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Minutes

Committee Hearing, November 21, 2001

Philadelphia City Council Committee HearingsNov 21, 2001

People mentioned

Names our system found in this transcript. Automatically extracted, so it can include anyone named in the record, not only officials or parties.

Organizations mentioned

Ms. Dungee-Glenn

And are there any other 111 11/21/01 EDUCATION COMMITTEE - RES. 010642 of your competitors that offer similar intellectual property?

Mr. Le

Absolutely not.

Dr. Stewart

There are some companies that are solely in that business. We're in the business of providing whole school models, and so in our typical relationships, that's what we offer. We're hired to provide a comprehensive educational instructional program with management systems.

Ms. Dungee-Glenn

Are you saying that you have no competitors?

Mr. Wade

No. I'm saying in that business, we don't know. The answer is, I don't know of other people who are doing this. To my knowledge, there isn't a company in the country that would have done a project like this. To our knowledge, I don't know that there's a relationship like this anywhere, like the one being proposed.

Ms. Dungee-Glenn

Okay, thank you. This will be something new. We're going into unchartered territory here. (No response.)

Ms. Dungee-Glenn

Now, let me ask you, going into your report that you submitted to us, I 112 11/21/01 EDUCATION COMMITTEE - RES. 010642 want to hit on some issues and I'd like to hear your response in terms of the fairness of that report, and it's looking at the comparison that you made between the Philadelphia School District and what you have phrased as comparable districts around the country. And most specifically, when you selected these school districts, did you make your best efforts in looking at districts that you would consider fair comparisons to the Philadelphia School District?

Mr. Wade

You know, I think what we did is, we made a tradeoff. And not to make it seem one way or the other. We had to look at districts that had -- were using SAT9. So in the universe of districts that use the SAT9, the two that were closest in size and complexity were Philly. Now, having said that, they're not the same in terms of poverty. I think we went over that last time. So Philly does have higher needs than those districts in terms of the number of students who, you know, use free and reduced, but we didn't have a -- you know, we couldn't -- you know, we didn't want to compare Philly on one test to Detroit on other tests to New York. Actually, 113 11/21/01 EDUCATION COMMITTEE - RES. 010642 to be honest, $2.7 million wouldn't pay for that analysis; you'd have to hire a bunch of sort of economists and stuff to go out and run those numbers, and we just couldn't do that in this exercise.

Ms. Dungee-Glenn

Mr. Wade, my read of the report says that you used the SAT, not the SAT9 to compare these districts.

Mr. Wade

It's the SAT, SAT9.

Mr. Le

They're the same thing.

President Ramos

Would it surprise you, Mr. Wade, if I said that the average poverty rate -- the average weighted poverty rate for all of those district, I believe, was around 35 percent; whereas, the School District's poverty rate is more than double that?

Mr. Wade

No, it wouldn't. We heard that last time we were here. It definitely wouldn't surprise me.

President Ramos

Did you have a chance to look at cost-of-living indices and make --

Mr. Wade

We heard about that last time we were here as well, so I know -- we're aware of that as well. 114 11/21/01 EDUCATION COMMITTEE - RES. 010642

Ms. Dungee-Glenn

Again, just for clarification, you do refer to it in your report as the SAT, which is a college entrance exam. Did you mean the SAT9?

Mr. Wade

Where are referring to in the report? We used the SAT9.

Ms. Dungee-Glenn

, educational program, at the bottom of the page, using SAT scores as a measure of students achievement and so on and so forth.

Mr. Wade

Yeah, the SAT9. I apologize. Yes, it is.

Ms. Dungee-Glenn

That should read SAT9?

Mr. Wade

Yeah, I believe that's correct. Stanford Achievement Test is what we were referring to, not the Scholastic Aptitude Test. REPRESENTATIVE WASHINGTON: So you're saying that in all the reports you have that down, it's an error so everybody has the same error in their reports that you've given out?

Ms. Dungee-Glenn

And if I may, Mr. Wade, I've been given further clarification -- 115 11/21/01 EDUCATION COMMITTEE - RES. 010642

Mr. Wade

No, it's not an error; they just have the same acronym.

Councilman Nutter

Well, but they mean different things. REPRESENTATIVE HORSEY: 'Cause it skews the data.

Mr. Wade

No, we didn't skew the data, sir. REPRESENTATIVE HORSEY: No, that mistake skews the data.

