Like a lot of entrepreneurs, Michael and Tonya Milkie got their start-up idea while working in a big organization where they felt stifled by bureaucracy and bloat. They had a vision of an alternative operation that would be nimbler and more effective. So when the chance came to start their own shop, they jumped at it, and now, a decade later, they have a chain of seven.

But the Milkies don’t sell their own blend of coffee or a boutique variety of running shoes. They are former teachers with the Chicago Public Schools (CPS) who in 1999 started a charter school on Noble Street in the West Town neighborhood for 126 high-school students. “We wanted to put the emphasis on results in both academics and school culture,” Mike Milkie says. “It’s really important to us that kids care about learning and care about each other.”

Working primarily with kids from low-income and Hispanic backgrounds, the Milkies established an extralong school day, an exacting core academic program—the only foreign language offered is Russian—a meticulous dress code, and a tight focus on character development. As a result, more Noble kids ended up graduating: Last year, 88.2 percent of Noble College Prep students graduated at the end of their four years, compared with the systemwide CPS average of 68.7 percent.

In 2006, the Milkies started cloning Noble Street, and now the Noble Network of Charter Schools has a total enrollment of 2,600 students in grades 9 to 12 at its campuses in Humboldt Park, Grand Crossing, Hermosa, and other disadvantaged parts of the city. What’s more, the Noble Network expects to open two more schools this year and one in 2010, for a total of ten schools. Not bad for a ten-year-old start-up.

As it turns out, the Milkies, and others like them, were in the vanguard of a new approach to education: charter schools, quasi-independent institutions often organized around a core mission or philosophy. Charter schools first emerged nearly 20 years ago after the frustration of parents and lawmakers over the perennial failure of public education reached a breaking point. In 1991, Minnesota became the first state to authorize charters, and five years later, the Illinois legislature followed suit. Since then, according to a 2008 study by the Rand Corporation, “charter schools have been among the fastest-growing segments of the K-12 education sector in Chicago and across the country.”

Given recent developments, that growth rate will likely only accelerate. In Chicago, Mayor Richard M. Daley, along with his former schools chief Arne Duncan, have been longtime champions of charter schools, which are an integral part of their Renaissance 2010 plan, a six-year-old initiative to provide the city’s public-school students (and their parents) with first-rate educational options. “We’re dramatically changing the opportunity structure,” Duncan told Chicago a few weeks before leaving his CPS post to become the U.S. secretary of education. “We have tried to make this [city] a mecca for people who want to make change in public education.”

Not only has Duncan carried his reformist zeal with him to Washington, D.C., but his new boss, President Barack Obama, has signaled his eagerness to pursue different strategies to improve U.S. schools. “We should experiment with things like charter schools that are innovating in the classroom,” insisted the president in his first postinaugural press conference. The fact that Obama’s statement was unprompted only underscores the important role charter schools will likely play in his administration’s pursuit of educational excellence.

Of course, it helps to understand exactly what charter schools are: privately managed public schools that, while free from many of the bureaucratic rules and union obligations that bind traditional public schools, must still demonstrate to state and city governmental agencies that their students are meeting or surpassing educational performance standards. In 1996, the Illinois legislature authorized creation of 45 charter schools: 15 each for Chicago, the suburbs, and downstate. In the suburbs, where there are only two charter schools, officials have been reluctant—or found it unnecessary—to implement this new educational model. One of those suburban schools—Prairie Crossing Charter School in Grayslake—exists today only because its founders, rather than applying to the local school district, made their appeal for a charter directly to the Illinois State Board of Education.

Chicago, however, quickly used up its original allotment, and in 2003, the legislature approved another 15 charters for the city. Because some of the city’s original charter holders were allowed to replicate their programs at multiple sites, today Chicago has 67 charter-school campuses. Compared with national figures, that is a relatively small number: New York City has about 100 charter schools, and Michigan has 232—with about 50 of those in Detroit, a public-school system that, with some 99,000 students, is less than a fourth the size of Chicago’s.

Despite their autonomy, it would be a mistake to assume the city’s charters are rogue institutions interested only in supplanting more traditional schools. “We’re not competing with CPS,” insists the Noble Network’s Michael Milkie. “All good charter operators hope the good things they do will be picked up by other schools and [eventually by] CPS.” Or, as an administrator at Namaste Charter School puts it, these revolutionary new educational institutions are “houses of innovation within CPS.”

