Education Firms See Money In Bush's School-Boost Law
Teachers, parents and principals may have their doubts about No Child Left Behind. But business loves it.
The Bush administration's new education plan requires schools to prove that their children are learning math and reading, and are closing the achievement gap between white and minority children. Already, states are reporting that thousands of schools aren't meeting minimum learning goals and now face an array of sanctions.
Companies that sell to the schools -- from test publishers to tutoring services to teacher-training outfits -- say business is booming as troubled districts turn to them for help.
There's a burgeoning "sense of consumerism in public education" as parents learn about the law and begin demanding services, says Jeffrey Cohen, president of Sylvan Education Solutions, a unit of closely held Educate Inc. His company says it expects to tutor 20,000 youngsters in struggling schools this year, with No Child Left Behind requiring the schools to pick up the $40- to $80-an-hour tab.
Test publishers are the most obvious winners, because the law requires states to track student progress by giving yearly reading and math tests in grades three through eight. Educational Testing Service, the nonprofit company that writes the SAT college-admissions tests, introduced a new elementary- and secondary-education division as the law worked its way through Congress. It expects revenue of $75 million this year from tests it is writing for California, New Jersey and Puerto Rico.
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Likewise, Harcourt Educational Measurement, a unit of publisher Harcourt Inc., says it has rewritten its key standardized test, renamed the Stanford 10, to tap the No Child Left Behind market. The new test is aligned with state curricula -- that is, questions come from what's taught in most classrooms rather than from general knowledge -- and states can add their own questions. Ten states have already bought the new test, whose costs vary by grade but are about $7 for a third grader. Harcourt Educational doesn't release revenue, but spokesman Mark Slitt says the unit expects to double its revenue in five years. "There's a lot of state business out there in the pipeline," he adds.
Some areas under the U.S. government's $24.3 billion budget for elementary and secondary education where businesses can compete for contracts:
• $12.4 billion for aid to high-poverty schools
• $1.05 billion for reading programs
• $700.5 million to improve technology use in high-poverty schools
• $390 million to help states write standardized tests
• $320 million to build and run charter schools
Source: U.S. Department of Education
If schools do badly on their tests, or if their English-language learners, disabled kids or the members of any racial or ethnic group don't meet yearly learning goals, a series of sanctions kicks in, including one that requires the schools to use some of their federal money to hire tutors. Only a few thousand schools must offer tutors so far, and few parents yet know to ask for them. But thousands more schools will face federal sanctions beginning next year, and districts with failing schools are required to set aside 20% of the federal money they now get to educate low-income youngsters to pay for tutoring -- potentially, about $2.4 billion.
Hundreds of "supplemental service providers" have already lined up to offer tutoring, including Sylvan, Kaplan Inc. and Princeton Review Inc. -- companies best known for offering college test-prep courses or homework help.
Kaplan, a unit of Washington Post Co., says it will have tutors in only 30 or 40 school districts this year, including New York City's, where it expects revenue of about $1 million. But as parents start learning about the service and demanding that schools hire tutors for their kids, it's "clearly going to be a growing market," says Seppy Basili, a Kaplan vice president.
No Child Left Behind also has created demand among schools for tools to help them track student progress and interpret the new data the law requires them to generate. Princeton Review is selling a Web-based product called Homeroom that lets teachers give frequent minitests to see whether their students are on track to pass the state exam. Test results come back immediately, identifying which youngsters are weak in, say, measurement or fractions, and providing exercises to help them improve their skills. The product costs $3,500 a school per year and is already in 3,000 schools, Princeton Review says.
Similarly, Kaplan offers the Kaplan Achievement Planner that, for about $20 a student per year, analyzes each student, then gives teachers different lesson plans for their fast, slow and average learners. It also supplies instantly scored minitests that look and read like the state exam. Kaplan says revenue for its elementary- and secondary-school division has doubled since No Child Left Behind passed.
The law's emphasis on reading scores is also fueling new products to help youngsters, including struggling teenagers, learn to read. Scholastic Inc.'s Read 180 product uses videos to give youngsters background on the story they're about to read, then individually helps them through each chapter using computer software, and provides reading exercises to build their speed and fluency. Scholastic's Read 180 was developed with National Institutes of Health funding, costs $30,000 for 60 students, and can be used over multiple years. Scholastic says Read 180 generated $40 million in sales last year, making it the company's fastest-growing education product.
On the low-tech side, Scholastic this year began selling 100-book, $275 classroom libraries that meet the law's requirement for federally funded reading programs that they actually teach kids how to read. The collection for third graders, for example, includes the book "How Sweet the Sound," which Scholastic says builds phonemic awareness, while "Up, Up and Away" builds vocabulary and "The Story of Ruby Bridges" helps with reading fluency.
The Association of American Publishers says that school textbook sales are flat this year because states have cut education spending, and particularly book purchases, as part of their budget-balancing efforts. But some of those cuts are being offset by the president's $1 billion-a-year Reading First literacy program. The publishers estimate that a third of the program's funding is going into textbooks.
The law also puts new pressure on the schools to boost teacher quality and to look beyond traditional education schools for teachers, which could prove a boon for online colleges. Kaplan, which already has an online university, plans to open the Kaplan College School of Education beginning next year for people who already have a bachelor's degree but need either subject-matter courses or teaching-technique courses to get a teaching job.
Companies that offer midcareer professional development programs also stand to benefit as schools prepare to meet a spring 2006 No Child Left Behind deadline for proving that all of their teachers are "highly qualified" because they have either taken a refresher course or passed a test in the subject they teach. The test-prep companies and online universities are also developing programs to help teachers deal with all the data they have now. Kaplan offers a $3,000 half-day course to help teachers understand testing, and ETS has an $18,000 course that trains districts to judge how good their teachers are.
Write to June Kronholz at email@example.com
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Education Firms See Money In Bush's School-Boost Law
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