“…Energy and other areas of the economy
that have moved from public to private hands, K-through-12 education has
stubbornly remained largely out of the control of investors. Next year, the
market size of K-12 education is projected to be $788.7 billion. And currently,
much of that money is spent in the public sector. ‘It’s really the last
honeypot for Wall Street,’ says Donald Cohen, the executive director of In the
Public Interest, a think tank that tracks the privatization of roads, prisons,
schools and other parts of the economy.
“That might be changing soon as barriers
to investment are rapidly fading. As Eric Hippeau, a partner with Lerer
Ventures, the venture capital firm behind viral entertainment company BuzzFeed
and several education start-ups, has argued, despite the opposition of ‘unions,
public school bureaucracies, and parents,’ the ‘education market is ripe for
disruption.’
“Hippeau’s vision is the growing
sentiment among investors. Education technology firms secured a record $1.25
billion in investments across 378 deals in 2013, while analysts predict that number
will continue to surge this year. Since 2010, Moe has led what has been billed
as the premiere education investment conference, which takes place annually in
Scottsdale, Arizona. The first year attracted around 370 people and 55
presenting companies. This year, that number soared to over 2,000 with over 290
presenting companies and speeches by luminaries including former Governor Jeb
Bush, Magic Johnson and Commerce Secretary Penny Pritzker. One of the largest
start-ups, a Herndon, Virginia–based company called K12 Inc., a for-profit
largely online charter chain, posted nearly $1 billion in annual revenue for
its last fiscal year in August.
“Many are attempting to duplicate that
success. ‘There’s a dramatic shift in how investors are thinking about this
industry,’ Fahad Hassan, an education entrepreneur with his own venture-backed
start-up, told a meeting of entrepreneurs earlier this year.
“The explosion of investor interest in
education raises a number of questions, among them: What kind of influence will
the for-profit education sector attempt to exert over education policy? And if
school reform is crafted to maximize the potential for investor profit, will
students benefit, as boosters claim—or will they suffer?
“There’s also the question of the
effect of privatization on costs. And there, the healthcare example gives
reason for concern. The privatization of health services has corresponded
closely with skyrocketing costs, leaving millions of Americans without access
to care or deeply in debt for seeking treatment for their illnesses. While new
laws, including the Affordable Care Act, have extended insurance coverage to
some 10 million Americans, many remain without coverage. The United States
still spends $8,745 per capita on healthcare, far above the average for all
other industrialized countries.
“The tantalizing prospect of tapping
into the K-12 market has drummed up new level of zeal from education reformers.
A good barometer of this passion is a document distributed by Moe, who now
leads a firm called GSV Capital, which invests heavily in education start-ups
including Knewton Inc. and Avenues, a New York–based private school with plans
to expand into a global chain. Like any sweeping manifesto, his education
reform blueprint sets the stage by listing massive social upheavals—the Arab
Spring, the Fall of the Berlin Wall and the Spanish Civil War—and asks, for the
‘Second American Revolution,’ one fought to decide the fate of education
policy, ‘Which side of history will we be on?’
“The revolution GSV goes on to describe
is a battle to control the fate of America’s K-12 education system. Noting that
this money is still controlled by public entities, or what’s referred in the
document as ‘the old model,’ the GSV paper calls for reformers to join the ‘education
battlefield.’ The GSV manifesto declares, ‘we believe the opportunity to build
numerous multi-billion dollar education enterprises is finally real.’
“This opportunity exists in part
because of major policy changes under the Obama administration. States moving
to adopt the federal government’s Common Core standards, which include new standardized
testing requirements, have incentivized the private sector to provide solutions
to schools. According to Paul Irby, a market analyst with Onvia, states
striving to implement the new standards could spend upwards of $12 billion,
with much of the money going to updating IT, professional development for
teachers, and testing technology.
“Moreover, the Obama administration’s
signature ‘Race to the Top’ program, which provides states with large cash
grants in exchange for changing how students and teachers are evaluated, is
being viewed as a potential cash cow for education start-ups. In a blog post,
Alex Hernandez, a partner with the Charter School Growth Fund, writes that
school districts are ‘raising more money than you can shake a stick at’ and the
money granted to local school systems from Race to the Top may be used on the
latest tech innovations. The most recent round of Race to the Top Funding, he
adds, means districts ‘should be unwrapping new toys for a while.’
“The Department of Education under
Obama has seen a flow of revolving door hires from the education investment
community. In May of this year, the Senate confirmed Ted Mitchell, the chief
executive of the NewSchools Venture Fund, as the Under Secretary for the US
Department of Education. Prior to his government position, Mitchell, a personal
investor in an array of education start-ups, forged a partnership last year
with the creators of Facebook app FarmVille to create new education game
products. James Shelton, the Deputy Secretary, is a longtime education investor
and the former co-founder of LearnNow, a charter chain that was sold to Edison
Learning, a for-profit charter management company.
“In an interview with EdSurge, a trade
outlet, Shelton explained that the Common Core standards will allow education
companies to produce products that ‘can scale across many markets,’ overcoming
the ‘fragmented procurement market’ that has plagued investors seeking to enter
the K-12 sector. Moreover, Shelton and his team manage an education innovation
budget, awarding grants to charter schools and research centers to advance the
next breakthrough in education technology. Increased research and development
in education innovation, Shelton wrote in testimony to Congress, will spark the
next ‘equivalent of Google or Microsoft to lead the global learning technology
market.’ He added, ‘I want it to be a US company.’
“The other transformative changes come
from the state and local level as a new class of politicians, including scores
of Democratic mayors and Republican legislators and state officials, have
ushered in new laws in recent years to divert taxpayer funding to charter
schools, which are often run as for-profit companies and are more willing to
embrace tech-centric classroom solutions than their public sector counterparts.
In many states, including Florida, Pennsylvania, Tennessee, and Ohio, parents
may opt to apply the amount the state would normally spend on their child’s
education (between roughly $5,000 to $10,000) to send their children to a
charter.
“The opening up of the K-12 money for
privately run schools, through charter schools or through vouchers applied to
private schools, with restrictions on launching charter schools increasingly
relaxed in many states, has created a boom in charter businesses hoping to
persuade parents to trust their children, along with their money, with them. At
present, more than 4 percent of students are enrolled at the more than 6,000
charter schools in operation. Few figures exist on how many of these students
are taught by for-profit operators (in most states, charter schools must be
registered as nonprofits, though they may outsource their operations to
proprietary companies.)
“The breakneck speed at which these
schools have taken off, often with little oversight, has led to scandals. Since
2013, the FBI has investigated more than five charter schools in Illinois,
Indiana, Ohio and beyond on suspicion that management has misplaced or stolen
funds. In Florida, a state with famously lenient rules for operating charters and
among the highest concentration for-profit K through 12 schools, the Miami
Herald has reported on a continuing laundry list of poorly run charters:
students going weeks without textbooks, class attendance sheets faked, and
children charged illegal fees for standard courses. In a growing phenomenon,
one Florida for-profit company, Academica, has earned over $19 million a year
by charging leasing fees to public school land already owned by its charter
schools.
“Does free market competition ensure
accountability in education by turning bad operators into economic losers?
That’s what privatizers claim, but the record so far suggests otherwise…”
This story was reported in partnership
with the Investigative Fund at the Nation Institute.
This story originally appeared in The Nation.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.