How-Business-and-Civic-Leaders-Can-Make-a-Big-Difference-in-Public-Education

How Business and
Civic Leaders Can
Make a Big Difference
in Public Education
A CEOs for Cities Briefing Paper
by

Paul T. Hill
Center on Reinventing Public Education
Evans School of Public Affairs, University of Washington

Prepared for

April 2004



This briefing paper was commissioned by CEOs for Cities to stimulate
discussion at the organization’s Spring 2004 national meeting to be held on
May 6 and 7, 2004 in Chicago. Conclusions expressed herein are the
opinions of the author and do not necessarily reflect an official policy or
position of CEOs for Cities or any of its members or sponsors.
Copyright 2004 Center on Reinventing Public Education and CEOs for
Cities. All rights reserved.
Cover photograph courtesy of morgueFile.com.

Daniel J. Evans School of
Public Affairs
University of Washington

Box 353055

Seattle, WA 98195-3055
206.685.2214




One Post Office Square
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www.ceosforcities.org


4
How Business and Civic Leaders Can
Make a Big Difference in Public Education
A CEOS for Cities Briefing Paper for Members
by Paul T. Hill
Center on Reinventing Public Education
Evans School of Public Affairs, University of Washington
Prepared for

CEOs for Cities
A national, nonpartisan alliance of mayors, business executives, university
presidents and civic leaders that strengthens the economic
competitiveness of cities
through an exchange and application of best practices, ideas, and
advocacy.

April 2004
Everybody who lives or works in
a big city has a stake in the
performance of the local public
school system. Businesses and
cultural institutions suffer when
thousands of young school
graduates are unprepared to do
productive work or take a full
part in civic life.
Despite nearly two decades of
well-publicized efforts, many
young people – a majority in
whole sectors of some big cities –
are unprepared. Half of the
nation’s minority students do not

get a high school diploma. On
average, low-income and
minority 12th graders still read
and write at about the same level
as middle class white 8th graders.
In many cities, more than 30% of
all poor minority students score
below the 10th percentile on
national reading and math tests.
The advantaged can run from
these facts, but they can’t hide.
Even families that can get their

children into the more effective
college prep schools still suffer,
as companies struggle to find
workers, highly skilled workers


resist moving to the city, and
property values stagnate.
None of this is news to big city
school superintendents and
school board members. They are
struggling to improve their
schools, but the tools at their
disposal are weak, and politics
disrupts strategy. Districts
months, i.e. Richard Green,
Joseph Fernandez, Rudy Crew,
Ramon Cortines, Richard Levy,
and surely at some point Joel
Klein).
The objective challenges of
educating large numbers of
children from destitute families,
including many foreign born, are
daunting enough. But big city
districts also face man-made
constraints that make their jobs
even harder. These come from
state and federal regulations that
prohibit flexible use of money,

union contract provisions that
strip school leaders of authority
and allow experienced teachers
to avoid the most challenging
schools, and control of all
important expenditure decisions
by a central district bureaucracy.
City school districts are further
harmed by a self-imposed
insulation from broader
community resources. School
districts strive to be fully
integrated within, and to depend
as little as possible on expertise
from the outside. They are willing

celebrated for improvement can
be derided as frauds or failures
only a few years later, and some
districts can be saved, lost,
saved, and lost again in rapid
succession (consider New York
City’s succession of chancellors
who went from being brilliant to
hopeless in only a few
to accept money, but on their
own terms, and will take in-kind
donations of services and goods
as long as these do not affect the
internal workings of schools. This

approach, derived from the
“professionali-zation” movement
of the early 20th Century,
needlessly limits reform options
and children’s learning
opportunities.
Most big cities have large
universities and sophisticated
high-tech industries, yet their
school systems often cannot offer
all students high-quality
mathematics and science
instruction. Universities,
community colleges, museums,
private schools, and training
organizations all have expertise
in instruction, yet they are kept
at arms length. Businesses have
expertise in management,
performance monitoring, and
finance that school systems
need. But many fear allowing the
snout of the private sector into
the tent of public education. So
public education does without
the help it needs.


In general, public schools are
isolated from the forces that

bring improvement into other
sectors. Money and students
can’t flow from less to more
successful schools. Though
school districts are often ready to
try new things on a small scale,
there is no mechanism to spread
success: teachers and
administrators in other schools
are burdened by rules and have
little incentive to imitate
someone else. Teachers and
principals whose successes win
publicity are more often resented
than imitated.
Meanwhile superintendents and
school members are driven by
politics to look for improvement
in the wrong place; they strive to
mandate one sovereign solution
that will transform every school
in the same way, rather than to
create a marketplace of
competing ideas. That’s why
districts that teach children who
speak 100 languages and come
to school at vastly different levels
of readiness to learn nonetheless
try to mandate use of a single
approach to reading or math

instruction.
In this environment, what should
businesses and philanthropies
do? Should they continue to work
within the public education
system? Or should they
concentrate on creating

alternatives and applying
pressure from outside?
Fortunately, in the real world the
choice is not so stark. Businesses
and philanthropies can and
should continue to support school
districts. But they must take care
to avoid being co-opted by those
who would protect the system
regardless of its failures.

