The Bland Accuracy of the GAO

Today the GAO released an evaluation of District of Columbia Public Schools (DCPS). Long known as one of the worst-performing districts in the country, it has been the site of radical change in the last two years ever since Mayor Adrian Fenty took over the schools and hired Chancellor Michelle Rhee. Today's GAO report is both a sober reminder of how hard change is, as well as a refresher course on just how bad things were.

Change is hard, and the implementation has been anything but smooth:

DCPS lacks certain planning processes, such as communicating information to stakeholders in a timely manner and incorporating stakeholder feedback at key junctures, which would allow for a more transparent process. In addition, DCPS did not gauge its internal capacity prior to implementing certain key initiatives, which, if addressed in the future, could help ensure the sustainability of initiatives. Without these planning processes, an organization risks having to revamp initiatives, leading to delays and compromising the implementation of timely, critical work. While having these planning processes in place will not eliminate all implementation issues, it will help to identify and mitigate risks associated with implementing bold initiatives and identify needed changes in the early stages of the initiative. Furthermore, a lack of these planning processes can result in decisions that are made on an ad hoc basis with resources unevenly distributed as was the case with the District’s new staffing model. Ultimately, the lack of such processes while planning and implementing initiatives has impeded the success of some of DCPS’s initiatives and could impede the District’s continued success and progress in reforming its school system.

But it was needed:

To increase accountability of its central office, DCPS developed an accountability system and an individual performance management system for central office departments and employees. The central office, which is responsible for providing academic and nonacademic supports47 to DCPS, had operated without such accountability systems prior to the recent reform efforts. For example, previously, performance evaluations were not conducted for most DCPS staff. As a result, central office employees were not held accountable for the quality of services they provided to support schools.

It's no wonder Chancellor Rhee inherited a central office where employee records were kept in boxes, paychecks were often inaccurate, and repair orders went unfilled for long stretches of time: the employees responsible for these tasks were never evaluated on whether these assignments were completed. It's worth remembering that what most people take for granted as a basic element of a well-functioning organization, evaluating employees and holding them responsible for completing their work, isn't so basic everywhere.

Just Asking

To all those who argue mayoral control of schools is bad for democracy, isn't it a good thing that schools are the issue in this year's New York City mayoral race? There's an incumbent mayor up for reelection using his success running the schools as his major claim, and now we have a challenger disputing those claims, issuing audits, and questioning the data. Someone please explain to me how schools could be more accountable to the public.

The Libertarian's Dilemma, Cont'd

Last week I wrote that the problem of runaway college spending presents libertarians with something of a dilemma, because, "the best way to bend down the long-term higher education cost curve and thus reduce government spending is to increase government regulation in the form of mandatory reporting [of information about institutional performance]."

Unsurprisingly, Neal McCluskey of the libertarian Cato Institute disagrees. I think he's unpersuasive, but before I explain why it's worth reviewing the central argument of the paper that prompted this discussion, The Revenue-to-Cost Spiral, by Robert Martin, published by the conservative John William Pope Center for higher education policy.

Martin begins with the principal / agent problem, an issue that's endemic in large modern organizations. Essentially, the problem arise when the interests of people who own or otherwise have a stake in an organization (the principals) are misaligned with the people who actually run the organization (the agents).

For example, a few years ago the shareholders (i.e. principals) of insurance giant A.I.G. employed a guy (i.e. an agent) named Joseph Cassano who sold billions of dollars of insurance to other large financial companies, essentially protecting them against the risk that their securities backed by sub-prime mortgages would become worthless in the event of a huge real estate market collapse. Cassano was paid tens of millions of dollars based on the short-term profits A.I.G. booked, some of which he used to buy a really expensive house in the Knightbridge section of London. Now A.I.G. shareholders have been devastated, but Cassano still owns the house.

In higher education, Martin argues, the principal / agent disconnect is less about risky profit-taking and more about status. Colleges are inherently status-maximizing institutions, even if the principals--taxpayers, donors, and students--would rather colleges focused on a different set of priorities, like giving every student a high-quality affordable education. As Martin writes,"senior administrators can persuade themselves that lavish offices, extensive building projects, expensive public relations events, luxury travel, and high compensation are in the institution’s interest. Board members may consider expensive social events to be in the institution’s interest." The same could be said for giving too much weight to the research mission at the expense of teaching and lots of other things.

How do you get more status, particularly in an industry where reputations are seemingly as ancient and permanent as the stone buildings themselves? You buy it, by purchasing nicer buildings (old-looking stone is a popular choice of materials) and more prominent researchers and students with better SAT scores. Or you just let it accumulate in the endowment, also a major benchmark of prestige. All of this dovetails with Bowen's revenue-to-cost-hypothesis: college spending is capped only by revenues and colleges have every incentive to spend, so they constantly build up fixed costs, raise more money, spend more money, raise more, spend more, and so on.

Martin's solution? More information. To mitigate the principal / agent problem, give the principals more data so they know what's really going on. And the government has to play a role:

[Reform] has to involve private groups, state and local governments, and the federal government. The most important federal government contribution to reform would be a significant increase in transparency requirements. The information requirements for tax-exempt status should be increased, and the IRS should conduct more and more-intense audits of these institutions. Further, the information provided to the IRS should be in the public domain immediately and available on the institution’s Web site or gathered in a single place. The federal government can also increase the quantity and the quality of the information reported to the National Center for Education Statistics (NCES).

That's the libertarian's dilemma in a nutshell--if you think seriously about restraining college costs, it brings you around to more meddling by the IRS, the Department of Education, etc.

McCluskey disagrees. "Wouldn’t the best, most direct way to “reduce government spending” obviously be to, well, reduce, or even stop, government spending?" he asks, before advocating for massive public disinvestment in higher education that would cripple thousands of institutions and shut the doors to college for hundreds of thousands of students nationwide. Well, sure! But that's like saying the best way to control long-term health care costs is to spend less money on health care. The relevant question is how. (Just to be clear: I'd like to spend more public money on higher education, not less, albeit in a way that's substantially more performance-sensitive and directed toward institutions that serve academically and economically at-risk students.)