The key idea behind any success at Chicago public schools during Duncan’s seven and a half years may have been the notion that one size doesn’t fit all. CPS, it has been argued, can’t adequately deal with the widely divergent needs of its 405,000 students—spread across more than 600 schools—simply by relying on the blanket institutional approach it settled into during the 20th century. Charter schools, which accommodate about 5 percent of Chicago’s public-school students, were only one solution to the city’s badly flawed educational system. Other alternative “schools of choice,” the educational catch phrase of the moment, included magnet schools, contract schools, and other new, smaller-scale options. “We want to have 600 high-performance schools, and charters are a part of that but not all of it,” Duncan said.

Nonetheless, those small, nimble charter schools have been on the frontline in the city’s attack on educational inequities. “The ways you structure your school and your resources to meet the particular needs of your students—those are decisions best made at the [school] building level,” says Elizabeth Evans, the executive director of the Illinois Network of Charter Schools (INCS). “It’s hard to make those changes at an administrative level for hundreds of schools. Charter schools really up your ability to meet a need where it is.”

Even at the charter schools, those needs—and the institutional mission—can vary widely from one campus to the next. Educational entrepreneurs have started Chicago charter schools that focus on everything from boosting the academic standing of young African American males, to combating childhood obesity, to providing “virtual” at-home classrooms. That narrow specificity can have drawbacks: Due to shrinking enrollment and a significant budget deficit, the seven-year-old Choir Academy of Chicago Charter School, which emphasized music to improve academic performance, will close at the end of the school year. (In the same way, a charter’s autonomy can sometimes cause blind spots: This winter, two of the three Chicago high schools that were accused of improperly strip-searching students were charters whose discipline procedures were not dictated by CPS rules.)

A school’s mission aside, the crucial question to ask is whether charter schools work. The failure rate among Chicago charter schools has been relatively low. In addition to the Choir Academy, there have been only a few other casualties. In 1999, Chicago Preparatory, a school on the Far South Side for students with problems with drug and alcohol abuse, shut its doors in the wake of reports that it had been poorly managed. Three years later, the Chicago Board of Education, citing poor test scores, did not renew the charter for Nuestra America in West Humboldt Park. Triumphant Charter School, created to help poorly performing South Side middle-school students, surrendered its charter in 2005 amid allegations of financial improprieties; this past December, its former principal was charged with stealing thousands of dollars from the school to finance her high-priced shopping sprees. (A fourth school, the Thomas Jefferson Charter School in Des Plaines, was closed in 2003 for failing to meet special education and other state requirements; before moving to the northwest suburbs, the school had spent a few weeks in Chicago after a planned DuPage County site failed to materialize.)

Looking to performance as a gauge of success, some grade-school charters have boosted the reading skills of their low-income students by more than one grade level in a year’s time, and high-school charters as a rule see higher percentages of their students graduate and enroll in college than do traditional CPS schools.

Yet while individual charter schools tout their students’ high scores on standardized tests—students at charter schools must take the same state-mandated exams as all other CPS students—that 2008 Rand Corporation study found that Chicago’s charters in general didn’t necessarily improve scores. Echoing those findings, “The Charter Difference”—a report authored by a former charter teacher and a researcher at the University of Illinois at Chicago, and released this February by the Grassroots Education Movement—concluded that Chicago’s charter high schools had only marginally improved student performance. In 2008, according to the report, students at the city’s charter high schools averaged 16.71 on the ACT test, compared with an average score of 15.82 at other CPS high schools.

Elizabeth Evans of the INCS immediately challenged the report, citing improved test scores and higher graduation rates among students at charter schools. (She also pointed to the long waiting lists to get into charter schools as further evidence of the institutions’ viability.) Furthermore, the 2008 Rand study did discover a measurable upside to the charter-school experiment that went beyond test scores. “There is really positive news on graduation and college attendance rates, [which] are closer to the goals of most families,” says Ron Zimmer, a coauthor of the Rand study. He adds that charters may also do a better job with arts and culture programming, at increasing their students’ expectations for themselves, and in providing a safer environment for learning.

