Edison Schools, created in 1992, is the nation’s largest private education management company. The company, which has failed to turn a profit since its inception, was once a publicly traded company but recently reverted to being privately held after disappointing stock performance, by accepting a $182 million buyout by the state of Florida’s government employee pension fund.82
Ironically, a company that critics charge threatens public education by attempting to privatize it, is now being bailed out by the earnings of Florida teachers, among other state workers. The deal was brokered in November 2003, by Chris Whittle, Edison’s founder, and Florida’s Board of Administration, which oversees the pension fund and is headed by Governor Bush. (Bush claims that the administration board handled the deal and he knew nothing about it until it was announced.)83
Critics of the deal are concerned that the state jumped onto the Edison bandwagon without adequate investigation. Edison is a risky proposition, that so far, has been a failing for-profit business,84 and has losses of more than $354 million. The company had only one profitable quarter, but the profits came not from business but from the sale of property.85 The state Board of Administration, which oversees the pension fund, has a history of making poor and risky investment choices that have caused losses of more than $428 million by investing in companies like Enron and WorldCom.86
House Democratic Leader Doug Wiles noted in a letter to Bush: “This transaction will risk the hard-earned savings of Florida’s public employees on a private company that has lost millions of dollars, is deeply in debt, has been subject to SEC (Securities and Exchange Commission) scrutiny and is being sued by its shareholders for misleading accounting and disclosure practices…I’m certain that the majority [of our employees] would not approve of a significant investment in a business that seeks to eliminate their own jobs.”87
Similar criticism from Florida unions such as United Teachers of Dade has prompted Governor Bush to suggest that the unions are trying to influence investment decisions. Bush stated: “We shouldn’t be making decisions based on politics.” But, not surprisingly, the major players around the Edison deal are all GOP supporters, with ties to the Bush family. The dots are easy to connect:88
- In October, Edison sponsored a school choice banquet, where Governor Bush was honored with an award.
- Edison hired a company that is headed by James Cayne—who raised more than $137,000 for President George W. Bush’s reelection campaign (in 2004)—to find a buyer for the company.
- Florida was represented in the deal by a firm led by David Girard-diCarlo, another fundraiser for President Bush in both 2000 and 2004.
The American Federation of State, County and Municipal Employees (AFSCME) President Gerald McEntee stated: “[The State Board of Administration’s] bad investment practices led to the massive loss of retirement funds for state employees…Governor Bush and the other trustees betrayed the faith put in them by Florida workers by putting their retirement security at risk.”89 Rather than learning from past mistakes, Governor Bush and his administration are rushing into another investment scheme that not only forces state education employees to prop up a company that believes in privatizing education but could also seriously compromise the state’s pension funds.