McCluskey goes on to assert that "Clearly, we don’t need government to set standards or inform consumers – markets will do those things themselves." He notes that the market provides consumers with plenty of information about things like hamburgers and cars. Which is true in part while ignoring the government's role in mandating reporting of things like nutritional information and gas mileage.

But the much more obvious example is the way the free market has reacted to the issue at hand, higher education. The free market has given us the U.S. News & World Report college rankings, which are all about status and spending. Fully ten percent of each college's score is based on a simple measure of spending per student--the more you spend, the higher you rank. Another 20 percent is based on things that cost money to buy--low class sizes, faculty salaries, etc.--and much of the rest flows from larger reputational and selectivity factors that are directly and indirectly enhanced by spending.

In other words, the free market has created an information environment that exacerbates the runaway college cost problem that McCluskey is supposedly interested in trying to solve.

Meanwhile, George Leef weighs in at Phi Beta Cons (at the National Review) to endorse the McCluskey spend-less-money-by-spending-less-money solution, assert without evidence that there is "wildly excessive demand for educational credentials" (From who? The private sector employers who have freely chosen to pay more and more for those credentials over the years?) and essentially disavow the central conclusion of a paper published by the Pope Center, where he (Leef) happens to be the Director of Research.

Jane Shaw, president of the Pope Center, also rejects Martin's proposed solution, saying:

Wouldn’t it be better if schools were motivated to provide the information that their customers — parents and students — want? Different schools could provide information suited to their potential customers. Wouldn't it be more valuable to have information along the lines of Princeton Review's multi-dimensional ratings, which tell you, say, where the party schools are — and let students decide whether those are positive or negative features? I believe that we would have a richer, more satisfying marketplace for education that way than we would with a mandatory website containing statistical "student-learning outcomes" that end up looking rather similar to one another. Rather than asking the federal government to intervene (which it does much too much of already), let's figure out ways to empower the customers.

"Motivated"? What would motivate a college to disclose information that didn't flatter the institution and burnish its status and reputation? Look, I'd be pleased as punch if colleges disclosed the good with the bad out of a sense of civic obligation, but I'm not going to hold my breath. And I'd sort of assumed that the steely-minded conservatives over at the National Review would have a similar view of human nature. There's no contradiction between Shaw's hope for multi-dimensional ratings, which I support, and a transparency agenda. But it's naive to think that colleges are going to get there on their own, which leaves one option--the government, like it or not.

Reviewing the Review of What Happened in Montgomery County

Jay Mathews reviews the new book Leading for Equity, which chronicles Montgomery County’s successes, so far, in closing the achievement gap. Straight out of the gate, Mathew’s is right about one thing —the six “lessons” are convoluted and sound more like titles for paper submissions to AERA than book chapters (Lesson 1, for example: Implementing a strategy of common, rigorous standards with differentiated resources and instruction can create excellence and equity for all students). But his critique of the book as too process-oriented is wrong. Process has tripped up many a reform and understanding what sequence of events and efforts lead to change is key to any district’s improvement strategy. Sit in on union-district negotiations, listen to testimonies at board and council meetings, dig into PTA minutes going back ten years and more, and you’ll see that Weast’s success is one of process---getting a strategic collective of people (aforementioned) to make difficult decisions for the right reasons.

Central to this success, which the book describes, was the mapping of two zones of affluence—the wealthier Green Zone and the less-affluent Red Zone—that illustrated for all the inequities of the county and its schools. As someone who was educated by MCPS (in the Red Zone before it was the Red Zone), and is now sending my son to MCPS (still Red Zone), I know the practical implications of living in the lesser of the zones. My kids will go to school with a lot of kids who don’t have as much as they do, who have parents that work two jobs and who don’t speak English and who don’t walk them to school every day or read with them every night or schedule extra conferences with their teachers. But they will also be in schools that give a little extra to these kids to even the playing field—from the initial full day kindergarten program to the extended learning opportunity summer sessions that are going on right now.

Mathews says the book misses the real story, which is how MCPS gets and keeps great teachers. I agree that human capital tops the list of public education concerns and that MCPS is successful largely because it has quality teachers, but I’m unconvinced that the story of Montgomery County rises and falls on the teacher reforms. MCPS has done a lot to improve teaching and teachers—its professional growth system, for example, is touted as one of the best in the nation. But Superintendent Weast’s struggle to close achievement gaps is not merely a teacher problem, at least not the way Rhee’s might be in DC. Getting and keeping great teachers in all MCPS schools is a product of the county’s convenient close-in spot to DC (it would be great to know, by the way, the % of MCPS teachers than are spouses to the federal government, think tank and World Bank trifecta—count my family as one) and its ability to offer a job that’s better (in pay and otherwise) than PG and DC school systems.

The real story is about how a county that was unaware of or unconcerned with school inequities, or both, bought into a differential approach to schooling that has resulted in significant gains for the poorest kids. This doesn’t always happen, is still quite contentious, and is definitely a long, involved process—one that is as important as it is difficult to capture.

A Monopoly for Non-Profit Lenders

SAFRA, the latest acronym in financial aid, refers to the Student Aid and Fiscal Responsibility Act - a large and ambitious piece of legislation released in the House this week. The legislation follows President Obama's budget proposal to move all future federal student loans to the Direct Loan Program, eliminating private loan companies from the business of making and holding student loans.

But, it keeps private loan companies in the business of servicing loans - keeping track of borrowers, collecting payments, and communicating with schools and students. The companies that get to service student loans will be chosen through a competitive bidding process run by the Department of Education. Well, almost all of them that is - the legislation allows non-profit loan companies in some states to be guaranteed a monopoly on the servicing of loans in those states.