Under the state legislation that created the charters, the schools are open to any and all students. When there are more applicants than available spaces—as there are in virtually every Chicago charter, where waiting lists are a common bragging point—a lottery decides who gets in and who doesn’t. “We’re here to answer a deficit that exists in the neighborhood, so we [recruit] students who live nearby,” says Brother Mike Fehrenbach, the president of Catalyst, which runs the Howland charter school in the North Lawndale neighborhood.

Voicing a complaint offered by other critics, Julie Woestehoff, the executive director of PURE—Parents United for Responsible Education—worries that charter schools select only the brightest or best-behaved of their applicants, and that they are quick to boot out students who fail to meet academic or behavioral standards. “They are picking the ones they want,” she insists (relying primarily on anecdotal evidence), “and getting rid of the ones they don’t want.” Duncan counters that all CPS schools are being prodded to improve, and that ultimately charter schools should not be the only places that motivated parents will want to send their kids.

As for funding, CPS (according to the INCS) provides 82 percent of the per-pupil expenditure for each student enrolled at one of the city’s charter schools. (On average, CPS spends $11,000 on each of its students.) The schools also receive any federal funding that “follows” the student, such as lunch money for qualifying low-income students.

To raise the rest of the necessary money, charter schools go after philanthropic funds; in some cases, fundraising fills about 25 percent of a school’s coffers. By law, CPS cannot give a charter money for capital improvements to the school’s own facility, and they must charge rent to any charter using a CPS facility.

But it’s in the hiring of teachers “that charters get to distinguish themselves most,” Noble’s Milkie says. It helps that charter schools are not bound by the same legislative rules as other public schools, nor are they beholden to the teachers’ union. Hence, they “can look to a much larger pool of talent,” says Evans of the INCS. At charter schools formed before 2003, only 75 percent of the teachers need hold state certification (at CPS and suburban public schools, all teachers must be certified); that number drops to 50 percent at charters formed after 2003. “I can get teachers who are coming over from another career to be part of education,” says Beth Purvis, the executive director of the multicampus Chicago International Charter School. What’s more, she can offer a salary based on experience in another field, rather than strictly adhering to a union pay ladder that recognizes only years spent in education. (Purvis also notes that 15 to 20 percent of the 500 teachers at her network’s 12 campuses live in the suburbs, something that CPS rules prohibit.)

Despite the professed eagerness of some administrators to reward their teachers, most charters generally pay less than union wages. Tim King, the founder and CEO of Urban Prep, says that charter schools enjoy the luxury of a teachers’ contract exemption. “We’re in our third year,” King says. “In the short run, we can stay competitive with CPS salaries because we don’t have [teachers] with 20 years of experience and two Ph.D.’s. It would be difficult for us to accommodate a teacher at that level. We’re trying to figure out a model that will allow us to hold on to our teachers as long as they want to be here.”

Some charter administrators hope that their teachers might one day feel so viscerally the school’s mission—and see so plainly the impact they have on students’ lives—that the pay differential won’t bother them too much. And there are non-pecuniary ways to compensate teachers, notes Tim Knowles, the director of the University of Chicago’s Urban Education Institute. An outgrowth of the university’s Center for Urban School Improvement, the institute operates four charter schools in the neighborhoods near the university. “Good working conditions for teachers are absolutely critical,” says Knowles, who came to the program in 2003 from a post as deputy superintendent of Boston’s city schools. “Salary and benefits and vacation days are important, but you can’t neglect the actual day-to-day experience in the schoolhouse.”

Knowles runs down a checklist. “Do teachers have a professional workspace and laptops and voice mail so parents can reach them?” he asks. “Do they have time when they can think and write and work together? Those are things that people in other professions view as just the basics for getting through the day, but in many urban schools, those things don’t exist.”

All the items on Knowles’s checklist are part of the workplace environment at the U. of C. charters. But there is also the constant mentoring and collaboration that come from the two-teacher model in place there (as well as at many of the city’s other K-8 charter schools). With two teachers—or a teacher and a full-time aide—in a classroom, it is easier to work with students in small groups; what’s more, teachers have a sounding board right there in the room with them. And at U. of C. charters, Knowles explains, teachers can step up from the classroom level to train younger teachers, lead a literacy program, or take on some other “meta-classroom” role without giving up their first love: the classroom. “We have hybrid roles they can play so they have an opportunity to have a broader impact,” he says, “but don’t leave the classroom altogether.”

