just have a couple, what I'd like to refer to as some initial background questions before we get into the items of today. Mr. Whittle, actually, the first thing I had written down -- this was a while ago. I'd just like to get your thoughts about this. I was initially going to ask for you to spell the word stigmatize, but I assume that you already know how to spell that. I am intrigued, though, by your thoughts about some of the comments by the Governor that led to a little bit of a fire storm here in the City 143 11/8/01 - EDUCATION - RES. 010642 about reading levels and who can read the newspaper and who can't and those kinds of issues. I'd like to hear your response to the tone and tenor to those comments. What's your reaction to that?
I'm sorry, Mr. Wayde, with every respect to you, I actually asked Mr. Whittle the question.
I actually wasn't on the ground the day those comments were made. I think Gene was, that's actually why I was giving him the mike because he actually heard them and had something about it.
Well, I appreciate that. Do you read the newspapers here in the City.
Well I think -- this is 144 11/8/01 - EDUCATION - RES. 010642 what I think. I think the Governor was trying to convey not to students in any way are at fault -- there's not one person at this table that ever believes that a student is at fault regarding how they're achieving. The Schools are at fault, not students. And It's important that schools help them succeed. I think that's what he was trying to convey. He's saying, what they've got here is a situation where 13, percent of 11th graders can 11 read at 75 percent comprehensive levels of the 12 Philadelphia Inquirer. That's obviously something 13 to be concerned about, and I don't think it was 14 designed as a criticism towards the students.
Well, schools are, at the end of the day, an inanimate object. The building. So in your comments you said that schools failing the students.
Who exactly is failing the students? The buildings don't teach them anything.
Schools are, as John Chubb has often said, they're not islands and they are part of a school system. And Here's the way I would 145 11/8/01 - EDUCATION - RES. 010642 put the question back to you, is that we know everyone in this room knows the following facts, somewhere between 57 and 60 percent of the children in the Philadelphia public school system on the PSSA are below basic or at basic levels. And We also know --
I appreciate the statistics. I probably don't read as much as you do, but I read a fair amount. The question was, who is failing the students? I don't need the statistical data to back up or justify the argument.
I was going to answer that. If those were our schools and we have some like it, we are failing the -- we, the adults, are failing these students. Full stop, no 17 qualifications. We are failing.
Now, there were at least two meetings that I participated in. One was downstairs in 319 with a group of black elected officials, the other was in the City Council Caucus Room. I think the Caucus Room meeting may have been first, the other meeting may have been second. And I thought I distinctly remember at the time that you said that the company was not interested or ready to 146 11/8/01 - EDUCATION - RES. 010642 manage the entire school system. Now, was that not true at that time, or did you change your mind?
I think the specific thing that we said was that we were not going to turn every school into an Edison school. That's exactly what I said, and I still stand by that; that it didn't make sense to take our curriculum the way we manage our schools with this particular design and recommend that design. And I think I went on to say, and I think that was me who said that, that there are some great schools in Philadelphia and there are some middling schools and there are a whole bunch of schools at the bottom, and you've got to think about them differently. That was the context in which they was made and that was the intent of the statement.
Well, I appreciate the context. Let me understand this, then. At what point did you decide that you should run the system?
My point -- I think we said to you when we talked to you before, that the issue of whether we ran the system or not, we were always prepared to be here. I think we said that. What we did say was that we weren't prepared to take every 147 11/8/01 - EDUCATION - RES. 010642 school and turn it into an Edison school. And just to really get to the answer to your question, when we signed up for the assignment, it's a public record, it's part of the contract, that we were going to make recommendations or present options to the Governor and that the Governor would then decide and Mayor through this process whether or not we were here and what that looked like on anything we were here and what that looked like. Anything that we proposed, we had to prepare to do. So the day we signed it, we were prepared. And I think we've been stating that all along, everybody, including private meetings and in public.
That you were prepared for full operational management of the School District? You're saying that you've always said that from the start?