A small section of the 181-page bill guarantees loan servicing business to eligible non-profit loan companies in each state, and in states with only one eligible non-profit, it allocates the lesser of 100,000 borrowers or all borrowers in the state. When I read this, I wondered how many states this might effect - in how many states would students have no choice in who services their loans?

Fortunately, I didn't have to do the math on that. Student Lending Analytics posted about this yesterday and estimated that 24 states might end up with one non-profit servicer in the state. SLA estimates that this would be 13 percent of all borrowers - 13 percent of borrowers would not have a choice in the company they rely on for help with repayment, to get a forbearance if necessary, and for communications about their loans.

Monopolies don't lead to the best customer service, and students need very good customer service when repaying their loans. These non-profit loan companies should compete with other servicers, rather than be guaranteed business in their state. And students should have the right to decide which company will do the best job of helping them repay their loans.

Charts You Can Trust - Revised

Earlier this week, the National Center for Education Statistics announced technical changes in the measure of student loan amounts for the 2007-08 NPSAS - the survey conducted every four-years on student financial aid. I won't get into technical details (you can find them here), but the end result limits the ability to compare the most recent data from 2007-08 to prior years of data using the publicly available DAS system.

These changes impact the data presented in Drowning in Debt, the CYCT published by ES last Thursday in which we compare student loan data from the 5 most recent NPSAS surveys, from 1992-93 to 2007-08. NCES has already revised the data for 2003-04 and will finish updating the 1999-2000 and 1995-96 data sets by October 2009. Once NCES finishes revising the publicly available data sets so that they can be compared with each other, ES will re-publish adjusted charts.

Despite this change, the primary conclusion of our report - that student debt is rising - remains unchanged. The revisions to the 2003-04 data reduce the average total loan amount presented in Chart 2 of our report by an average of $600. This means that the increase from 2003-04 to 2007-08 was even steeper than we originally presented.

Briefly,

En route to Pitchfork music festival in Chicago so blogging via blackberry and limited to short post:

1) David Brooks' column today about community colleges is quite good, much more so than yesterday's higher ed piece in the Post from E.J. Dionne.

2) The Post review of the Dead Weather concert @ 930 club misses the point spectacularly, the whole enterprise is clearly a controlled experiment to see if rock greatness can be achieved through sheer force of charisma, stage presence, and overwhelming cool. (Answer: Indeed it can!)

3) Neal McCluskey's arguments seem to deliberately ignore the actual history of higher education in America over the last 50 years, more on this next week.

Only In The Military?

A report released by the National Center of Education Statistics on Tuesday provides a more detailed account of states’ failure to close the achievement gap between blacks and whites. While 15 of 35 states closed the gap in 4th grade math, only four states closed the gap in 8th grade math. Reading performance is even worse, with only three states narrowing the margin in 4th grade, and none closing the gap in 8th grade. The failure to close the achievement gap is old news. However, the report does uncover a possible solution for closing the gap at a faster pace.

Black students at the Department of Defense Education Activity (DoDEA) have consistently scored at the top or near the top in math and reading on the National Assessment of Educational Progress (NAEP) when compared to their peers attending non-military schools. The chart below shows how black students at DoDEA measure up to their peers on the NAEP assessment. Besides 4th grade math, black students at DoDEA have the highest scores in 8th grade math, 4th grade reading, and 8th grade reading.

The DoDEA's success is not an isolated event. The system serves over 84,000 students in 12 foreign countries, seven states, Guam, and Puerto Rico. According to a 2007 Education World article DoDEA schools share many characteristics of typically found in low-performing public schools. Forty percent of students are minorities, 50 percent of the students eligible for free lunches, and a 35 percent annual mobility rate. "Yet, the schools have a 97 percent high school graduation rate, and the majority of students go on to higher education," Education World finds. DoDEA's success is attributed to factors inside and outside of the classroom.

Within the school, DoDEA has high academic expectations of students and regularly assess students’ progress. All schools use the same curriculum and have standardized classroom procedures to make students’ transition process less stressful. External factors might play an even more important role. Behavioral problems are not an issue due to the values students are taught at home. This in turn allow teachers to spend more time on teaching.

Militarizing all public schools is not a practical approach to school reform. This view might be one of the reasons there has been a lack of collaboration between military and civilian schools. However, this is changing. The latest round of base realignments and closures in 2005 has forced some military personnel to send their children to civilian schools. These changes prompted the Defense Department to create an Education Partnership Directorate in 2007 to work with local school districts to adopt aspects of DoDEA's curriculum to ease students' transition from military to public schools. "I feel there’s a real spirit of cooperation now," and "they [defense education officials] don’t want to be a hollow force," says John Deegan, superintendent of the Bellevue Public Schools near Offutt Air Force Base, Nebraska, and executive director of the Military Impacted Schools Association in the Army Times.

With a healthy budget and support from the Department of Defense, the Department of Education, and state education departments to form partnerships with local school districts, the DoDEA's Directorate has the arsenal it needs to help improve civilian schools that need it the most. Hopefully, the DoDEA does not limit itself to partnering to schools that are already high-performers. By showing that it can turn around low-performing schools with large minority populations, the DoDEA will make the military a more attractive place to raise families, produce a successful school model that can be implemented throughout the country, and perhaps help more states close the achievement gap.

-- Tim Harwood

Teachers First, Kids Second?

In a recent Education Sector online discussion, Laura Bornfreund states, “the challenge of teachers’ unions has little to do with the professional nature of the work and everything to do with the product they are producing: a public good.” I’d say the challenge has to do with both professionalism and the end product. But does this production of a public good mean that the union should be expected to lead or unreservedly support reform initiatives in the school system? Absolutely not. Let’s be real. That is not the union’s job, nor should it be.

