Education “Reform”: Putting Middle Men First

Last summer, I asked this question:

Why are millionaires and billionaires targeting public education? For the same reason banksters pimped mortgage loans. For the same reason Wall Street wanted to privatize Social Security. For the same reason Willie Horton Sutton robbed banks.

Answer this question: What is the largest portion of the budget in all 50 states?

A couple of new columns chronicle further moves by what former Assistant Secretary of Education Diane Ravitch calls “The Billionaire Boys Club” to take their cut of public education tax dollars.

The New York Times  has a Sunday piece on billionaires using the “leveraging effect” of philanthropic advocacy to steer public policy. Efforts by the billionaire-funded Gates and the Broad Foundations to promote charter schools resulted in the Obama $4.3 billion “Race to the Top” program which, says the Times , prohibits states from limiting the number of charter schools. According to Ravitch, Obama appointed someone from the NewSchools Venture Fund that promotes charter schools to run “Race to the Top.”

The philanthropists, “some with roots in the loosely libertarian milieu of Silicon Valley or Wall Street,” might have noble intentions, but also have their critics:

“It’s sort of influence-peddling writ large,” said Richard L. Brodsky, a senior fellow at the liberal-leaning research organization Demos and a former New York State assemblyman. “The notion that the society is better served by the super-rich exercising their charitable instincts is in the end anti-democratic.”

But not anti-capitalist.

The Sunday Washington Post  looks at the growth of “virtual schools.” Ronald J. Packer, CEO and founder of K12 Inc. of Herndon, VA (just outside Washington), controls the country’s largest provider of public virtual schools. The Post  reports that between 2004 and 2010, “K12 gave about $500,000 in direct contributions to state politicians across the country, with three-quarters going to Republicans, according to the National Institute on Money in State Politics.” If K12 were a school district, it would rank 30th largest among the nation’s 1,500 districts.

Packard, 48, took a roundabout route to education. A former Goldman Sachs banker, he was working as a consultant with McKinsey and Co. when he got a call from Michael Milken, the financier who pleaded guilty to securities fraud in 1990 and later became a philanthropist partly focused on education.

Packard joined Milken’s education investment holding firm and ran one of his companies, a chain of preschools. About the same time, Packard was trying to find an online math course for his 6-year-old daughter. Frustrated by the dearth of options, he saw a business opportunity.

He founded K12 in 2000 with a $10 million investment from Milken and Larry Ellison, the chief executive of Oracle Corp., maker of software and hardware systems. William J. Bennett, education secretary under President Ronald Reagan, became the company’s chairman, bringing his conservative bona fides and political connections to a company that originally aimed for the home-schooling market. Bennett resigned from K12 in 2005.

K12 Inc. has the right backers. It has the right location. It bought the right friends. And it had revenues of $522 million in the last year, netting the investors $12.8 million in profits and Packard $2.6 million in total compensation. Says Packard, “For many kids, the local school doesn’t work. And now, technology allows us to give that child a choice. It’s about educational liberty.” [Emphasis mine.]

If that cheese-whiz grifterism doesn’t make the hair stand up on the back of your neck, you haven’t been paying attention.

Aside from investors, how are virtual schools doing for their presumptive clientele, children? How well are they learning in front of a monitor? The Post  reports that there is not yet enough data to be sure, but by standard measures for-profit “virtual schools — often run as charter schools — tend to perform worse” than the traditional public school room.

At the Colorado Virtual Academy, which is managed by K12 and has more than 5,000 students, the on-time graduation rate was 12 percent in 2010, compared with 72 percent statewide.

That same year, K12’s Ohio Virtual Academy — whose enrollment tops 9,000 — had a 30 percent on-time graduation rate, compared with a state average of 78 percent.

Last year, about one-third of K12-managed schools met the achievement goals required under the federal No Child Left Behind law, according to Gary Miron, a Western Michigan University professor who called that performance “poor.”

But not poor enough to get investors to give up on the idea. Not when cracking the education market guarantees investors a steady, recession-proof stream of public tax dollars.

The Nation  reports on efforts to “reform” public education through vouchers, charters and privatization. This “gold rush” in the K-12 online learning industry, according to one study “will grow by 43 percent between 2010 and 2015, with revenues reaching $24.4 billion.”

Investment banker Michael Moe is one of those who has worked to turn public schools into Wall Street’s next “cash cow,” writes The Nation’s  Lee Fang.

A veteran of Lehman Brothers and Merrill Lynch, [Moe] now leads an investment group that specializes in raising money for businesses looking to tap into more than $1 trillion in taxpayer money spent annually on primary education. His consortium of wealth management and consulting firms, called Global Silicon Valley Partners, helped K12 Inc. go public and has advised a number of other education companies in finding capital.

To help those companies land lucrative public contracts, Patricia Levesque, former lobbyist, advisor to former Governor Jeb Bush on education reform, told a 2010 education reform retreat of her plans in Florida to sponsor statewide decoy legislation — on promoting religious schools or union busting — aimed at keeping opponents busy while charter school bills fly under the radar.

According to a report in Mother Jones , former Florida governor, Jeb Bush, spoke at the 2010 commencement ceremonies for Electronic Classroom of Tomorrow (ECOT), Ohio’s largest virtual charter school. Bush has teamed up with a Democrat, former West Virginia Gov. Bob Wise, to launch Digital Learning Now, another “reform” initiative aimed at promoting public funding of for-profit virtual schools. Mother Jones  calls online schools

… part of a larger agenda that closely aligns with the GOP’s national strategy: It siphons money from public institutions into for-profit companies (including those that are supporting Bush’s initiative). And it undercuts public employees, their unions, and the Democratic base. In the guise of a technocratic policy initiative, it delivers a political trifecta — and a big windfall for Bush’s corporate backers.

Like K12, Inc., ECOT’s performance falls far short of the hype. ECOT collects an annual $64 million in state tax dollars:

With more than 10,000 kids, ECOT is bigger than some of Ohio’s 609 school districts. But its test scores rank above those of just 14 other districts. In 2010, barely half of its third-graders scored (PDF) proficient or better on state reading tests, and only 49 percent scored proficient in math, compared with state averages of 80 percent and 82 percent, respectively. ECOT’s graduation rate has never exceeded 40 percent.

ECOT spokesmen argue that this is because it enrolls students already far behind in learning.

The stories continue to multiply. Bipartisan-sounding rhetoric aside, the feeding frenzy and the grifterism (see Schools for Scoundrels ) suggest that children’s education is not exactly the top priority for the school reform movement. The players, the performance and the profits in the reform gold rush suggest education reform is not about education. Not about children. Not about America’s future. There’s a conservative political tie-in, sure: big government. But it is only big government when public money is flowing to the wrong people. This “reform” is about the money, about the right people getting their cut of that steady, recession-proof stream of public tax dollars.

Once our public schools have been thoroughly privatized, once middle men control our middle schools, what happens to America’s schools and its workforce once investment gurus decide the K-12 market is no longer the hottest way for savvy investors to feed at the public trough?

(Cross-posted from Scrutiny Hooligans.)