Big Biz Gets It Wrong

I am always fascinated by education articles in business publications. Today's article in Fortune was no less fascinating in its naivete and because of a particularly stupid (yes, stupid) statement by ExxonMobil CEO Rex Tillerson. 

Let me backtrack and share with you where I'm coming from when I read articles like this. I have a business degree from a private university in New York City, that produced some of the most sought after accountant and finance grads by the Big 8. We lived and breathed finance, asset management, accounting, international trade and marketing. 

I am also the granddaughter of an economist. If you had the great fortune to go to NYU in the 1960's and 1970's, he was the professor of banking and finance and the chair of banking and finance department for many years. He was a division chief for the Federal Reserve Bank of New York. He was a director for the Federal Home Loan Bank of New York. Wall Street titans would spend their Saturday afternoon picking Pop's brain about what he thought was going to happen long term - no one was particularly interested in short term. I was a kid who grew up talking about and learning economics, banking, and markets on the knee of a guru. 

So I'll just say, in my less than humble opinion, that Rex Tillerson is a fool. While this thought process is not new, and he is not the first to utter such nonsense, the timing is interesting. Common Core State Standards (CCSS) are finally under serious scrutiny. Here's Tillerson's statement.

“I’m not sure public schools understand that we’re their customer—that we, the business community, are your customer,” said Tillerson during the panel discussion. “What they don’t understand is they are producing a product at the end of that high school graduation.”

Just. No. 

No, Rex. You are not their customer. America's children are not products that are meant to go in one end a human being and out the other a product for corporate America to do with what they will.

I am blown away by the acute shortsightedness of that statement. Especially for a guy who is sitting at the head of a company that exists only as long as fossil fuels do. Rex. Buddy. You should be clamoring for innovation. TRUE innovation. For creativity. For vision. 

If no one has had the balls to tell you, I will. A standardized education (one which you and I did not have, nor did anyone pre-NCLB) will NOT get you what you should be looking for. And for someone who should be well trained at this point in his career to spot trends, which frankly, in education are as blaring as the lights in Times Square, the narrowing of curriculum is detrimental to all students. We've had 15 years of this crap. More isn't going to make it better. 

As for the rest of the article, I'd say it's worth a read, but be prepared for the usual extremes that have absolutely nothing to do with what's actually wrong with CCSS.

Then, in great contrast, was this article in the Boston Globe. It's not about education, but rather, about what some of the old school Who's Who of Wall Street are seeing as a really big problem. I have to say, I think my grandfather would have liked Morris Pearl - former managing director of BlackRock. He is part of a group called the Patriotic Millionaires. Terrible name, but I suppose it gets to the point. 

Their point is this (in admittedly simplistic terms). Wall Street used to be about raising capital for companies to grow. People could buy shares and therefore share in the wealth earned through that growth. Factories would be built. Wages would rise. People could afford to buy products, and so on. We are talking basics here. Econ 101. Remember macroeconomics? 

Now, companies are sitting on their cash. They are using it to pay dividends and for buybacks, not for reinvestment back into their own infrastructure, not for raising wages. The value of companies is now based (deemed) on their quarterly earnings, not on long term plans. The narrowing of the focus on Wall Street is hurting all of us, except the ones at the very tippy top of the pile. 

So why this article, which you should absolutely read? Simply, that there was a time, as the author put it, "When his father expanded his business by investing his profits in other clothing stores, he and others within the family benefited from the expansion. In the same way, large companies could raise the capital needed for growth on Wall Street and sell shares to the public, enabling anyone to own a piece of corporate America, and enrich countless stockholders.

In 1950, individuals owned 90 percent of all stock shares, and usually held them for the long term. This was the virtuous circle that had attracted Pearl and many others, as growing companies hired new workers, raised wages, and rewarded shareholders." 

The same idea holds true for education. There is a cycle in society, a social contract, of which my grandfather often spoke. We have a fundamental responsibility to those who come behind us. We do have a collective good to maintain and it crosses over into many sectors of American civilized societies. We all pay for public education. It is there for all of us. We stand on the shoulders of those who came before us, just as those coming up, count on us to maintain public education for all of them. Without it, we have the Tillersons and the Gates of the world thinking that being rich entitles them to destroy the system that has served most of us incredibly well for generations. 

The End of Special Education Part IV

This is really Social Impact Bonds (SIBs), aka Pay for Success, part 2. 

It seems that NJ Senator Teresa Ruiz, Chair of the NJ Senate Education Committee, thinks that SIBs may be a way to pay for the Committee's vision of Pre-K in New Jersey. Tuesday morning I heard a clip of Senator Ruiz on WBGO's news report. My jaw dropped.

Senator Teresa Ruiz says one recommendation is establishing a five-year pilot program allowing the private sector to pay for expanding early childhood education and then receive a portion of the state savings from that investment.

“It allows for programs to really develop more quickly because the funding is there, and certainly, later on, what we can look for is we will save money because we won’t have to have early-intervention programs and classification and wrap-around services because we did the work early on.”

Just. No. 

I wrote about SIB's here, but let me recap. Goldman Sachs funded a SIBs program in Utah. They claim a 99% "success" rate. In other words, 99% of the 3- and 4-year-olds who went through their funded program did NOT require remedial help or special education classification. Goldman Sachs received $260,000 in payment for those 109 out of 110 students. And will continue to receive payment for every year those students are NOT classified for special education. 