FOCUSING ON SOLUTIONS
Eight years ago, the Brookings
Institution set out to create
options for city leaders – mayors,
heads of cultural institutions,
philanthropies, and businesses,
and school board members and
superintendents – who hoped to
turn around failing big-city school
systems. We studied many cities
that reputedly were making

headway on their school
performance problems, but the
results to date are sobering.1
To this point in the cities we have
studied2 virtually all major efforts
1

For more extensive discussions
see Hill, Paul T., and Mary Beth
Celio, Fixing Urban Schools,
Washington DC, Brookings 1998,
and Hill, Paul T., Christine Campbell,
and James Harvey, It Takes A City:
Getting Serious About Urban School
Reform, Washington DC, Brookings
2000

2

We conducted formal studies in
Seattle, San Francisco, San
Antonio, Boston, Memphis, and
New York City, and also worked


to improve big city school
systems, including mayoral and
state takeovers, have been
doomed by the same two deficits
that sank the school systems in

the first place.3 The first deficit is
in strategy. No city has thought
through all the changes that
must take place before a
chronically low-performing school
system can come to operate at a
consistently high
standard. The second deficit is in
implementation. No city has
organized the political and
financial support necessary to
sustain a reform strategy over a
long time.
On strategy, our book It Takes A
City (Brookings 2000)4 shows
that a reform strong enough to
move a big city school system
must have three parts:
1. Incentives to reward good
performance and sanction
bad, including family and
teacher choice that lets
people and resources move

3

4

with reformers in Cleveland,
Chicago, Houston, and Denver.

Possible exceptions are current
reform initiatives in Boston, where
progress is slow but ongoing, and in
Detroit, San Diego, and
Cleveland, where change
strategies are still taking shape.
Hill, Paul T., Christine Campbell,
and James Harvey, It Takes A City:
Getting Serious About Urban School
Reform, Washington D.C., Brookings
Institution Press, 2000

from less- to more-successful
providers of instruction;
2. Investments in capacity, so
that new approaches can be
tried and educators and
parents are not starved of
information and ideas, and
can ask for and get help; and
3. School freedom of action, so
that people with new ideas
about how to use money,
children’s and teachers’ time,
and instructional methods can
put them into practice, and
also abandon their own
practices in favor of better
ones they see elsewhere.
Taken together this is a

framework for open and
competitive experimentation, the
kind of empirical approach to
problem solving that works for
hard problems like going to the
moon or curing cancer. But to
date no city education system
has used it all. Most cities
emphasize one factor –e.g.
building school capacity by retraining teachers, providing
strong performance incentives
and school freedom of action.
The box on the next page
provides an example of a
community-wide strategy with all
these elements. In It Takes a City
we call it the Community


Partnerships strategy5. It is
totally compatible with the ideas
outlined in System Change Goes
to School, a white paper
prepared by Curtis Johnson and
Neal Peirce for CEOs for Cities.
This strategy creates new
incentives, by putting all schools,
no matter who operates them,
into a competitive environment.
It creates new capacities by

introducing new school providers
of all sorts and allowing people
with good ideas to try them out.
It creates freedom of action by
allowing school operators to use
time, money, labor, and
technology in new ways.
Cities relying on superintendents to propose
action will not get a strategy as bold as this.
Superintendents are people who have come 
up through “the system,” and though hope 
for school improvement they shrink from 
pressing reform ideas that would roil 
central office staff, unions, and other 
entrenched interests. Most such 
superintendents are also itinerants who do 
not understand the politics of the cities in 
which they work, and are thus unable to 
marshal grassroots support for reforms.

5

It Takes A City proposes two
more modest but less promising
strategies, one based on radical
centralization under a strong
executive and another a
comprehensive system of school
contracting, contained within the
geographic and financial boundaries

of existing school districts.

Civic and philanthropic leadership is 
needed to formulate and keep a reform 
strategy as bold as the Community 
Partnerships approach. Key roles for this 
leadership include formulating a reform 
strategy, organizing political and financial 
support for it, and creating institutions 
outside the control of the public school 
system to sustain reform.