That certainly was not my understanding. Can you provide to the Chair a detailed budget for the report that was produced? The cost of that was $2.7 million; is that correct? Can you provide a detailed budget as to what that actually 148 11/8/01 - EDUCATION - RES. 010642 paid for, how many people worked, who those individuals were, any vendors that were paid or other expenses that show a complete matching up of the $2.7 million and where it went?
I'm happy to respond to that. That is essentially a decision the client has to make. And The client is the Governor's Office and Administration. We did prepare a budget for them. If they deem fit to release it, we certainly don't have a problem with that. But the relationship is between -- we were hired by the Governor's Office and it's really a decision that they have to make.
I appreciate that, but I guess now as a Pennsylvanian who does as an individual pay taxes in the Commonwealth as public person, are you saying that you did work for the government and you can't provide us with an explanation of how you spent our money?
Having said that, we do have budgets that is have been released. And in fact, a couple of your newspapers have already gotten copies of them from the Governor's Office. So we can certainly take that information and send it to you. 149 11/8/01 - EDUCATION - RES. 010642 It's a public record. Portions of it that they are releasing out are public record.
Just to clarify. To the extent that the Governor's Office has already released it, it's a public document and you're certainly welcome to it.
But I want to understand Mr. Wayde's response. Are you only going to give us the part that have already been released by the State or are you going to give us a complete detailed analysis of the entire $2.7 million and how all the dollars were spent?
Whatever they processed and approved, sir, they're releasing. Some of it may not have been processed. We haven't even paid for all the work yet. So It goes through an approval process. And I think you're all aware of that. That process will get started and our final bills are being submitted because the project just ended.
I mean, you know who your vendors are and -- whether people pay or not, you know who you're going to have an invoice for, right?
Now, I have been intrigued by this for some time. Why is it that you don't manage any schools in your headquarters base City of New York?
We currently have schools in New York in the following places, Buffalo, Rochester, Long Island, the Bronx, which is -- we're head quartered in Manhattan. We're moving our headquarter to Harlem. We just received zoning approval to build our first school in Manhattan from the zoning commission in New York.
Are you managing of the or have relationship with -- I don't know what the system is called. We're the School of Philadelphia. I guess It's called the School District of New York City.
Oh, no. We don't. We have a charter school through the State Board of Regions 151 11/8/01 - EDUCATION - RES. 010642 in the Bronx, as well as the others in the state we manage.
I understand. My question was about is it called the New York School system or --
Now, what is your expectation in terms of educational outcomes and do you expect to exceed the current education outcomes based on the present funding level and funding stream that the School District receives right now?
Our general expectations, which are based on our experience in public schools in urban areas all over America, is that students will make rapid progress on the State criterion reference test. And if a Norm reference test is used, then on that test as well. Our recommended goals in the report that we have submitted are that, 152 11/8/01 - EDUCATION - RES. 010642 number one, for student-- for schools, rather, that is are the lowest performing or low performing which means they have more than half of their students in the lowest category, that those students would progress at a rate that the schools would have less than half of their students in that failing category at the elementary levels within five years.
What would the per student expenditure that's been much discussed in our City for some time, what would the per student expenditure be under your plan versus what it is today? And what is it today based on your analysis of the District's finances?
Do you want the answer on the basis of the total amount being spent by the Direct or the total amount being received by the District? Because they're not the same.
The total revenue in the District today -- excuse me, this is the 02 year, is 153 11/8/01 - EDUCATION - RES. 010642 projected in the range of $9,000 per pupil, which is roughly 1.8 billion divided by roughly 200,000 students. I'm averaging this. And in the fifth year of this plan the revenues --
Yes. But by ther way, that revenue number is not that different than the current revenue number. It's roughly a 1.8 billion revenue base.
Total revenues will rise, as Mr. Mash said by about 150 million, which roughly is $700 per student additionally. And those are the 154 11/8/01 - EDUCATION - RES. 010642 State and City funds.
There's been some discussion about some of the schools or some of these partnerships, I guess they're called, will be able to retain 2 percent of their overall budget. I wasn't crystal clear where that 2 percent calculation was coming from. What is that for, where does it go, and how does it get spent.