You know there are going to be questions, really basic ones, when you see "results" like that. Presumably, Senator Ruiz heard about those results and did not look further into the inevitable questions about the validity of those claims. 

What was the starting criteria for those students? What tests did they use? Medical history? Demographics? How many students would have likely had to have special education if they didn't have the "high quality" Pre-K experience? How many would they expect to classify even with the experience? What is "high quality" Pre-K? What does "high quality" Pre-K cost? How much does Utah spend on Pre-K? What is the threshold that has to be met for Goldman Sachs to earn its money back?

The NY Times DealBook took an unusual and distinctly skeptical look at the program.

A few weeks ago, Senator Ruiz held a hearing on Pre-K. All of the usual associations were there to provide testimony. All agreed that "high quality" Pre-K is essential to a good start in elementary school. It is even more important for children from certain demographics to have these experiences. 

A Rutgers professor of economics, Steven Barnett, testified that "high quality" (he put great emphasis on that) Pre-K could mean as much as a 50% reduction in the need to classify for special education, BUT that most studies show a 10-20% reduction. That is considered to be very good. In this context, 99% is not even statistically possible. 

So, how much did Goldman Sachs spend per student? A measly $1700, not even enough to cover part-time costs of daycare. Pre-Ks used in successful studies spent 4 to 5 times that amount. Again, what exactly is "high quality" Pre-k? Sounds like Goldman Sachs got off cheap.

Goldman Sachs also only had to achieve a 50% reduction to in order to make back their investment, plus 5%. What's unclear and I haven't found out yet is, who would have picked up the tab if the program "failed" and only achieved a 10% reduction? Would Utah have been on the hook for that? Or, would Goldman have simply written it off? Can we please acknowledge that no Wall Street firm is going to enter into a deal like this if they didn't expect to make money?

I'm also not sure what the point of bringing in Wall Street was. Utah, previously, had no Pre-K program. They didn't really even know what the costs are. Usually in Pay for Success, you're trying to show a savings on the government side...which is why in places like Texas, this kind of program has not worked with daycare. You simply can't show great savings if you're not spending any money on it in the first place. 

Now for New Jersey. What is Senator Ruiz attempting to achieve? Her statement, "we won’t have to have early-intervention programs and classification and wrap-around services because we did the work early on" is naive at best and potentially destructive at worst.  

"High quality" Pre-K is not a magic bullet. Students with disabilities will not be magically cured by attending preschool. It sounds too good to be true because it is. New Jersey's classification rate is about 14.5%, higher in low-income districts where this program will take place. 

Will preschool help decrease the percentage of students who need special education services in those districts? I have no doubt that it will. The research supports that presumption. 

Are you going to end the need for Early Intervention, classification, and wrap-around services? No. You aren't. There will always be students who would have been classified no matter how much preschool they had. There will always be students who need wrap-around services because we, as country, much less as a state, are doing nothing to address the poverty that creates the need for these services.

Big picture here is, Goldman Sachs is going to make money on students NOT being classified. RtI is going to become the framework for K-12, delaying as long as possible the identification and classification of students with disabilities. And the Special Education Ombudsman position the Senator is trying to create (because constituents have been begging for help) will work for the NJ Department of Education. 

This does not look good for the students with disabilities in New Jersey. Parents, it's going to be a really interesting (read: ugly) ride while all of this plays out. We don't need a system that further works against students and their families. Find another way to pay for preschool that doesn't involve a negative outcome on our most vulnerable students.

The End of Special Education Part III

Social Impact Bonds, aka Pay for Success. Both terms sound so innocuous. Nothing could be further from the truth.

In the special education world, everyone, including Goldman Sachs (yes, that Goldman Sachs), is trying to reduce the number of students who are formally classified with a learning disability. As we have just celebrated 40 years of IDEA and its success at requiring all children have a free and appropriate education, programs like Pay for Success, are especially heinous.

While there are a fair number of studies on the impact of high quality pre-school on the number of students who later do not need special education services. The range of success is varied, but still a 10-50% reduction is really big. It does makes sense to support high quality preschool. What doesn't make sense is for Wall St. to fund those pre-school programs with the aim of making money off students NOT being classified.

This has already been done in Utah. Goldman Sachs claimed a 99% reduction in "at risk" students being classified. 99%. That cannot possibly be correct. Even if you only use, say, NJ's average of a 14.68% classification rate, that 1%  rate is simply not possible. Goldman Sachs got paid for every single one of the 99% AND they will be paid every year those students are not classified.

Does anyone think, even for a second, that Goldman would enter into a contract where they did not expect to make money? I can't wait to see the long term outcome on this. How many of those kids will actually need services later because they were sold out in pre-school?

Look, I get the public-private partnership idea. In some cases, it may make sense. However, when public education is involved, in our current climate of selling it off to the highest bidder, while looking for some magic pill to "fix" everything, literally selling out our special needs (any!) kids is not acceptable.

And yet, Pay for Success may be here to stay because it is included in the rewrite of ESEA. We've been given about 48 hours to review the entire document before it goes to a vote in Congress. The very first thing I did was a search for the Pay for Success term. And, sure enough, it's in there.

Let me channel my inner Nancy Reagan: Just say NO to ESSA.

We need time. We need educators and parents to weigh in on the rewrite. We need to be sure that this law is supporting public education for all children in this country, not Wall St. firms, not charter school companies, and not testing companies.

Our children deserve so much better than this.