Feature Stories - June 2001

Private Schools in Nevada:

Reading, Writing and Turning a Profit

by Patricia Martin

These are good times for private schools in Nevada. With the media focused on school violence, crowded classrooms, teacher misconduct and poor test results, private schools are increasingly becoming the schools of choice for Nevada parents.

As of last year, more than 16,000 Nevada students attended private schools, according to figures released by the Department of Education (DOE). While it’s still a small number compared to the 325,610 students who attended public schools in that time period, administrators at private schools say enrollment is climbing and waiting lists are growing. Indeed, in the past five years, DOE figures show private school attendance in Nevada has grown by at least 1,000 students, despite high tuition costs, which nationally average between $8,000 and $14,000 per year.

And the growth hasn’t arrived just in the form of non-profit religious and non-sectarian schools. For-profit education companies are also staking a claim to the state’s growing market. Just three years ago, for instance, Nobel Learning Communities Inc., a for-profit education concern based in Media, Penn., entered the Las Vegas market. Since then, the company has grown its Southern Nevada operations to six schools: four pre-elementary institutions and two schools that offer classes from kindergarten through sixth grade. Combined, Nobel’s Merryhill Schools have a current enrollment of about 950 students.

Nobel is just one of nearly a dozen U.S. corporations that are shocking the $360 billion public school market, which has been relatively free from competition. While some purists may be aghast at the thought that Wall Street is playing a role in educating America’s young, schools like Nobel’s Merryhill, as well as its charter institutions — public schools Nobel runs for a fee paid with tax dollars — are being embraced by parents and students alike. Out of America’s 53 million children attending kindergarten through 12th grade, these companies are teaching more than 120,000 students in some 250 for-profit schools.

Clark County School District recently awarded a contract to one these firms, Edison Schools Inc., a New York-based, for-profit education concern. Edison will operate several charter schools in north central Las Vegas. Charter schools operate classrooms for local school boards or independent chartering organizations with taxpayer money, and students attend them tuition-free. They are public institutions that are run by private companies.

Gary Lea, executive director of Merryhill’s Las Vegas schools, cited a number of reasons why the for-profit education sector has been growing, including public schools’ tarnished image. In Southern Nevada, the area’s booming population has also served as a catalyst for his company’s growth. "While we all know there are some really fine public schools, Clark County now represents the fourth-largest school district in the nation. And along with that, come problems like overcrowding, which makes it hard for teachers to give individualized attention to students," he said.

At Merryhill Schools, there is an extremely low student-teacher ratio compared with that in various public schools. Enrollment in some classes, depending on the grade and subject matter, can reach as high as 25 to 30 students in Southern Nevada public schools. At Merryhill, the maximum number in a class is approximately 17 students. "We average about 14 to 16 students. And we’re expanding a number of sections," Lea said. Private school administrators say smaller classrooms result in more one-on-one attention by instructors, which ultimately leads to better results for students with respect to both discipline and grades. At Merryhill Schools, students on average test about 1.2 grade levels higher than their current class average on Stanford 9 national tests in the areas of comprehension, math and reading.

But can you turn a profit teaching reading, writing and arithmetic? To date, companies like Edison have lost several hundred million dollars, due in part to tremendous start-up costs associated with opening new schools. Chris Whittle, Edison’s founder and chief executive officer, estimates his company won’t be able to turn a profit until sometime in the next four years. By then, Whittle hopes his company will be running 440 schools, a number that Whittle says will enable Edison to get in the black.

Meanwhile, Lea said Nobel, which has approximately 170 schools, has posted a small profit in large part by keeping overhead costs at a minimum. For every dollar in a typical public school budget, 20 cents to 30 cents goes to administration. But at Merryhill Schools, administration costs are a little more than 7 cents. "Our philosophy has always been education at reasonable costs," Lea said. Merryhill employs about 150 people at its six Southern Nevada campuses. Yet only about a dozen of the schools’ entire staff is classified as administrative.

