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New Jersey has moved to take over its largest school district, which investigators describe as rife with corruption and incompetence.

Commissioner of Education Leo Klagholz ordered Newark school officials last month to show why the state should not assume control of the city’s schools. That set in motion the takeover process.

Newark had 20 days to respond to the July 22 order, and school officials there said they plan to contest it in an administrative court hearing, as allowed by the takeover law.

New Jersey has issued only two other so-called “show cause’’ orders--to the Jersey City and Paterson districts. Both led to takeovers, although Jersey City fought the move in a protracted court battle. (See Education Week, Sept. 4, 1991.)

If the state assumes control of Newark’s schools, it would mark the first time that one of the nation’s 100 largest districts would be run both academically and financially by a state--with the exception of Hawaii, which has a unique, statewide school system.

Under New Jersey’s pioneering takeover law, the local school board would be replaced by a state-appointed superintendent for a minimum of five years, and the current superintendent and the top echelon of administrators would be stripped of their positions.

At least 20 states have takeover laws or other procedures under which a state can intervene in local school administration. New Jersey’s law gives the state the broadest power to fire school officials, according to Chris Pipho, the director for state relations at the Education Commission of the States.

Because of the cumbersome procedures dictated by most such laws, few state education departments follow through on their threats to assume control, Mr. Pipho said.

“I didn’t think it would go this far in Newark,’' he said. “But it looks like they’re going to forge ahead.’'

‘Two Worlds’

Newark’s tangle with state officials dates back a decade. But observers say many of the district’s problems began surfacing nearly two decades ago.

Details of the district’s inability--or unwillingness--to comply with state mandates have been revealed in each report that state officials have released, as prescribed by state law prior to seizing control of a district.

Mr. Klagholz’s show-cause order followed an investigation of the district by state-agency staff members and two independent consulting firms--Towers Perrin, which specializes in governance and management, and Arthur Andersen & Company, which focuses on fiscal concerns.

“The evidence in the five-volume Comprehensive Compliance Investigation report indicates that the Newark board of education has consistently failed or has been unable to take corrective actions necessary to establish a thorough and efficient system of education for the 48,000 school children in Newark,’' said Peter Contini, the state’s assistant commissioner of field services, who is in charge of the investigation.

The report paints a picture of Newark as a system in turmoil.

“The C.C.I. team found two worlds during its investigation of the Newark school district: the world of the schools themselves, with misdirected instruction, badly neglected buildings, inefficient practices, and inequitable distribution of even the most basic resources,’' concluded the investigators, “and the world of comfortable offices and important-sounding titles in the district central office, detached from the everyday reality of the schools.’'

“The activities that take place in the district central office accomplish little of value and drain needed resources from students,’' the investigators said.

The report describes a school board that is ineffective, “unengaged,’' and “unfamiliar’’ with budget details, policies, district performance, and other major issues.

It also accuses the board of “willful violation’’ of election laws in hiring board employees to work in the 1992 school board election, allowing unregistered voters to vote, and allowing others to vote twice.

‘Questionable’ Spending

The report also charges that the board engaged in questionable spending practices, including:

• Leasing classroom space at a Newark Airport hangar at an annual cost of $18,000 and employing a full-time coordinator at $54,000 for an aerospace program that “shows little evidence of activity.’'

• Leasing from two board employees an “unsafe, vermin-infested’’ building for use as a school at more than $175,000 a year.

• Requiring potential vendors to donate $1,000 or more to the executive superintendent’s scholarship fund if they wanted to do business.

“The Newark board of education’s inefficient and often illegal practices and the resultant litigation have placed a financial burden on the district’s taxpayers,’' asserts the report.

At the heart of the district’s problems, however, is the quality of its academic services, which the report also indicts.

Special-education students do not receive an appropriate education, the investigators concluded; nor do Chapter 1 students or limited-English-proficient students. Instruction for all is geared toward low-level skills, they said, and teachers receive inadequate help to improve their teaching.

The only in-service training is provided by publishers and district staff members when new textbooks are purchased--even though the district has both an office of curriculum services and an office of professional development.

Despite early-warning tests taken in 8th grade that should alert officials to deficiencies, student performance on 11th-grade proficiency tests is “alarmingly low,’' states the report. “As a consequence, the majority of youngsters who remain in Newark’s schools through 12th grade are in danger of leaving high school without diplomas.’'

Reform Plan Cited

Executive Superintendent Eugene C. Campbell declined to discuss specifics of the report pending the administrative hearing. But he argued that its summary of the district’s problems is outdated and does not reflect improvements made in recent years.

Mr. Campbell also contended that the state takeovers of Jersey City and Paterson have sparked little improvement there.

“From my viewpoint, cosmetically things have happened there, but I don’t think there’s been any systematic change,’' he said.

The state-appointed superintendent recently resigned in Jersey City because she reportedly refused to fire two members of her staff who were involved in what Commissioner Klagholz called “egregious violations of the public trust.’' He has since fired them and named as interim superintendent Frank M. Sinatra, the retired superintendent of the Perth Amboy schools.

In its fight to remain independent, Newark will frequently refer to the reform plan it issued last spring, Mr. Campbell said. Designed with the help of such prominent educators as Robert S. Peterkin, the director of the urban-superintendents program at Harvard University, the plan could be a model for many urban districts, he said.

It outlines ways to insure that Newark students meet four major goals: mastering calculus, speaking two languages fluently, writing a 25-page paper, and demonstrating the capacity to live by high ethical standards.

School officials delivered the plan to state officials in April, but Mr. Campbell said the state has stymied their efforts to implement it.

But the state report said that, “given the pattern of the last 10 years, it is unlikely that the district’s same leadership, however well-intentioned, can demonstrate the ability not just to develop such a plan, but also to carry it through to produce major change.’'

A long, bitter battle is expected. Hostilities between the state and district have broken out periodically since the district was notified last year of the potential takeover.

In one incident, a 65-year-old state official was handcuffed and dragged from a school. For its part, the state staged a 2 A.M. raid on district offices to seize files.