The idea was, I think I may have eluded to it earlier, that certain of the wrap around type services that groups typically fund and do, we have in the school design that we would use and we'd recommend and that the group that would be partners in these schools would actually perform that service. So the SSM, for example, the Student Support Manager that I discussed with you earlier, rather than being directly in the school, would be someone that the -- it would be a team of them that the community groups would actually hire and manage and partner with the schools to deliver those services. So the idea that there'd be wrap around services and coordination of wrap around services through the community partners.
I appreciate your 155 11/8/01 - EDUCATION - RES. 010642 response. I have no idea what you just said, but I'll read the transcript.
Councilman Nutter, just a point of clarification on the answer you got. The answer you received to the question of what's the per pupil expenditure was $9,000, is that correct?
I thought that was the answer, is the first I've ever heard that number here in Philadelphia.
Would that be 1.8 billion divided by 200,000 students in the School District or by 215,000 students funded by the School District?
I have no idea. I just thought the $9,000 was quite intriguing.
The point, Councilman Nutter, is that it's clever math because it excludes all the charter schools being funded from the $1.8 billion.
Mr. Ramos, we weren't trying to do that. I guess asked to do some math up here quickly, we looked at the budget and said I think the per pupil -- you take 215,000 kids in the 156 11/8/01 - EDUCATION - RES. 010642 system, you divide it by the total revenue and you get to a number that's somewhere around grand a 4 kid. That's the short answer. I mean, I can pull 5 out my calculator and actually calculate it for you. 6 I don't have that in front of me. But I thought 7 what you asked total revenue of the District divided 8 by number of kids. 9
You can do it any way you want. The numbers that are generally talked about here in the City, I think, are usually in the seven-something range, so -- I mean, I was intrigued by your nine, but I figured you had a HP or something over there and you were doing better than I was.
No, these aren't our budgets, these are their numbers. And let me tell you, what you raise is a really good issue. Part of what we saw -- and think I'm going take this and try to provide context here -- is that part of the accounting here in the District math is to exclude categorical dollars and a lot of other kinds of dollars that are actually used to program what we consider to be core functions, like curriculum, professional development, training. And because 157 11/8/01 - EDUCATION - RES. 010642 they're in a different, quote unquote, category, they're not counted as part of the budget. For example, when we tried to drill into those numbers, we couldn't figure out where some things were going. So When we look at the school, we look at the entire resource base available and how it's used in the classroom and in management. That's why you got that answer from us.
Now, if this was all to work out, tell me what happens to the present 260-million-dollar deficit? Does that go away?
Yes. I think we submitted a proposal, a report to the Governor that recommended certain options. We said here's some options for actually trimming down the budget while also making investments. So Under this plan, the budget deficit will go away in part because $150 million in new resources will be coming into the District.
The answer to your question is yes. The deficit goes away over a three-year period based on deficit financing, new dollars coming in, and cost reductions.
What I would like to say is that this year's deficit, no matter who is managing 158 11/8/01 - EDUCATION - RES. 010642 the District, this year's deficit will have to go away by some form of deficit financing. I mean, reasonable people, and I think everybody would agree, including the district empowerment plan, that you've got to actually finance out. This year's deficit was by and large you can't adjust the cost structure of the District this year. It's already in place.
My last question is, there was a hearing back on September 24th about these issues convened by Councilwoman Miller Education Committee, and I took down earlier that you had some 7,000 members of that as a team. That must include all of your teachers and all that. At headquarters, I know in this document it says you have I think 342 people. Maybe it's larger by now. I don't know when this was produced. Can you tell me why no one came to that hearing?
I was actually scheduled to go to that hearing, sir, and got called to Harrisburg in connection with this project. So that's -- I reached out and informed the Councilmember that I couldn't make it and that we'd 159 11/8/01 - EDUCATION - RES. 010642 be prepared to come back in.
If the other ten people that are here with us today, none of them could come to a City Council hearing?
