"Thank you, Kathy, not just for those kind words, but also for everything that you and the members of the Partnership have done for our city and-especially-our city's 1.1 million public school students. You've made a huge difference for them.

"Good morning, everyone. As we meet, those students I just mentioned are preparing to receive their final report cards for this school year. It's not easy being in their shoes. I remember the days when my grades would come all too well, because I was the kind of student who made the top half of the class possible.

"But I want to say that-as a group-this year our students, and their parents, have a lot to be proud of. And we should all be proud of the students for the enormous strides they've made-for progress that would have been thought impossible just a few years ago. Think about this: If five years ago, I had stood here and predicted that by today, New York City public school students would be performing math on a par with students in many suburban school districts-And that students in the historically problematic middle-school grades would be leading the way-Most of you would have thought that I had lost my marbles.

"But the statewide math scores released earlier this month revealed that that is precisely what our students have achieved since our school reform efforts began five years ago this month. There have also been remarkable advances in reading and writing test scores, in graduation rates and in closing the ethnic and racial performance gaps in the classroom-and I'll elaborate on that progress in a few minutes.

"Since 2002, along with Chancellor Joel Klein and his team at the Department of Education, we have been engaged the most far-reaching overhaul ever made of any major public school system anywhere in the nation. Our schools still have a long way to go. At this stage in the process, however, we can step back and clearly see just how our reforms fit together, and appreciate how they have fundamentally transformed our schools, both structurally and philosophically. That transformation has been so successful that I believe there can be no question now about ever returning to the failed status quo that we have swept away.

"In the spirit of the outstanding math scores I mentioned earlier, I'll sum up what we have achieved in this simple equation: A plus E plus C equals R. Anyone know the answer? - and let's not always see the same hands.

"All right, here it is: Accountability plus empowerment plus competition equals results for our students. This is our formula for school reform; let me tell you how it's working.

"The first essential element in that formula is the accountability made possible by the historic decision Albany made five years ago to grant New York City government control of our public schools. That permitted us to scuttle a school governance status quo that was fractured, patronage-ridden, and utterly dysfunctional.

"You can compare the school system we inherited to a ship that was foundering in high seas. Not only wasn't it going anywhere; it was definitely in danger of sinking. Now we've got control of the ship. Accountability is our tool for fixing its worst problems.

"Accountability begins at the top-and now we've also established it at every level of the school system, right down to each classroom in the city. We're holding principals accountable for the performance of their schools. They understand that there are consequences for consistent failure; we've shown that by shutting down 62 schools across the city.

"Teachers are also being held accountable. Our citywide curriculum in reading, writing, and math means principals can more rigorously measure the job they're doing. And the longer school day we've negotiated as part of the teachers' contract means we're getting more value for the instructional dollars we're spending. We're also holding students accountable for their behavior with our successful, no-nonsense approach to school safety.

"By beginning to end social promotion-and giving youngsters the extra help they need-we're also holding youngsters accountable for learning. And by issuing objective report cards on the performance of every school, we're giving the real bosses of the system-the parents and taxpayers-the tools to hold all of us accountable for the job we're doing.

"Accountability also means rewarding good performance. It's why we've created a 'lead teachers' merit pay program, and negotiated 'pay for performance' bonuses of up to $25,000 a year into the new contract with the Council of School Supervisors and Administrators. The CSA's overwhelming vote approval of that contract was also a vote of confidence in our reforms.

"Joel describes what we've done as replacing 'a culture of excuses with a culture of performance.' From the outset, this process has been data-driven.

"Beginning in the new school year, we'll sharpen that robust use of data even further. A new and unprecedented 'achievement reporting and innovation system'-called ARIS-will provide regularly updated information on student performance. It's going to help principals identify classrooms where students are lagging, and enable teachers across the city to share 'best practices' to improve student performance. It's going to give us better answers to the essential accountability question we're asking at every point in the system: Are children learning? If the answer is 'no,' we'll have the real-time information we need to change it to 'yes.'

"That's accountability. Then there's the second element in our school reform equation: Empowerment. The classrooms-not the bureaucracy-are where the real action is in education, and they're where the action always will be. The schools have to be light enough on their feet to respond to each of our 1.1 million students. So we've done something virtually unprecedented in American schools. We've pushed decision-making and resources as close to the child as possible.