On implementation, It Takes a
City concludes no strategy is selfexecuting. Big-city reforms face a
tough array of implementation
problems. An initiative that
threatens no one will change
little and cannot make a
substantial difference in schools.
Yet superintendents and school
board majorities are easily swept
aside by small, organized groups,
often led by teachers who dislike
the changes proposed. The
inside-the-system relationships of
school board, teachers union,
and school superintendent are
too enmeshed in conflict to allow
formulation of a profound reform
strategy, and too unstable to

allow one to survive.
Once it is clear that fundamental
reform is necessary, the mayor or
other senior local leaders – the
ones who normally organize
major civic projects like
applications for the Olympics or
responses to major threats to the
city’s economic well-being – must
take responsibility for strategybuilding.


Community Partnerships is a strategy that does not
respect the traditional boundaries between assets owned by the
public school bureaucracy and other institutions, public and private.
It offers a no-holds-barred approach to the question, “How can this
community use all its assets to provide the best education for all our
children?”
A new community authority – one with jurisdiction over an existing
school district or a wider geographic area – would oversee the supply
of educational opportunities for all children. It could license many
entities to provide K-12 instruction, including conventional public
school systems, charter schools, private contractor whether for- or
non-profit, and unconventional options such as colleges, universities,
libraries, church-supported systems willing to operate under First
Amendment constraints, and dispersed “cyber schools.” The only
schools excluded would be those that could not be licensed, did not
want to be considered part of a public system, or will not accept the
public per-pupil expenditure as full payment of tuition. Parents
would have choices among all forms of schools.

The new community authority would control all funds for public
education and would write checks to schools based on their
enrollments. It could enter master contracts with local public
systems, but it would also be free to license other providers to serve
children in the same areas. Public school boards would receive per
pupil amounts for all children served by their school, but nothing
extra. Public school boards could then run their own schools or
contract with independent providers for them. Because their schools
would compete with other schools run under very different auspices,
public school boards would have strong incentives to eliminate
unnecessary overhead costs and put as much money into the
schools, and on instruction, as possible.
The new authority could hold back a small amount of money to
incubate new schools and encourage development of new options for
poorly served groups or neighborhoods. Public school boards, with
their broad portfolios of schools and economies of scale, would
presumably have an advantage over smaller providers when it came
to meeting new needs.


A small leadership group,
including at least one highly
credible minority church or civic
leader, should meet quietly to
create a menu of fundamental
reform options such as the three
suggested above. They should
commit to one overarching
strategy, but discipline their
selection by the knowledge that

any workable strategy must have
definite and strong arrangements
to create school-level
performance incentives, capacity
building, and freedom of action.
This group should then recruit
others to the idea: they should
never engage in open-ended
consultation with the implied
promise that the reform strategy
will take account of every
interest in the school district and
community.
Every community embarking on a
serious reform strategy needs
this kind of long-lasting civic
reform oversight group to provide
principled guidance and highlevel political leadership.
Necessary functions that can be
performed only by a dedicated
group of senior civic leaders
include:
 Mobilizing electoral support for
the reform design
 Making sure reform strategies
survive superintendent
succession

 Opposing distracting proposals
and pressing for termination of

old arrangements
 Supporting the reform at the
state capitol
 Counseling school system
leaders and buttressing those
who get into trouble for
pursuing the reform
 Making sure successes are
recognized and failures lead to
improvements in strategy and
tactics
 Helping build a parent
constituency for reform
Anyone interested in learning
more about how these tasks can
be done should look in the
Appendix.

WHAT BESIDES STRATEGY
IS NEEDED?
School districts neglect activities
that are necessary for powerful
and long-lasting reform. The dayto-day imperatives facing school
boards, the need to pay teachers,
keep schools operating and
support the central office, lead
school districts to neglect or
avoid many activities essential to
long-term improvement.6
6

In a series of confidential
interviews conducted by the authors
with school superintendents and
chief financial officers, most said
that efforts to improve instruction


Small symbolic reforms do
happen if school systems are left
to themselves, but deep and
lasting ones don’t. School
districts reject change in much
the same way that the human
body fights transplants. Just as
hospitals administer medicines
and powerful agents to suppress
the body’s natural immune
system, so too schools need
independent institutions to help
maintain the environment for
reform and provide support at
critical moments. These
institutions should be friendly to
the public schools and
sympathetic to their aims, but
separate from them.
School districts are built to
sustain existing schools, not
create alternatives to them. They

are built to employ a fixed group
of teachers and administrators
on a lifetime commitment basis,
rather than to search
continuously for the best people
who can possibly be attracted to
work in the schools.
When school districts were
developed nobody ever
considered that they would
perform badly or that publicspirited citizens would conclude
were constrained by the fact that
funds are all tied up in salaries for
incumbent teachers and compliance
with mandates from courts and the
federal and state governments.

they needed to create
alternatives. No one saw a risk in
creating a monopoly that was
unable to adapt to change. But
that’s what we have. Districts
inhibit change from inside via
rules and rigid control of funds,
and they discourage competition
from outside – for example by
giving facilities to the schools
they operate while competitors
are required to find their own
buildings and pay rent.