Mr. Wade

But it isn't a mistake. Now, if we look through the report -- I'm going to do this right now. I'm going to look through the report and find where we define that term, 'cause I'm sure my team defined the term somewhere in the report. So we'll look through the report and find where it's defined, and then we can go back and use that definition. All the acronyms that we used were defined in this report. In fact, in the back of the report in the appendices, we talk about the fact that we ran SAT9 data. There's quite a bit of data that we don't do throughout the appendices, and it's lear that it's clear that it's SAT9 scores. 116 11/21/01 EDUCATION COMMITTEE - RES. 010642

Ms. Dungee-Glenn

Mr. Wade, according to your footnote, number 11, , that the source for this is the National Center for Educational Statistics, and I'm being told that that site does not contain SAT9 scores, it does contain SAT scores. So it does bring me back to my question.

Mr. Wade

The footnotes go back to the prior sentence, ma'am.

Mr. Le

Footnote applies to spending 11 less money, not to the acronym SAT.

Ms. Dungee-Glenn

So what is your source for the academic comparisons?

Councilman Nutter

Well, wait a minute, what about 12? Footnote 12 says "SAT." If the Chair will allow, I mean, it is, I think, generally accepted out in the public that the SAT means one thing and the SAT9 means something else. It's been reported in every Philadelphia newspaper that it was SAT. Everybody knows what SAT is.

Ms. Dungee-Glenn

And the point, Mr. Wade, is to get to the issue of fairness of the comparisons that you're making between the Philadelphia School District and the three school districts you claim are comparable -- Houston 117 11/21/01 EDUCATION COMMITTEE - RES. 010642 Broward County, and Clark County. And we've already established that they have very different poverty rates. And even in your reports, you recognize that there is a correlation between academic achievement and rates of poverty within a child's home and the impact that it may have on their achievement.

Mr. Wade

I would agree.

Ms. Dungee-Glenn

And if we are comparing school districts that have at best a little better than half the poverty rate of the Philadelphia School District, do you consider that a fair comparison?

Mr. Wade

The answer is yes because that was the only -- as opposed to comparing it to somebody who took a different test -- and by the way, if look in our appendices, we're talking about SAT9 data. We're looking for the definition. In terms of the comparison, I think that versus trying to compare Philly to a district that uses a different test, that was the most fair thing that we could find given the -- unless we were just going to do it based on the population of kids and have small school districts and compare those to 118 11/21/01 EDUCATION COMMITTEE - RES. 010642 Philadelphia. I mean, so we chose similarly-sized districts who took the SAT9.

Ms. Dungee-Glenn

It seems that it would be at least fair that in your report you do indicate, though, that the district you're comparing differed from Philadelphia in some very significant ways, which is not brought out in your report. It was only brought out through questioning here, and I think it was information that had to be presented from this side of the table as opposed to something that was forthcoming from your company. And, again, the impression and the perception that it leaves, which I think is very unfair to our students, is that they are, for some reason, not measuring up, when you're really not comparing really comparable student populations. And, again, I think that's just an example of what we're saying, that something very unfair has been brought forth in the report that's been presented to us.

Mr. Le

Just two things. One is that, you know, it's clearly our report and we're 119 11/21/01 EDUCATION COMMITTEE - RES. 010642 responsible for it and we stand behind it, but these are not numbers that Edison created. These are numbers that we hired out for. Alan Krueger, who is one of the country's most well known economists and academic economists -- and actually, in all of Alan Krueger's prior writings on the relationship between money and performance, he's very clearly pro-money in (indiscernible). So these are his findings; these are not Edison's (inaudible). And these secondly, Metametrics, the other company that handled --

Mr. Wade

If I might, I think your point, I think it's a very fair point. I think you've made a very fair point that in the comparison -- the comparison may have been unfair. In the actual data runs that we did on the SAT9 data, those we think we stand by. We were trying to compare that to something and we compared it to other districts who took the SAT9 who had a similar size. And that is essentially the methodology.

Ms. Dungee-Glenn

But still, they have very different student populations.

Mr. Wade

I would agree with you. 120 11/21/01 EDUCATION COMMITTEE - RES. 010642

Mr. Masch

So now that we've laid all of that out, are you prepared to say that this may have been an inappropriate or unhelpful comparison? particularly because it follows immediately after the following sentences: "It is well established that children living in poverty are at a much greater risk for learning and behavioral problems, health problems, abuse, and neglect. In addition, living in poverty increases the chance that a child will experience difficulty in school." And then you say, "However, it is important to note that other urban school districts of similar size have historically outperformed the school district academically."

Mr. Wade

But all of that is true.

Mr. Masch

So everything there is true, but the "however" seems to suggest that notwithstanding the fact that poverty is a differential, look at these school districts, they are doing better. Do you regret having written it in this way now?

Mr. Wade

No. The only thing I regret is that we didn't footnote it. 121 11/21/01 EDUCATION COMMITTEE - RES. 010642

Mr. Masch

Do you think it's possible that people may have understood you to be saying that with comparable problems in terms of poverty and other challenges to learning, these school districts are doing better because of the immediate juxtaposition with the connection of the "however"?