I was actually scheduled to go and I was planning to be here. No one else was scheduled to go. I was actually planning to be on the hearing, me. On the day before the hearing, I had called Harrisburg, and I think it was shortly after when the Governor was brought -- was bumped up to the White House and the new governor was sworn in. It was during that period, sir. So In connection with all that, I felt it was important to try to serve the client and get to Harrisburg and help sort out where things were. It was a period for of all us of great difficulty. So, yeah, I did reach out and told the Councilmember who was holding the hearing that I wouldn't be here.
I do appreciate that. And As this concept and relationship evolves, I would only ask that for the half billion dollars at a minimum that we'll be contributing to this, that going forward we would get the same level of client service since they're our children. 160 11/8/01 - EDUCATION - RES. 010642
I think that's a fair request. And the reason we're here today is exactly that. We tried to be here with as much of our senior management as possible.
Thank you. Madam Chair, you've been most kind with the time. REPRESENTATIVE WASHINGTON: It's getting ready to ring on you, so...
I know the plug was getting ready to get pulled. Thank you. REPRESENTATIVE WASHINGTON: Thank you, Councilman. Councilman Ortiz.
Thank you Madam Chair. You're listed on the stock Exchange, is that correct, Mr. Whittle?
I have here your latest filings with the SEC. That was in December of last year. 161 11/8/01 - EDUCATION - RES. 010642
I have one that's December of last year. And in here you're explaining SEC you have explanation of what additional risks that may affect your future results. And one of the categories is that you're a young company having opened your first schools in '96, it makes it difficult to evaluate your business. In essence, what you're asking the SEC is that since you're so young and can you not be evaluated, to wait for results to happen. And If you fail, then the stock goes down. But you're asking, in essence, the SEC for the parents of Philadelphia to wait for your results to happen. And we're sort of like the guinea pigs that are going to be tested in your SEC report here, because you haven't proven it. And you say here that -- it says, "We have not yet demonstrated that public schools can be profitably managed by private companies. And We're not certain when we will become profitability, if at all. Our ability to become profitability will depend upon our ability to generate and sustain higher levels of both gross, 162 11/8/01 - EDUCATION - RES. 010642 site contribution, and total revenue to allow us reduce central expenses as a percentage of total revenue. Even if we do achieve profitability, We may not sustain or increase profitability on quarterly on annual basis. Failure to become and remain profitable will adversely affect the market price of our Class A common stock and our ability to raise capital and continue operations." My problem is that if you don't achieve that, you will close up shop and leave.
You're exactly right, you're quoting ur SEC document. And if you look at Microsoft, General Motors, General Electric and every SEC filing, they are required --
I understand. But I'd like to respond please. Every SEC filing is required to show potential risk to investors. Doesn't mean we believe that those risks are going to happen.
BUT, you see, the difference, the difference with General Motors and IBM and others is that they make cars. We have 163 11/8/01 - EDUCATION - RES. 010642 children. (Applause.)
And the Excel (ph) may fail and Ford may still be in business and the Corveyer (ph) with the motor in the back may be a hazard, but we have children. It's not the same thing. It is not the same thing. I'm sorry. (Applause.)
By the way, we are all from humble beginnings in this Council. REV. FLAKE: That means we have a kindred spirit.
And I'm from the lower east side. REV. FLAKE: The area that we have succeeded clearly is in the successes of schools and in the net results. I think Chris has been very fair in stating that, one, of the 65 school that we started, we're still in relationship with 62 of them. And, two, when you look at it across the board, you have 85 percent success rate. The bottom line is that the probability of failure is greatly reduced by virtue of --
Reverend Flake, 164 11/8/01 - EDUCATION - RES. 010642 throwing out statics about 85 percent rate success, without the sustainable data and the test that we're given, because if you give a test without comparing it to the other test and an equivalent sort of, you can get the results that you may want. So I'd rather that in essence within the last few years, you have not yet proven your success rate. And in fact, in the report here, these are the risks. The thing is that you are -- when you talk about risk. You talk about risk to your investment. We talk about risk to our children. So when you're talking about risk, recording core losses at our schools if we're enable to enroll enough students, well, that's fine and good. But we have 220,000 students that we're supposed to turn over to you. And then in the next, "We're experiencing rapid growth which may strain our resources and we may not be sustainable." The thing is, that your corporation in asking the City and parents of Philadelphia without any consultation with them to, in essence, bankroll your risks. Bankroll your risks without any assurances, without anything that if those risks don't materialize and your stock goes down, you will pick up and you'll leave or you'll go into bankruptcy. 165 11/8/01 - EDUCATION - RES. 010642 That's why we need local control. (Applause.)