Now I’ll be the first to admit that the union has its problems as the Citizens’ Commission on Civil Rights so accurately lay out. Unions (NEA in particular) are wrong to create a system that can encourage complacency and resistance to instructional improvement in schools. The real problem is that some unions oversimplify their function to protect teachers, creating a blanket protection for all teachers without accounting for teacher effectiveness. On the face of it, this egalitarian aim may seem favorable to its membership but the reality is that it does more to decrease the professionalism of teaching, backfiring on unions in the long run. A “protection for all” attitude may do more to delegitimize demands for higher compensation and increased funding, which is in everyone’s best interest. As in any profession, accountability is absolutely necessary to ensure productivity. There needs to be a way to evaluate teacher performance, providing incentives to teachers that are successful and getting rid of teachers who are not. However, the unions’ apprehension about increased accountability is not completely unfounded, and it is unfair to demonize unions for this reason. Reforms that are not backed up with resources and implementable strategies for improvement can do more harm than good to teachers AND students. I’ve seen it, experienced it, and it’s not pretty.

So yes CCCR, it would be great if unions would support or help shape more effective reforms like these. And yes, they need to be more rational in their resistance to certain reforms. (This might happen if more teachers, who agree with these reforms, had more of a voice in their union…but that’s another discussion). However, we must not expect unions to accept every reform idea thrown at our school system and condemn them if they do not. Most (not all) teachers want what’s best for the students or we wouldn’t have entered this extremely challenging (and underpaid) profession. So the union’s perspective is one that definitely needs to be heard and respected in these reform debates, making sure that while we figure out what’s best for the students, the teachers who are the implementers of reforms do not get lost in the shuffle.

--Marilyn Hylton

A Next Step for School Choice?

A fascinating proposal is being considered by the Los Angeles school board (here). Yesterday was the first meeting on it. The district has 50 schools that will come on line in the next couple of years. Instead of having the district run all of these new schools, Yolie Flores Aguilar, the vice president of the board, has proposed that there be a competitive process to determine who runs these new school sites. The school district itself could be one of the bidders, but would have to compete against others including charter school providers, union run schools, the mayor, and other non-profit/community groups. The thought of having the school district itself compete to run these schools would truly by a new evolution in thinking about the role of a school district. Finding adequate facilities is one of the biggest barriers to creating a new charter school. Some charter schools have been able to gain access to existing school facilities in LA, but generally these schools have been the bottom of the barrel facilities. Under this proposal brand new schools would be in play. As can be expected, this proposal will face much union opposition, and would likely create a lot of foundation support. As the LA Times editorial board concluded, this is a proposal worth consideration especially for the school sites that are located in parts of the districts where students do not currently have viable high quality school choice options. Setting up an effective set of criteria to determine who would operate the schools and expectation benchmarks that would need to be met to continue to operate the school would be a must. The specifics of the proposal start on page 7 (here).

Calculating Costs

Last fall Congress passed the Higher Education Opportunity Act (HEOA) which included, among other things, a requirement that colleges and universities supply an online calculator of expected net costs. These calculators would enable prospective students and their parents to get a prediction of their actual costs, after subtracting a family's probable financial aid package from the institution's gross tuition and fees. The US Department of Education is developing a template, set to be released later this summer, that colleges could adopt with only minor adjustments. The HEOA requires the calculators to be live three year's after the law's passage (a little over two years from now). From this morning's Chronicle ($), we find that two colleges have already adopted their own versions and made them available to prospective students, and it wasn't all that hard to do:

Purdue built its calculator with the help of the university's IT office, and it took about two months, [the university's senior associate director of financial aid] said.

A common complaint of university officials is that families will not understand that these calculators return only expected numbers and are not binding guarantees. Both Purdue and Smith College, the other early adopting institution, have found that not to be the case. Smith, for example, used to publish in its viewbook sample financial aid packages awarded to hypothetical families of different incomes. Real families often complained that their situation was similar to these hypothetical examples; the new calculator has reduced complaints and Smith now gets far fewer calls from families asking for explanations on how different assets are treated. At Purdue, more than 125,000 people used the calculater between September and March.

The true costs of higher education have been increasingly obscured by complex pricing models under which institutions list high tuition and fee costs but then distribute large financial aid packages. Other than national trends, families have been left in the dark about how much aid they should expect. The new calculators are one way of removing the guesswork.

Update: A commenter asked whether these calculators will be available to the public or only for applying students. The answer is they must be made available to the general public, but, in thinking about how to respond to the question, I thought it would be nice to be able to link to the fine work done by Purdue and Smith.

It turns out I can't. Purdue has a Web site up saying its calculator is not currently available, and I cannot find any evidence of Smith's site (it could exist, but I get paid to do things like this. If I can't find it, how likely are prospective students and parents to find it? I digress). There are, however, similar calculators available for Princeton, MIT, Yale, Williams, and Amherst. The College Board runs its own version to calculate Expected Family Contribution, but that is a far cry from a predicted cost at a specific institution.

The Libertarian's Dilemma

A couple of weeks ago I was invited to attend a meeting at the Cato Institute to discuss a new paper that explores why higher education is perpetually becoming much more expensive and what do about it. I was happy to attend; while my politics are pretty far from Cato's and I often think they're wrong, they tend to be wrong in interesting ways. And in this case I thought the paper was quite good (more on why below). Its top-line recommendations track closely with something I write about a lot: the need for more transparency and public information about how well colleges and universities serve their students and help them learn.

The problem is that colleges aren't just going to unilaterally release lots of new information on their own. Nor would it help matters much if they did; for data to matter it has to be standardized in a way that allows for comparison. That's why companies report one set of quarterly financial results to the SEC, not 50 different sets to each state. Given that higher education is a national market this leads to a similar national solution: the federal government should compel colleges to release much more information about success as a condition of receiving direct or indirect federal aid.

