Commentary

Spending to Educate?

By Jennifer Grossman
October 24, 1997

Multiple choice question: when it comes to improving education, which amount is worth more? a) $500 million, or b) $6 million?

If you answered “b,” you may be in desperate need of a school voucher to improve your basic math skills. Or you may have understood that real reform in education is less a matter of how much you spend, and more a matter of how and where you spend it.

The two amounts represent two ground-breaking gifts given by private individuals to lift the quality of education available to inner-city school children. One was announced Monday when entrepreneur Ted Forstmann pledged $3 million, matched by investor John Walton, to fund 1,000 scholarships for low-income Washington, D.C. children to attend the private school of their choice. The very same day the Washington Post ran a front page headline: “Can $500 Million Make a Dent?” The story revisited the historic half-billion pledged by publisher Walter Annenberg in aid to urban public schools.

It may seem unfair — not to mention tacky — to compare the altruistic gestures of these philanthropists. But the comparison holds a vital germ of understanding about how private giving can best expand educational opportunity — particularly where it is most absent, in our inner cities.

After all, what megabucks businessmen bring to the table is not just their bank accounts, but — potentially at least — their strategic thinking. Unfortunately, too many entrepreneurs seem to forget the very entrepreneurial instincts that served them so well, and instead adopt a conventional, bureaucratic mentality when it comes to serving others. As a result, they are rightly seen as dilettantes less intent on solving problems than on buying publicity and posing with semi-celebrities at “volunteerism summits.”

If the judgement seems harsh consider that virtually every one of the $1 million-plus donors listed by Slate magazine decided to give their riches to rich universities where they probably went to learn how to get rich in the first place. Does the super-smart media magnate Michael Bloomberg truly believe that the $3 million he gave to Harvard’s business school is where resources were most needed, or where his investment would leverage the most returns?


Public education is a $300 billion dollar industry. 84 percent of that budget is spent on personnel — less than half of whom are teachers.


At least give credit to Mr Annenberg for understanding that the problem with American education is not with ivy league endowments but with kids who never even make it out of high school. Still, just four years after his unprecedented $500 million gift to public education, the Post spoke of “diminished expectations.” On the part of whom, and of what? Clearly, “the White House and many educators” who had “heralded” the donation might find their expectations diminished. Journalists, too, apparently. But any investor worth his salt should not be surprised.

Public education is a $300 billion dollar industry. 84 percent of that budget is spent on personnel — less than half of whom are teachers. That’s right half of all the public school employees in the country are actually teaching kids. To say that Mr. Annenberg’s $500 million — one sixth of one percent of the total public spending — represents a drop in the bucket is to grasp at an imperfect metaphor. More precisely it is very little bit of grease applied to a very large machine.

The result, of course, is that Mr. Annenberg’s money has become “so tangled in the politics of big city school systems, or divvied among so many groups for so many purposes, that overall the benefits may be marginal.” That’s quite a bust for your half a billion.

If Messrs. Forstmann and Walton were in the market for an extremely expensive photo-op — with applause from “the White House and many educators” — they could have simply made their check out to Education Secretary Dick Riley (or, to save time, the NEA and AFT). But as the Cato Institute’s David Boaz estimates, Washington already spends as much as $12,000 per year to graduate only 53 percent of high school students. If this represents a good investment opportunity I must have missed that class of New Math.

In the interests of full disclosure I should note that I’ve known Mr. Forstmann for eight years and have worked with him for the past three. That said, in our exchanges over education, I’ve probably learned as much from him as he has from me. After all, having perfected the art of leverage in the financial world, he’s simply applying the same archimedean logic to prodding American education out of its paralysis. That requires more than merely throwing millions at a broken system. It means finding what Intel’s Andy Grove calls “the inflection point” - that moment in which the future trajectory of events is decisively shaped.

At the very least, Mr. Forstmann’s and Mr. Walton’s $6 million will give 1,000 disadvantaged schoolchildren a shot at a better future. But by providing an alternative, the scholarships just might create the educational equivalent of a West Berlin - a haven for inner-city refugees from the violence, drugs, and failure that pervade Washington’s public schools. Just as West Berlin’s culture of freedom ultimately liberated East Berlin, so too can the expansion of educational choice encourage positive changes in the public school system. Just as the fall of the Berlin Wall hastened the democratization of the rest of the Soviet Bloc, so too can a grand experiment in our capital city quicken the critical mass for more choice around the country.

As Immanuel Kant observed, “The actual proves the possible.” While ideologues bat theories of reform back and forth, while politicians battle over vouchers and standards, there’s something to be said for just going ahead and making it happen. In demonstrating both the demand for and potential supply, of real educational opportunity, Messrs. Forstmann and Walton have hit on an investment strategy for others to follow.

Jennifer Grossman is director of Education Policy at the Cato Institute and a contributor at MSNBC.