Mr. Wade

I certainly would have understood them, Mr. Masch, to be saying I -- I wouldn't have perceived people to understand all of that. I guess the point is --

Mr. Masch

So why did you say "however? However, notwithstanding that all of this is true, look at these districts, they do better. Why is the "however" in there? Isn't it supposed to connect one paragraph to the other?

Mr. Wade

No, I think I addressed it earlier. I think we -- I'm telling you how we got there, I'm going to be very clear about it, 'cause I don't want to give answers and have you guys say, Well, you're just making up stuff. So --

Mr. Masch

So is it a useful comparison or isn't it?

Mr. Wade

Excuse me?

Mr. Masch

Is it a useful comparison? 122 11/21/01 EDUCATION COMMITTEE - RES. 010642

Mr. Wade

I think it is a useful comparison. I think we -- if we --

Mr. Masch

So poverty does not matter, it should not be taken into consideration.

Mr. Wade

We say that in the report that it matters.

Mr. Masch

You say that, and then you say, "However, note that these school districts do better," as if, even when you have problems in poverty, you can do better than we do.

Mr. Wade

No, Mr. Masch. Either we're acknowledging the poverty as a factor or we're not. We acknowledge --

Mr. Masch

No, I think you can acknowledge it and say that notwithstanding that problem, you can do better, and the proof is that these school districts --

Mr. Wade

Well, part of where that may be coming from is notwithstanding our population of students is what it is -- just the 64, let's not talk about the 136, so we're clear. The 74 in the report is a similar demographic base. You can do better. So that is -- so I would disagree. I 123 11/21/01 EDUCATION COMMITTEE - RES. 010642 would say to you that notwithstanding -- are you saying that notwithstanding the fact that these kids are where they are, they can't do better?

Mr. Masch

Yes, I'm saying that they can do better, but I'm also saying that I think that we need to make investments in order for them to do better, given how much of the resources of this school district are already claimed by other uses, and most of that by judicial order, by mandate, by contract, by law, which takes away a great deal of discretion. So if we want to address core education, the statement here that we can do much better and we don't need to spend more money, I do question that.

Mr. Wade

Well, we didn't say that. We actually asked the State and Commonwealth for $150 million. So we didn't say don't put any more money in --

Mr. Masch

Right and then -- (Unintelligible; parties talking over each other.)

Mr. Masch

And then you propose reductions in spending of 225. I think 225 minus 124 11/21/01 EDUCATION COMMITTEE - RES. 010642 50 gets you 175 in net cuts. Isn't that true? Some reprogramming and the rest is an absolute reduction in spending, and I think we -- we still don't know how you could do that without harming education, and we're looking forward to getting the itemization on that.

Mr. Wade

Oh, I'm looking forward to getting into that conversation as well, sir.

Ms. Dungee-Glenn

Mr. Wade, I just want to conclude on this point by saying that I do believe it was an unfair comparison because the assertion that you made is as if the a school district with similar rates of poverty can do much better than we have. And what you have shown is that you have not compared us to the school districts with similar poverty and, therefore, your conclusion is faulty and leaves a false perception. And I think that's very unfair and it's presented and attempted to be presented in an objective and fair way.

Mr. Wade

It certainly wasn't an attempt on our part to obfuscate, and I can understand how you would take away that. I mean, all I have to say is that we made 125 11/21/01 EDUCATION COMMITTEE - RES. 010642 a decision to compare you to people who were taking the same test rather than comparing you to folks who weren't. And that's the result of it. So we, you know -- I'm sorry, go ahead.

Councilman Nutter

Well, let me just add on.

Councilwoman Miller

Councilman Nutter.

Councilman Nutter

Thank you. Just to finish that thought out, then have you made a comparison between not only similarly-sized districts but districts that have similar poverty rates and done that comparison?

Mr. Wade

I'm not sure what your question is.

Councilman Nutter

You compared Philadelphia to similarly-sized districts, but Philadelphia had a significantly different poverty rate as compared to the other three districts. What I asked you was, did you compare Philadelphia to similarly-sized districts with similar poverty rates? That was the question.

Mr. Wade

Not for purposes of this report.

Councilman Nutter

Why? 126 11/21/01 EDUCATION COMMITTEE - RES. 010642

Mr. Wade

Because they don't take the same tests.

Councilman Nutter

I'm sorry?

Mr. Wade

They don't take the same tests so there's no way to compare it necessarily. In other words, if you --

Councilman Nutter

So there are no other systems that are of comparable size to Philadelphia, that also have comparable poverty rates anywhere in the United States of America that take the same test? Are you talking about the SAT9?

Councilman Nutter

Okay, is that a unique test to Philadelphia?