Excuse me, Councilman Ortiz, your time is up. COUNCILMAN ORTIZ; I just want to know how much money Mr. Whittle has made in selling stock from March to today in terms of his Class A stock and others that you exercise options that were --
It's close to $50 million in stock that you have sold of Edison.
That's incorrect, sir. I'll be happy to provide you the correct --
I got it here, it says, Class A stock sold at $23.27 a share. Proceeds, $13,961,977. Then another 15,001 shares of Class B stock sold at and the proceeds were 22 1,163,523. Is that correct or is that wrong? 23
No, I said 15, close 166 11/8/01 - EDUCATION - RES. 010642 to 15. It's my Latino accent.
I'm sorry I misheard you. Fifteen is close to that. I think it's also important to have a little context on that, which I would like to provide. Over the last eight years I took every dollar of my personal worth. I mortgaged my home and I invested in the company. Every dollar that you see in that sheet and it also is in that file, every dollar went to repay those debts, not to me but to J.P. Morgan, the bank that I borrowed the money from.
Thank you Councilman Ortiz. I just want to recognize that we've been joined by a Board member Christine James Brown. We have a lot of members of the community here and we are going to reconvene these meetings on Saturday. So If anyone from a community group or any of the groups want to sign up for Saturday, I know some people have to leave, then you can do that. And Jenelle Lemon is standing over there at the door if you want to do that. We're going to reconvene on Saturday at 10:00 a.m. 167 11/8/01 - EDUCATION - RES. 010642 What we have to do, we're going to put the timer on and we have to enforce the time limits because there are a lot of elected officials here that also have questions and comments. And editorial comments are good, but we have to try and maximize the use of this time. Wilson Goode, Jr., a member of the Education Committee is next.
Thank you, Madam Chair. I'm going to try to move as quickly as possible and limit my questions to Mr. Whittle regarding business relationships and Reverend Flake regarding charter schools. Let me start with the first question to Mr. Whittle. How did you establish a business relationship? What's the origin with the Commonwealth? When, where, how did it happen? Who called who? How did you develop the relationship to Commonwealth?
Our first relationship with the Commonwealth were probably related to charter schools in York and in Phoenixville, which we have launched over the last --
I meant related to 168 11/8/01 - EDUCATION - RES. 010642 Philadelphia.
How did you establish your business relationship related to Philadelphia?
We began our relationship with the Philadelphia School District about a year ago --
With the Commonwealth of Pennsylvania, when did you starting doing business with the Commonwealth of Pennsylvania regarding Philadelphia? Who called who, when, where? How did you establish the relationship? You're a businessman, right? At some point the relationship started when it was actually business. How did you establish the relationship?
In regard to Philadelphia in this specific situation, about early July, I think in the first ten days of July, we received a call from Secretary Zogby saying that that there was a pending crisis in Philadelphia public school system that they wanted to discuss. And we went to 169 11/8/01 - EDUCATION - RES. 010642 discuss it with them.
You received a phone call from the Secretary of Education. This was before the meeting between the Mayor and the Governor?
The reason is, I don't know which meeting you're referring to.
Was the relationship established before the memorandum of understanding? I don't know what happened between the Governor and Mayor in terms of why Edison was involved. I'm asking you from your standpoint --
I know when we had the meeting. I don't know the exact dates of the MOU.
But it was initiated by the Commonwealth of Pennsylvania, Secretary of Education.
