Topic: Education and Child Policy

On Fed Ed, A Little Less Horrible Is Still Awfully Bad

This morning NPR published an interview with Sen. Lamar Alexander (R-TN), the presumptive next chair of the Senate Health, Education, Labor and Pensions Committee. Unfortunately, if you were hoping the new GOP Senate would move decisively in the right direction on education, you may be disappointed. While the interview suggests we could see a moderate move in the right direction at the k-12 level, there is little reason for hope in higher or early childhood education.

For elementary and secondary education Alexander certainly says the right thing – the states should be in charge – and it is better that federal funds be block granted with few rules attached than delivered via numerous, micromanaged streams. So he is moving in the right direction when he says under a Republican plan, “Tennessee, Texas or New York would decide what the academic standards would be, what the curriculum would be, what to do about failing schools and how to evaluate teachers.” His general inclination is also right when he says he wants to “give states the option — not mandate — to take federal dollars and let those dollars follow children to the schools they attend.” Empowering parents beats simply feeding government monopoly schools.

Unfortunately, moving somewhat in the right direction isn’t the same as doing the clearly right thing. The Constitution does not allow federal funding of education (outside of D.C. and federal installations), nor does the record indicate that federal funding is educationally effective. The feds should therefore get out of education, including abandoning plans to provide private school choice, which if voucherized would eventually deliver stultifying federal rules and regulations to private schools nationwide.

Alas, things only go downhill in the interview after tackling k-12.

On higher education, as I feared, Alexander gives no indication he will do what must be done to address colossal waste and crippling price inflation: significantly reduce student aid. Indeed, what he seems most intent on doing is simplifying the Federal Application for Federal Student Aid, which makes sense from a paperwork-reduction standpoint but might actually lead to more aid flowing from Washington as more people complete aid applications. At least, though, Alexander recognizes the danger of the federal government trying to rate all of the nation’s postsecondary institutions, ranging from “Nashville Auto-Diesel College…[to] Harvard.”

And then there is pre-kindergarten. Again, Alexander rightly warns about federal micromanagement, but he seems to fully accept that Washington should be spending tens-of-billions of dollars on pre-k. Indeed, he states that, “The question is not whether early childhood education is a good idea. It’s how best to encourage it.” But the question absolutely is – or at least should be – whether early childhood education is a good idea. As the Cato Policy Analysis published last month by George Mason University professor David J. Armor made abundantly clear, the pre-k research simply does not support the conclusion that early childhood programs work, and talking like it is a settled issue does not make it so.

Based on this one interview, the good news is that Senate Republicans might try to make horrible federal education policy a little bit better. The bad news is that something made a little less horrible is still awfully bad.

A Few Words on ‘Gainful Employment’

The big higher education news this week is that the Obama administration released its “gainful employment” rules aimed squarely at beleaguered for-profit colleges, which are the schools most likely to offer programs that are explicitly about supplying job skills. This attack does not seem to come because for-profits are objectively worse performers than the rest of the decrepit Ivory Tower, but because it is easy to demonize institutions that—unlike much of higher ed—are honest about trying to make a profit. Oh, and because going after the real culprit—an aid system that gives almost any person almost any amount of money to go to college—would require federal politicians to take on a system they created, and that makes them look ever-so-caring.

Perhaps the only unexpected thing about the regulations is that they do not include cohort default rates—the percentage of an institution’s borrowers defaulting on their loans within two or three years of entering repayment—among the assessments of aid worthiness. Instead, they just use debt-to-earnings ratios. The American Association of Private Sector Colleges and Universities—proprietary colleges’ advocacy arm—suspects this was done because including the default rate was projected to ensnare some community colleges, and the administration wanted this to be all about for-profit institutions.

There is reason to believe this may be true. The administration has lauded community colleges as the Little Schools That Could for a long time, and, indeed, directly compared them to for-profit schools in its press release for the new regulations. “The situation for students at for-profit institutions is particularly troubling,” they wrote. “On average, attending a two-year for-profit institution costs a student four times as much as attending a community college.” What didn’t they mention? According to federal data, completion rates at community colleges are around 20 percent, versus 63 percent at two-year for-profits. The data aren’t perfect—they capture only first-time, full-time students who finish at the institution where they started—but it is a yawning gap that illustrates a crucial point not just about gainful employment, but overall higher education policy: emotions and political concerns, not objective analysis, seem to drive it.