Mr. Wade

No, but in terms of how it's used here versus how it's used in other places, you've got to have a similar student grade level, you've got to be taking the test at the same grade level, and it's got to be used in the same way.

Councilman Nutter

Right.

Mr. Wade

And the data that's reported in those states -- for example, Texas (inaudible).

Councilman Nutter

Let's go back to 127 11/21/01 EDUCATION COMMITTEE - RES. 010642 Mr. Masch's question, then. What is the valuable of comparing Philadelphia to a similarly-sized district that happens to take the same test but has glaringly wide variance in poverty rate? What is it then that you're comparing?

Mr. Wade

Two districts of the --

Councilman Nutter

But what's the validity of the comparison if, as you point out -- in your report, you say that poverty is a criteria to be calculated in any equation that talks about educational output. You acknowledged the fact and then took it out of the equation.

Mr. Wade

Poverty's not the only driver of achievement.

Councilman Nutter

No one's ever said that.

Mr. Wade

Right, but that's --

Councilman Nutter

But if you're going to do a fair comparison -- (Indiscernible; parties talking over each other.)

Mr. Wade

We're not the one that, you know, as if we didn't include that, then it's invalid. You're saying -- 128 11/21/01 EDUCATION COMMITTEE - RES. 010642

Councilman Nutter

No, you acknowledged it; you just compared two different entities based on that issue.

Mr. Wade

Based on their size, their actual size of being urban districts who take the SAT9 and use them the same way. We took the --

Councilman Nutter

Does poverty matter or not?

Mr. Wade

We said it mattered in the report.

Councilman Nutter

Okay, thank you. Let me go on to my questions. In the course of your work either for the Commonwealth or for the contract you have or any other work that you've done, have you looked at any other school districts in Pennsylvania and their performance?

Councilman Nutter

Which ones?

Mr. Wade

We've looked at the data on the District Web site, we looked at the PSSA exams. I mean, we had the ranking of Philly as one of the (indiscernible) districts. So in that regard, we did -- we didn't examine other districts other than Chester, where we actually manage schools. 129 11/21/01 EDUCATION COMMITTEE - RES. 010642

Councilman Nutter

So, for instance, you don't necessarily know what's going on in the Lower Merion School District or Gladwyne School District or the Colonial School District or Wissahickon or Radnor, any of those places?

Mr. Wade

No, we don't.

Councilman Nutter

Okay. Do you have any sense of why those districts are such high-performing districts in Pennsylvania as compared to Philadelphia?

Mr. Wade

No. I'm not familiar with those districts, sir.

Councilman Nutter

Okay, let me ask you a couple of financial questions. What's the price of the stock today?

Mr. Wade

I don't know, I didn't watch it.

Councilman Nutter

Okay. What happens if you have a contract with the SRC and as things kind of go up and down and you experience significant problems on the NASDAQ, what happens in terms of your relationship with either the School District, the City, or the SRC?

Mr. Wade

That's a good question, 130 11/21/01 EDUCATION COMMITTEE - RES. 010642 actually. We lost half of our market cap a year ago, when the market went down. That's a really good point. We've been through a situation where we lost half of the value of the shareholders in the company, and nothing happened. Not a thing happened to our schools, we didn't pull back services or anything. We just had our stock price go down. So, I mean, at least to say that if what happened earlier this year was any experience, a lot of companies around the country lost a whole lot of value, including us, like something on the order of a billion dollars of the of the market cap, and nothing changed in our schools.

Councilman Nutter

Okay. And what, if any, impact would be on the company if, for instance, Mr. Whittle, who, at least according to the most recent schedule 14A, has a fairly significant bonus opportunity as well as a variety of stock-option possibilities, depending on the price of stock? What happens to the company if Mr. Whittle decides to cash out and do something else?

Mr. Wade

We've brought a group of 11 131 11/21/01 EDUCATION COMMITTEE - RES. 010642 people in here. I mean, Mr. Whittle, like me, is involved in new-school development. The operations of the schools are Mr. Cerf, are other players in our school. We're a very, you know, a pretty large --

Councilman Nutter

Almost all of them have the same financial package?

Mr. Wade

Not necessarily. Mr. Whittle was one of the original investors and owns a lot because he built the company and started it.

Councilman Nutter

I understand.

Mr. Wade

So we wouldn't all have the same. You know, having said that, I don't think he's anywhere near a controlling shareholder. I don't think control would change hands in the company. You know, he owns a significant stake.

Councilman Nutter

Right, I understand. Suppose it did, what would happen?

Mr. Wade

If he left? Well, I imagine we'd promote somebody else to CEO and keep moving. I imagine we would do like a lot of other companies do. What happened here -- same thing happened here. When your CEO of the School District leaves, 132 11/21/01 EDUCATION COMMITTEE - RES. 010642 you get a new one. I mean, that's something that organizations do.

