Florida's state pension system is now the proud owner of Edison Schools, a company that manages public schools. In November, it invested $182 million to buy 96 percent of the company and pay off $80 million of the company's outstanding debt.
Even though Edison has struggled in recent years--its stock has fallen to bargain-basement lows and at least 17 school districts canceled contracts with the company last year--Liberty Partners, which manages about $1 billion of Florida's pension funds, recommended the buy. A Liberty report noted that Edison is well positioned to take custody of schools classified as "failing" under the federal No Child Left Behind Act and that would give the company the potential "to be a Fortune 500 company."
Critics saw the investment differently. The Florida Education Association and Democratic legislators said that spending teachers' retirement money--half the pension fund comes from educators--on a company that has eliminated teaching positions was a political move to support private education at the expense of public schools.
There also were charges that the move is fiscally imprudent. "Basically, here's a corporation that has been in existence for 12 years and managed to put one profitable quarter together," says Florida Education Association spokesman Mark Pudlow. "We think it's putting our members' retirement futures in jeopardy, and it's a really, really lousy deal for them."
Coleman Stipanovich, executive director of the State Board of Administration, denies that a political or social agenda drove the investment and warned that political interference with state investments would set a bad precedent. Many legislators agreed.