"A year ago, almost 25% of principals embraced the challenge of leading 'Empowerment Schools' giving them extra resources and broad discretion in using them-in short, the authority and the means to run their own shows. This year, we've laid the groundwork for the next phase of this empowerment process.

"When the new school year begins in September, the principals in all 1,400-plus schools will, for the first time, truly be in the driver's seat when it comes to making key decisions about their schools. Our new system of student funding will support them by giving every school in the city a fair budget deal from City Hall.

"We've also freed principals from what were known as 'seniority-based transfers'-a euphemism for the musical chairs game of fobbing off teachers who simply weren't pulling their weight on schools that had to take them. And by flattening the bloated bureaucracy we inherited, we realized $350 million in savings-money that principals can now spend to buy textbooks, or hire teachers-or use how they see fit.

"The third element in our reform equation is competition. This was a foreign concept in the old school system. But just as it does in the private sector, competition in education rewards innovation, weeds out failure and provides a mechanism for continuous improvements in quality. That's why we've injected competition into the city's public schools.

"We've done that by dramatically increasing the range of schools, like our 200 new small secondary schools, available to students and parents. We've also made New York the most charter school-friendly city in the nation. By this fall, we will have opened 45 charter schools-and this year, we achieved our longstanding goal of persuading State leaders to let us charter at least 50 more.

"And let me describe another innovation that will promote more competition. In the past, the school bureaucracy told schools what kind of support services-like in-service staff development-that they needed and could receive. It was a cookie-cutter, top-down model-antithetical to flexibility and innovation.

"Starting in the new school year, there will be competition in providing those services. Principals will be the consumers picking and choosing what they want, based on what their schools need. The support groups who do a good job of meeting their needs will flourish. Those that don't, won't. And our students will be the winners.

"Now, combine competition with accountability and empowerment, and you get the sum total of our equation: Results in the classroom. And at your tables are handouts that detail exactly what those results have been.

"They show that five years ago, fewer than 40% of students in grades 3 through 8 scored levels '3' or '4' in either math or English Language Arts-meaning that fewer than 40% were working at or above grade level standards in those areas. Today, close to two-thirds are at levels '3' or '4' in math, and more than half are meeting or exceeding standards in ELA. We're not where we want to be yet-but we're making real progress.

"You'll also see that the most heartening thing about this progress is the way that black and Hispanic students are leading the way. The proportion of black students scoring at levels '3' or '4' in math has increased by 29 percentage points, and that Hispanic student performance is up 29.6 points. Even as the performance of white and Asian students has also improved, their black and Hispanic classmates are still succeeding in closing the gap. And while gains have been smaller in English Language Arts, the same pattern holds true.

"Graduation rates are also on the rise. Measured by the State Department of Education's yardstick, which excludes students earning their General Equivalency Degrees, in 2002 only 41% of the city's public high school students graduated within four years. In 2006, roughly half did-a 20% increase. And in fact using any yardstick, whether it includes or excludes GED students, special education students, and other groups of students, the story is the same: A steady upward trend in graduation rates.

"Today, we're five years into this philosophical and structural transformation of education in our city. And most of the biggest pieces in our school reforms are now in place. From here on out, most of what we will be doing will be deepening and refining the accountability, empowerment, and competition that I've just described.

"We'll also build on the already significant gains we've made in improving the quality of the principals and teachers in our schools. Any organization is only as good as the people in it. And that's why we will continue to work with the UFT to revise the teacher tenure process. We need to make sure that those who receive tenure have genuinely earned it. We'll also explore new incentives designed to put our best teachers in the schools where their talents will do the most good-teaching the students who need them most.

"These sound like basic ideas to most of you in this room: Reward excellence, promote based on merit, invest in success. But far too often, these have been unknown in public schools-and we're changing that. An intensified focus on quality will build on what we've achieved with accountability, empowerment and competition. That's our formula for successful school reform.

"The results we've achieved speak for themselves. They've created a new era of hope in our city schools, and made them a model for big-city schools across the nation. Other cities are looking to us for guidance in turning their schools around, because they see that we're no longer writing off generation after generation of students. Instead, for the first time in years, our schools - and our students - are on the right track. And it's our students who deserve the real credit for the incredible distance we've come in these past five years.

"They have shown what they can do if the schools put their interest first. That's what we've done in these past five years-put the children first. By staying on the course we've set, we can do even better for our children in the years to come.

"And on that note, I'll be glad to take some questions."