Councilman Nutter

The School District's not traded on the NASDAQ; it's a public entity. What's the impact of your contract here in Philadelphia on the finances of the company?

Mr. Wade

We don't have a contract and we're not exactly sure what any contract's going to look like right now, so we don't know. I can't answer that.

Councilman Nutter

What educational outcomes are you prepared to commit to for your work here in Philadelphia over the term of your contract? What can we expect over the school year -- I guess that will be school year 2002-03 up through school year 09 and 10, I guess.

Mr. Wade

If you will look on the report, we lay out what we think are academic performance gains, and we separate them out by type of school for certain school categories. And these are based on, you know, performance and achievement gains that we typically sign up for around the country. For your lowest performing schools, we're -- meaning fewer than 75 percent of the 133 11/21/01 EDUCATION COMMITTEE - RES. 010642 students performing in the -- 75 percent of the students in the below-basic categories. So in other words, 50 percent or fewer of the students will be scoring in the below-basic category, right? The goal is to move those kids percentage 7 points; meaning over the course of five to seven 8 years, you move those kids, you double the rate of 9 achievement. 10 That's pretty significant. I mean, as a 11 school system, there's not a district -- I can tell 12 you this: There's not a district in the country 13 that's done that. 14

Councilman Nutter

So why can you do it? 15

Mr. Wade

'Cause our experience in our 16 schools -- 17

Councilman Nutter

With every respect, I 18 mean, you guys are smarter than every administrator 19 of every school district in the United States of 20 America? 21

Mr. Wade

No, we're not -- I never said 22 that, sir. 23

Councilman Nutter

I didn't say you said 24 that; I'm asking you the question. You said that 25 no one else has been able to do it, and I'm asking 134 11/21/01 EDUCATION COMMITTEE - RES. 010642 you how will you do it?

Mr. Wade

Because of our own experience -- to be clear, the schools that we let out in the report that gave to you, which is the 74 schools, we see these types of achievement gains. So we feel comfortable signing up for them in the schools that we manage because that's what we do. And that's what we expect. And our internal goals for our company are actually higher, that's what we expect in our schools.

Councilman Nutter

Right.

Mr. Wade

We do this in our schools.

Councilman Nutter

What happens if you don't meet those goals?

Mr. Wade

I think at that point, there are going to be, you know, repercussions for the company?

Councilman Nutter

Such as what?

Mr. Wade

A good example is what happened in Lancing, Michigan. You know, people may say, You guys didn't perform for a long enough period of time, so we don't want you here. That's -- but, you know, we'd say, Give us a chance to show you what we can do and, you know, give us a couple, 135 11/21/01 EDUCATION COMMITTEE - RES. 010642 three years to show you. Let's be clear. We're not saying, Give us seven years and then the schools that move zero and then on the second year, they're ging to move to the percentile. I think there's floors, so 7 every year, you ought to see a couple pf percentage 8 gains in the PSSA. I think right now in Philly, 9 it's 0.2 is the gain rate. And we're talking about 10 5 percent. 11

Councilman Nutter

All right. Do you 12 have either performance incentives or what some 13 might refer to as clawback provisions in your 14 contracts for non-performance? 15

Mr. Wade

No. We have renewal and 16 termination. I don't think we've done any -- in 17 other words, if we don't perform, the schools don't 18 take money away from the schools. What they say 19 is, if you don't perform under the contract and we 20 see adequate improvement, we will then terminate 21 your contract. 22

Councilman Nutter

Right 23

Mr. Wade

'Cause the net effect of that 24 would be really just to take money out of the 25 classroom. 136 11/21/01 EDUCATION COMMITTEE - RES. 010642

Councilman Nutter

No, I actually wasn't talking about taking money out of the classrooms; I was talking about taking money back from you

Mr. Wade

Yeah. We haven't done that, we haven't had those deals. We do have deals that say if we don't perform, then after two years, not waiting till the end, even mid-course, our contracts are -- you know, we can be terminated for the lack of progress. That's how we deal with it.

Councilman Nutter

But, I mean, you got the money, you've moved on, you've got other irons in the fire and, I mean, you just kind of keep moving, right?

Mr. Wade

But that's not a good business model for us. It's much more costly for us to get a customer and get the school off the ground --

Councilman Nutter

I understand.

Mr. Wade

We make a significant investment that we would never recoup.

Councilwoman Miller

If you don't perform during the course of your contract before two years, is payment based on performance?