Taken together these attributes
of school districts discourage
innovation, experimentation, and
reallocation of resources from
less to more effective activities.
Philanthropic investments of
several kinds can either create
and competition that might
survive against the district
monopoly. These include:
 Starting good new schools
 New sources of teachers and
principals
 Insurance to manage the risks
of high special education costs
 A way of providing school
facilities for schools that
cannot be housed in districtowned buildings
The remaining sections discuss
these investment opportunities in
detail.

Starting New Schools


In most big cities no one, neither
the government nor the private
sector, is prepared to create
large numbers of new schools.
School districts typically prefer to

rework or enlarge existing
schools. This makes sense in
purely economic terms. It
spreads the fixed costs of having
a school principal, grounds,
heating plant, and so on across
more students. However, it has
grave educational costs. Schools
become more complex and
impersonal. Schools that must
serve many different needs
become holding companies for
diverse programs and factions of
parents and teachers. The school
can take little responsibility for
the character or quality of a
student’s instructional
experience; everything depends
on chance encounters with
particular teachers.
In contrast, new schools can be
built around a purpose and a
specific approach to instruction.
This becomes the reason why
teachers and families decide to
join in. They need to be small.
Smaller schools, with more
intimate contact among faculty,
less formal organization, and
more personalization for

students, are much less likely to
lose track of students. In big
cities especially, large schools
are high-risk environments while
small ones are much more
benign. That is why the Gates

and Carnegie Foundations have
sponsored efforts to reduce the
size of high schools, both by
breaking existing schools into
multiple smaller units and by
creating new small schools from
scratch.
However, it is not easy to start a
good school, even a small one.
New charter schools demonstrate
the difficulty of starting a school
that works well on its first day.
Many charter schools go through
a one- or two-year shakedown
during which teachers and
parents gradually learn to work
together. Dissident groups of
teachers, parents,
administrators, or board
members soon separate from the
school.
Difficulties with start-up have
stimulated the creation of school

incubators in a few localities.
These incubators invest in the
development of new schools
before they open by giving
administrators and teachers a
time and place to work together
and to receive expert help and
advice in advance of actually
opening their school.
Public school systems have
seldom taken responsibility for
helping new schools get off the
ground, and it is unlikely that
they will do so. Existing
incubators, in Massachusetts,
Washington State, and


Dayton, Ohio depend on
philanthropy for core support but
also charge some fees to
participating schools and school
developers. Creating such
institutions in big cities is a very
promising role for philanthropy. In
addition, donors can provide
seed money so that teachers,
principals, and parents hoping to
start new schools can pay the
fees charged by incubators, and

buy other materials and
equipment required to support
their planning.
Businesses and philanthropies
can also take a direct hand in
creating new schools. In
Chicago, an independent
philanthropy called Business and
Professional People in the Public
Interest wrote a “request for
proposals” and managed the
selection process for groups to
create 200 small new elementary
schools. Another business-funded
group, Leadership for Quality
Education, has provided
organizational and analytical
assistance to help Chicago’s
charter school office establish 35
innovative new public
elementary and high schools.
Similar groups are now working
in Cleveland.
Foundations can also pay for
market surveys to estimate
demand for different kinds of
schools, and subsidize the onetime costs of planning for a

specific new school and
recruiting and training its

teachers. Philanthropists wishing
to help create many new schools
in a short time might also pay to
import school development
expertise from New American
Schools design teams or from
education management
organizations like the nonprofit
Aspire Public Schools, the San
Francisco-based KIPP Academy
program, or the New York Citybased for-profit Edison Schools.
Another potential source of new
schools is nonprofit organizations
like the YMCA that have already
run many education programs.
Such organizations have
generally stayed on the sidelines
to date, which is understandable
– until recently anyone ready to
develop large numbers of new
public schools would have been
all dressed up with no place to
go.
Now that the need is evident,
one possible supply-side solution
is interfaith coalitions of churches
that have experience running
their own schools. The Catholics,
Lutherans, Episcopalians,
Baptists, and Jews all know how

to run simple private schools that
focus on instruction. Hundreds of
thousands of people either now
teach and administer in such
schools, or have done so in the
past. These people know how to
make such schools work, and


