(FORTUNE Magazine) – IT IS THE BEST of times and the worst of times for America's schools. Best, because after years of talking about it, the nation's political leaders finally seem dedicated to radical reform. In April, President Bush announced America 2000, a four-pronged assault on educational mediocrity intended to drive the U.S. toward the six ambitious national education goals that he and the governors of the 50 states adopted last year. Worst, because the reasons reform is essential have never been more grimly apparent. In August the College Board announced that scores on the Scholastic Aptitude Test had declined four points from last year, to 896 out of a possible 1,600. The verbal score, which fell to 422, was the lowest on record. This is after a decade in which spending per student, after inflation, has risen roughly 33%, schools have stiffened graduation requirements, and practically every major U.S. corporation has increased its involvement in K-12 education. The mood among the 300 executives, educators, and politicians who gathered in September in Washington, D.C., for FORTUNE's fourth annual education summit reflected a mix of anger and hope. Says Alcoa Chairman Paul O'Neill: ''It makes me angry to go to business meetings and find that my colleagues don't know about the President's education goals. And it makes me very angry to find that we're spending 95% of our time bashing each other about the things we disagree on and maybe 5% working on the things we agree on.'' Tempering that frustration was the discovery that we now agree on quite a lot. We agree, for instance, on the need to educate all kids -- not just those in the top half academically. We agree on the need for higher standards, more effective tests, a curriculum that teaches the skills industry needs, better teacher training, and more preschool education. As Secretary of Education Lamar Alexander observes: ''There is an enormous amount of common ground about what to do. What's left is to figure out how to do it.'' This report on our summit, which leads off a five-article special report on education, zeroes in on how business can make a difference. Robert Kennedy, CEO of Union Carbide, believes more executives should bang on their bully pulpits: ''We can begin by communicating the urgency of the problem to our own employees and getting them involved.'' Business must also be more vocal and articulate about what it needs from the schools. Says Ian Rolland, CEO of the Lincoln National insurance company in Fort Wayne: ''We really have not done a very good job of telling the educational community what we expect -- maybe because we're not sure.'' BellSouth Chairman John Clendenin knows what he'd like to see -- more emphasis on student writing: ''Demanding this of your local schools is a specific change that is achievable and will make a difference.'' Above all, business can help raise expectations. Says RJR Nabisco Chairman Louis Gerstner Jr.: ''We have reached this point of dismal academic performance because we as a country stopped demanding excellence. If we accept second rate, we will become second rate. We must demand the best, because you never get more than you demand.'' NONE of the ideas proposed in President Bush's America 2000 program inspired more discussion at FORTUNE's summit than his call for setting national standards in math, science, English, history, and geography, and holding educators accountable for achieving them. The President wants the U.S. for the first time to develop voluntary national achievement tests for fourth-, eighth-, and 12th-graders, and to have the initial battery of those tests ready to go by September 1993. In a country that has long cherished local control of education, just talking about national standards is revolutionary. Opponents complain that it isn't fair to judge schools on performance, since many are coping with forces like drugs and poverty that are beyond their control; that teachers will teach to the test; and that decentralized schools cannot be measured against a single national benchmark. Rubbish. For starters, America's 110,000 schools are already being measured against a single benchmark -- international competition -- and are coming up disastrously short. As for teaching to the test, Keith Geiger, president of the National Education Association, the largest teachers' union, notes, ''If our assessment instruments measure the learning goals we have for students, then it would be perfectly appropriate to teach to the test.'' Another objection to standards is that poor performance on national tests might damage students' self-esteem. If you buy that, consider that on a 1988 international math test conducted by the Educational Testing Service, American students scored 12th out of 12 countries and provinces. Yet when asked how good they thought they were in math, 68% of the U.S. kids replied, ''Very good.'' Says Lou Gerstner: ''Clearly these kids do not have a self-esteem problem. They have a serious performance problem.'' In a nation of diverse people and unequal schools, the challenge is to agree on exactly what those new standards should be and then how to test students against them. How to do both without imposing a standardized curriculum? Here business's help is critical. Says Labor Secretary Lynn Martin, whose Commission on Achieving Necessary Skills is trying to define the basic competencies needed for most entry-level jobs: ''We have to have a better dialogue between business, schools, parents, and community leaders about what skills are needed and why.'' SOME of that dialogue