Mr. Wade

No, not -- it's negotiated. So what we say is, we are paid and we agree to produce 137 11/21/01 EDUCATION COMMITTEE - RES. 010642 these results. So is payment year to year, you know, kid to kid, based on performance? No. It's not realistic. What we do is, we say, you know, Here's the aggregate achievement gains that we're going do sign up for, and then there are check points in the contract where the provider is -- in charter schools, it's easy because they bring in third parties, they have charter school boards and they assess your performance. And our contract schools are a similar type of mechanism.

Councilman Nutter

Okay. It's been reported in the press that -- and I think this was a statement by Mr. Whittle -- that if you didn't get the central office or central management or, 0I guess, direct control or the 55 people, we can go back to that example, but the Whole central office management -- I think Mr. Whittle was quoted as saying if you didn't get the central office management as a part of your engagement here in Philadelphia, there was a question, it seemed to be a serious question, as to whether or not you would want to do any business here in Philadelphia.

Councilman Nutter

Given the events of 138 11/21/01 EDUCATION COMMITTEE - RES. 010642 the last hours, how do you respond to that and why are you still engaged?

Mr. Wade

I think what Mr. Whittle was 5 conveying is the sense that, you know, if we're 6 going to be making a serious investment in 7 (inaudible) some of the worst-performing schools, 8 the District -- it's a lot easier to do that if the 9 District is on a similar tract, meaning the 10 District is improving its operational performance, 11 it's actually delivering the services at the right 12 cost, it's right-sizing itself. And we thought 13 that we could be helpful in that. 14 We would be concerned about coming into a 15 district that said a totally different agenda and 16 we were basically running 60 schools. You create a 17 situation where we might not be able to get our 18 jobs done. 19

Councilman Nutter

You might not -- 20

Mr. Wade

We might not be able to deliver 21 on the 60 schools in that kind of a situation. 22

Councilman Nutter

In that context, it 23 was also reported, I believe, in the press that as 24 a part of your relationship here, there was an anticipation that you were going to be investing 139 11/21/01 EDUCATION COMMITTEE - RES. 010642 upwards of $100 million --

Councilman Nutter

-- in the Philadelphia school system. Where does that commitment stand based on the events of the last hours? 7

Mr. Wade

That commitment still stands. 8 We would invest that money into the 60 schools, and 9 we -- 75 -- we anticipate about 75 million of it 10 going into, you know, the -- if we're the led -- 11 let's assume we're the lead provider here. We 12 would -- the lead provider would put up 75 million 13 lead provider schools and make available 25 million 14 to other groups, community groups and companies 15 that we're going to start other schools as part of 16 that arrangement. 17 In other words, you know, it's like -- 18 right now, it's like starting up charter schools. 19 People wouldn't have to cap them to get them off 20 the ground. It's our commitment -- if we were the 21 lead provider, we would provide that 100 million. 22

Councilman Nutter

Okay. Last question. 23 Who are some of the local people that you 24 contracted with for your work here in Philadelphia?

Mr. Wade

Universal Companies was a 140 11/21/01 EDUCATION COMMITTEE - RES. 010642 contractor of ours. Some of those groups had other contractors that we worked with, but Universal was one of our local partners that did some work for us early. PFM, Public Financial Management, was another company that's local that we hired to do a lot of the financial analysis. I believe there was a real estate group that we also brought in locally to help us with some of the analysis for the operations, real estate operational issues.

Councilman Nutter

These other people that you mentioned, you kind of give the indication that you didn't contract with them directly?

Mr. Wade

Yeah, we --

Councilman Nutter

How would anyone get any part of a contract if they didn't have a contract with you directly?

Mr. Wade

We've asked people to, you know, do assignments and they have their own vendors that they partner arrangements, I mean, just like we do. If we're asked to do work, we've got, you know, partners all over the place that we bring in. 141 11/21/01 EDUCATION COMMITTEE - RES. 010642

Councilman Nutter

Give me some examples.

Councilman Nutter

In this situation.

Mr. Wade

IBM, for example, would be an example for us. We do business with them all over the country. They'd come in on this and work with us and just provide people and resources.

Councilman Nutter

So excluding the outside contractors, what was the actual dollar amount paid to Edison for its work?

Mr. Wade

I don't know where we are today. I don't know how much has been paid out.

Councilman Nutter

Regardless of how it's paid out. I mean, you --

Councilman Nutter

We've got $2.7 million, you hired a bunch of contractors, the balance actually goes to you.

Mr. Wade

I would imagine less than a million dollars of the $2.7 million went to Edison. In other words, most of that is the full-time people that we brought to bear on this. We had about 30-some-odd people in different capacities working on this. And I would say -- 142 11/21/01 EDUCATION COMMITTEE - RES. 010642

Councilman Nutter

They were Edison people?

Mr. Wade

Yeah, they were Edison people.

