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Who Benefits from the Public Schools?

What if we look at public schools as profit-making ventures?

by
Charlie Martin

Bio

August 13, 2013 - 1:48 am

Public schools in the United States, particularly in “blue” cities like New York and Washington,D.C., seem to be an ongoing slow-motion train wreck. Recently the state of the New York City schools came to the top of the recurring-news pile. While Mayor (for life) Michael Bloomberg pursued his various important concerns, CBS News reported that 80 percent of New York City high school graduates required remedial classes in reading, arithmetic, or both, before they were prepared for classroom work in New York’s own community colleges.

The report was originally headlined “80 percent illiterate” because not being prepared for college work is not the same as being actually illiterate. But then it’s appropriate to point out that the New York City schools have a graduation rate of only around 65 percent, and we can also assume that students applying for admission to the community colleges are to some extent self-selected as well. If only 20 percent of that selected population are prepared for a community college curriculum, what about the others?

The automatic recommendation when school systems are performing badly is higher funding and more teachers, and when you first look at the New York schools, it seems plausible. After all, the schools in NYC have been reduced to holding bake sales to buy school supplies, and asking parents to bring toilet paper to the schools.

But then we look at the actual school budgets. According to an article in the Huffington Post, New York City reports spending about $18,600 per student per year. A Cato Institute study examines the accounting, which understates or eliminates some costs, and arrives at $26,900 per student per year.

Five years ago I wrote a piece for PJM called “A One-Room Schools for the 21st Century.” I also wrote an extended piece on the same topic called “Cosmopolitan One-Room Schools: A Modest Proposal,” which was picked up and circulated widely. (Bootlegged, to be honest. Dylan, the Grateful Dead, and me. Who knew?)

The basic idea was to go back to basics, and examine a modern one-room school in Manhattan commercial office space. Without going through the whole discussion again, we can sketch an income statement for such a school. These income statements assume the reported cost per student (for both reports), and assume office rents of $50 a square foot a year, along with rather lavish technology and supply budgets of $3000 and $1000 per student per year, respectively. These income statements exclude the cost of a teacher, for reasons which will become clear shortly.

Revenues  HuffPo  Cato
Gross revenues 446,400 624,000
Expenses
Rent @ $50/ft^2 31,250 31,250
Tech @ $3000/student 72,000 72,000
Supplies @ $1000/student 24,000 24,000
TOTAL EXPENSES 127,250 127,250
NET INCOME 319,150 496,750

Based on these figures, we now have a net income of $319,150,  or $496,750 per 24-student classroom in midtown New York commercial office space, depending on which figures we use for per-student spending.

We exclude the teacher’s salary because my original article made the assumption that these were essentially entrepreneurial schools: net income became the “wages” of the teacher.

So let’s look a little further. New York teachers’ salaries, according to their website, start out at about $45,000 a year ($52,000 with a master’s degree) and max out at just over $100,000 a year. If we assume that these one-room schools attract the highest-paid teachers, that leaves between approximately $200,000 and $400,000 in net income per classroom per year, or $8,000 to $17,000 dollars per student per year.

Which is to say, the gross profit percentage is near 50 percent.

As an aside, if New York wants to start one of these schools, I’ll volunteer to run it. I’ll throw in an annual two-week summer tour of Europe for all the students and six adults as chaperones. Back of the envelope, that’s about a $30,000 expense, and I get a tour of Europe in the bargain — and still make $350,000 a year!

Cui bono?Lucius Cassius Longinus Ravilla

Imagine, if you will, that we were running a for-profit company in the same environment as a public school system: providing an essential service, with a near-total monopoly, in that even potential customers who choose not to buy are still charged full price. It would be massively profitable, until they caught us; the stockholders would make a real killing. Even more so if the quality of the product could be reduced with little impact on revenues.

A for-profit company would also be expected to distribute any profits that aren’t retained to the stockholders. As we know, the New York City schools aren’t awash in excess cash, so like a for-profit company, they must be distributing the profits somehow. If we find out who is getting the profits, we know who the effective stockholders are.

“When school children start paying union dues, that’s when I’ll start representing the interests of school children.” — Attributed to Albert Shanker, former president of the American Federation of Teachers

Okay, I admit it: I’m giving away the punchline. Who benefits? It’s not New York City schoolteachers: remember that a teacher with a 20 student class is still bringing in more that $400,000 in revenue for a nine-month semester, whether they’re paid $45,000 a year or the maximum, and they basically don’t get any more (or any less) based on anything but seniority. Numbers for New York City schools have been hard to find, but in New York state, school spending has increased, teachers’ pay has increased, but non-teaching professionals’ pay has increased faster. In Nassau County, just outside New York City, the first 30 school employees listed on the RocDocs site make more that $250,000 a year, with the highest salary being that of the superintendent, at $567,248.00. (And I’d love to show you actual New York City statistics, but they are hard to find. Curiously so.)

I’ve got one more rule that serves me well. I assume that every human institution optimizes its behavior to maximize rewards, and while money isn’t everything, when you’re looking at reward it’s the way to bet. I think we must conclude that New York schools — and this analysis can be replicated in nearly every big-city school system — are being run to benefit not the teachers and, with 80 percent near-illiteracy rates, not the students. The school systems are a very successful, profit-making institution that distributes their profits to the “stockholders” — the non-teaching professional staff.

