Microsoft just reported its quarterly earnings, posting $5.7 billion in profits but disappointing investors, who had hoped for more. News like this naturally excites Wall Street more than it does education wonks. However, much of the wealth that now funds education reform initiatives, from teacher evaluation to charter schools to Common Core standards, was built at companies like Microsoft and Netflix.
We here at Gadfly thought it might be fun to track how some of the companies most associated with education reform are doing. So far I've added five companies to the Fordham Investment Index (or FINNdex): Netflix (associated with digital learning backer Reed Hastings), Wal-Mart Stores (the Walton family), The Gap (the Fisher family, supporters of KIPP and other efforts), Microsoft Corporation (Bill Gates), and KB Home (founded by reformer Eli Broad).
The market has not been kind to the FINNdex year-to-date. Unfortunately, many of education's leading funders come from the technology and real estate sectors, which have had a rough time over the past few years. The chart below shows performance of an equal investment in all five stocks (in blue) versus the S&P 500 (in red):
Let us know in the comments which other stocks associated with education reformers you think we should add. We'll update you on the performance of the FINNdex as its members pop up in the news from time to time.
Times are tight for school budgets, which is one reason Fordham and others have dedicated new attention and energy to doing more with less. Being conscious of cost-effectiveness is about more than pinching pennies, however; it also enables schools to get the very best quality for the dollars they spend on services.
Nathan Levenson, managing director of the District Management Council and a former district superintendent in Massachusetts, highlights this in an interview today with StudentsFirst, talking specifically about special education and early intervention:
I like to simplify this topic, and assert that only three things really matter in early intervention -- reading, reading, and reading. The stats are clear -- reading is the gateway to all other learning. Children who struggle in reading are over-referred to special education and often never catch up. This is especially sad, since we have "cracked the code" on how to teach reading. The National Reading Panel and the What Works Clearing House spell it out. Some districts feel they don't have enough money to implement a best practice reading program, but our studies have shown that typically it costs 1/2 to 1/5 as much as the current mish-mash of elementary support programs. The obstacles aren't dollars, but focus, turf battles, silos, and other organizational self-imposed barriers.
The mentality that schools don't have enough resources ? despite marked increases in per-pupil spending over decades ? can lead to blaming every failure in education on a
South Carolina is in hot water with the Education Department over the state's failure to meet federal maintenance of effort requirements for special education spending. ED is threatening to dock South Carolina $111 million in federal aid after rejecting a waiver request. The Palmetto State has cut SPED support for three years running due to budgetary pressure.
Federal mandates are coming under attack across the board, often for good reason. Idaho has announced it will refuse to comply with NCLB ? not ask for a waiver ? while the Council of Chief State School Officers is planning to blitz Arne Duncan with waiver requests. In South Carolina's case, however, lawmakers felt they couldn't continue to privilege special education students over every other recipient of state dollars. The state could, of course, have made its case more compelling by matching spending cuts with an agenda of effectiveness in education services, possibly?following Massachusetts' example of outsourcing services to more cost-conscious providers.
The federal response ? that states should allow special education spending to balloon in a time of fiscal austerity when everyone else in the school system is pressured to be more efficient ? is senseless. Washington's mindless maintenance of effort rules simply distort local budgets in favor of certain groups of students, regardless of local needs or resource constraints. As a result, ED is inserting its own judgment into the South Carolina budget process, which it has no business doing.
Our recent study on trends in the special education population was only able to get at the costs of special ed obliquely. But with some states spending two or three times as much per student as others, it seems clear that districts and states could find savings in this $110 billion-plus slice of overall school spending without negatively impacting kids. Some districts are now turning to private companies to provide services at a lower cost.
The role these businesses can play seems to be twofold. First, they are more flexible than districts at providing services where and when they're needed, reducing the amount of time kids are pulled out from their normal classrooms and getting past rigid staffing formulas. Second, because they are a level removed from the difficult politics of special ed, they may have more power to say no to services that are not effective.
Outsourcing these services is no walk in the park, of course. Shady operators will have every incentive to overcharge and underdeliver. Districts must consider which services they're outsourcing, and to whom. The need for careful oversight is a given.
However, serving a population of students with very diverse needs using a variety of outside providers with narrow specialties and an incentive to help children overcome their challenges for good (if possible) is a worthy approach to try. It could both save money and provide a path to more individualized instruction for all youngsters.
- Stretching the School Dollar
- Common Core Watch
- Ohio Gadfly Daily
- Board's Eye View
- Choice Words
About the Editor
Bernard Lee Schwartz Policy Fellow
Chris Tessone was a Bernard Lee Schwartz Policy Fellow and the Director of Finance of the Thomas B. Fordham Institute. He has strong interests in governance and education finance, especially teacher compensation and school facilities finance.
May 16, 2013