This school investment isn't so sound

By Bill Cotterell
DEMOCRAT POLITICAL EDITOR
Posted on Mon, Oct. 06, 2003

When it looked like Florida voters were going to mandate caps on class size in public schools last year, Gov. Jeb Bush joked that he had some "devious plans" — which turned out to be simply asking voters to repeal the costly constitutional amendment.

Bill McBride and the teachers unions that had made him the Democratic nominee against Bush howled that the governor secretly was scheming to thwart the will of the people. But now the teachers, the public-employee unions and the Florida AFL-CIO are learning — not that they ever doubted it — how clever Republicans can be at post-election payback.

The state pension fund plans to sink $182 million into Edison Schools Inc., which operates 150 schools in 23 states. In addition to buying up more than 96 percent of Edison's stock, the money would pay off the company's debts and create a line of credit for operating expenses.

The employee pensions are guaranteed by the $92 billion Florida Retirement System, which can afford to take another Enron-sized bath if it has to. That doesn't make the idea any less galling to the employee organizations.

The Florida Education Association, Service Employees International Union, the American Federation of State, County and Municipal Employees and the Florida AFL-CIO aren't just worried about revenge. They bet on McBride, so they must have expected to take their lumps when the Republicans swept the legislative and executive offices again.

Going into the private-school business with public-employee pension funds might be the most condign revenge any governor has ever devised. It gives members of the employee unions a stake in the success of an idea they hate.

The four labor organizations wrote to the governor last week, noting that Edison Schools lost more than $354 million since its inception 12 years ago. They said its only profitable quarter came when Edison sold off some property.

Edison's stock opened at $18 a share in an initial offering on Nov. 11, 1999, and doubled by early 2001. But it hit a low of 15 cents a share a year ago and was going for $1.68 late last month.

"The situation is beyond disturbing," said Jeanette Wynn, state president of AFSCME. "We urge the governor and Cabinet to initiate an investigation by outside experts."

Bush and his fellow SBA members, Attorney General Charlie Crist and Chief Financial Officer Tom Gallagher, raised no questions about Edison at last week's Cabinet meeting. Afterward, Bush denied there was any hidden motive in buying out the privateers with public-employee pension money.

"The State Board of Administration should be investing based on their investment guidelines. They should rely on investment professionals and political implications of investments should be so far down the list," he said. "The focus ought to be on the 760,000, more or less, people who are participating in the Florida Retirement System."

Andy Ford, president of the FEA, responded that the state already is suing one of its Wall Street investment consultants over its Enron advice. "Wasn't the $335 million Enron loss suffered by the FRS a warning about fiscal responsibility?" Ford asked.

State Rep. Curtis Richardson, D-Tallahassee, said "it was a poor decision" but that teachers and other unions got the message.

"Florida withdrew its investments from companies in South Africa during the era of apartheid. We divested tobacco investments," Richardson said. "I think they should look at this in the same way."

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Contact political editor Bill Cotterell at (850) 222-6729 or Bill Cotterell.

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