JOHN MERROW: It's the grand opening of a new business: A tutoring company, part of a booming industry serving 216,000 public school students nationwide, the result of the No Child Left Behind act.
PRESIDENT GEORGE W. BUSH: There is a triggering event in the bill and it says that if schools are not meeting expectations, then parents should be given different options.
JOHN MERROW: Free tutoring is an option for students in chronically failing schools. The government makes $2 billion available to pay for it, and lets parents pick from three kinds of programs. Tutoring provided by school districts, by community groups or by private companies like the one headed by Joe Lockavitch .
JOSEPH LOCKAVITCH: I've focused on the "I'm pulling my hair out at the roots; I don't know what to do with this kid, driving me crazy" kids.
JOHN MERROW: Lockavitich founded a company several years ago to help struggling readers; he called it Failure Free Reading. Today it's a choice under No Child Left Behind in 40 states.
JOSEPH LOCKAVITCH: Thanks to Congress and the president, what they're saying is, "We are going to give parents, lowest income parents of lowest performing schools the opportunity that middle and upper middle-income parents have always had which is what they've always had, after hours tutorial students for their kids."
JOHN MERROW: Lockavitich took that message to school districts across the country. But in many places, he said he has been shut out.
JOSEPH LOCKAVITCH: In certain school districts, you are not allowed to contact the principals or the building. It's extremely frustrating. Many times we are seen as the enemy rather than the helper.
JOHN MERROW: Pauline Richards has felt like the enemy at times. She owns a company called Club Z In-Home Tutoring Services. It's part of a national chain that offers one-on-one help to students in 26 states.
PAULINE RICHARDS: It's really the best you can get. A group situation is definitely not good for every child. We would like to improve the situation; we would like to make a difference.
JOHN MERROW: Elizabeth, New Jersey, seemed like a good place for her to start. Thousands of struggling students here qualified for tutoring. Richards and five other companies wanted to help.
But this district is one of hundreds that runs its own tutoring program, and the companies would have to compete against it for students. Julia Stapleton runs the district's program.
JULIA STAPLETON: Elizabeth has a really solid program that has been well received, and we are getting benefits already. We built our own curriculum. We put a lot of our own resources into making this a valuable program.
JOHN MERROW: Money was also at stake. More than a million dollars from the district's federal funding would go to programs the parents chose. By law, school districts must inform parents of all the tutoring options available.
PAULINE RICHARDS: That's what it's all about, whether it's me they're choosing or another company, they should have a choice.
JOHN MERROW: The school sent parents letters, informing them about the seven tutoring programs they could choose from: Six run by companies, one run by the district itself. All 2,520 parents signed with the district's program.
JOHN MERROW: Did Elizabeth provide choice?
JULIA STAPLETON: We did; we provided a list to the parents.
JOHN MERROW: Did you give complete information about the other programs?
JULIA STAPLETON: Yes, we did. We met all the criteria that the law requires.
JOHN MERROW: The district said it also sent this chart outlining the tutoring programs. But we obtained copies of a different chart from three different schools that officials confirmed was mailed to parents. It describes the seven programs, among them Pauline Richards described as Club Z Tutoring Service.
JOHN MERROW: What is the full name?
PAULINE RICHARDS: The full name is Club Z In-Home Tutoring Services.
JOHN MERROW: They left out "In Home." Is that essential to say as part of the title?
PAULINE RICHARDS: I would think so. That's what it's called.
JOHN MERROW: It says location: Permanent site not determined.
PAULINE RICHARDS: Not determined.
JOHN MERROW: Is that accurate?
PAULINE RICHARDS: No -- very easily determined - in their home.
JOHN MERROW: About Elizabeth's own program, there were full paragraphs mentioning high quality materials, small group instructions and opportunities for acceleration. There was nothing about the six company programs, except contact provider.
JOHN MERROW: Is the school district playing by the rules when it does this?
DIANA AUTIN: I don't think so. I don't think that's a fair way to give information to families.
JOHN MERROW: Diana Autin is director of the statewide Parent Advocacy Network.
DIANA AUTIN: But I have to tell you, as a parent advocacy organization, we see inadequate and inaccurate information being given to families all the time.
JOSEPH LOCKAVITCH: This is typical of what we see if a school district chooses to be obstinate.