Marilyn Stewart, the president of the Chicago Teachers Union, says those perks and benefits are tangential to the issue of salaries. “We’re professionals, and we love what we do,” she says. “But we need to be paid, too. If you want to hire only the youngest people and use them until they [can’t afford] to work for you anymore, that’s abusive.” Union contracts are hard-won protection against such abuse, Stewart says. “We have the right to be unionized in Illinois—and for good reasons.”

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There is another difference that Stewart emphasizes. Charter teachers typically don’t leave the classroom at the same time CPS teachers do—and neither do their students. A key difference between charters and traditional schools is the extended school day and year. In North Lawndale at Catalyst’s K-8 Howland charter school, most children arrive with reading and math skills that are well below average. “They are from families that can’t provide many resources at home,” says Brother Fehrenbach. “They come to us well behind where they could be.” Thus, every student gets 80 minutes each of reading, math, and language arts every day, a total of 1,200 minutes of core instruction a week—which would take up the lion’s share of the 1,500-minute school week at CPS. At Howland, the school week is 2,100 minutes, leaving room after the core classes for gym, cultural enrichment, and other activities.

“Our students desperately need more time,” Duncan told Chicago. “Charters have longer school days and school years,” and they leverage that time into more instruction. “I’m fighting for every minute I can get for our kids.”

But union contracts don’t budge much. The CTU’s Stewart says she would support added instructional time “if there were proof that it is having an impact on student performance. But there isn’t. With their [longer school] day, the charter schools should be blowing other schools out of the water. They aren’t.”

The charter schools’ extended calendar also draws fire from other quarters. PURE’s Julie Woestehoff points out that, despite the longer hours, many teachers in charter schools are paid less than union requirements. “You’re assuring yourself very fast turnover,” she says. “If you want to bring young, inexperienced teachers into what can be very challenging circumstances, burn them out, and spit them out two years later, that’s a tradeoff.” Stewart insists that rapid turnover is rampant at charters, and that it undercuts the kind of continuity that benefits both teachers and students. If young teachers don’t have veterans around to help them over rough spots, she says, the pass-along effect on students is considerable. “You need those experienced teachers in your work force,” she says.

Yet history has demonstrated that many experienced, dedicated teachers are drawn to charter schools, despite the potential for diminished salaries. Eboni Wilson is in his third year as the principal at Ralph Ellison High School, a campus of Chicago International Charter School on the Southwest Side. Rescued from the hard-hit neighborhoods of South Central Los Angeles by a college football scholarship, Wilson went on to pursue a doctorate in education with the professed intent of helping other kids from backgrounds similar to his own. From the beginning, he was drawn to charter schools. “In Chicago you’re doing things for your inner-city schools that surpass other places,” Wilson says. “You have very high expectations and you’re holding everybody accountable—students, teachers, parents—and success is inevitable with that.”

At Ellison, Wilson works at keeping his teenage students focused on the long-term benefits of academic achievement. He spends three lunch periods a day in the lunchroom talking with students and using his own experiences to demonstrate that they, too, can prevail. “They need to see you can do this,” Wilson says. “You can get past your circumstances; you can change the things that happen in your life. They see that I did.”

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Although the majority of the educational entrepreneurs behind charter schools have targeted underserved minority students, the flourishing of charters has also led to unusual school options for other families. A standout among them is the Chicago Virtual Charter School, a hybrid of distance learning, homeschooling, and traditional classroom education. The three-year-old school has a detailed online curriculum and strict requirements for being logged in for five hours of instruction five days a week.

Cathy Elizondo, a Garfield Ridge mother with a master’s degree in education, took the virtual route for her two young children. She set up a school area in the living room of her home, and she frequently works with her kids more than the required five hours. “This is totally individualized instruction, going at the child’s own pace,” Elizondo says. “I know the traditional schools say they’re doing that, but they can’t go this far.”

After a dozen years, it remains to be seen just how far charter schools can go. “We’re starting an entirely new program and we have 300 kids coming through those doors every single day,” says one charter-school administrator. “Give us a little time. Please.”