This puts libertarians in somewhat of a box. On the one hand, they tend to be hostile toward the tens of billions of public dollars that flow into colleges every year. The more colleges cost, the greater the claim on the average citizen's hard-earned money and thus reduction in their precious liberty etc., etc.

But the best way to bend down the long-term higher education cost curve and thus reduce government spending is to increase government regulation in the form of mandatory reporting. So it's a pick your poison situation for the Cato folks--would you rather have Big Brother's hand in your wallet or his eye on your business? You really can't avoid both.

The paper itself, by Robert Martin, is admirably clear and concise, running through a lot of basic economic theory and how it applies to spiralling college costs. Some of it is familiar--the principal / agent problem, Bowen's revenue-to-cost hypothesis, etc.--but it's always nice to see these ideas restated in compelling ways. Good parts include:

Unlike for-profit firms, the nonprofit organization is accountable to a number of groups. It not only serves its “customers” (in the case of higher education, students) but also its third-party payers (taxpayers or private donors). The nonprofit’s customers know about the quality of the product or service, but third-party payers have very little firsthand knowledge about quality. For example, the taxpayers who support a state university are subsidizing the cost of students’ education. If the students minimize their efforts, spending more time at football games and parties than in learning, or if educators shirk their responsibilities, giving outdated lectures and not showing up for office hours, they may deliver results well below what taxpayers and donors expect. But taxpayers and donors probably do not know about it.

And:

In higher education, the principals are taxpayers, students, parents, alumni, and donors, while the agents are faculty, administrators, and board members. As is always the case, the interests of all of these parties are not perfectly aligned.

One rarely encounters a venal person in higher education. Theft is rare in the ivy halls. Most people working in higher education are dedicated, sincere, and conscientious. But they are also human beings subject to normal human failings.

The particular human failing that leads to the agency problem is the assumption that whatever is in our own interest is also in the institution’s interest. Often we are unaware that our interests do not coincide with those of the institution.

I’ve experienced this lack of awareness myself. As a faculty member at a private liberal arts college, I welcomed lower teaching loads and smaller classes, telling myself that these benefits gave me time and opportunity to improve my teaching and research. I also welcomed liberal sabbatical policies, more research funds, reduced contact hours, and liberal travel funds for much the same reasons.

Similarly, senior administrators can persuade themselves that lavish offices, extensive building projects, expensive public relations events, luxury travel, and high compensation are in the institution’s interest. Board members may consider expensive social events to be in the institution’s interest. The inability to recognize when our personal benefit deviates from the institution’s benefit leads
to excessive costs.

And:

To understand the incentives that operate in higher education, we need to recognize that the chief objective of the producers may not be education per se, but maximizing the school’s reputation...[This leads]to a bias against reform and a bias toward increasing revenues rather than cutting costs...Pointing out problems leads to controversies, and controversies damage reputations; hence, reform damages reputations. Even admitting that there are unresolved problems at the institution can damage its reputation...Suppose you are a faculty member, an administrator, or a
board member. Fixing a serious problem will take years, and it will involve considerable controversy. Alternatively, the problem and the controversy can often be temporized by applying more cash to the institution. With more money, for example, more appealing courses can be added without eliminating those with low registrations. Faculty members, administrators, and board members ask themselves: Do I want my tenure to be known for controversy or to be known for an increasing flow of new funds into the institution? The answer is obvious. More funds trump controversies. Thus, board members hire presidents for their fund-raising abilities and pay lip service to cost control.

And:

Bowen’s revenue-to-cost hypothesis is sometimes compared to another traditional explanation for rising higher education costs, “Baumol’s cost disease” (Baumol and Bowen 1967). The two explanations are not competing hypotheses, but Bowen’s appears to have more direct relevance to higher education...higher education finance is a black hole that cannot be filled. The relationship between revenues and subsequent costs has a dynamic feedback effect. Higher education responds to higher costs by raising tuition and fees or initiating fundraising campaigns. But because costs in higher education are capped only by total revenues, there is no incentive to minimize costs. The costs go up in tandem with revenues. The next year, the cycle begins again because the higher costs mean that the new programs must be financed by additional revenues. There is thus a never-ending spiral effect between revenues and cost.

Taking a Close Look at the Middleman

The New America Foundation released a report yesterday looking closely at the confusing and slightly mysterious role of guaranty agencies in the federal student loan program. These non-profit entities play several roles in administering federal loans - some are vestigial and no longer necessary for the federal loan program to function, while others are ill-defined and poorly monitored. And, as the report describes, the payment structure for the agencies' various functions can run counter to the interests of taxpayers and borrowers.

The report makes it clear that it is time to overhaul the role of guaranty agencies in the federal loan program in order to remove unnecessary activities (and federal payments for them) and focus guaranty agencies' energies and money on a truly important task - helping students repay their loans and preventing students from defaulting.

TIME Act Reintroduced

Kennedy’s back with round two of the TIME---Time for Innovation Matters in Education---Act. The acronym could use some work but the proposed legislation looks pretty good and is well-timed following declarations by both Obama and Duncan about the need to expand school time.

The TIME Act expands school time in high-need schools so low-income students have more opportunities to learn. It’s based, and not loosely, on the model used by Mass2020 -- planning and evaluation are front and center, there is a lot of flexibility in how time is used, and schools must increase time for core academics, enrichment activities, and teacher planning and collaboration. In total, TIME authorizes $350 million in the first year and up to $500 million in 2014 for competitive grants to state education agencies, who will match a percentage of the grant (10% in first year and up from there) and then distribute at least 90% via subgrant process to locals—the rest is for state planning, evaluation and technical assistance (on tech assistance, look for a lot of groups stepping up to offer their services to states—besides the obvious National Center on Time & Learning which is intimately tied to the TIME Act.