they could start new ones.
Tragically, as Catholic
archdioceses implode financially,
the number of experienced
people available will grow.
Interfaith coalitions have other
advantages: they include
organizations with financial and
managerial competence,
established nonprofit status, and
access to funds. They can easily
pass constitutional scrutiny by
offering value-based education
that is does not proselytize for
any church. Such coalitions have
been effective providers of lowincome housing and social
services. Now is the time for
them to turn to education.
Interfaith coalitions already exist
in virtually every city. All that’s
required is a little leadership to

move them into providing
schools. A single leader –
whether a rabbi, minister, priest,
or lay leader, could assemble a
group to develop charter schools
or create new schools to serve
children who leave failed public
schools. A mayor or county
executive could perform this
convening function. National
foundations interested in
sparking a supply response could
offer start-up funds for interfaith
coalitions willing to create new
schools.

New Pipelines for Educators

Though urban superintendents
often complain that they cannot
find teachers and principals,
actual shortages are rare. In
most localities, save the few with
very high rates of immigration,
there are enough certified
teachers and principals to fill all
available slots. However, quality
is a different matter. The real
complaint is that there are too
few teachers of high ability,

especially in math and science,
and that people with principal
certificates are often mediocre
and unprepared to lead serious
school improvement initiatives.
Apparently, the education
schools and career ladders now
available produce plenty of
people, just not enough good
ones.
Private organizations, with help
from philanthropists, are already
creating alternative training
programs for individuals who
want to be teachers or principals
but do not want to endure
several years of training in an
education school. These include
the well-known Teach for America
program, which places talented
college graduates in high-poverty
rural and inner-city schools, and
the Department of Defense’s
“Troops to Teachers” program,
which transitions military
personnel into classrooms across
the nation.


The San Francisco-based Pisces

Foundation is funding a
specialized program of training
for future principals looking to
open schools based on the KIPP
Academy model, itself the
product of two former Teach for
America members. Houston,
New York City, Chicago, and
other large school districts are
also creating their own training
programs, enabling them to
certify teachers from sources
other than conventional
education schools. In New York
City, for example, educated
individuals from other walks of
life are able to gain provisional
teaching certificates with a
summer’s preparation, and then
work toward full certification as
they teach. These are important
initiatives and worthy recipients
of funding.
Yet new training mechanisms are
only part of the answer. City
schools also need to attract
talented personnel and make
teaching as attractive to people
who want to teach for just a few
years as to those who are sure it

will be their life’s work.
Philanthropy can help new people
enter teaching in two additional
ways:
 Creating new organizations
that can employ teachers
under different rules and
provide extra compensation

for those whose skills are in
greatest demand
 Creating new forms of
retirement and health benefits
that can allow people to move
more freely between teaching
and other occupations
Teacher employment is now
constrained by civil service and
collective bargaining
conventions. These prevent
school systems from getting the
teachers they need in three
ways: 1) by forbidding extra pay
for people with rare skills; 2) by
tying pay increments to seniority
rather than performance; and 3)
by making training in pedagogy
an absolute prerequisite for all
teaching, even in areas like
science and mathematics, where

no amount of pedagogical
expertise can compensate for a
lack of content knowledge.
These problems all stem from
politics and collective bargaining.
One possible solution is to create
a new status for teachers with
scarce or highly specialized skills.
Science, mathematics, special
education, and other teachers
with rare skills could be
employed by independent
organizations, which would be
manpower vendors to the school
district and provide instruction to
them on a contract basis. Such
organizations—let’s call them
teacher providers—could employ


teachers and provide their
salaries and benefits. The school
district would contract with them
for instructional services; the
amounts paid could combine
current salaries, benefits, and
expenditures for in-service
training and substitutes.
The providers would then be
responsible for recruitment,

training, and compensation. As
contract employees, teachers
would not be covered by the
same rules on pay and
certification that now constrain
school districts. (Due to union
resistance few districts have
found teachers in this way, with
one exception: athletic coaches,
whom some schools hire on a
contract basis.)
Individuals working for a
cooperative could be assigned to
work in one school or many
(advanced physics teachers
might be able to work in two or
three high schools), and could
work full or part time. Some
individuals might keep
concurrent jobs in industry or
pursue advanced degrees while
working part-time as teachers.
College faculty could also
moonlight as schoolteachers.
Individuals with advanced
degrees, who now make little as
adjunct faculty at colleges and
universities, could be paid much
better for teaching part-time in
public schools.

