Posts Tagged ‘Economic Issues’

Moving Toward Fee-For-Service

October 23, 2014 Leave a comment

I scoured Mokoto Rich’s latest NYTimes article, “Nation’s Wealthy Places Pour Private Money Into Public Schools, Study Finds” in hopes of finding a quote explaining the underlying rationale for the trend described in the headline, which is to move schools toward a fee-for-service model as opposed to a public utility model.

Several years ago when I was Superintendent in MD in the mid 1990s, some leaders of the local business community introduced the idea of creating a foundation to fund some elements of the budget that they felt were discretionary. Their thinking was prompted by the experiences of  states where budget caps were forcing districts to cut things like field trips, elective courses and school clubs and school-based organizations were picking up the costs through private donations. In effect, the business community was seeking to shift the burden away from broad-based taxes toward the end users…. that is making public schooling a fee-for-service enterprise like, say, trash collection.

At the same time as this idea was being floated in the county, I was serving on a State “Blue Ribbon” panel created by the Governor that was examining the funding formula in the state. In retrospect, I can see the connection between these two initiatives more clearly. While the legislators serving the less affluent districts in MD were trying to raise the State’s base contributions to a higher level in hopes of providing their students with an equitable opportunity, the business community was trying to find ways to offset the effects of the loss of State funds they sought through capping taxes by developing “workarounds”.

Over the next 15 years I witnessed a continuation of this tug-of-war between those favoring an increased base in school funding and those advocating a de facto “fee-for-service” model, a tug-of-war that manifests itself in the following ways:

  • The portrayal of  “public schools” as “government run schools”: As the American public’s suspicion of anything associated with the government increased as a result of their belief that “government is the enemy” the so-called “school reformers” re-branded “public schools as “government run schools”. Raising taxes for a “program run but the government” would not meet favor with voters who believe that “the marketplace” can spend more wisely.
  • The increased acceptance that fees are an acceptable means of providing non-mandated programs: My first experience with a fee-for-service model was in the early 1980s with the institution of a fee for Drivers Education based on the rationale that Drivers Ed was not a graduation requirement and taking the course provided a benefit only to those students whose parents could afford a car for the student to drive. In effect, it was an effort to shift the overall cost of an education program that benefits affluent students away from taxpayers who arguably needed relief. When I went to lead schools in Exeter NH I inherited a district policy that required high school students to pay for the bus if they lived within 3 miles of the school building based on the rationale that State law did not mandate transportation for students within that range. In Hanover NH, the district I led in the early 2000s, I inherited a plan whereby the district charged athletic fees each season that covered all of the non-personnel costs for sports that were in place when the fee was instituted. The rationale was that Little Leagues and soccer programs charged fees and parents were accustomed to paying for their children to participate in those town-sponsored activities. I found many of these fees troubling, but I knew that undoing a practice that creates a revenue stream is extremely difficult in a time when many other pressing priorities were in play. Moreover, whenever fees were debated in budget sessions members of the public and Board members would cite practices in CA and several midwestern states where book fees, activity fees, and athletic fees are commonplace. By the time I retired three years ago, the charging of fees for service, once rare, was increasingly commonplace.
  • The increase in privatizing services within schools: As noted in prior posts, schools typically privatize transportation, food services, special education related services, and many non-instructional services related to business operations and technology. With every portion of the budget that is privatized it becomes increasingly easy to argue that another segment of the budget— say music lessons or even tutoring— can be outsourced to lower the budget without compromising the education program.
  • The narrowing of the mission of public education: While much has been written about mission creep in public education, including an article I wrote for a local newspaper over five years ago, the reality is that legislators and the voting public increasingly see school funding being limited to those courses that are graduation requirements and whose focus is academic. The standardized testing regimen as only made this worse by effectively de-emphasizing art, music, and physical education in favor of “academics” at the elementary level and viewing secondary education as preparation for work or college. This narrowing of the content results in schools shedding “non-essential” programs in the arts and “non-essential” electives and extracurricular activities in high schools adding to the joylessness for students and driving parents to either enroll their children in after school elective programs or take their children out of school completely.
  • The expansion of the fee-for-service model across all government services: The “government is the enemy” mentality has increased the level of privatization in other government agencies including the armed forces, parking, and, yes, the return of  toll roads.