Things you should know about the TIME Act:

• It targets high poverty schools (50% or more students FARM eligible) so it’s going to reach the kids who need it most. I’m very glad to hear less of the talk about how American kids can’t compete and the whole public school calendar is antiquated and therefore we should extend school from dawn to dusk and birth to death—and hear more about the fact that poor kids need shorter breaks and better opportunities to learn. This is what it’s always been about, this is what the research backs, and this is the only way to budge the big hand on the clock (there are still plenty of parents and teachers in happy middle class suburbs that have no intention of expanding the schedules or calendars in their schools—maybe in ten years, or twenty, but not yet). Risk of targeting high-poverty schools of course is that these schools are likely to be low-performing and may not have the capacity they need to pull it off. See further down…

• Grants are for 6 years. This type of initiative needs time, no pun, since it’s a major shift in custom and culture to see school as more than a 6-hour a day Labor to Memorial Day endeavor. And years are necessary to determine, at the district, state and national level, which time models are the most sustainable and effective as reforms—again, the idea of redesigning school schedules and calendars is no small thing so if we’re going to do this we should figure out what works and what doesn’t. On this note, TIME Act includes money for a national evaluation.

• The 6 years includes a full year for planning with a subset of schools. This year of planning is essential—not every school is ready for this and the potential for wasted money and time is enormous. Planning year, plus competitive nature of grants should help avoid the “bad schools now open longer” problem. This is very real risk--increasing student learning is of course the goal here but there are incentives to keep kids in school, even if they’re not learning anything. Parents want to know their kids are safe, businesses don’t want to be responsible for policing kids in the afternoon, and police don’t really want this responsibility either. [As an aside, I once asked the principal of a high school where I worked why students were watching Jerry Springer from 4-5pm every afternoon—just watching, not discussing, not thinking. The principal said it was a reward for good behavior all day and helped keep them engaged in school. I'll stop there].

• Restrictions on how the time can be used are few and intentionally imprecise, although there is a hard fast number for the amount of time schools must extend time by--- at least 300 hours (an arbitrary number). Still, schools have a lot of leeway in choosing how they use those hours-- to enhance learning in core academic subjects, or for enrichment, or for teacher planning and collaboration. Schools can extend by hours in the day, days in the week, weeks in the year—or any combination. And there is additional flexibility built in for high schools---elementary and middles must extend for all kids, but high schools have to do so for only kids in at least one grade—likely this is aimed at younger students, so ninth-grade academies and small school initiatives will align nicely with this. This kind of flexibility is important not only in an operational sense—schools have different needs---but also in an experimental sense—again, to learn what works in what context. Risk here is that flexibility puts a lot of pressure on the leadership to build a schedule and organize staff with some serious strategy in mind.

• There are also few restrictions on who is doing what to extend time--so partnerships can be forged between LEAs and universities and community agencies. This will bridge the worlds of school-based and out-of-school learning, which is good. But it will be messy at first—who provides which services, who hires and oversees staff, who serves as the fiscal agent, and who's accountable for what outcomes? All questions that the extended time movement will stir up and hopefully help answer.

Duncan needs to pressure Washington State

Sec. Duncan has put pressure on several states to either change their charter school cap policy or pass a charter school law. For example, Duncan has pushed Tennessee to increase the number of students that could attend a charter school. He discouraged Indiana from imposing a stricter cap on charter schools. There are still 10 states that do not allow charter schools. The Secretary called out one of these states a while ago as the state’s legislature was considering a charter school law – Maine.

Charter schools in Maine, really? This is a state where the largest city Portland, Maine has a total population of 63,000. Most communities in the state are too small to support a charter school even if they were allowed. Portland has a total of 14 regular schools including 8 elementary schools and these are all relatively small schools by national standards. So, maybe it could support one or two charter schools. In addition, the state’s population is decreasing. So, how many other communities in Maine would have a large enough student population to support multiple elementary schools? Is this one of the places to wage a war to expand charter schools?

I spent a chunk of last summer doing some work in Montana, another rural state without charter schools. I can’t imagine more than a few cities in that state even having enough students to support a new school let alone a new charter school. Perhaps Missoula Billing or Helena, but not likely anywhere else. To my knowledge there are only a couple private schools in the whole state. Perhaps there may be some reason to create distant learning charter schools to support home schoolers in these rural states, but site based programs would be limited in many of these states.

There are some states where the Secretary has not made enough noise about the lack of charter schools. At the top of my list is my home state of Washington. Washington has over 1 million students, the 15th largest student population in the country. The largest city has almost 600,000 people, and most of the state’s population is centralized along the west coast of the state within a couple of hours of Seattle. In the largest school district in Seattle – Seattle school district – almost a quarter of students attend private school. So this is not a state that is opposed to school choice. It is the home of Bill Gates, one of the most important charter school supporters. It is also home to the Center for Reinventing Public Education, one of the leading charter school research groups that could help design an effective charter approval and oversight process. So, here is a state where charter schools could really make an impact, but the state is not stepping up.
The state’s teacher union has been able to keep the charter school advocates at bay including a $3 million state initiative effort funded by Paul Allen around 2000. And in 2004, when the legislature finally acted to approve a charter school law, WEA and NEA will able to go to the voters and have it repealed.

This is a state where an Obama support for charter schools would likely make a difference. This state loves Obama. In the fall election he received 58 percent of the vote. But, perhaps more important in this Democrat controlled state, 68 percent supported Obama against Clinton in the primary. So encouragement to Sec. Duncan, put Washington state on the top of your list of states that need a charter school scolding. Based on a quick look at demographics add Kentucky, Alabama, and Nebraska to the states that need a little harassing on charter school law. You can likely leave the rest of the non-charter school states alone including Maine.

Basic Demographics of Non-Charter school states.