Individual teachers’ pay and
benefits, including contributions
to vested retirement accounts,
could be based on scarcity of
skills and the quality of their
performance, rather than on
seniority. Thus, highly capable
younger people, and individuals
who are masters of pedagogy in
one discipline, could maximize
their productivity and pay.
Providers would have strong
incentives to use teachers’ time
as efficiently as possible. The
result would be their assigning
teachers only to those courses
that they can teach well. It would
also promote experimentation
with effective ways to use
capital, especially computerbased instruction and televised
presentations by master
teachers. Teacher providers
might, in fact, be the mechanism
whereby high-leverage uses of
technology are finally brought
into the public schools.
Contractors might also provide
school leadership. As with
teachers, school leaders could be

contract employees and would
not have to meet all the arcane
requirements that apply to
district-employed school
principals. School districts facing
shortages of principals would
then be able to tap a fresh supply
of people experienced in
managing small organizations.


Teacher providers would
eventually be self-supporting.
However, philanthropic funding
for design, trial operation, legal
and financial preparation, and
the development of recruitment
and training capacities is needed
to get them started.
Teacher providers would be more
viable organizations if businesses
and philanthropies worked on
creating portable employee
benefit packages. Current
teacher retirement funds are tied
to particular school systems or
states, and subject to benefit
limits that discourage senior
teachers from working past their
mid-50s. Inflexible government

benefit packages also give
teachers less freedom than
private sector employees to
select among health insurance,
housing assistance, and other
benefits providers. Current
benefits for teachers are typically
good for married, settled middleaged people, but less valuable
for younger, single, mobile
people.
Privately managed, portable
retirement funds could support
expansion of the pool of potential
teachers in two ways. First, they
would allow people to move more
readily from private sector jobs
into teaching, and vice versa.
This would enable professionals
who would like to teach for a

while—sometimes more than
once—to teach without
sacrificing retirement income. It
would also make it more likely
that experienced teachers who
move from one state to another
would decide to continue
teaching: they could continue
building retirement savings
rather than being forced, as

typically happens today, to start
over on the lowest steps of a new
retirement system.
Second, privately-managed
portable retirement funds would
ease the problem of “maxing
out.” This common provision of
government retirement plans
means that senior employees
eventually reach a point at which
they cannot add further to their
retirement savings.
Understanding that their real
incomes have suddenly dropped
sharply, many leave public
employment at about age 55.
Some simply quit working, but
others use their skills elsewhere.
“Maxed out” teachers are now a
boon to private and charter
schools, which can offer them a
better deal on retirement. Bigcity schools need to be able to
compete for these teachers, and
portable private pension funds
could permit it.
In the long run, such benefit
pools would be financially selfsustaining. But foundation
funding is necessary to create

new providers and to attract
existing benefit vendors into this
field. Foundation funding for
business formation, legal and
financial analysis, and for shortterm demonstration programs
could help create new teacher
benefit options.

Helping Schools Manage the
Risk of High Costs for
Special Education
Laws on education of
handicapped students are a
major challenge for charters and
others that would compete with
district-run schools. Schools that
remain connected to school
districts must pay hundreds of
dollars per student to support the
central office special education
unit. Schools that maintain no
connection to school districts
must pay for whatever services
their handicapped students need,
including placement in residential
facilities costing as much as
$50,000 per pupil.
This sets up a dilemma: to avoid
the financial ruin that could result
if a seriously handicapped child

were to enroll, many new schools
stay close to the very districts
whose control they hoped to
escape. Further, charters and
other schools that rely on school
districts often get far less than
they pay for. Because charter
schools hope to avoid labeling

children as handicapped, they
work hard to solve students’
learning problems early. Charters
in effect transfer money to
district schools that are careless
with the “handicapped” label.
Schools in a voucher system
could face the same dilemma. As
long as public funding brings an
absolute obligation to provide
special education services,
schools must either affiliate with
districts or take huge risks.
Some charter schools are forming
special education risk pools,
which are good until one school’s
unexpected costs create havoc
with many schools’ budgets.
A better solution would be
insurance for special education
costs. Schools could buy

insurance coverage from
commercial underwriters,
including deductibles for small
extra costs and “catastrophic
coverage” for the rare instance
when a student requires
residential placement. A mature
insurance program could be loss
rated, so that schools with
excellent track records of solving
children’s problems without
applying the “handicapped” label
would pay less than schools that
use the label carelessly.
A special education insurance
program would be good for
schools and for children. Schools


would know in advance what
special education would cost
each year – no awful surprises.
Students would also benefit from
schools’ efforts to solve learning
problems before they became
overwhelming. Children who truly
need special services would also
benefit, because the funding
would be guaranteed by
insurance.