How did you establish your relationship with one of the community cited in the report, Universal Companies? When, where, how, who called who? REV. FLAKE: That started about better than a year ago when I received a call from Kenny Gamble's office asking if his representative could come to New York and look at what we were doing as a church in community economic development, because we build homes, we build senior citizens housing. And they wanted to look at that model, having heard me speak I think in Boston, and so they wanted to come and see the model. So that's where the whole notion evolved that you cannot build a community without addressing the problems of schools and that discussion eventually brought us into a constant dialogue about how to make some things happen.
That was around when? REV. FLAKE: That was around -- seems to me that that may have been -- that was before we got into any discussions with the State. So that was probably January of last year, not this year.
Mr. Whittle, do you have any proactive relationships in terms of you 171 11/8/01 - EDUCATION - RES. 010642 initiating trying to find business? And is your business actually dealing in distressed districts? I mean, are you, quote unquote, an ambulance chaser or do you do business in non-distressed districts?
The great bulk of our business is in what I would call non-distressed districts. A growing percentage of our district is in distressed districts. Most states in th United States have passed accountability legislation of certain types. With that accountability legislation, most states have some form of takeover provisions.
With the accountability legislation comes the Edison referral?
With the accountability legislation comes the Edison referral?
I want to move to charter schools. Reverend Flake, why do people form charter schools?
In general, people have 172 11/8/01 - EDUCATION - RES. 010642 been forming charter schools because they are convinced that they need models for the new paradigms for delivery of public education to young people where they're not convinced that they're going -- that the schools within the system are going to turn around fast enough for them to be able to be assured that they're going to get the kind of quality education that they expect for their children. So in general, they see this is the most valuable alternative to still stay in the public sector while at the same time being able to assure that their child gets a good education.
And how does the Governor's plan affect charter schools in Philadelphia? SPEAKER: Can I add to the question about why charter schools since I used to have his job before I started the teachers college. I've established charter schools in Detroit and D.C.
Was that a promotion or demotion? SPEAKER: I saw it as a promotion because I wanted to make sure that we had quality teachers and excellent principals for the schools 173 11/8/01 - EDUCATION - RES. 010642 that we were operating and we needed to create our college to make that happen. When I talked to -- I've established charter schools with YMCAs. And for example, the YMCA has a service learning mission and they want to develop that service learning mission through K12 and there's another way for them to connect with the parents of children to deliver their services. I've also started a charter school in partnership with the YMCA in Atlanta, Georgia. In Washington, D.C., our partner is the oldest social service agency in the City, Friendship House. They pride themselves in being the social service agency to bring the first kindergarten program to Washington, the first montesory program. They saw Edison as a cutting edge reform. They wanted to be the organization to bring Edison to town. They run their after school programs in our schools. So They have a mission partnered with ministers because they see their mission as building great schools and they see supporting the public school system. And It's not a competition but expanding choice an options for parents and their communities.
Thank you. How does 174 11/8/01 - EDUCATION - RES. 010642 the Governor's plan effect charter's schools?
One of the assumptions is that charter schools -- a lot of charter operators would be interested in being partnership schools and partnering to manage schools through a different format. There's no contemplated legal change to charter schools in the district. And anyone who has a charter now obviously has a contract an a charter and will continue to operate and grow those chargers.
So is there any plan to convert other schools or charter schools in any massive way?
Through Edison's vision, is there a plan to take schools an convert them to charters?
In this order, 175 11/8/01 - EDUCATION - RES. 010642 next we have Representative Bishop, Meyers ,and Cohen. REPRESENTATIVE
Thank you, Madam Chair. I just want to make one comment and I want to ask just one question. Sometime ago we were concerned that there was an outburst in the audience, but I do want to say that this is the first time the public has had an opportunity to comment. Previously when the meetings were held throughout the community, they absolutely were not allowed to make comments. (Applause.) REPRESENTATIVE
This is the first time, the first time since this issue came to the table that they have had an opportunity to express their desire. So I just want you to please been patient with them if they appear to be a little hostile tonight. Secondly, I just want to ask one question, and I guess it would be Mr. Whittle. In every form of life we have someone over the top of us, someone that we have to answer to. Elected officials have to answer to their constituents, and when they don't, they're voted out of office. 176 11/8/01 - EDUCATION - RES. 010642 Reverend Floyd Flake has to answer to God first, but then if his congregation is not pleased, he's out. So I want to ask Edison, and whichever one of you think should answer, who do you answer to? You who have asked for a certain amount of schools that you will be running and then a certain amount that you will be managing, who is over you? Who do you report to? And at the end of the day, if you have not done what you said that you would do, how much time do you have and who tells you pack up and leave? (Applause.)