is taking place in a partnership led by the Learning Research and Development Center at the University of Pittsburgh and the National Center on Education and the Economy in Rochester, New York. Their New Standards Project aims to build a new generation of evaluation tools that replace multiple-choice tests with performance exams and project appraisals. Says Lauren Resnick, head of the Pittsburgh center: ''Life doesn't come packaged in short answers and bubbles.'' To design the exams, Resnick and Marc Tucker, her counterpart in Rochester, are working with teachers and corporations from 15 states and six major urban school districts. Collectively these account for 42% of U.S. school children. Allowing clusters of states to offer their own regional exams and grade them according to a national standard finesses the issue of state vs. federal control. The key to turning out better students, of course, is better teaching. With support from AT&T, Chrysler, Du Pont, Ford Motor, and several other corporations, the National Board for Professional Teaching Standards, headed by former North Carolina governor Jim Hunt, is developing new ways to raise standards among teachers and to evaluate performance. Like board standards in the medical specialties, these evaluations will be voluntary. They will go beyond written tests and rely on in-class observation, classroom simulations, videotapes of teachers at work, and interviews. Teachers who make the grade will receive an advanced certificate from the national board entitling them -- in theory, at least -- to more pay and other benefits. Says Hunt: ''Assessment of teachers is essential for reform. We must learn what makes great teachers and encourage hundreds of thousands of them to achieve that status.'' In America today two subjects that get little respect are math and science, a conclusion confirmed in the 22nd annual Gallup poll on education. Asked to rank the education goals set out in America 2000, Gallup's respondents deemed making U.S. students first in the world in math and science by the year 2000 the least important target. Not so, says Lamar Alexander, who thinks that America's failures in this area are so dismal that an alarm bell ''ought to ring all night.'' One man attempting to awaken U.S. kids to the excitement of science is Dr. Robert Ballard, discoverer of the Royal Mail Ship Titanic and director of the Center for Marine Exploration at the Woods Hole Oceanographic Institution. After a 1986 Turner Broadcasting System special showed him at work on the Titanic deep in the Atlantic, Ballard received more than 16,000 letters from youngsters asking how they could do what he does. To capitalize on this enthusiasm, Ballard has persuaded several companies, among them Electronic Data Systems, Cray Research, TBS, and the National Geographic Society, to underwrite an educational innovation he calls the Jason Project. Jason is the name of the robot Ballard invented to explore and transmit images from hard-to-reach places like the mountains that lie beneath the sea. Two years ago, Ballard began taking hundreds of thousands of high school students on annual two-week electronic field trips by hooking them up via satellite to his traveling laboratory. In 1989 the Jason team went to the Mediterranean Sea to the deepest known ancient shipwreck site. Last year they explored two sunken War of 1812 warships, complete with every kid's favorite: skeletons of sailors. To participate, students go to one of several satellite receiving centers -- there are now 20 -- where they view live, interactive broadcasts, ask questions of Ballard and his team, and even help control the robot. Beforehand the kids spend an average of 50 hours studying a special curriculum prepared by the National Science Teachers Association. The cost to the schools: just $3 or less per student. In December some 600,000 students and 10,000 teachers will join the third Jason expedition -- bound for the Galapagos Islands. Says Ballard: ''Kids are born scientists. The first question out of their mouth is 'why?' '' Turned on as a student might be by skeletons and seaweed, he or she won't ever be a scientist without first learning math. In Fort Worth, under a program called C 3 -- community, corporation, and classroom -- local businesses such as Tandy Corp., American Airlines, and Burlington Northern evaluated more than 1,000 jobs to determine what skills they needed and concluded that math was an area where the school system fell short. Students weren't required to take much, and the little they took was more theoretical than practical. THE SOLUTION: Within three years the Fort Worth schools hope to require all students to take algebra in the eighth or ninth grade. To make sure the kids are ready, the College Board and several foundations brought a new program this year to Fort Worth called Equity 2000 to train teachers in innovative methods of math instruction, to counsel students and parents, and to motivate the youngsters to learn and to appreciate math. In this area too, better performance hinges on improving both the quality and quantity of math and science teachers. The White House is aiming for a 50% increase by the year 2000 in the number of teachers with a substantial math or science background. U.S. business can lend a hand by providing in-service training and teaching grants to those already in the classroom. Cray Research runs a staff development program each summer for some 900 math and science teachers in rural northwestern Wisconsin. GTE sponsors a program called GIFT -- Growth Initiative for Teachers -- that each year awards 50 teams of math and science teachers $12,000 grants, part of which must be spent on a classroom project they have designed. One GTE teacher-team built a space shuttle cockpit and took students to the Kennedy Space Center in Florida to observe a launch. Also growing in popularity are programs that encourage corporate engineers to become math and science teachers. Polaroid, Hughes Aircraft, Rockwell International, and Digital Equipment are just a few of the companies that will pay for retirees, and in some cases active employees, to go back to school to get their teacher certification. This year Digital's Engineers in Education program will move another 60 to 70 people with bachelor of science degrees into education. But will this kind of slow, incremental effort really change American education? No, says Chris Whittle, the chairman of Whittle Communications: ''You can't make a light bulb out of a candle. Instead of trying to improve the current model, we need to take it completely apart and put it back together into a fundamentally different whole.'' Lamar Alexander and his team agree. One way they hope to realize the goals of America 2000 is by challenging the country to build a ''new generation of American schools.'' It's easier to say what these schools are not than what they are. Among other things, they will abandon the traditional assumption that schools close their doors at three; that subjects are taught in 50-minute classes; and that students must be grouped by age and grade. The White House is fostering such new schools in two ways. First, Bush is asking Congress to provide grants of $1 million to each of at least 535 communities -- one in each congressional district, plus two per state -- so that they can create their own high-performance New American Schools. At the same time he has asked U.S. business leaders to contribute $200 million to launch the New American Schools Development Corp., a private, nonprofit organization that will award contracts in 1992 to as many as seven design teams. These teams of companies, universities, and education consultants will fashion new kinds of learning environments for students and then help communities adapt them to their individual needs. Meanwhile, a number of states and businesses are attempting to reinvent schools on their own. In 1990, RJR Nabisco launched its Next Century Schools project, which will invest $30 million over the next five years in 45 ideas to change the schools. For six years, Apple Computer's Apple Classrooms of Tomorrow project (ACOT) has been exploring how technology affects learning and teaching. INSTEAD OF LISTENING to lectures all day, more than 3,000 ACOT students in 100 schools around the country work with Apple-donated technology, including personal computers, laser disk players, optic scanners, and video cameras. Using infrared satellite images called up over on-line databases, eighth- graders at the Booth Fickett Math Science Magnet School in Tucson, Arizona, were able to study Hurricane Bob as it ravaged the East Coast. Says student Casiano Armenta: ''By doing this we learned that hurricanes are controlled by warm and cold fronts, high- and low-pressure areas, steering winds, and jet streams.'' ACOT research shows that students who use high technology to learn are more self-confident, more comfortable working in teams, and better able to solve problems. So far the most radical scheme to restructure U.S. schools is the $2.5 billion project recently launched by Chris Whittle. Having learned the depth of public educators' resistance to change during his much-publicized battle to sell Channel One, an advertiser-supported news program, to high school students, Whittle now intends to end-run the whole system. His plan is to open 1,000 low-cost, state-of-the-art, for-profit school campuses around the country by 2010. Whittle offers no apologies for the fact that his schools will, if successful, make money. Says he: ''We are all seriously kidding ourselves if we believe that business-led charity is the answer to the current crisis. It costs $250 million per hour to run American K-12 education. That means all the money business currently spends annually on philanthropy could run our schools for about 90 minutes.'' Nonetheless, Whittle stresses that his will ''not be BMW schools,'' designed for the top 1% of U.S. households. Rather, they will be ''Beetle schools,'' open to all students, with an average annual tuition of $5,500 -- roughly what the public schools spend per student. If Whittle succeeds, he expects a pack of private competitors will follow -- and hopes public schools might learn from and imitate his project as well. Supporters of school choice see this kind of market-led competition for the hearts, minds, and dollars of K-12 students as the perfect tonic for what ails American education. And free-enterprise fans were surprised and cheered when the White House's America 2000 program broadened the debate by advocating that states and local districts give parents the right to use public money to send their kids to private and parochial schools. That turned an already heated controversy over public school choice into the rhetorical equivalent of a food fight, with both sides slinging barbs like broccoli. Says Lewis Finch, superintendent of Jefferson County schools in Colorado: ''Corporations want us to operate public schools like they operate their businesses. They can carefully select their raw materials to produce, say, the best Oreo cookies in the world. But out behind the plant is a pile of refuse