It's been two years now since Boston University made the unprecedented move of taking control of an entire public school system.

Since then, life has not been easy for either the university or the tiny city of Chelsea just north of Boston.

The financially disabled and educationally starved city is the first in the country to boast the complete guidance of a private university.

Since May, 1989, B.U. has assumed the role of school committee for the city, taking on the right to hire and fire, make or break, and wheel and deal as it pleases.

B.U.'s bold actions suggest to universities across the country one possible solution to the nation's urban education woes: tapping into the ideas, faculty and financial resources of wealthy, private institutions.

Over the past two years, B.U. has involved faculty and students from each of its 15 schools and colleges.

B.U. administrators say they can point to many successes in their attempts at reform, but not all of the university's actions sit well with the tiny municipality's residents.

Used to Difficulty

The people of Chelsea have become accustomed to uncertainty over the years. Chelsea is one of the poorest municipalities in the state-over half of the students who enter the school system leave without a diploma. This summer, the city's fate was put into the hands of James P. Carlin, a state appointed receiver. The city's plight is one many will be watching closely.

Initially, B.U.'s proposal was welcomed by most of the 26,000 residents of Chelsea. Under the plan, the city would transfer much of its power to B.U for 10 years, during which time the university would attempt to rejuvenate the system with innovative ideas backed by its considerable financial resources.

For its part, Chelsea had to provide the operational funds for the schools and demonstrate to B.U a new dedication to education.

"Chelsea has a history of not providing money for education," says Ted Sharp, assistant dean at the B.U. School of Education. The problem with the Chelsea system, he says, was basically two-fold:

First was its lack of financial commitment to the schools. Chelsea contributed only one-fifth of its local tax revenues to the schools, falling well behind the statewide average of 54 percent.

Second was "the absolute dearth of political will" to support the need for education, with the exception of the mayor, Sharp says.

Two Early Problems