The Business of Education

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Scholar asserts that education reforms, which have often tracked private sector regulatory schemes, have failed to achieve equal educational opportunity.

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People rarely associate education reform with the business world. State and local governments have traditionally held the reins, with varying levels of input from the federal government. Therefore, it may be surprising to learn that this country’s most consequential education reforms over the past half century have closely tracked regulatory trends in the private sector.

In a recent paper, Stephen Sugarman of the University of California, Berkeley, School of Law traces the progression over the past half century of five regulatory strategies for education, which he asserts mirrored contemporaneous business reform approaches in the broader U.S. marketplace.

Sugarman analogizes the historic lack of equal educational opportunity for many students to “market failures” in the business world that require corrective regulatory action. Education reforms, when successful, can correct these failures and yield positive results, such as a more highly skilled workforce and a better-informed populace.

Sugarman begins his analysis with the “adversarial legalism” approach, which in the 1960s shifted power from local school boards to judges to end racial segregation in U.S. schools. Empowered by Brown v. Board of Education, reformers brought lawsuits seeking “equal educational opportunity” for Black students.

Without subsequent political enactments to change practices, however, courts became less useful regulatory tools in education. A judge could order desegregation, but courts could do little to noncompliant schools other than shut them down, a result that, of course, would have harmed the students the orders were meant to serve. Sugarman notes that housing policy reformers saw a similar combination of “limited judicial reach and reduced judicial reception” to their claims, which doomed adversarial legalism in the housing industry.

As tensions between parents and local school boards rose, Congress shifted power to education policy bureaucrats, Sugarman writes. The idea behind this “command-and-control” approach was that government-employed professionals knew how best to serve the public interest. These agency-backed bureaucrats employed “sticks”—direct demands on regulated entities—and “carrots”—conditions attached to monetary provisions for regulated entities.

In education, federal and state officials gave categorical grants to local schools—the carrots—conditioned on those schools improving outcomes for racial minorities, low-income students, and special education students—the sticks. In 1965, Title I of the Elementary and Secondary Education Act provided increased aid to low-income students, but legislators attached elaborate accounting and reporting requirements to ensure the funds reached those students. Noncompliant schools could lose funding if they failed to accommodate these students.

This change happened just as food stamps, Medicaid, and other government programs shifted from command-and-control systems in which the government controlled the means of distribution of goods and services to systems in which consumer-citizens were empowered to use their government-provided funds to buy those same goods and services from businesses.

This market-oriented “choice” model exploded in the education sphere with the rise of charter schools—which Sugarman describes as private schools receiving public funds. Often run by private non-profits, charters can contract with for-profit school management organizations to serve their students.

Sugarman writes that, while relatively freer from the command-and-control constraints of traditional public schools, many charters have suffered from mismanagement and sometimes outright fraud, given their reduced oversight and often ambiguous testing criteria. Moreover, Sugarman notes that research does not clearly establish that competition from charters consistently makes public schools improve.

Sugarman then outlines the early 2000s approach of “outcome-based” regulations in which private industry was required to meet federally determined government objectives. Given the unintended negatives of unchecked market-based competition, regulators sought to encourage efficiency without constraining the private sector. For example, to slow climate change, governments required firms to obtain permits to emit CO2 while also limiting the number of permits available. This scarcity motivated companies to find creative solutions to reduce their emissions without sacrificing profitability, Sugarman asserts.

Meanwhile, in the education sector, the George W. Bush Administration in 2001 introduced No Child Left Behind (NCLB), a law that required improved student outcomes but allowed local officials to determine the means to achieve those results. For example, many low-income schools had to meet annual improvement standards to reduce the gap between pupil outcomes across racial and socioeconomic groups.

NCLB seemed like a viable bipartisan initiative that could work, but testing issues and other irregularities plagued its administration, according to Sugarman. He presents NCLB as a cautionary tale to businesses using outcome-based measures, warning that unless the right outcome “can be defined, measured, and not seriously scammed,” failure is certain.

Sugarman lastly considers “management-based” regulations that emphasize both procedure and outcomes. Sugarman describes the U.S. Food and Drug Administration’s 2011 Food Safety Modernization Act, which requires food processors to adopt their own food safety plan and document their compliance with that plan, with input from third-party auditors. Visiting federal inspectors can offer further suggestions, but the food processors decide how to fix any issues.

Sugarman cites California as an example of a jurisdiction that employed a management-based education strategy. California in 2014 shifted from a basically uniform per pupil funding structure coupled with large state and federal categorical grants to a state funding structure that gave additional weight to English language learners, low-income students, and students in foster care. Schools receiving increased funding must adopt three-year accountability plans showing how they will improve outcomes for these students, Sugarman explains. These accountability plans must address a minimum of eight general goals, with execution left to “local control.” Due to the program’s novelty, Sugarman notes that definitive conclusions about its effectiveness should only be drawn after more time has passed.

Even though many of the problems animating these reform movements persist, Sugarman views the reinvestment of local authorities with some power—subject to state and federal checks—as a good sign. He suggests, however, that realities like high income inequality might continue to hamper reform efforts, and he notes the added challenges reformers may face with the proliferation of virtual instruction.

Sugarman expects that whatever new regulatory approaches arise in education will mirror strategies being used in other sectors of the economy.