Washington
1,033,000 students, 97.2 people per sq mile, largest city Seattle (593,000),
Cities with greater than 100,000 people – 6 cities

Alabama
749,000 students, 91.3 people per sq mile, largest city Birmingham/Hoover (229,000),
Cities with greater than 100,000 people – 4 cities

Kentucky
683,000 students, 106.8 people per sq mile, largest city Louisville (558,000),
Cities with greater than 100,000 people – 2 cities

Nebraska
288,000 students, 23.1 people per sq mile, largest city Omaha (433,000),
Cities with greater than 100,000 people – 2 cities


West Virginia
279,000 students, 75.3 people per sq mile, largest city Charleston (53,000),
Cities with greater than 100,000 people – 0 cities


Maine 189,000 students, 42.7 people per sq mile, largest city Portland (63,000),
Cities with greater than 100,000 people – 0 cities


Montana – 143,000 students, 6.5 people per sq mile, largest city Billings (102,000),
Cities with greater than 100,000 people – 1 city


South Dakota – 121,000 students, 10.5 people per sq mile, largest city Sioux Falls (152,000), Cities with greater than 100,000 people – 1 cities


North Dakota – 95,000 students, 9.3 people per sq mile, largest city Fargo (93,000),
Cities with greater than 100,000 people – 0 cities


Vermont – 92,000 students, 67.2 people per sq mile, largest city Burlington (38,000),
Cities with greater than 100,000 people – 0 cities

The State of Our Nation's Children

The Federal Interagency Forum on Child and Family Statistics released its annual report on the well-being of America's children today. It tracks measures in eight key areas ranging from demographics and family background to health care, behavior, and education. The report is worth checking out in full, but I've chosen to highlight some selected findings below.

The chart below shows child poverty rates over time. As the middle line indicates, the percentage of children in poverty has hovered near 20 percent since 1980 and is notable for its lack of variation. The most notable positive finding is that the percentage of children living in poverty has declined for families with females as heads-of-households. This next chart shows the percentage of youth living in various household structures, by whether or not the adult(s) were employed. All of the categories have risen over time, suggesting that more adults have more secure employment than they did in 1980 (this is of course a general trend upward and current unemployment numbers suggest at least a temporary downturn on this measure). Household with two married parents have consistently been more economically stable than other family structures.

Part of the reason children are increasingly living with working adults is the next graph, which shows the percentage of children born to unmarried mothers by age group. Children born out of wedlock has risen for every age group except 15-17 year-olds. Births from eighteen and nineteen year-olds has risen slightly in the last few years, but remain well off the modern high in the early 1990s.

The next graph shows the percentage of children aged 6-17 who qualify as overweight according to body mass index calculations from the Center for Disease Control. It shows a steady increase in overweight children, male and female, between 1976-80 and 1999-00. The percentage of overweight adolescents has increased from six percent to 17 over the graph's time frame, numbers which seemed low to me. If anyone needs further evidence of how a housing bubble developed, look no further. The chart below shows the percentage of children living in households where the cost of housing was greater than 30 percent of the family's income. It rose from 15 to 37 percent, suggesting that more families are spending more money on housing. The percentage of children living in households spending more than 50 percent of their monthly income on housing costs alone has gone from six to 16. These numbers include both renters and owners.
Find all the indicators here.

School Districts Without Schools

This is a pretty incredible story. Among the 285 school districts in this country that don't actually operate a single school is this one:

Tavistock, for example, is a golf course with some big homes on it - and a total of 20 residents. But it has its own local government and school board. In the coming year, the little town with seven homes will send one student to school in neighboring Haddonfield, paying a total tuition of $14,805.

According to Wikipedia, the town of Tavistock was formed to allow the members of the Tavistock Country Club the ability to play golf on Sundays.

Hat tip Gadfly.

Free

Chris Anderson, editor of Wired magazine and author of The Long Tail, has a new book out called Free: The Future of a Radical Price. His basic hypothesis is that businesses need to adapt to a new world where the price of Free (Anderson always gives it the capital "F") is the Future. Anderson, while providing some really interesting and compelling examples, overstates the case for Free. Malcolm Gladwell's review reads as if it was written by a person who gets paid to write for a living. That's not necessarily a bad thing, but both views are slightly off.

First, it's admirable that Anderson is taking Free seriously. Not only does he write a book explaining how others need to adapt to Free, he has made his entire book available on Google for Free for the next month. It's an engaging read, and I strongly encourage it if for no other reason than to learn about lots of interesting businesses. But, while Anderson's examples of Free are interesting, note that none of them are actually Free in every sense of the word:

• Gillette gives away razors Free but charges for the blades.
• Google gives away searches, a blogging service, a news feed, email, chat, and other products Free. But it collects your information and targets you for ads.
• Zecco gives away 10 Free stock trades a month if you have at least $25,000 in your account. It charges if you have less money than that or if you make more trades. It also makes interest when you leave money sitting in cash.
• Craigslist charges for job listings in seven cities only and for apartment listings in only one city (New York). Everything else is Free.
• SecondLife lets everyone have an avatar and explore the game for Free. It charges half a million paid users between $5 and $195 a month to rent virtual real estate.
• Webkinz has been the number one toy in America for two years. You have to buy a real stuffed animal, but then you have access to a Free web site, where you can also upgrade by paying more money.
• Runescape lets 5 million users play on its site for Free, but these are subsidized by the one million paid subscribers that generate $60 million in revenue a year (more than the most profitable online news content site, The Wall Street Journal, which is partially Free and partially not).
  
• Disney's Club Penguin is a Free website where users can have their own penguin and igloo. Users can upgrade their igloo or buy a virtual pet for their virtual penguin for $6 a month. It generates $40 million in revenue annually, and Disney paid $700 million to acquire it in 2007.

The list goes on: strip clubs let you see the show for Free but charge you for drinks. Casinos charge you for the shows but let you drink for Free. Etcetera, etcetera.

These are all interesting examples, but they're not all Free in the sense that they cost $0.00. They're free in that users can sample a version, but to get the full experience (or repeat it) they must pay, somehow or other. This is different than free.

