How New Generation of Reformers Targets Democrats on Education

A money manager recently sent an e-mail to some partners, congratulating them on an investment of $1 million that yielded an estimated $400 million. The reasoning was that $1 million spent on trying to lift a cap on the number of charter schools in New York State yielded a change in the law that will bring $400 million a year in funding to new charter schools.

The money managers who were among the main investors in this law — three Harvard MBAs and a Wharton graduate named Whitney Tilson, Ravenel Boykin Curry IV, Charles Ledley, and John Petry — are moving education-oriented volunteerism beyond championing a single school. They want to shift the political debate by getting the Democratic Party to back innovations such as merit pay for teachers, a longer school day, and charter schools.

The organization from which they hope to launch their revolution, Democrats for Education Reform, does some of its work at cocktail parties hosted in Mr. Curry's Trump Plaza penthouse. The group — actually two separate political action committees — has raised money for senators Obama, Clinton, and Lieberman; Governor Spitzer; Rep. George Miller; state senators Malcolm Smith and Antoine Thompson; assemblymen Sam Hoyt, Hakeem Jeffries, and Jonathan Bing, and City Council Member Vito Lopez. They count the charter cap lift, signed by Mr. Spitzer in April, as their first major victory.

Next week, at a June 5 launch party, they will press their next goals, including a plan to raise several more million dollars, expand into at least four different states, and shape the 2008 presidential race.

"It's easy to work at a school and have it be a cute little philanthropic effort," the group's executive director, Joe Williams, said. "But these guys are really about running the tables. They don't want a couple of cute little schools."

Though charter schools are public, they operate independent of many regulations and receive less than the usual per-student funding. So school operators depend on donors to survive. Three of DFER's four founders sit on the boards of charter schools, and the fourth, Mr. Ledley, has just applied for a spot of his own.

But none of the four have been satisfied just to invest in a few schools. Mr. Curry's story is typical. After graduating from Yale in 1988, he worked at a consulting firm that specialized in selling best-practices tips to big industries, like hospitals or banks. In 1990 the firm took on a pro bono project, meeting with 15 school superintendents at a conference in San Francisco. "Where could we help you?" the consultants asked. The room was silent. "It soon became clear that unlike somebody who was running a bank, their issue wasn't that they didn't know what to do," Mr. Curry recalled. "It was that they didn't have the ability to do it." Interest groups with a stake in the status quo, they explained — teachers' unions, janitors' unions, parents groups, the federal government — had made change impossible.

The firm abandoned its project, deeming it a lost cause. But Mr. Curry held tight to the lesson. When New York began allowing charter schools in 1998, he raised a few million dollars to co-found Girls Preparatory on the Lower East Side. As a charter, the school had freedom to implement new ideas, like paying teachers 20% above teachers in traditional city public schools — but demanding longer hours — and making a principal with just a few years' experience a six-figure starting offer. Mr. Curry says he and the board had planned to offer less, but a bidding war with another charter school kicked up the wage.

Teachers' unions may give a big boost to the Democratic Party, but so do those working in finance. If Democrats for Education Reform can convince them to press issues like length of the school day and merit-based teacher pay, it could force a dramatic swing in the party itself.

Last week, Mr. Curry made his pitch to the Fortress Investment Group's head of global investments, Mike Novogratz, in a meeting in Mr. Novogratz's Midtown office. Leaving, Mr. Curry wondered whether Mr. Novogratz, whose company recently went public and made him a fortune, would sign on. He seemed to have bought the sell — about leverage, and the possibility of enormous change from a relatively small amount of money. But would Mr. Novogratz, a major Democratic fund-raiser, be wary to "break any glass"? Mr. Curry found the answer in his e-mail inbox: "I'm in." Mr. Novogratz has pledged $50,000 to Democrats for Education Reform.

Last week the group hosted a dinner for State Senator Malcolm Smith, the minority leader, one day before he was scheduled to attend a fund-raiser hosted by the president of the United Federation of Teachers, Randi Weingarten. "Nobody's going to be bought here," Mr. Williams said. "Any reasonable person that wants to become the Senate majority leader should be talking with Randi. We just want him to be talking to us too."

As investors, the group's leaders spend their days searching for hidden diamonds in the rough: businesses the market has left for dead, but a savvy investor could turn for a profit. A big inner-city school system, Mr. Tilson explained, is kind of like that — the General Motors of the education world. "I see very, very similar dynamics: very large bureaucratic organizations that have become increasingly disconnected from their customers; that are producing an inferior product and losing customers; that are heavily unionized," he said. A successful charter school, on the other hand, is like "Toyota 20 years ago."