The question of money is seeded through the debate over education, in several ways. This week I want to focus first on the way money most immediately factors in the current political debate; namely, where is the money behind the push for charter schools coming from?
Answer: To a significant extent, the money for charter schools is coming from Wall Street, and in particular from hedge fund managers. Consider:
Mr. Petry, 38, and Mr. Greenblatt, 52, may spend their days poring over spreadsheets and overseeing trades, but their obsession — one shared with many other hedge funders — is creating charter schools, the tax-funded, independently run schools that they see as an entrepreneurial answer to the nation’s education woes. Charters have attracted benefactors from many fields. But it is impossible to ignore that in New York, hedge funds are at the movement’s epicenter.
“These guys get it,” said Eva S. Moskowitz, a former New York City Council member, whom Mr. Petry and Mr. Greenblatt hired in 2006 to run the Success Charter Network, for which they provide the financial muscle, including compensation for Ms. Moskowitz of $371,000 her first year. “They aren’t afraid of competition or upsetting the system. They thrive on that.”
Hedge fund managers may be better known for eight-figure incomes with which they scoop up the choicest Manhattan penthouses and Greenwich, Conn., waterfront estates. But they also dominate the boards of many of the city’s charters schools and support organizations. They include Whitney Tilson, who runs T2 Partners; David Einhorn of Greenlight Capital; Tony Davis of Anchorage Advisors; and Ravenel Boykin Curry IV of Eagle Capital Management.
The Tiger Foundation, started by the hedge fund billionaire Julian Robertson, provides a large chunk of financing for several dozen charters across the city. Mr. Robertson’s son, Spencer, founded his own school last year, PAVE Academy in the Brooklyn, while his daughter-in-law, Sarah Robertson, is chairwoman of the Girls Preparatory Charter School on the Lower East Side.
The Robin Hood Foundation, the high-profile Wall Street charity founded by Paul Tudor Jones II, a legendary hedge fund manager, considers charter schools “right there at the top of our list of priorities,” said Marianne Macrae, a spokeswoman.
Or the recent $20 million contribution from Goldman Sachs Gives to the Harlem Children's Zone.
These are the people who ruined our economy, but suddenly we're supposed to think it's a good idea to turn them loose on our schools?
Or, moving away from Wall Street, consider the fact that one of the producers of the pro-charter movie Waiting for Superman is Philip Anschutz, owner of the Weekly Standard and funder of anti-gay campaigns and an intelligent design think tank. Again, are we to believe that his political projects are innocent?
And this isn't just some long-term project to privatize public education. There's short-term profit in it, as well. NY Daily News columnist Juan Gonzalez explained on Democracy Now:
There's a lot of money to be made in charter schools, and I'm not talking just about the for-profit management companies that run a lot of these charter schools.
It turns out that at the tail end of the Clinton administration in 2000, Congress passed a new kind of tax credit called a New Markets tax credit. What this allows is it gives enormous federal tax credit to banks and equity funds that invest in community projects in underserved communities and it's been used heavily now for the last several years for charter schools. I have focused on Albany, New York, which in New York state, is the district with the highest percentage of children in charter schools, twenty percent of the schoolchildren in Albany attend are now attending charter schools. I discovered that quite a few of the charter schools there have been built using these New Markets tax credits.
What happens is the investors who put up the money to build charter schools get to basically or virtually double their money in seven years through a thirty-nine percent tax credit from the federal government. In addition, this is a tax credit on money that they're lending, so they're also collecting interest on the loans as well as getting the thirty-nine percent tax credit. They piggy-back the tax credit on other kinds of federal tax credits like historic preservation or job creation or brownfields credits.
Gonzalez lays out how it works in Albany, NY:
In Albany, which boasts the state's highest percentage of charter school enrollments, a nonprofit called the Brighter Choice Foundation has employed the New Markets Tax Credit to arrange private financing for five of the city's nine charter schools.
But many of those same schools are now straining to pay escalating rents, which are going toward the debt service that Brighter Choice incurred during construction.
The Henry Johnson Charter School, for example, saw the rent for its 31,000-square-foot building skyrocket from $170,000 in 2008 to $560,000 last year.
The Albany Community School's rent jumped from $195,000 to $350,000.