made up of those that don't qualify. Is that the kind of school system we want for America? I think not.'' Even some ardent backers of public school choice worry that a nationwide system of education vouchers might do more harm than good. Says Joe Nathan, director of the Center for School Change at the University of Minnesota: ''Choice, like electricity, is a very powerful tool. If handled carefully, it can create enormous benefits for millions of youngsters. If not, it will create far more problems than it solves.'' The consensus at FORTUNE's summit was that public school choice, which has proved its worth in a handful of school districts, such as Cambridge, Massachusetts, and East Harlem in New York City, should continue its slow expansion. But private schools, except in a few special situations -- say, to help pregnant teenagers -- won't be granted public dollars to join the party anytime soon. THOUGH the first of America 2000's six education goals declares, ''All children in America will start school ready to learn,'' there is no goal that says, ''All children will graduate ready to work.'' The Administration's otherwise comprehensive program offers no specific plan to help the 40% of high school graduates who won't immediately go on to college and the roughly half of college-bound grads who later drop out. Several governors are working to fill that gap. One is Arkansas Governor and likely Democratic presidential contender Bill Clinton. ''We can no longer let kids get out of high school and wander around trying to figure out what to do,'' he says. ''We've got to have a better school-to-work transition.'' Last spring, Clinton persuaded the Arkansas legislature to pass a bill that provides funding for at least five youth apprenticeship programs in areas critical to the state's future, among them health, machine tooling, and entrepreneurship. Political leaders in Oregon are also aware that not everyone will grow up to be an astrophysicist or an investment banker. Earlier this year they passed a law that will eventually establish the nation's first statewide apprenticeship program for students who don't go on to college. Under the Oregon plan, all high school students would be required to demonstrate competence in math, science, reading, and other academic courses by the tenth grade. At that point, they would have to choose between a college prep or job-training curriculum. Give Oregon's plan points for ambition. But its final realization may be years away. Several business leaders in the state note that at a time when manufacturing companies are reducing work forces, apprenticeships are an unwanted expense. Companies also complain about the safety rules, child labor laws, and liability issues they have to contend with. ''We've got a long way to go,'' admits Gary Carlson, who serves as vice president of Associated Oregon Industries, a trade group that represents 15,000 companies in the state. ''But companies can't just cheer on the sidelines. We have to get in and work with schools to provide workplace experiences, along with a structured curriculum.'' One new industry-driven course of study that is beginning to catch on around the country goes by the name of Tech Prep, or 2+2. This curriculum aims to prepare high school kids for two years of community college. Tech Prep students take a full load of academic courses in addition to several technical courses, some of which count for community college credit. In southern Maryland, high schools in three counties are working with Charles County Community College to offer Tech Prep programs in engineering technology, business and management, and health and human services. They % provide a model for how to begin. First, the college invited ten electronics technicians to spend two days answering the question, What do I do as an electronics technician? Later it put a related question to the managers who hired the technicians. In phase three, the faculty of the college and participating high schools will work together to ensure that all these skills and tasks are incorporated into their Tech Prep program for engineering. For all the public optimism and enthusiasm of FORTUNE's education summit, a number of executives privately expressed a deepening gloom over the willingness of the educational establishment to embrace new ideas. After several years of working to improve this sprawling bureaucratic system, they wonder if any significant progress is possible. But RJR Nabisco's Lou Gerstner warns corporate America to hang in there. ''We can't become complacent or lazy or tired just because things are taking longer than we want them to,'' he says. ''Like the Soviet citizens who recently rejected the regime that would roll back their hard-won gains, we must be steadfast. For business, for all of us, this is not a matter of philanthropy. This is a matter of preserving our democracy and our standing in the world.'' Could any cause matter more?

BOX:

GREGORY R. ANRIG ''As long as there is testing in the public schools, there will be prayer in the public schools.'' Anrig is president of the Educational Testing Service.

ADAM URBANSKI ''If you always do what you've always done, you'll always get what you always got.'' Urbanski is vice president of the American Federation of Teachers.

JOHN L. HICKMAN JR. ''At my school I embarked on something radical: a dress code for teachers.'' Hickman is principal of Little Rock Central High.

GOV. ROY ROMER ''Standards and assessment are two halves of a sandwich. It's what's in the center -- the curriculum -- that makes the difference.''