Kansas efficiency: Consulting firm’s record with St. Louis, New Orleans public schools raises questions
Topeka ? When Kansas lawmakers announced the hiring of the consulting firm Alvarez & Marsal to conduct an efficiency study of the state’s budget, House Speaker Ray Merrick touted the firm’s experience in actually managing government functions.
“I’m impressed that A & M employs executives who routinely step in to act as interim CFOs, comptrollers and other top leadership programs in organizations around the world,” said Merrick, R-Stilwell. “That kind of experience combined with a fresh perspective should provide us with the recommendations we need to make state government more efficient and effective.”
A & M isn’t being asked to take over direct management of any state functions in Kansas. But in St. Louis and New Orleans, where the firm did take over management of local public school systems, education advocates say they were unimpressed with — and in some cases, shocked by — the company’s performance.
And Kansas education groups say they’re skeptical that the consultants will come up with any proposals that haven’t already been considered in Kansas.
“It’s hard for us to see what that would be,” said Mark Tallman, who lobbies for the Kansas Association of School Boards. “We look at 14 academic indicators. On that scale, Kansas ranks fifth in the nation for performance, and 25th in expenditures. We think we are already a pretty efficient system.”
Last week, state lawmakers finalized a contract with A & M for nearly $2.6 million to conduct a government efficiency study for the state of Kansas.
The contract calls on A & M to conduct a “diagnostic analysis” of the current budget, make recommendations for significant cost savings and efficiency, and evaluate the state’s budget process in general based on best practices in both the public and private sectors.
The contract is not clear about how much focus the firm will put on state funding for K-12 education, which accounts for roughly half of all state spending in Kansas.
But it does say that the firm is to develop recommendations that target “areas with large and substantial expenditures of state general funds and where the State can become more efficient and thereby provide cost savings to the State’s taxpayers.”
St. Louis public schools
A & M had a similar charge in 2003 when it was hired to take over management of the troubled St. Louis public school district, which had been shedding population for the previous 40 years and was running financial deficits in the range of $60 million to $70 million a year.
New school board members were elected that year, and they turned for help to A & M, a firm that at the time had built a reputation turning around troubled private companies.
It was considered an experiment in putting the principles of private business management to work in a government setting, and one of A & M’s first acts was to install one of its own people, Bill Roberti, as superintendent.
A former CEO of Brooks Brothers, a clothing retailer, Roberti had no background in managing a school system, but he was nonetheless granted a temporary license to work as a superintendent by the Missouri Department of Elementary and Secondary Education.
“They pretty much destroyed the district academically,” said Ray Cummings, vice president of St. Louis branch of the American Federation of Teachers. “We were two points away from accreditation when they brought them in. They had no particular concern about academics. It was just about cut the budget. Cut, cut, cut.”
A & M did not respond to several requests by the Journal-World to comment about their work history. But Roberti said on the PBS NewsHour program at the time, “You couldn’t get the student achievement equation until you solved the operating of financial difficulties that this district had.”
Among the cuts enacted was the closing of 16 school buildings. A & M also outsourced the district’s custodial and food services, and it redrew bus routes and bus stops to make transportation more efficient.
Some of those decisions quickly backfired.
“They consolidated bus stops that were farther from students, so kids would have to walk across a highway construction site and past a known drug dealer’s house,” said Byron Clemens, a former teacher in the district. “Somebody who lived in the city and drove the streets like some of our administrators used to do would have known that. It’s an example of how relying on a computer and an outside consultant didn’t work.”
Peter Downs, a parent in the district who published a book about the district’s troubles at the time, accused A & M of using a flawed philosophy about public schools to begin with.
“In their final report, they projected economic and enrollment gains (in future years), based on the idea that if you become the low-cost producer, people will come to consume your product,” Downs said.
“Their background was in business enterprise, and that makes sense in business,” he said. “But in education, the main cost is teachers. So if you become a low-cost producer, the only ones who show up are the ones who can’t afford anything better.”
A & M was in charge of St. Louis schools for about a year and a half. During that time, it remained on provisional accreditation with the state, but students’ academic performance did not improve.
Between 2008 and 2012, the St. Louis district was unaccredited by the state of Missouri. It regained provisional accreditation in 2013 and remains in that state today.
New Orleans and Hurricane Katrina
Soon after leaving St. Louis, A & M was hired to turn around another troubled urban school district, this time in New Orleans, which had many of the same problems as St. Louis: high poverty rates, poor test scores and a declining population fueled by the flight of middle-class families to the suburbs.
But the district would soon experience another crisis, the likes of which no other American school district had ever seen. A & M inked its contract with the district in June 2005, just two months before Hurricane Katrina slammed into the Gulf Coast, devastating the city and its public school system.
U.S. Education Secretary Arne Duncan was famously quoted as saying Katrina was “the best thing that happened to the education system in New Orleans” because it focused the public’s attention on the need to reform and rebuild a crumbling school system.
What happened to New Orleans schools after that, however, was mainly a function of the state of Louisiana, which took over Orleans Parish and several other school systems and established what was called the Recovery School District, a system of publicly funded, privately managed charter schools.
But Alvarez & Marsal — which again brought in Bill Roberti to take charge — did play a significant role in the process.
On its own website, A & M cites the New Orleans project as a “case study” for its style of turnaround management. At the end of its contract, A & M says New Orleans Public Schools “was able to meet all of its obligations, avoid bankruptcy and return to solvency, obtaining its first clean audit in many years.”
But Shane Riddle, a lobbyist for the Louisiana Association of Educators, one of the state’s two major teachers unions, remembers A & M primarily for the way it handled laying off more than 7,000 teachers.
“They had a contract to handle that process,” Riddle said. “Some would argue that they botched it up.”
Last year, a federal appeals court ruled that the layoffs were handled improperly because many teachers were not afforded due process and were entitled to be hired back as jobs reopened.
Total damages that could be owed to those teachers, including back pay and benefits, have been estimated at about $1.5 billion.
Since Kansas lawmakers voted this spring to engage an efficiency consultant, the state’s fiscal picture has gotten worse. During the first quarter of the new fiscal year, revenues flowing into the general fund have come in $42.5 million below expectations.
But Republican Gov. Sam Brownback and House Speaker Merrick both said last week that they remain optimistic the state can avoid tax increases or midyear budget cuts to balance the budget.
“I am excited about the possibility the Alvarez & Marsal efficiency study gives the State to continue providing quality services but at a better value for taxpayers,” Merrick said in a written statement.
But Mark Desetti, who lobbies for the Kansas National Education Association, was less optimistic that A & M would find savings of that magnitude.
“I guess they’ll look at everything, not just schools, and we’ll see what kind of amazing things they’ll come up with,” Desetti said. “I don’t know what this group will find that (Legislative) Post Audit hasn’t already found, or that superintendents aren’t already doing on their own.”