Councilman Nutter

Who were already on the payroll?

Mr. Wade

Yeah, that were on our payroll that we pulled away from other assignments around the country and put them in here for different periods of the project. And I would bet -- and, again, the caveat is I haven't seen the final bill, so I don't know, but I know, for example -- I can add up from just having looked at our most recent bills. Of the million and a half dollars that I can stand by that's already gone out the door to other vendors in connection with this. So I'm assuming that when the final bill comes, it will probably be less than a million. And the way Edison handled this is, we brought the resources to the table. We paid our own people, and it looks like the project actually ran over, and we will just have to eat that. In other words, we may end up spending more than a million dollars on the Edison people, but we're not 143 11/21/01 EDUCATION COMMITTEE - RES. 010642 going to get any more money for that. And part of the reason why is we extend this thing out another 30 days, and they didn't increase -- you know, they didn't say, okay, Edison, we're going to, you know --

Councilman Nutter

What about 30 days?

Mr. Wade

We extended the -- our work -- a lot of our work on this was extended out more time, so we had more time in the project and we didn't get extra for it. So we incurred additional costs that never got picked up by the State for the project. A lot of our vendors bill based on their time. So --

Councilman Nutter

I understand. Now, when did you say you were going to have that detailed budget analysis?

Mr. Wade

I will call the State and have them deliver you a bill early next week, and whatever we deliver, you know, you'll get a copy of that.

Councilman Nutter

Okay. Well, you should give it to the Chair.

Councilman Nutter

Thank you. 144 11/21/01 EDUCATION COMMITTEE - RES. 010642 Thank you, Madam Chair.

Councilwoman Miller

Thank you. One last question from Representative Horsey. REPRESENTATIVE HORSEY: I'll keep it short. I remember years ago sitting there was Dr. Connie Clayton and she made presentations to City Council and she'd have five or six people with her. And just for the record, Connie Clayton, Dr. Connie Clayton, who used to be in charge of the school system, has a chair at Penn in the Department of Education named after her. And then we got Mr. Hornbeck and he'd sit there. And the difference between Mr. Hornbeck and Connie Clayton is, when Connie Clayton sat there and made the presentation to City Council, she had Ph.D.s in education. When Mr. Hornbeck sat there, he had eight or nine lawyers. So my question to you is exactly -- maybe you'll get it. My question to you is, I see you gentlemen there, I've asked the question earlier, and I got on you about it. You are after a management consulting contract; is that correct? 145 11/21/01 EDUCATION COMMITTEE - RES. 010642

Mr. Wade

That's one part of what we would do here, that's one piece of it. One piece of it is we'd have a -- I'm sorry, we'd have a consulting -- a management consulting contract at the District. And then if, you know, if we're chosen as lead provider, we'd have a management contract for schools. REPRESENTATIVE HORSEY: So you'll actually be responsible for teachers in the classroom as well as principals and schools?

Mr. Wade

Managing those schools, that is correct. And not the people at this table, but the dozens of superintendents and former public school educators that work in our school system, the Edison Schools Network. REPRESENTATIVE HORSEY: So you do have Ph.D.s who specialize in education with Edison?

Mr. Wade

We have former 20 superintendents that are associated and work for Edison, including -- REPRESENTATIVE HORSEY: That's not a fair question [sic].

Mr. Wade

I'm not sure what your -- REPRESENTATIVE HORSEY: Mr. Hornbeck was a 146 11/21/01 EDUCATION COMMITTEE - RES. 010642 school superintendent; that doesn't go to the heart of his expertise to me in education. I'm talking in terms of education degrees.

Mr. Wade

I guess I'm not trying to be flip; I just don't know what you're getting at. REPRESENTATIVE HORSEY: Well, the point being that I believe education has been highjacked away from the professionals who are teachers vis-a-vis principals, people who have gone to school, studied the art of teaching children, and have made it their life. The argument for me right now, and the reason why we're at this table, is the argument between administrators who are bureaucrats over who's going to be in charge of those professional people down here. That's the -- the comparison of Connie Clayton to Mr. Hornbeck is that Connie Clayton had Ph.D.s in education and was an expert in the area of education. David Hornbeck had lawyers with him, and they were always talking about areas of education. They were not experts.

Mr. Wade

Mm-hmm. REPRESENTATIVE HORSEY: So that the struggle that's going on now in Philadelphia is 147 11/21/01 EDUCATION COMMITTEE - RES. 010642 between the bureaucrats and which ones are going to be in charge of the experts. So my question to you again is, you guys are experts; do you have people with education degrees with Edison?

Mr. Wade

Absolutely, absolutely, yes. REPRESENTATIVE HORSEY: Thank you.