These trends do not bode well for those who advocate an increase in the base in school funding, especially given the acceptability of the workarounds for affluent parents. Given the choice between higher taxes to provide physical education and the arts for all children and paying a fee to enroll their children in arts programs and physical activities their children enjoy, it is not surprising that parents accept the less robust program in their schools. From the taxpayers perspective, it is an even easier decision: low taxes will always trump services for children in another town if not their own community. Without the full throated advocacy for equitable funding for all schools, funding that would require the same per pupil expenditures as the most affluent districts now pay, we will never have true equity of opportunity…. and the fees will keep increasing.

Toll Roads and Toll Schools

October 21, 2014 Leave a comment

Today’s NYTimes editorial page blog, Taking Note, has a short post by Vikas Bajaj titled “Republicans Against Toll Roads“. The blog talks about the pushback TX Republican legislators are getting as a result of their decision to fund road improvements through tolls instead of gasoline taxes. But voters are getting what they are paying for… and MAYBE the pushback in TX will spread the same way their current thinking about charging fees instead of taxes has spread.

As I noted in a comment I left on the blog, Texas’ Republican’s view of “the commons” is different from the rest of the country… but seemingly the thinking of Texas is spreading. IN, IL, and WI are all talking about toll roads as a workaround to tax increases which were needed because the mpg on cars was resulting in lower fuel consumption. But the “fee for service” model in TX has spread to schoos as well. Their public education funding is based on the same kind of premise: they underfund school districts who then charge fees to make up the difference. Texas is ranked 45th in the country in per capita spending, up from 49th. Prisons, though, are a GOOD place to spend if you’re a TX legislator! TX has more people in prison than ANY state and keeps spending even though it had 11,000 empty beds in 2013.

It would be nice if TX was an anomaly… but what has happened in TX mirrors what is happening in our country as a whole where we are cutting social spending but adding to a military budget that has excess capacity. MAYBE the outback in TX is a harbinger of what will happen across our country in the near future.

Privatization: A Demonstrably Bad Idea

October 17, 2014 Leave a comment

Two blog posts yesterday described a report released Wednesday by the Center for Media and Democracy titled “Outsourcing America Exposed“. For any readers who are skeptical about the belief that “if we just get rid of government and replace it with the private sector, everything will run a whole lot better”, I suggest reading Thom Hartmann’s “A Red Privatization Horror Story”  posted on his blog. It describes the debacle of deregulated for profit charter schools in FL and PA and demonstrates that:

Ultimately, private corporations are only interested in making money and are only really accountable to their shareholders, not “We the People.” The way they see it, it doesn’t matter if prisoners have to eat rotten meat, if students get a crappy education, or if for-profit hospitals like the ones in Texas don’t have proper staffing. All that matters is making a quick buck, and if that means screwing over the public, then so be it.

The only bone I had to pick with Hartmann was this sentence:

And Republicans will never change their mind about selling the commons off to the highest bidder, because from the Republican point of view, these aren’t scandals or horror stories, they’re success stories.

As I wrote in a comment I left, the Democrat party is just as willing to sell the commons when it comes to public education, and that is a real problem for those of us who believe all children are entitled to the same kind of public education as the most affluent children in this country receive.

Alas, Common Dreams writer Dierdre Fulton also overlooked the outsourcing of public education in her article, focussing on prisons, legal costs, and water in her article, which included this quote:

Some experts estimate that $1 trillion out of the $6 trillion that federal, state, and local governments spend annually are handed over to private contractors, according to the Center.

The lack of coverage about deregulated for profit charter schools doesn’t reflect the report they are highlighting, which cited ALEC’s support for online for-profit charters and their well documented failures in OH, PA, and FL. IF public education becomes privatized, taxpayers should be aware that more of their trillions of dollars will be going to private for-profit contractors and given the choice, those contractors will be more interested in satisfying their shareholders than meeting the needs of the taxpayers… and they can’t be voted out of office.

Teaching Fear

October 15, 2014 Leave a comment

Yesterday as I was driving into town from our home in rural NH with my wife I observed that cars were waiting at the end of dead-end streets and fairly long driveways to meet elementary school children as they got off the school bus. We recalled our disembarking from the bus and that of our children when we lived in situations where the bus picked them up and could only recall a handful of times that we met our children at bus stops and could recall no times when we were met by our parents at bus stops. I lamented that the parents who waited daily for their children were implicitly teaching their children fear and dependence: by waiting for them on a sunny fall day they were conveying the idea that it was unsafe for them to be outdoors on their own— even to walk from the bus stop to their home.

I read a CBS news account this morning that Baltimore County is installing an “integrated camera network (that) gives police an inside view of school buildings” in each of its schools and is “on a fast track to outfit middle and high schools, with an additional $9.5 million of improvements, including a card identification system.”