No insurance underwriter has
offered such insurance, for two
reasons: First, school districts
have covered their own costs,
largely by robbing other generaleducation accounts to pay for
their burgeoning special
education offices. Within districts,
the managers of special
education have had no incentive
to control costs, and
superintendents are afraid to
cross the groups that represent
handicapped children. Second,
information about individual
schools’ expenditures has been
hidden in district budgets that
record costs by function, not by
school.
An insurance industry could
emerge rapidly, however, if
businesses and philanthropies
offered to support start-up
insurance funds and pay excess
losses for small pilot projects.
Charter and voucher-funded
schools could buy insurance for a
few hundred dollars per pupil and
have their costs adjusted

annually on the basis of

experience.
This small innovation, which
relies more on business
entrepreneurship than on policy
activism, could make a huge
difference in the numbers of
groups willing to start schools of
choice, and in the financial
survival of new schools.

Ensuring Fair Access to
School Facilities
Without major political or legal
pressures, regular public school
systems are unlikely to make
school space available to schools
other than those they operate
themselves. Facilities managers
in some cities have admitted
tearing down public school
structures rather than allowing
them to be used by
“competitive” contract, charter,
or privately run schools.
Philanthropy can support
emergence of new schooling
options by helping districts get
out of the real-estate business. A
major foundation or business
coalition could help a school

district uncouple the property
management function from its
school district by creating a new
quasi-public institution, a Public
School Real Estate Trust.7 The
7

For a more complete discussion
of these ideas see Michael


Trust would own all public school
buildings and oversee the
district’s capital expenditures.
The Trust would have three key
features. First, it would have a
clear mission: to ensure that all
publicly funded schools
(traditional schools, charter
schools, and contract schools)
have timely access to the space
they need. Second, the Trust
would be flexible; it would have
the freedom and
incentive to use a variety of tools
to make sure every publicly
funded school has a place to
thrive. It might allow other
community organizations to rent
space while schools are not in

session—so-called mixed-use
agreements—in order to squeeze
some of the market value out of
school properties; it might enter
partnerships to take advantage
of private providers’ capitalraising advantages. Third, the
Trust would be accountable: the
district and community could
create clear criteria for judging
its performance based on its
mission.8
DeArmond, Rethinking Bricks and
Mortar: New Approaches to School
Facilities Supply, Seattle, Center on
Re-Inventing Public Education, 2001.
8

In Oklahoma City, public
officials recognize the value of
creating an independent capacity to
manage capital infrastructure. In
2001, the city’s mayor proposed
creating a seven member public

By creating a new institution
dedicated to managing school
real estate, philanthropy can help
ensure that a city’s school
buildings don’t constrain the
educational opportunities it can

offer its children or hinder its
attempts at reform.

CONCLUSION:
IMPLICATIONS FOR
CEOS AND CITIES
The new institutions described in
this paper can help address the
intrinsic deficiencies of school
districts. Yet, these institutions
cannot create themselves. Local
districts are unlikely to launch
them. If they are to come into
being, they will need to be
financed by some combination of
philanthropic and statewide or
national initiative.
The total cost of these new
institutions and capacities will be
significant, but probably not
more than the amount of
business and foundation support
now provided big-city school
systems. In Seattle, for
example, one analysis of
philanthropic giving estimated
authority to manage the school
district’s buildings instead of the
district.

donations of nearly $150 per
student. Even if only receiving
one-third of that rate, a school
system the size of Houston,
Chicago, or Los Angeles would
now receive private grants in
excess $20 million annually.
These grants now support less
productive initiatives than those
suggested here. But if
thoughtfully reallocated and
coordinated, the same amounts
of money could easily pay to
build vital new local capacities to
sustain school reform.
Table 1 outlines the approximate
costs of building and sustaining
these institutions in a major
metropolitan area. It
distinguishes the start-up costs

of such institutions as
independent data analysis
organizations, new schools, and
new teacher providers, and the
annual costs of supporting them
through grants from foundations
and businesses. The start-up
costs are predictable and have

very little to do with the size of
the metropolitan area. Some of
the annual operating costs,
however, do depend on district
size. Thus a large district might
need to start five to ten schools
each year, while a small district
could get by with one or two.
Some new institutions (e.g. a
school real estate trust and a
teacher provider) should be able
to pay their own operating costs.