And speaking of objective analysis: We will be hosting what should be a great, diverse panel discussion on Wednesday, November 5, that will look at the changing face of higher education—including, no doubt, gainful employment—as well as offer predictions about what the previous night’s election results might mean for higher education. Hope to see you there!

The Costs of Ebola: Guinea and Sierra Leone

For a clear snapshot of a country’s economic performance, a look at my misery index is particularly edifying. The misery index is simply the sum of the inflation rate, unemployment rate and bank lending rate, minus per capita GDP growth. 

The epicenter of the Ebola crisis is Liberia. My October 15, 2014 blog reported on the level of misery in and prospects for Liberia.

This blog contains the 2012 misery indexes for Guinea and Sierra Leone, two other countries in the grip of Ebola. Yes, 2012; that was the last year in which all the data required to calculate a misery indexes were available. This inability to collect and report basic economic data in a timely manner is bad news. It simply reflects the governments’ lack of capacity to produce. If governments can’t produce economic data, we can only imagine their capacity to produce public health services.

With Ebola wreaking havoc on Guinea and Sierra Leone, the level of misery is, unfortunately, very elevated and set to soar.

Armor’s Reply to Barnett: Research on Early Childhood Ed Still Unpersuasive

W. Steven Barnett’s attempt to rebut my review of preschool research begins with an ad hominem attack on my (and Cato’s) motives for publishing this piece, calling it an “October Surprise” with an aim “to raise a cloud of uncertainty regarding preschool’s benefits that is difficult to dispel in the time before the election.” He omits that my first review of preschool research was published in January, the same month Cato sponsored a public forum on the topic with both pro and con speakers.  The current, expanded review was published now because it took me that long to finish it.  

Of course, it is crucial to let the research and arguments speak for themselves, but for what it is worth, I have no formal affiliation with Cato or any other organization other than George Mason University, while Barnett is Director of The National Institute for Early Education Research (NIEER), whose mission is to “support high-quality, effective early childhood education for all young children.”  Barnett is a long-time advocate of universal preschool, while I had no position on pre-k until I read reports from the national Head Start Impact Study (HSIS).   

Moving on to substantive matters, Barnett says that because the successful Perry and Abecedarian programs were small and more intensive than current proposals, we should devote more resources to replicate them at scale, not discount them as of limited value in indicating how much larger, and different, programs would work.  But current “high quality” pre-K programs, including Abbott pre-K, do not in fact replicate either of these programs.  Moreover, Barnett ignores the national Early Head Start demonstration, a program similar to Abecedarian, which found no significant long-term effects in Grade 5 except for a few social behaviors of black parents–hardly an endorsement to make it universal.  Moreover, this one area of positive effects is tempered by significant negative effects on certain cognitive skills for the most at-risk students. 

Return of the Vampire Lawsuit Against School Choice

Just in time for Halloween, a vampire lawsuit against school choice has risen from the dead.

Nearly a month ago, a Florida judge dismissed the Florida Education Association’s (FEA) lawsuit against a bill amending the state’s school choice laws, ruling that the plaintiffs lacked the standing to sue because they were not harmed. The union wanted to block the creation of the Personalized Learning Scholarship Accounts program for students with special needs, and “in particular” the so-called “expansion” of the Florida Tax Credit Scholarship (FTCS) law, which provides tax credits to corporations in return for donations to nonprofit scholarship organizations that help low-income children attend the schools of their choice. There are two additional lawsuits against school choice in Florida, including another involving the FEA.

This year, nearly 70,000 low-income students received FTCS scholarships. One former scholarship recipient, Denisha Merriweather, recently wrote an op-ed for the Wall Street Journal explaining how the FTCS allowed her to switch from her assigned district school, which failed to meet her needs, to a private school where she thrived.

Last week, the FEA filed an amended complaint with additional plaintiffs. The union argues that the new plaintiffs have standing as district school teachers and parents of district school students because they “are threatened by the implementation of […] the expansion of the Florida Tax Credit Scholarship Program,” which they claim would cause the district schools to “[lose] considerable funding” since the scholarship funds “that otherwise would go to support the public schools are instead redirected through an intermediary to provide vouchers [sic] for Florida children to attend private schools.” (The FEA’s complaint did not discuss the impact of the Personalized Learning Scholarship Accounts.)