An incident in one of the schools in the district serving well over 100,000 students prompted the action which will require over $10,000,000 in equipment and an unreported amount in personnel cost… assuming someone will be watching the footage on a daily basis and/or notifying parents when a child fails to swipe a card at the entrance or exit of the school.

Here’s what concerns me: as relatively well off as Baltimore County is, I’m sure that teachers would rather see $10,000,000+ spent on additional teaching staff, guidance staff, and classroom upgrades than cameras and security staff. And once the cameras and security staff are in place there is very little chance that they will be kept in disrepair or cut from the budget. If taxpayers want to provide security in schools they should be willing to pay for it in a separate budget so that security dollars are not forced to compete against instructional and support dollars.

Public education has always included a hidden curriculum… and increasingly fear of “the other” and the acceptance of 24/7 surveillance is now part of the hidden common core.

Why We’re Losing the Global Education Battle

October 6, 2014 Leave a comment

If you want to see the antithesis of the US version of workforce preparation look no further than Germany, a country that a Think Progress post reported has eliminated all fees associated with attending college. Why, because they want to address the issue of inequality and they saw the $630/year fees a hindrance for many students who were qualified to get into school.

I know that Germany has a different system for determining which students are eligible to attend college, one that is based on national standardized tests. But there are other differences as well. Where we have unpaid internships Germany has paid apprenticeships. Where our country wants to have market forces applied to post-secondary public education (AND K-12 education) Germany’s government and businesses fund programs to ensure that all youth can transition into the workforce. And the result: the last time I looked Germany had the strongest economy in the EU and a standard of living that rivals what we once had before the .1% hollowed out the middle class by off-shoring employment in the name of efficiency.

In the system, students without the financial wherewithal or the necessary educational background to attend post-secondary school after the age of 18 are enticed to take on debt for schooling that includes non-credit bearing remedial education and/or degrees that are worthless in terms of gaining employment. At the same time, instead of the traditional paid apprenticeships that exist in Germany our country has unpaid internships and a galaxy of low-paying service jobs designed to prevent the employees from qualifying for health benefit and a living wage.

I believe we could develop a hybrid system that draws from the best elements of the German schooling and our more libertarian system that would reintroduce equal opportunity into our public education. If we abandoned the notion that examinations determining entry into post secondary schooling or the workforce must be taken at a certain age level, replaced all unpaid internships with work-study jobs, and adopted the idea that passing an entry exam would qualify a student for full tuition or full-time employment, we would create an incentive for students to persevere in public schooling until they can pass a mastery test that qualifies them for workforce entry or entry into a fully funded post-secondary school. A rational individual, given the choice of taking on debt to attend a school that does not guarantee a wage to pay-off the debt, working part-time at a dead-end job, or scrabbling out an existence might opt for the latter… and that appears to be what is happening in our country today. Ironically, a market economy depends on rational consumer behavior, even if that rational behavior is not good for society as a whole. The best way to break this cycle of dropping out of the workforce is to have the government create meaningful work for those no longer seeking employment, work that would be funded with the profits accumulated by those who are benefitting from today’s debtors. Oh… that’s right… I forgot… government can’t be part of the solution because government is the problem!

Over the past several days I’ve written posts describing the profiteering in post-secondary education, blogged on countless occasions decrying the movement to privatize K-12 education, and frequently lamented our country’s lack of faith in government. Germany shows one way a country can establish a system that promotes equal opportunity. Maybe our education policy makers need to borrow some ideas from one of our competitors who seems to be doing a better job preparing for the future and creating a system where equal opportunity is valued.

Privatization + Deregulation = Debt

October 5, 2014 Leave a comment

An Upshot article by Kevin Carey in today’s NYTimes describes how for for-profit post-secondary institutions prey on unemployed and naive high school graduates who are seeking jobs in the medical field. The best way to summarize the article into an algebraic equation is this:

Privatization + Deregulation = Debt

The deregulated post-secondary education “system” is rife with institutions that provide programs that are superfluous, costly, and fully funded by the federal government when a student defaults on loans. The poster child for this abuse is in the training of medical assistants, an area where there will be unarguable job growth in the coming decades. But the first problem with these training programs is described in this paragraph:

A small number of public community colleges have successful medical-assistant programs, minting graduates who make $25,000 per year or more. But the industry is dominated by for-profit colleges, which produce more than nine out of 10 medical assistant certificates nationwide. For-profit programs are typically expensive and financed primarily with federally backed grants and student loans.

