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Education Tue Sep 01 2009

The Education Bubble

To the speculator, "saturation" is the filthiest word. When a market is robust and investments see steady and steep returns, all is good. When too many of his cohort are vying for the same investments, the rate of return diminishes.This situation forces these investors to get creative.

The "edupreneur"- a creature that is one part philanthropist and a thousand parts venture capitalist- is the paving the way for the newest, untapped market; our schools.

In the nineties, "information" became a commodity and investment in physical things started looking pase. When that bubble busted, people realized the value in "things" and everyone bought a home. This was followed by foreclosures, bankruptcy, and in some cases homelessness. Speculators got creative again and started investing in "derivatives," a concept I still don't quite understand. As an English major in college, the term derivative would only be used to describe the relationship of David Foster Wallace's writing to Thomas Pynchon's.

Now that the D-word is a name that shall not be uttered, there is a rush towards the newest bubble, one that had been steadily inflated throughout the nineties , but recently has received a sudden, new surge of hot air, the Education Bubble.

As Ramsin pointed out, charter operators, like UNO have used the new charter school "market" to gain influence and bring in huge sums of cash.

Not all edupreneurs take over entire schools to make profits. Since the privatization of schools is not happening "fast enough" for the tastes of failed "reformers" like Secretary of Education Arne Duncan, privatization of curriculum is the preferred route for test-prep companies turned curriculum think-tanks.

In Chicago, this practice took the form of a Gates Foundation initiative called "High School Transformation." This program was initially a 10+year effort to

"transform CPS high schools to ensure that they prepare students for success in college and the workforce."

The line quoted above was taken from a brochure, published by the CPS, extolling the virtues of the program and quoting some key players in the Education Profiteering game.

One of the major components of the Transformation project was the "Instructional Development Systems" (IDS) program. IDS is a set of "choices" a school has regarding which scripted curriculum vendor it will purchase its lessons. Companies like Kaplan and America's Choice sell scripted daily lesson plans for the English, Science, and Math departments to participating schools. Teachers become more like conduits for these corporate partners than participants in the educational process.

The IDS program not only gives teachers a scripted curriculum, but increases the amount of testing that takes place in the classroom. To implement the data-driven model that has been fetishized by public administrators throughout the nation, students in the IDS program are given additional tests instituted by the American Institute of Research (another outside contractor) to see what gains have been made. Students in non-IDS schools are also given these tests to have the IDS data norm-referenced (to give a basis of comparison).

The gains , according to one University of Chicago Study, "produced incremental change rather than transformation." This was enough for the Gates Foundation to pull funding (can you blame him, this guy was savvy enough to survive and persevere through the busting of the tech bubble).

However, CPS has not dropped the program, but they are now completely liable for the bill, which according to CPS officials, will be $31.8 million for fiscal year 2010. This does not account for the amount of funds required from each individual school to contribute, which averages about $300 per student. These are funds that typically go to textbooks, field trips, fine-arts programs, and everything else that "engages" students.

The CPS claims to have a $62 million dollar shortfall* and is paying almost half that into a program touted as "transformation" but should really be called "High School Incremental Change."

Meanwhile test-prep companies like the Washington Post-owned Kaplan still receive full payment for their product, paid for and insured on the backs of Chicago taxpayers.

Therein lies the difference between the education bubble and the housing/derivatives bubble. After the market tanked, the banks received a bailout that was political and tricky and was to the tune of billions. This profiteers investing in the education bubble get smaller, incremental bailouts each fiscal year, subsidized by the American taxpayers. It's the difference between capitation and Chinese water torture.

This goes deeper when we bring charter schools back into perspective. When the school board takes on loans to make capital improvements on charter school buildings, they are not susceptible to limits imposed by state law. These loans are issued to the city and are backed by the full faith and credit of the Chicago taxpayer. This is incredible credit, which ensures an outstanding bond rating. In fact, unlike private entities, school boards do not have to keep a "reserve fund" to insure a high bond rating (although the CPS does keep one to the tune of over $400 million).

If the charter school "fails," it gets to close up shop and leave the Board of Education with the bill. There is no reason to keep your shareholders happy when your shareholder have no say. The shareholders in this case being the taxpayers of Chicago, with a Board of Directors they do not choose since the entire Board of Education of the City of Chicago is appointed by the Mayor.

What we have is the worst parts of the public sector and the worst parts of the private sector squeezing out funds for well-clouted friends of the Mayor.

If this isn't happening fast enough, Daley has Arne Duncan, his boy in DC, putting the squeeze on states to lift caps on charters with his "Race to the Top" program, which awards paltry amounts of money to states that do as he says, which means the union-busting package of merit pay for teachers, school turnarounds, and more charters. The Edupreneurs are lobbying the general assembly and writing Op-Ed Columns to push the General Assembly to open the door for unlimited charters.

R. Eden Martin, President of the Civic Committee of the Commercial Club of Chicago writes this piece for the Chicago Tribune. The Civic Committee authored the report that was the catalyst for the Renaissance 2010 program, which opened the floodgates for CPS privatization.

Robin Steans writes this piece. Steans is the sister of state representative Heather Steans and the President of Advance Illinois, a state education group co-chaired by former Republican Governor Jim Edgar and Bill Daley, Midwest Chairman of J.P. Morgan Chase and brother of the Mayor.

Duncan's strategy is at best, an infringement on federalism, using an appointed bureaucrat to influence the decision making of the state legislatures, and at worst; extortion on states to bust their teachers unions.

What we have now is the constant bailout to keep the friends of the powerful rich during a time of economic crisis. The bubble is being inflated quickly, but the elasticity lent do it by the taxpayers will allow it some time before it busts.

*The claimed "shortfall" does not take in account the fact that the at the end of 2008, the 150+ TIF districts have brought in a $1billion surplus. These are property-tax revenues that were taken out of the school coffers and placed in Daley's slush-fund to divert to his investor friends and his pet projects.

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know the ledge / September 1, 2009 7:35 PM

Great article. Also David Foster Wallace is a complete and pathetic derivative of Pynchon, good call. What will it take to see this trend change?

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