Philly Catholic high schools to be managed by a private foundation

The oldest and largest Roman Catholic education system in the nation is about to undergo massive organizational changes, as the Archdiocese of Philadelphia hands over management of its secondary and special-education schools to a private foundation.

The recently incorporated Faith in the Future Foundation, headed by former Cigna chief executive H. Edward Hanway, aims to not only maintain but also grow an archdiocesan school system hit hard by declining enrollments, deficits, and closings.

Beginning Sept. 1, the foundation will manage 17 high schools and four special-education schools, under the five-year agreement signed Tuesday by Archbishop Charles J. Chaput.

The blockbuster move, affecting about 16,000 students, will create the first independently run Catholic school system in the country, the National Catholic Education Association confirmed.

"While this decision reflects a paradigm shift, it serves to change the organizational structure for Catholic education, not its mission," Chaput said at a news conference at St. Hubert Catholic High School for Girls in Northeast Philadelphia.

Grade schools will still be managed by the parishes, with curriculum support from the archdiocese's Office of Catholic Education. That office, though, will now report to the foundation.

Bishop Michael Fitzgerald, who oversees education for the archdiocese, said in an interview that school costs have long been rising and enrollment shrinking.

"We've done a good job for years on the educational side," he said. "We still do. It doesn't mean that we can't do that in more creative ways, through some other entrepreneurial partnerships."

Hanway will serve as chairman of the foundation's executive board of education and as interim CEO. He sat on the recent blue-ribbon commission that helped guide a large-scale restructuring of area Catholic schools, including a number of parish-school closures and mergers.

Earlier this year, the panel recommended creating a foundation to further the cause of Catholic education. Hanway was put in charge.

An executive board of education - including Fitzgerald and other archdiocesan appointees - will help govern the foundation. A national search for a permanent CEO is under way.

Asked how much influence he will exert on the board, Chaput was clear: "A whole lot."

Faith in the Future, which will not be paid for its work, wants to raise $100 million in five years. As of July 1, it had raised $15 million.

Although the archdiocese will still own the schools and their assets, the foundation will cover the schools' operating deficits. Since Faith in the Future's formation, Hanway said, it has helped shrink the high schools' deficit by about half, to what he called a "manageable" size. He said he expected it to come down even further.

Archdiocesan officials declined to release the amount.

"We do not believe the system should function with an operating deficit," Hanway said. "We're very committed to eliminating the deficit."

The decision to move to a new system came together over the last few months, after lay leaders first discussed managing the four high schools they helped save, then quickly proposed running the entire secondary system, Fitzgerald said.

"It was the archbishop who said, 'Why don't we talk about entering into a contract with the foundation? Let's give this a try,' " Fitzgerald said.

Outside management, Chaput said, could have helped stem some of the schools' losses to date.

"If we had a foundation like this earlier," he said Tuesday, "I think it would have been better."

Hanway - who publicly thanked the administrators, teachers, students, parents, and alumni who have devoted themselves to the schools - praised Chaput's "open mind" and "bold vision."

After the initial five-year contract, subsequent management agreements will run for three years. Both sides will have "out" clauses, officials said.

The archdiocese has spent more than $11 million in the last 16 months responding to a 2011 Philadelphia grand jury report on clergy sex abuse, and projects a $6 million deficit in its operating budget for fiscal 2012-13.

However, Hanway said, those difficulties did not drive the decision to privatize school management.

In 2011, the archdiocese's Office for Financial Services gave the high schools $3.5 million in subsidies, and $4 million the year before. But earlier this year came the announcement that that long-standing practice would be discontinued.

The subsidies have ceased, in part, because the funds had come "from a source that would no longer be available" and, in part, because the blue-ribbon panel decided months earlier that "the high schools need to be self-supporting," Hanway said.

"If they had come to me and said, 'Hey, Ed, we can't afford to run these schools,' it would have been a very short conversation. I'd be out playing golf right now instead."

The foundation's motivation, he said, is to bring a more "metrics-driven management structure" to schools. Each school will have specific enrollment and development goals.

Faith in the Future will also help push some educational initiatives - for example, partnerships with colleges and universities, sophisticated technology education, and new language programs.

Some of that work has begun. Eleven schools will offer distance-learning courses; guest teachers from China will teach Mandarin at six high schools. There will be internship programs, college courses, and other extras, like free instrumental-music instruction at West Catholic.

The schools' identities, missions, and curricula will still be overseen by the Office of Catholic Education, Fitzgerald said.

"Anything that has to do with the Catholic identity of the schools - faith, morals, doctrine - will be completely the purview of the archdiocese as determined by the archbishop," said Fitzgerald.

Catholic high school teachers are unionized, and those contracts will not be affected, church and foundation officials said. Teachers will remain employees of the archdiocese; when their current contract expires, they will negotiate with the archdiocese.

Rita Schwartz, president of the union representing 700 lay teachers at the high schools, learned of the management change Tuesday. She said she wasn't sure what to think.

"I'm happy when our schools are going to remain open and are doing well," she said. "Who could argue with what these guys are planning to do? But the devil is always in the details, and I need to see the details."

The move to independent management will position the Catholic school system to take advantage of both the Educational Income Tax Credit program and the new Opportunity Scholarship Tax Credit passed in the recent state budget. That program set aside $50 million for private education for students who would otherwise attend struggling schools.

The foundation, Fitzgerald said, will help Catholic schools develop strategies to attract students now attending schools deemed "failing" - most of them Philadelphia public schools.

"On the city side, we hear that there's a lot of kids who need seats in better-performing schools, and we want to help," Fitzgerald said. "There are many people - Catholic and non-Catholic - who would like to send their kids to Catholic schools, but can't afford it."

While vouchers would help the foundation, its success is not contingent on vouchers, Hanway said.

"We're committed to growing schools with or without vouchers."

Hanway said he did not expect the foundation to increase tuition, which now averages $6,000 a year, in order to raise revenue. "If anything," he said, "we'd like to bring it down."

He stressed that this was not a tearing-down of the existing Catholic school system.

"We have some great people who have devoted their entire lives to this system," he said. "We're not saying to them, 'What you've done hasn't worked.' Just the opposite. Catholic education in Philadelphia has a proud tradition, and our whole mission in life with this new arrangement is to see if we can't create the environment where more kids can take advantage of it."

Mark Gleason, executive director of an organization established two years ago to raise $100 million to support high-quality public, private, and charter schools, was encouraged by the agreement.

Many other area schools struggle with educational quality; Catholic schools have had different problems.

"What this system most needs is sustained focus to market the schools and make sure families know the quality of what's being offered here, the outcomes," Gleason said. "We need to help these schools become better operators. That's what the archdiocese has struggled with. They have a lot of other things to focus on."

The foundation, he said, should be able to help on that score.

Philip V. Robey, executive director of the National Catholic Education Association's secondary-schools department, called Philadelphia's new independent school system "a creative way of ensuring that Catholic secondary schools thrive and continue to grow in the future, because it allows for systematic and continued planning."

He added, "We hope [it] will prove useful."

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