TABLE 1: Start-Up and Sustaining Costs of New
Institutions
Start-Up Costs

Annual
Sustaining
Costs

$100 thousand per
school

$0-$50,000
per school

-- Employment contractors

$1.5 million over 3 years

none

-- Benefit pools

$1.5 million over 3 years

none

-- Insurance for special education

$3 million over 3 years

none

-- Real estate trust

$3 million over 3 years

none

NEW SCHOOLS
NEW SOURCES OF TEACHERS

INSTITUTIONS TO CREATE AN EVEN
PLAYING FIELD


Such investments will require
careful planning and

collaboration among funders.
Individual foundations or
business philanthropies will have
their own abilities and
constraints. But philanthropies
must allow their education grant
officers to enter agreements with
other funders, and to contribute
to pooled funds for initiatives
that no single funder can afford,
financially or politically, on its
own. Local philanthropies
expecting public education to
change should do no less
themselves. They must open
themselves to new and more
challenging roles, and to
collaboration in initiatives that
will discomfit educators and
generate criticism.
Other philanthropic approaches
are possible. Readers piqued by
these ideas should also look at
the ideas for philanthropists on
the websites of the Center on
Reinventing Public Education

(www.crpe.org) and the Thomas
Fordham Foundation
(www.Fordhamfoundation.org).

Urban education is everybody’s
problem, but business and civic
leaders can make unique
contributions to its solution.
Elected officials often avoid
involvement with a struggling
school system, considering it a
no-win proposition. Educators are
either embedded in the existing
system or, in the case of private
school leaders, excluded from it.
Only business and civic leaders
have the combination of standing
and resources necessary to
transform public education. To
use these assets effectively,
business and civic leaders must
enter a game that lasts many
innings and requires many
different tactics, sometimes
helping the school district and
sometimes subjecting it to
external pressures and
competition. The game is hard
but it can and must be won, even
if it goes into extra innings.


APPENDIX

What a Civic Reform Oversight Group Would Do
in a Community Partnership Model
The best form of civic leadership
is one that guides a city through
major transitions. These are
groups, like the Commercial Club
of Chicago and the Cincinnati
Business Committee, that
normally organize applications
for the Olympics or mount
campaigns to support
investments to transform the
city’s economic infrastructure.
Traditionally, mayors and
business leaders dominated such
groups, but these leadership
entities now, quite properly,
include minority, community, and
religious leaders as well. Besides
preserving the flame of the city’s
educational vision, these groups
can operate as buffers between
the schools and the community,
interpreting the district to the
larger community and the
community’s crosscurrents to the
district.
Across the nation, virtually every
major city can draw on a coalition
of powerful local interests to

advance the city’s well-being.
For example:
 The Commercial Club of
Chicago transformed the
downtown and waterfront.

 Pittsburgh’s Allegheny
Conference helped clean up
air pollution in the city,
revitalized downtown, and
helped legendary school
superintendent Richard
Wallace transform the schools
in the 1980s.
 Cincinnati’s Business
Committee led a levy
campaign for adequate school
funding and uses its clout in
the state capital to win the
school system relief from
burdensome regulations.


In Washington, DC, the
Washington Board of Trade
has employed its mandate to
improve the business climate
to lobby for District home
rule, a state-of-the-art
subway system, and

improvements in city schools.

Although the make-up of each of
these groups differs slightly from
one city to another, the most
effective seem to include leaders
from several different communities:
the political establishment, the
business community, and the
foundation and art worlds. They:


Mobilize political support for a
reform strategy
Community leaders understand
that school board elections are
the forums in which entire reform
initiatives can be sustained or
lost. Nothing can protect a
reform against a newly elected
school board that claims a
mandate to trash the reform
strategy or fire a superintendent.
School boards are not good
forums for creating integrated
strategy but they are excellent
platforms from which reform
initiatives and their leaders can
be destroyed.
A civic reform oversight group

cannot guarantee election results
or prevent a well-mobilized
majority from having its way. But
it can develop an election
strategy, provide public
information, make sure that good
candidates are fielded, and
manage voter turnout initiatives,
all indispensable parts of reform
implementation.

Survive Superintendent
Succession
The typical big-city
superintendent’s two-and-onehalf year tenure is far too short to
create and institutionalize a
reform strategy. Faced with the
likelihood of superintendent
turnover, leaders of a civic
reform oversight group must

make sure successive
superintendents are hired to
continue and build upon the
city’s reform strategy, not reject
and replace it.
A civic reform oversight group
needs to pay close attention to
the school board’s preparations
to hire a new superintendent and

use its moral authority – and the
mayor’s influence – to make sure
that the premises on which new
superintendents are hired
reaffirm the city’s commitment to
its basic reform strategy.

Arrange Regulatory Relief
and State Support
A civic reform oversight group
can help promote flexible use of
funds provided by the state or
passed through the state from
the federal government.
Sometimes, all that is required is
that someone asks for help.
Leaders of a civic reform
oversight group do not have to
accept the first thing they hear
about what is permissible and
what cannot be done. They can
and should be the community’s
leading edge in seeking advice
and cooperation from high-level
state and federal officials,
including their state’s governor
and the U.S. Secretary of
Education.
Foundation heads and business
CEOs have their own direct