So a “small number” of publicly funded schools graduate students who make $25,000 per year… a reasonable wage and one that arguably yields a good “return on investment” which seems to be the primary motivation for education based on the thinking today. But the “expensive” programs offered by for-profit institutions cost upwards of $15,000 and the average wage for graduates is just over $14,000: a terrible return on investment by any measure. Here’s what makes the “investment” even worse: the certificate earned after paying tuition to these for-profit schools is worthless! 

No state or federal law requires medical assistants to have a medical assistant certificate from a college. Among the hundreds of medical assistant job openings on Craigslist in the New York City metropolitan area, it’s nearly impossible to find an employer who explicitly requires a certificate. Instead, the ads are full of phrases like “experienced multitasker,” “skilled phlebotomist” and “fluent in Russian.”

As noted in earlier blog posts on loans, the only winners in this game are the investors in the for-profit schools and the banks who get their loans paid by taxpayers even if the loans are not paid. We don’t need to create new metrics for post-secondary institutions if we intend to invest scarce federal education dollars wisely: we only need to regulate the for-profit post-secondary schools and close down those that offer superfluous, costly degrees.

One last note: is there any reason to believe that for-profit K-12 institutions will do any better than for-profit post-secondary when it comes to recruiting “customers”? Is there any reason to believe that market forces are appropriate for a public good like schools?



College Students Lose, Colleges Win

September 26, 2014 Leave a comment

Distressing news today for college students as reported in Huffington Post: the USDOE has decided NOT to punish colleges for “questionable servicing practices” that resulted in students being punished for loan defaults while colleges whose loan servicing caused the defaults allowed to remain open and free of any financial penalties.

Here’s the way it works for college students who need to borrow money to attend college: They can get a federal loan or grant through their college. Over the course of their education, the school they attend might change the companies that service their loans, making it conceivable that a degreed or non-degreed student might have multiple collectors seeking paybacks for the money they borrowed. This phenomenon is called “split-servicing”. As recently as November 2011 USDOE reported that “…some 500,000 borrowers with federal student loans were being forced to make multiple monthly payments to different loan companies.” If one or more of the servicers is negligent in collecting the funds, the student is penalized.  How?

Borrowers in default on at least one of their federal student loans face high collection fees, damaged credit scores, an inability to secure home mortgages or auto loans, and garnishment of their tax refunds and Social Security payments, said Cochrane of the Institute for College Access & Success.

recent federal audit revealed that the Education Department is demanding so much money from seniors with defaulted student loans that it’s forcing tens of thousands of them into poverty. At least 105,000 Americans had a part of their Social Security benefits garnished last year to the point that their monthly benefits were below federal poverty thresholds, according to the Government Accountability Office.

Here’s the way it works for colleges: as long as less than 30% of the college’s student/borrowers do not default on a loan within the first three years they are required to make payments, the government will continue to guarantee the loans. If, however, the default rate is 30% or greater, the college could lose access to taxpayer-provided student aid, and that “…would be the equivalent of a death sentence for most colleges.” 

And here’s what’s happening: at least 20 institutions should have gotten the so-called “death penalty” but they dodged a bullet because the federal government did not include students who were current on payments for ONE loan but made no equivalent provision for the students. This decision had the effect of lowering the percentage of “default students” giving the institutions a reprieve from the “death penalty” but maintaining the penalties applied to students.

Borrowers aren’t getting any relief or similar consideration from the Education Department,” said Debbie Cochrane, research director at the California-based Institute for College Access & Success, which advocates affordable education. “If the school isn’t held accountable for the default, then the borrower shouldn’t either.”

“Borrowers have no control over who services their loans. So why not remove the defaults from the borrowers’ records as well?” Cochrane said.

Of course the real winners in this are the servicers who collect the fees and the banks who collect the money even if the students default. “WHAT???”, you ask?

Jeff Baker, a senior official at the Education Department’s Federal Student Aid office, says the Education Department

…has tried to ensure that all student borrowers only deal with one company when making their loan payments. For example, it has put an emphasis on borrowers with Direct loans and FFEL loans owned by the Education Department, which it purchased under a 2008 financial crisis-era law that amounted to a $110 billion bailout of the student loan industry, according to figures cited by Baker.

I’m not a financial expert, but I BELIEVE that $110,000,000,000 did not go to colleges and did not go to students who couldn’t make loan payments… it went to banks. Oh, and where exactly did that $110,000,000,000 come from? I think my tax returns helped a little bit. Oh… and if I’m wrong and someone wants to set the record straight, please do so…