Gladwell, while opposing Free intellectually, actually embodies it in his work. He works for a magazine with paid subcribers, but he makes a lot of those available on his Web site, and he makes his real money on his books and speaking engagements. Even his employer, The New Yorker, embodies some Free principles. It makes a significant portion of its magazine freely available online, including Gladwell's semi-regular columns (and book reviews!).

What's most interesting about Free is that it's not new at all. Information has always been passed by word of mouth. Businesses have always promoted themselves with sample products and free give-aways. Technology has sped all this up, but it's not new.

Some industries have adapted better than others. Newspapers, by and large, have not done it smoothly. Free shares the story of a Portuguese newspaper that used Free to boost its sales 36 percent over three months when it began offering Free silverware with every newspaper purchase. If you bought Monday's paper you'd get a free spoon, Tuesday a fork, and so on. Weekend edititons, the best selling and highest priced days, earned readers serving utensils. If you bought the paper every day for three months, you'd accumulate a full set.

Music, comparatively, has adapted much better than newspapers. It had to figure out how to survive on the radio, then on television, and now on the Internet. Record companies have struggled to block the spread of music file sharing, and their bottom line has suffered. But musicians themselves are doing quite well. Easier access spreads their music to more audiences, building larger fan bases for concerts, licensed music in movies and advertisements, and merchandise in general.

Free gives two good examples to support this. The band Radiohead opted to release their most recent album, In Rainbows, online in digital format and let anyone download the tracks for whatever they chose to pay. The band made more money on this digital release, before the album actually hit stores, than they made on their entire previous album. This could be an anamoly because of Radiohead's already-large fan base, but Free also gives an example of a musician named Derek Webb. He had a new record out called Mockingbird, but his label was financially unable to promote it. Webb decided to give it away free, so long as people provided him with their name, email address, and zip code. 80,000 people downloaded it in three months, and Webb is now able to use the information he collected to build a fan base. When he tours, he sells out his shows. Free made it possible.

But, you might argue, giving out personal information carries some cost, so it can't be Free. That's entirely true, and it's what makes Free little more than a marketing gimmick. This is what both Anderson misses and Gladwell scorns. Free is powerful and lucrative, but it's pretty much a sales gimmick nonetheless.

Death! Destruction! Student Loans!

Education Sector released a super-sized Charts You Can Trust today looking at the past 15 years of financial aid, and the constant growth in student borrowing. Below is Chart 1 from the report, and the trend line is pretty clear. From 1992-93 through the latest NPSAS in 2007-08, the percent of students borrowing has increased nearly every year for every type of institution. In 2007-08, 53 percent--more than half--of full-time students borrowed for their education.

Today's Inside Higher Ed covers the report - and provides some push back to our assertion that this rising tide of debt is a BIG problem. Are we just joining the bandwagon of hype around the issue of student debt?

If we are on that bandwagon (we, after all, did use the word catastrophic...), I think the wagon is headed in the right direction. Let's just say that the fact that more than half of full-time students borrow for college actually isn't such a big problem and that it focuses on the wrong end--nearly half of students, after all, don't borrow. So great, we're just fine today.

But that doesn't address the very clear trend line - which continually ticks upward and, given growing tuition and the current economic situation, isn't likely to stop anytime soon. So at what point is there too much borrowing? And isn't it good to sound the alarm before we get to that point, rather than wait until we have a generation of college graduates so far in debt that they can't contribute to the economy through spending, buying houses, and starting families?

Borrowing is also higher among the most vulnerable students - the ones that are supposed to be helped the most by financial aid. We didn't include this in the report, but low-income students borrow at slightly higher than average rates - 56 percent, compared with 42 percent for higher income students. So, is 56 percent of low-income students borrowing too high?

These are, after all, the students who can least afford to take on substantial debt to finance college. And that means that 56 percent of those students will pay more for college in the end. Just like that pair of shoes costs more when you add in interest from your credit card, college costs more when you include interest payments over 10 years--even subsidized interest.

Borrowing is really just one symptom of the larger problem - that higher education is becoming increasingly unaffordable. The 44 percent of low-income students who are not borrowing may be using other methods of paying for college that have their own costs, like holding a full-time job, which reduces a student's chance of graduating.

So maybe it's not death and destruction, but growing student debt and the underlying problem of college affordability could actually be catastrophic - and not just for student borrowers, but for the health of our entire economy.

Duncan Data

There's renewed scrutiny around what Secretary of Education Arne Duncan accomplished in his previous position as head of the Chicago Public Schools. Andrew Coulson writes over at Cato about what his sleuthing has uncovered:

So to get a reliable measure of Duncan’s impact, I pulled up the 4th and 8th grade math and reading scores for Chicago on the National Assessment of Educational Progress — a test that is much less susceptible to massaging by states and districts. I then compared the score changes in Chicago to those for all students in Large Central Cities around the nation, and tested if the small differences between them were statistically significant. Not one of them is even remotely significant at even the loosest accepted measure of significance (the p <>Chicago students did no better than those in similar districts around the nation between 2002/2003 and 2007, a period covering virtually all of Duncan’s tenure in Chicago.

This would be all well and good, and we could trust Coulson's excellent analytical skills. Or we could trust the analysis that the National Center for Education Statistics has already done on the same data. Back in December, when Duncan was only a candidate for his new job, I wrote about what they found:

Since Duncan took over in 2001, Chicago has made statistically significant progress in fourth and eighth grade math and fourth grade reading scores. They're up across all subjects and grades for low-income students, students with disabilities, and English Language Learners (ELL). Low-income students narrowed achievement gaps in all but fourth grade math, while students enrolled in special education and ELL students closed gaps in both eighth grade subjects....The racial achievement gaps have not narrowed as much as we'd like, but blacks are scoring higher in 3/4 categories and Hispanics on all four.

These achievements, while not dramatically amazing, are pretty solid, and Duncan deserves credit for more than adequately steering the nation's third largest school district.