All very good questions, and I will try to answer them to the extent that we know that today. And the reason I make that qualification is that an arrangement between Edison and whatever body is going to be in charge of the Philadelphia School System doesn't exist. But I think I can answer some of the pieces. First of all, if you look at what the Governor has proposed, Edison would report to, be hired and fired by something called the SRC, the School Reform Commission., which as proposed by the Governor has four appointees by the Governor and one 177 11/8/01 - EDUCATION - RES. 010642 appointee by the Mayor. So we would report to that commission. They would negotiate the arrangement between us. And Included in that arrangement, I am sure there will be performance standards, and there typically are in our arrangements with public entities. The most important of those performance standards is student achievement. And most of our contracts have some provision that if student achievement does no achieve this or that level by this or that date, then we can be terminated for that reason. We view that as the most important provision. REPRESENTATIVE BISHOP have you signed that contract yet? Do you know what that time is, that time frame?
In the report that we provided, we suggested to the Governor what aggressive academic goals should be for the school system of Philadelphia. Just to put it in perspective, those goals were five to seven times the current rate of academic gain in the district that we recommended to the Governor. I am sure that we're going to see, if we're ever in negotiation 178 11/8/01 - EDUCATION - RES. 010642 with the SRC, I'm sure we're going to see something like that stuck in our contract. REPRESENTATIVE
Let's take a break for five minutes. (Brief recess.)
We are have a couple of announcements. You know this hearing is going to recess tonight and reconvene Saturday at 10:00 a.m. At this time, all the officials here at the table have agreed to hold their questions until Saturday. And Edison has agreed to also return on Saturday, maybe not in its full complement, but they will bring people here on sat. And you know, We do have senior staff at the table. So at this point, we want to ask Edison -- we want thank you for your testimony. I know that you've made a commitment to stay. Can you have a seat over there or whatever so we can start bringing some of the community people up. Thank you. Wait a minute. We have two Board members that is won't be here on Saturday that have questions, but we really want to get to the community groups. One from Board Member from Sandra 179 11/8/01 - EDUCATION - RES. 010642 Glenn and then we'll have Board Member Dorothy Rush.
Good evening. Thank you, I'm glad to now have an opportunity to meet you. I regret that we had to spend much of our valuable time this evening being introduced. You've been here three months or so, and unfortunately, prior to today, many of us had not had a chance to meet you. So I'm glad that we were able to accomplish that. I do have two questions, if I may, Madam Chairwoman. My first question goes back to your issue that you raised at the capacity. You mentioned that you operate a total now of 136 schools serving about 75,000 students. Could you give me a breakout of how many of those schools are elementary or K to 8, how many are middle, and how many are high schools?
I going to do this approximately and then we will get you the exact numbers in writing. So I'm doing this from memory, and if somebody wants to correct me, please do. Roughly, I think it's about 60 percent elementaries, 30 to 32 percent middles, and eight to ten percent highs.
It would be helpful, understanding those are rough percentages, if I 180 11/8/01 - EDUCATION - RES. 010642 could have the actually numbers of your 136 schools that fall into those categories.
We will get you that. I think the percentage I gave you is in the zone.
Understood. Am I correct in understanding that in terms of actually operating school districts, you are currently operating of 9 11 schools in Chester, is that correct? 10
We have three situations where we are operating under state arrangements, one in Baltimore, Maryland, where the state has taken control of three schools. One is a partnership between a board of education and the State Board of Michigan, which is Inkster, Michigan, which is four or five schools. And then Chester is correct, 10 of 11.