The union’s argument suffers from at least two fatal flaws.

First, the FTCS does not “redirect” any state funds. The state of Florida allocates funds to school, in part, on a per-pupil basis, but the fiscal impact of a student leaving her assigned district school to accept a tax-credit scholarship is no different than the fiscal impact of a student moving out of the district, attending private school without a scholarship, or homeschooling. Moreover, if the funds were actually “redirected” then the state would not realize any savings. In fact, the state’s own Office of Program Policy Analysis and Government Accountability found that the FTCS generates significant savings ($36.2 million in 2008-09) because the forgone revenue is less than the reduction in state expenditures.

Second, the union is factually incorrect in asserting that the challenged legislation, SB 850, “expanded” the FTCS. The bill loosened eligibility requirements by eliminating the requirement that recipients spend the prior academic year in a district school; allowing foster students to continue receiving scholarships if adopted; and raising the income thresholds for eligibility for full and partial scholarships. However, the bill did not expand the amount of tax credits available nor did it add any new credits against other taxes. In other words, while the bill increased the number of students who can apply for scholarships, it did not increase the actual amount of available tax credits or scholarship funds.

The FEA’s vampire lawsuit misunderstands how the FTCS law works and misstates the facts about what the legislation does. The judge should drive a stake through its heart.

Bulgaria: Liquidate KTB, Now

The long-awaited audit of the Corporate Commercial Bank’s (KTB’s) assets has been released by the Bulgarian National Bank (BNB). In its wake, a debate has arisen about the future of the KTB: Should it be recapitalized? And if KTB is recapitalized, should the Bulgarian or the European authorities be responsible? However, it is clear from the results of the audit that, once the obscurity of the technocratic arguments is stripped away, there can be no debate. KTB should be liquidated as soon as possible, and whatever proceeds can be obtained in liquidation should be used to reimburse guarantees to depositors paid from the Bulgarian Deposit Insurance Fund (BDIF).

KTB should be liquidated because it is not, and apparently never has been, a commercial bank. Had KTB been operated according to commercial banking principles, it would be virtually impossible for KTB to destroy value on the scale witnessed by the independent auditors. As of September 30, 2014, the auditors estimate that 76% of the asset value in KTB’s non-financial loan portfolio, which accounts for 80% of KTB’s assets, has been lost.

Losing 76% on a commercial loan portfolio must be put into perspective. In making loans, commercial banks generally require a senior secured position. This means that in the event of default, the bank may take collateral from the borrower and use the proceeds from selling the collateral to recover the bank’s principal, prior to any other creditor. From 2003 to 2012, Standard and Poor’s found that European lenders recovered 78% of their principal, on average, from defaulted loans with these characteristics. Even where defaulted loans were not secured by collateral, European lenders averaged a 48% recovery rate. Compare these recovery rates to KTB’s pathetic implied recovery rate of 24%, and it becomes clear that KTB was not operating as a real bank.

The KTB audit report tells a story in which KTB blatantly ignored the basic pillars of commercial lending. According to the report, there is little evidence that initial loan underwriting and subsequent credit monitoring ever took place at KTB.

If KTB’s management were just grossly incompetent, it would be bad enough. But it appears they were also criminals. The BNB is forwarding the audit results to the Sofia City Prosecutor’s Office. The auditors state that KTB lied to and misled BNB banking supervisors, and engaged in transactions with no evident commercial purpose. The suspicion of criminal activity is just another reason why KTB should be liquidated, now.

Philadelphia Teachers Disrupt School Board Meeting

In poll after poll, parents tell us that they care about academic achievement, but that they also want schools to help instill good values. And since children are adept at drawing lessons from adults’ behavior as well as from their words, it’s always nice when teachers conduct themselves with decorum and sensitivity. Which begs the question, how many parents would want their children to emulate the teachers who disrupted last week’s meeting of the Philadelphia School Reform Commission—the district’s governing body? For that matter, how many of these teachers would want their students to behave this way in class?

All the shouting, incidentally, was over the Reform Commission’s decision to require teachers to contribute for the first time to their health insurance premiums. For what it’s worth, Philadelphia was one of only two districts in the state that had not yet required this.