(Via Open Left)
In short, education reform is a good cause. Experimentation is good -- and some of the best charter schools today have experimented in what could be valuable ways. But the push, coming from Wall Street and the extremely wealthy, for this specific form of charter schools, for this specific way of funding them, is part of both short-term and long-term drives for profit that will accrue to the wealthiest while weakening the middle class. The question is not whether we should back away from the cause of education, or the cause of education reform. The question is in whose interests it should be done and who should most strongly influence the outcomes.
Two other huge questions of money play in the education debate. What difference does money in the schools make to educational outcomes? The public debate is sort of ridiculous -- we hear, on the one hand, that traditional public schools couldn't work no matter how much money you threw at them, but on the other hand so many of the things we hear as positives about charter schools come from additional funding. Neither set of claims stands up to the complexity of the issue. For instance, there's the 4,100 student traditional public school in Massachusetts recently featured in the New York Times for its extraordinary turnaround in the course of a decade, today outperforming 90% of Massachusetts high schools. And there's the tens of millions of dollars lavished on the Harlem Children's Zone and the so far mixed results of its schools. But then again, as School Finance 101 recently asked, if money doesn't matter, why do private independent schools spend so much more than traditional public schools?
Obviously, money in schools matters. The thing is, we don't know enough -- not nearly as much as people all over this debate would have us believe -- about where and how it matters. Is it small class size, or teacher pay (and if so, merit pay or tenure), or computers in the classroom, or extended school hours, or or or?
The thing is, and it can't be emphasized enough, there's a clear area where money and things related to it matters overwhelmingly in educational outcomes. It's just not in the schools and too often it falls entirely out of the public debate: the biggest factors in student success are outside the classroom. Richard Rothstein of the Economic Policy Institute puts this in the context of the economic crisis:
Consider the implications of this catastrophe for our aspirations to close the black–white achievement gap. The national unemployment rate remains close to an unacceptably high 10%. But 15% of all black children now have an unemployed parent compared to 8.5% of white children. If we also include children whose parents have become so discouraged that they have given up looking for work, and children whose parents are working part-time because they can’t find full-time work, we find that 37% of black children have an unemployed or underemployed parent compared to 23% of white children. Over half of all black children have a parent who has either been unemployed or underemployed during the past year.{v} Thirty-six percent of black children now live in poverty.{vi}
The consequences of this social disaster for schools are apparent, and include:
Greater geographic disruption: Families become more mobile because they can no longer afford to keep up with rent or mortgage payments. They are in overcrowded housing; they often have to double up with relatives in apartments that were already too small. Children have no quiet place to study or do homework. They switch schools more often, fall behind in the curriculum, and lose the connection with teachers who know them well enough to adapt instruction to their individual strengths and weaknesses. Inner-city schools themselves are thrown into turmoil because classes must frequently be reconstituted as enrollment rises and falls with family mobility. Even the highest-quality teachers cannot fully insulate their students from the effects of this disruption.{vii}
Greater hunger and malnutrition: When more parents lose employment, their income plummets and food insecurity grows. More children come to school hungry and/or inadequately nourished and are less able to focus on schoolwork. Attentive teachers realize that one of the best predictors of how their students will perform is what they had for breakfast, if anything at all.{viii}
Greater stress: Families where parents are unemployed are under greater psychological stress. Such parents, no matter how well-intentioned, often become more arbitrary in their discipline and less supportive of their children. Children from families in such stress are more likely to act out in school and are less able to progress academically. The ability to comfort and support such students may be a more important indicator of a teacher’s quality than her students’ test scores, which may still be lower than the scores of students coming from stable and secure homes.
Poorer health: Families where parents lose employment are also more likely to lose health insurance.{ix} Their children are less likely to get routine and preventive health care and more likely to miss school days because of illness. They are less likely to get symptomatic treatment for illnesses like asthma, the most common cause of chronic school absenteeism. Children with asthma, even when they attend school, are more likely to come to school irritable, having been up at night with breathing difficulty.{x}
Recession isn't the only time those factors are at play -- it's just a time when they're at play for more people. Until we incorporate inequality outside the classroom fully into the debate on education reform, the improvement we want to see will be out of reach.