Even though they have pared bloated administrative costs, for-profit educators are struggling to get out of the red, despite reporting record-breaking revenues. Nobel, which is traded on NASDAQ, saw its revenues soar to $37.3 million for its second 2001 quarter ending Dec. 31. That was an 18 percent gain over the same quarter in the prior year. However, net income was just $415,000, or 6 cents per share, versus a net income of $615,000, or 8 cents a share, for the same period in the prior year. The company attributed the drop in net income to new school start-up costs. "The profit margins are very low. The people that are involved in for-profit education do it for a higher and noble cause. It’s not a pocketbook issue. People do it because there’s a tug at their heartstrings. Education is probably the greatest single resource you have in improving a child’s life. That’s why we’re involved," said Lea.

Indeed, of the state’s nearly 150 private institutions, only a handful are trying to make a profit educating Nevada children beyond kindergarten. "It’s definitely rough," said Katie Osgood, assistant director at Brookfield School in Reno. "All private schools try to pool their efforts to remain profitable. We help out one another," she added. Osgood’s school is a member of the National Independent Private Schools Association, a national trade group based in Florida with regional operations throughout the country. The group assists independent school owners with advice and tips on how to run a tight ship without sacrificing academic quality or extracurricular activities that private schools are known for. Art, music and language classes are routine offerings at Nevada’s better private schools.

Tuition covers operating costs at Merryhill and Brookfield, along with several minimal fees. Like Lea, Brookfield’s Osgood said keeping administrative costs down is a key to keeping a private for-profit school in the black. "Having a business background has helped me a lot," she said.

The school was founded in 1964 by Marian Osgood, Katie Osgood’s mother. She still owns the school, which offers pre-school classes through eighth grade to 175 students. Brookfield charges on average about $6,100 yearly for tuition, and has a student-teacher ratio of about 12.5 students for every instructor. Student SAT scores average in the 80th to 90th percentile.

Studies show parents choose private institutions over public schools for a variety of reasons, including smaller classes and more rigorous academic standards. But safety is also cited as one of the primary reasons parents choose private education, said Dr. William L. Johnson, Ph.D., headmaster of Sage Ridge School, Reno’s only private non-profit college preparatory day school. "Parents are looking for smaller, more intimate campus settings where every faculty member knows each student by name. When you have that type of intimacy, there is going to be more accountability, and parents want that," he said.

Sage Ridge opened its doors in the fall of 1998. It currently has about 120 students attending classes in two buildings totaling about 30,000 square feet. The buildings are nestled on a beautiful 44-acre campus located about 10 miles southwest of downtown Reno. Currently, Sage Ridge offers grades six through 10, but plans call for graduating its first class in 2003. Tuition at the school ranges from $10,000 to $13,000 per year. The rates rise in accordance with class level. Sage Ridge officials estimate tuition will increase $500 annually for the next three years.

While private schools generally can’t match the retirement packages or salaries longtime teachers are offered in the public sector, administrators say they are able to attract high-quality instructors despite the pay disparities. "We have had great success in recruiting excellent faculty. We have an academic program that is powerfully attractive to teachers who have been in the field for a period of time and who are looking for innovative and more effective ways of teaching. And the Reno-Tahoe area is also a magnet," said Sage Ridge’s Johnson.

Carolyn Goodman, founder and board president of The Meadows School in Las Vegas, said teachers are also attracted to private schools by their class setting and size. "People who love to teach want smaller classes, so salary isn’t the sole deciding factor in coming to a private school," she said. "And everything is relative to the instructor. It’s the philosophy of education that is the critical driving force behind any school. Whatever that philosophy is, you have to deliver on it. That’s how you attract good staff." The Meadows has blossomed since it first opened its doors to 140 students in 1984. Today, the school, which sits on 40 acres of land in Summerlin, has about 900 students. 2002 tuition will range from $9,250 to $12,200. About one-fifth of the students who attend The Meadows receive some form of financial aid or scholarship. Virtually all of its high-school graduates go on to four-year universities.

Despite the financial challenges facing private schools, administrators expect the good times for Nevada’s private institutions will last, at least in the near term. "Although there hasn’t been a history of independent schools in Nevada because it has been one of the least-populated states, we have the potential of riding the crest of the wave that’s taking place at private independent schools in America," said Sage Ridge’s Johnson.