Councilwoman Miller

Thank you Representative Horsey. We want to wrap this hearing up. And is there anything that Edison would like to say in wrapping this up?

Councilwoman Miller

I have a couple questions that we'd like you to -- we're going to recess this hearing, I'm not going to adjourn it -- and ha-ha.

Mr. Wade

If I may respond, what I'd like to do is, for example, the exchange -- I just want to be candid, right, I just want to be real candid. I do want to give you straight answers, but the forum -- I mean, we're willing to -- the folks here or anybody we need to bring, let's create a forum where we can sit down and talk about this, 'cause I 148 11/21/01 EDUCATION COMMITTEE - RES. 010642 think people are making good point. We're not out to, like, misrepresent anything or we're not trying to not answer you, but this whole -- we spent 5 minutes on how many schools do we have. I mean, 6 it's, like, we can do that at this setting or we 7 can actually sit and -- I understand from the 8 School Board's standpoint, you've saying you 9 haven't had a chance to engage us on this, and some 10 of the process has broken down. 11 The process is now back on track, the 12 Mayor and Governor are working. Documents are 13 being sent over, and we are prepared to make 14 ourselves available to people to answer questions 15 that folks have. I mean, it wasn't like we're 16 saying Edison doesn't want to or not want to give 17 you the information that the folks that you 18 represent deserve. 19 I mean, I think what we should do is spend 20 some detailed time with board members individually, as a group, City Councilmembers individually, site visits, come into our corporate office, kick the tires. When we talk about a site versus a school, let us explain to you what we mean before -- you know, we're in a situation folks are firing at us, 149 11/21/01 EDUCATION COMMITTEE - RES. 010642 saying, We don't understand what you mean so we're going to assume that you meant it this way. We want to have a chance to explain, particularly to you folks, what is we do and how we do it. And we're not sitting here because we're ashamed of what we do; we feel good about it. We actually are doing some good things, and we'd like to be able to say, Here's what we've done well, here's where we've actually had some challenges. We're not perfect, and some of the things that we've done poorly we've learned from. But we do relish the opportunity to sit in small groups and in big groups and really dig into the meat of what we're talking about with respect to proposals, with respect to our assumptions, with respect to, you know, what we propose for the District. Now, having said all of that, at the end of the day, We're not going to be the decision-makers here, but we did provide at least a platform that people can disagree or agree about this, but at some point, we're going to get beyond this, and it's going to be about -- we're going to all figure out what we're talking about at the 150 11/21/01 EDUCATION COMMITTEE - RES. 010642 District and then we're going to drill into what do we do to improve the school system. And, you know, we're willing to make ourselves available for you guys to answer questions in any way, shape, or form, you know, as this process unfolds. And I expect over the next days, we're 8 going to be pretty heavily engaged with just one of 9 the groups up here, which is the Mayor and some 10 representatives of the School Board. There's going to be intense engagement around that. And so what I would say to you is that over the next 10 days or so, at least some of the folks here and many of our senior people will be in a room with District employees and we won't be able to be here, you know, for long sessions.

Councilwoman Miller

We're very happy to hear that over the next 10 days, there will be some really intensive meetings with our school board and --

Mr. Wade

Certain members, whoever the Mayor sends into the meeting.

Councilwoman Miller

Right. That will be fine. One of the things that I want to do is 151 11/21/01 EDUCATION COMMITTEE - RES. 010642 wrap this up, and we are looking forward to individual meetings or other types of forums, but in the meantime, until those things are set up, until things are much more clear from our perspective of what role you're going to play here in Philadelphia, I want to recess this hearing to somewhere around December 14th at the call of the Chair. If we don't need to do it then, then we will not. But in the meantime, we need to end this with some structure with a date in mind because there are a couple --

Mr. Masch

Could I just add one thing. I do understand that our staff at the School District and other representatives of the Mayor's Office are going to be meeting with the Edison staff. And one of the things that we're looking forward to is, you know, getting their -- getting that interaction going and the assessments of some of the analysis and really report back from our own staff, which we will then share not only with the Mayor's Office but with other elected officials and which we will share with Edison. I want to say on the record that we will share whatever analysis we get from our staff with 152 11/21/01 EDUCATION COMMITTEE - RES. 010642 Edison. We want everything to be open. We want you to see that analysis before we give it to elected officials so that we really can have a dialogue. I wish that is the way that things would have proceeded in the past. The only part of the process we can control is our side so we will make that commitment.

Councilwoman Miller

Thank you.

Mr. Wade

Thank you.

Councilwoman Miller

So we want to recess this, and what I'll do -- we did have someone here writing down questions. We do have a document that someone recorded questions from the November 8th hearing. And we also have our court stenographer, so once we get all of this together, who should I send it to?

Mr. Wade

To Dr. Stewart.