JOHN MERROW: It's happened, Lockavitich says, in about one of every four districts he has approached across the country.
JOSEPH LOCKAVITCH: In one Midwestern state, we were told we had to do a financial audit to the tune of $20,000 or $30,000 before we could even come there.
In addition to that, we were told that we had to have a $4 million umbrella policy that would have cost $25,000. And so it's almost is $40,000, $50,000 in up front fee, and then we go in there and they won't give us access to the parents to recruit.
EUGENE WADE: The districts themselves are both the players and the referee, and I think that can be difficult. If you are asking somebody to do something that is a pretty unnatural act, on a unlevel playing field and "Oh, by the way, I'm going to compete in it."
JOHN MERROW: Gene Wade heads Platform Learning, another tutoring company that says its path has been blocked at times. Platform operates in major cities in 17 states.
EUGENE WADE: The politics of this are that if districts don't spend the money, they get to keep it. So there is an incentive oftentimes not to notify parents, not to let them know of their rights, to oftentimes shut companies out.
JOHN MERROW: School districts say there is another side of the story, that it's not about holding the money; it's about providing quality education.
JULIA STAPLETON: We felt the outside provider didn't have the information as a district that we had that would help our children succeed academically.
JOHN MERROW: Local districts know exactly what lessons are taught during the day. They can custom build their tutoring programs to match. Compare that to what most outside companies offer.
JOHN MERROW: Can a company use the same curriculum here, there, and everywhere?
DIANA AUTIN: They can use the same curriculum no matter where they are, and they can use the same materials no matter where they are, and it doesn't have to have any relationship to the information the children are expected to know when they take the test or the things they're struggling with in the classroom.
EUGENE WADE: It's not true. We've got something like 22 variations of our curriculum. Anybody who works in our program will tell you they don't -- usually they are not having a problem with the program materials; they're having a problem with the instruction; they're having a problem with the politics or all around the stuff.
JOHN MERROW: But in some companies, tutoring companies have received poor marks. This recent letter from school officials in Chicago notified Platform that it was in default from its contracts there, saying that on numerous occasions, tutors failed to show up to many locations. In March, Chicago fired Platform from seven schools.
EUGENE WADE: I will tell you there are schools where we've had some problems, but you are not going to find that across the board that we have like a systematic problem of some of these issues.
JOHN MERROW: But across the industry, there are few regulations. Tutoring companies can teach however they like and hire whomever they like including uncertified teachers.
JOSEPH LOCKAVITCH: The reality is that there are some providers, quite frankly, who don't have experience with my particular population and in many cases, are doing nothing but warehousing kids.
DIANA AUTIN: There isn't enough oversight. I frankly think it's a frightening and sad thing when we are spending so much money on them.
JOHN MERROW: Back in Elizabeth where not one student signed up for private company tutoring, school officials talk about having a better program, which they say is also the better buy. The biggest issue of all is cost.
JULIA STAPLETON: A provider charges more than we charge. We can give them a full-blown year long program that matches what they are learning during the day.
JOHN MERROW: Many tutoring companies charge the maximum allowed, about $2,000 per student for some 50 hours of tutoring. Many school districts run their programs at half that price and provide more hours of instruction. For what companies charge to tutor one student, Elizabeth on its own can tutor four.
JULIA STAPLETON: We knew we could provide for more students, that could do a much better program this way than if we did it the other way, we were limited to how much we could pay per student. We would only be able to serve maybe 500 of our neediest. We are serving 4,000 of them. We can't beat that.
JOHN MERROW: If it's a great tutoring program, what's wrong with that?
PAULINE RICHARDS: If it works but it didn't work before.
JOSEPH LOCKAVITCH: If you are a low-performing districts with low-performing schools, how do you have the audacity to say you can be a high performing after-hours tutorial.
JOHN MERROW: So asking Elizabeth to tutor the kids who didn't make it under Elizabeth's control makes sense?
JULIA STAPLETON: We will prove it.
JOHN MERROW: Whether it's local school districts, Pauline Richards' company, Joe Lockavitich's, or Gene Wade's that does the tutoring in the end, the president's education law makes it difficult to prove whether tutoring works.
The act that demands testing and accountability for schools exempts tutoring programs from similar tough scrutiny.