Well Past Halfway ; column re $17 million contract for turnaround consultants Alvarez and Marsal
Fascinating column about $17 million contract DOE has given to Alvarez& Marsal – corporate turnaround specialists, who slashed budgets and laid off teachers in St. Louis schools, while increasing pay to managers.
July 21, 2006 Edition > Section: Opinion
Well Past Halfway
By ANDREW WOLF
July 21, 2006
We are now well past the halfway point in New York 's great experiment with mayoral control of the schools, an experiment that appears to be a work in progress. When first passed, few commented about one curious provision of the law — it is due to sunset exactly seven years after it was first passed. Seven years seemed like an eternity back in 2002. But now we are only three years away from the day that if the legislature and governor do nothing, the old Board of Education and the 32 Community Districts will be reinstated, rising phoenix-like from the dead. Stranger things have happened.
It is now four years since Mayor Bloomberg made the surprising choice of Joel Klein as chancellor, and a full three years since his much-heralded "Children First" restructuring was put into place. What is there now is a creation of the current administration, which makes it all the more surprising that Chancellor Klein is not only engaged in dismantling the structure that he himself put in place to "reform" the system, but is hiring outsiders to do the job for him.
Mentioned casually in the press release first announcing the changes back in January is the participation of the firm of Alvarez & Marsal. The specialty of Alvarez & Marsal is turning around troubled companies, in their words "to develop and implement plans that unlock business value." Their clients include Formica Corporation, Parmalat, Timex Corporation, Winn-Dixie, Liquor Barn, and Levi Strauss. Now they have found another turnaround situation — troubled public school systems across America .
A&M has recently been granted an 18-month $17-million contract by the Department of Education to "support the implementation of budget reductions and reallocation of resources to drive cost savings to schools; assume interim management of financial operations; lead the regional and central offices in developing and providing quality services that schools could choose to purchase; and provide analytical support for long-term organizational improvements that will facilitate the expansion of the Empowerment Schools."
In earlier times, a contract such as this would have been put to a public vote by the Board of Education, a vote taken after a public hearing. All contracts over $100,000 were subject to a hearing and public vote. Had such a hearing taken place, this contract would surely have received scrutiny and debate. Instead it has received mention in just a handful of news stories. Alvarez & Marsal come to the table with a mixed and thin record in dealing with public school systems. The lead item on their resume is their "turnaround" of the St.Louis school system during the 2003-2004 school year. By New York standards, St. Louis is a tiny district with fewer students than several of Gotham 's 32 community school districts. St. Louis has terrible schools and even worse management. When A&M arrived, the district was drowning in $73 million in red ink.
Alvarez & Marsal closed schools and slashed payrolls, even reducing the number of teachers. To run the system, they brought in William V. Roberti, whose previous job was running the Brooks Brothers Clothing store chain. Fixing instruction wasn't part of his mandate. It was all money. Unquestionably, Mr. Roberti and A&M brought the district's budget into line. Critics charge that any audit would have resulted in necessary budget cuts. With A&M's $5 million contract and huge salaries paid to top management, the reform came with great pain and much resentment on the part of parents and teachers. After the year spent on restructuring, St. Louis remains a profoundly troubled district.
Alvarez and Marsal were also hired to fix the practices of what may have been the nation's most corrupt school system, that of New Orleans . The A&M team hardly had time to unpack its bags when Hurricane Katrina struck, so A&M's work in New Orleans has been dwarfed by other problems.
New York's problem is improving academic performance by its students. As in many large government entities, the Department of Education could stand better spending practices. But much of the waste emanates from the mayor's and chancellor's own initiatives. Things like the $60 million or so that has been squandered on "parent coordinators." Or extra money spent to bus students from their home-zoned schools. There are the tens of millions spent on questionable professional development schemes. And then there is the $17-million going to Alvarez & Marsal.
Mayor Giuliani cut hundreds of jobs at the old Board of Education the old fashioned way — he reduced funding and forced their hand. Mayor Bloomberg, who tells us he wants to be accountable, can do the same, and he shouldn't have to hire a $17 million private firm to do the job.
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