JOHN MERROW: This is not a normal school board meeting. But then again, St. Louis is not a normal school district.
TEACHER: We're using that water every day.
JOHN MERROW: In 2003, it spent more than $12,000 per pupil around 40 percent above the national average. And yet only 5 percent of high school juniors in St. Louis could read at a proficient level. Last year the city elected four new school board members, a majority, who campaigned on a promise to radically overhaul the system. Over the last three decades, St. Louis has lost tens of thousands of students to the suburbs and to private schools.
VINCENT SCHOEMEHL: Thirty years ago there were 115,000 kids in the school district. Today we're down to 37,000, 38,000 kids. That doesn't happen by accident.
JOHN MERROW: New board members, Vincent Schoemhl and Danetta Clinkscale, decided that St. Louis should do what New York, San Diego and Philadelphia had done-- turn to the private sector for help.
VINCENT SCHOEMEHL: We knew this place was broken. The H.R. Department didn't work. The I.T. Department didn't work. They couldn't get their bills paid. They didn't have year-to-date financials. I mean, this place was flying blind.
JOHN MERROW: The board hired a New York City firm that specializes in turning around failing businesses. It employed Alvarez and Marsal at one year for $4.4 million.
BILL ROBERTI: We were called on Friday and told to arrive on Monday, that we had won the bid, they had picked us as the firm.
JOHN MERROW: Alvarez and Marsal sent its managing director Bill Roberti to St. Louis. The former CEO of Brooks Brothers had never worked in education before, but on June 2, 2003, the veteran businessman became the city's school superintendent.
VINCENT SCHOEMEHL: What we've done here is we've tried to take private-sector practices and blend them with a public-sector institution.
JOHN MERROW: Bill Roberti was hired to fix the operational and financial systems, not its academic problems.
BILL ROBERTI: You couldn't get the student achievement equation until you solved the operating of financial difficulties that this district had.
JOHN MERROW: But one day after Roberti began work, he and the board discovered that the financial problems were bigger than anyone imagined.
DARNETTA CLINKSCALE, President, St. Louis Board of Education: We thought we had a surplus and we found we didn't. We had a deficit of upwards of $64 million. We later found out it was $74 million. Then we found out it was a $90 million cash flow deficit.
BILL ROBERTI: Not only did we have a severe financial crisis, but effectively the school district was bankrupt.
JOHN MERROW: One of the first and most controversial changes made by Bill Roberti and the school board was to close schools, like this one and 15 others. By their calculation, closing 16 schools trimmed the deficit by approximately $15 million.
BILL ROBERTI: We saw a school district over the last 35 years that had declined by almost 70 percent in enrollment. Yet it had not kept its pace with, you know, reducing the amount of buildings that it had in relationship to the amount of students that it had.
JOHN MERROW: But the sudden change angered many members of the community.
MAN: One of the reasons that this Board has been so insensitive is because the reality is it is not your children that we're talking about. (Applause)
JOHN MERROW: Roughly 3,100 students were transferred into the 96 remaining schools. For some, this meant bigger classes. Elaine Johnson has a son in the fifth grade.
ELAINE JOHNSON: Last year there were ten to twelve kids per class. Now there are like 25 or more kids per class.
JOHN MERROW: Then, Bill Roberti set out the reduce staff. He cut custodians and administrators and ultimately reduced employment by 20 percent without laying off any teachers. These changes also produced a backlash when school engineers did not show up for work.
BILL ROBERTI: To carry these employees was very costly. This is not a jobs program. This is a school system here to teach kids, not provide jobs to the community.
JOHN MERROW: Roberti hired private companies to provide food, maintenance and transportation which he says not only cut cost but improved operations. He also updated the bus routing system when his staff discovered a $100,000 transportation software program sitting in a closet.
BILL ROBERTI: And they continued to do their planning on a map with colored string. We brought in a transportation expert to work us with. We saved over $7 million in that system in the past year.
JOHN MERROW: From the beginning, many parents and civic leaders said the $4.4 million being spent on Alvarez and Marsal should have been used to improve academic performance.
SUSAN TURK: We wanted to see improvement. We're not opposed to that as parents. But we're not getting that kind of change.
GEORGE COTTON: We've had a year into this, and they haven't spent any time, by their own admission, they've not spent any time focusing on the academic side.
JOHN MERROW: But Bill Roberti says he did not ignore academics. He asked Mike Casserly and his Council of Great City Schools to evaluate St. Louis. Casserly has worked in urban education for 27 years.
MIKE CASSERLY: The St. Louis instructional program was among the worst that we had seen in any major city across the country.
JOHN MERROW: After months of investigating every aspect of the schools performance, Casserly's group released a 132-page report.
MIKE CASSERLY: Student performance was low. Expectation for the students were low. No one was really held accountable for student performance. And their instructional program was largely so incoherent, so fractured that you couldn't possibly move it... move student performance forward on a system-wide basis.
JOHN MERROW: The school board has promised to use the report's recommendations as a basis for improving teaching and learning.
VINCENT SCHOEMEHL: Now we have a game plan. We know what needs to get fixed and we know where to begin and we know who the resources are around the country that we need bring them in here to help us fix all of the other components of a very complex urban education system.
JOHN MERROW: When the contract with Alvarez and Marsal ended in June, many in the community were happy to see Roberti go.
MAN: It's my hope that now that Mr. Roberti you'll be on your way. (Cheers and applause)
VINCENT SCHOEMEHL: The ability to leave town is so valuable in this sort of an environment. It is just... it just adds another whole dimension to what you're buying - is that you're buying total independence and the ability for people to make qualitative decisions not political decisions.
BILL ROBERTI: There was no one inside the city of St. Louis that could get away with doing some of the things that had to be done and end up living here later.
JOHN MERROW: According to the board of education, Roberti trimmed $72 million out of the district's general operating funds during his year as superintendent, and the St. Louis schools moved substantially closer to receiving full state accreditation, Missouri's seal of approval, something they haven't had for five years.
JOHN MERROW: Are the schools better today because of what you have done?
DARNETTA CLINKSCALE: I think some of them are. I think the system is in place to make them better.
VINCENT SCHOEMEHL: Did we do it perfectly? No. Could it have been done perfectly? No Did we do it well enough? We did as well as we could.
JOHN MERROW: But St. Louis still has big problems. It has not hired a permanent superintendent to replace Roberti and it's facing a general operating deficit of $38 million next year.
GEORGE COTTON: The morale has been horrible. What you have are students and parents beginning to ask themselves, what is this going to look like next year, and do I gamble that this is going to be a positive experience for my recovers from? Or do I pull my kid out?
JOHN MERROW: How long will it take to see real improvement in St. Louis?
SPOKESMAN: Oh, I don't think this job is ever done. On the other hand, they ought to be able to show some pretty substantial gains in student performance within a couple of years easily.
JOHN MERROW: Do you think public education generally needs the private sector mentality in order to do its job?
BILL ROBERTI: Yes. Absolutely. I think there's a strong sentiment and feeling out there across this country that there is not the business, financial and operating talent out there to run these very complicated, complex entities. I mean, this is a half a billion dollar enterprise. It should run efficiently so that it can take its money and its resources and allocate it to the classroom and focus it on student achievement.
JOHN MERROW: Over the summer, St. Louis will close another five schools to further reduce the deficit. The board is trying the figure out how to attract more students in the years ahead.