Charlie Martin writes on science, health, culture and technology for PJ Media. Follow his 13 week diet and exercise experiment on Facebook and at PJ Lifestyle

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Top Rated Comments   
My wife and I are helping a local couple (grandparents) home school their grandson. We can get all his classes done in about 3 hours of teaching/work time. He is doing far better than when he was in a regulated classroom. So I could actually do two classes a day instead of one even with more students. It's all about organization and knowing how to motivate students.
When I was actually still teaching full time in a low-socioeconomic 45/45/10 (black/Hispanic/white) school district I never had student issues but sure had administration issues because they didn't like my exceedingly high standards of conduct and performance. Funny thing was that the Kids actually worked diligently to meet those standard
50 weeks ago
50 weeks ago Link To Comment
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All Comments   (57)
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Our Little Red Schoolhouse method that reliably produced creative, independent, spunky Americans was supplanted by the Prussian Volkschule model, which was designed by J. G. Fichte to produce good Germans ("workers who will not strike, citizens who will not revolt, soldiers who will not disobey orders"). Fichte designed his school system after Napoleon whipped the Prussians at Jena (1805). He perceived the problem to be that German farmers and craftsmen were too free and independent to make good soldiers. Horace Mann, education secretary for Massachusetts, liked what he saw on his tour of Berlin thirty years later and brought it back to his state, then peddled it to legislatures in other states as a cure for the "immigrant problem." Progressive John Dewey added some features late in the century to make it more assembly-line like, and it has changed little in 200 years because it works as designed to the benefit of our political class.

Among Fichte's innovations were grades, homework, rows and columns of desks, bells to mark class periods and lack of privacy anywhere on campus--all the things we associate with schools to this day. The most important innovation to Fichte was a high-sounding curriculum of idle knowledge unconnected to any real-world processes. These features he felt would turn Germans from impossible-to-herd self-sufficient cats into easily-trained-and-led dogs.

We sent our sons to one of the rare schools in the country still modeled on the Little Red Schoolhouse, and it made all the difference.
49 weeks ago
49 weeks ago Link To Comment
Progressives are terrified of the individual. They're terrified of individual responsibility. They can't imagine that the country would be better off if education was an individual and family responsibility, despite all evidence to the contrary.

You give them the quote from Adam Smith "It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest." Even if they can understand that economically, they can't understand it personally: that we can all be -- must be -- trusted to act in our own self-interest or suffer the consequences thereof.

Education is a self-interest. People interested in an education will find ways to get one. People interested making sure people of little means get educations will find ways to make those educations available (without government force).
49 weeks ago
49 weeks ago Link To Comment
Several problems

While 1-room school houses could be located to reduce transportation budgets by 95% you are still missing out on the Big city school district obligations which is to feed poor kids 1-2 meals a day.

You also aren't affording the children the opportunity to stretch their legs.

I might also add that you would either need to
1) install cameras
2) get parents to take shifts supervising
3) hire a second teacher

for each 1-room school house in order to monitor the teachers for appropriate behavior and shield yourself from liability.

Lastly, keep in mind that while the teachers are paid $45k or whatever they are generally receiving another $20-30k in benefits in addition to regulatory compliance costs which add tens of thousands more dollars to the mix.
49 weeks ago
49 weeks ago Link To Comment
Hell, I can fit a couple dozen webcams into that technology budget. As we discussed below, even if you double the teacher salaries, you still should be making $6-$10 thousand a sturdent.
49 weeks ago
49 weeks ago Link To Comment
I can't tell if this is sarcasm. Install cameras in a one-room school house? Really? Lord, how did we survive for millenia without omnipresent monitoring?

One would presume that, in a one-room school house situation, the parents would have liberal visiting and supervision abilities. They are the employers, or clients, depending on the business model, and they hold the power of the purse. You really don't need any additional oversight than direct interaction between the 24 sets of parents and the primary teacher. One would presume I, as the parent, could drop in whenever I want -- if that wasn't the case, I'd pick another teacher.
49 weeks ago
49 weeks ago Link To Comment
Oh and millenia? pray tell how long has formal education been going on?
49 weeks ago
49 weeks ago Link To Comment
Read carefully, Will. He asked "how did we survive for millennia without omnipresent monitoring". We were surviving long before we had formal education.
49 weeks ago
49 weeks ago Link To Comment
I would call working next to your dad or mom starting around 6-7 until you hit maturity at 14-15 to be under the omnipresence of monitoring. I might also point out that family trees were more like family bushes back then (and still are in the 3rd world) so even if you weren't being watched by your parents odds are it was some other kin.
49 weeks ago
49 weeks ago Link To Comment
I am deadly serious.

1) Predators go where the prey are. The public schools system has a much much larger problem with pedophilia than the catholic church.

2) You are applying your cultural norms to the 40% of the parents out there that don't give a toss about education and are just happy for the baby sitting and feeding service. What supervision are those parents likely to bring?
49 weeks ago
49 weeks ago Link To Comment
But how many families in NYC can affor $20k to $30k per year out of pocket for their gradeschool kids every year for twelve-plus years and then college? And how about a library? Substitute teacher? OTOH your "tech" budget seems awfully high for an annual expense.

Maybe Elon Musk can get into the rocket-powered, electrified supersonic tube schools, if we're going back to archaic ideas in the modern age.

49 weeks ago
49 weeks ago Link To Comment
$26k isn't high for a private school education. And this is prime Manhattan real estate. This could be done much more cheaply in an area with lower costs of living. Plus, there are many teachers who would be willing to do this for far lower compensation -- many would be pleased to net just $100k.

I really don't understand why there are not more entrepreneurial teachers opening one-room schoolhouses. Probably regulatory reasons. Once you are a private school, you're probably subject to a crushing burden of regulation.
49 weeks ago
49 weeks ago Link To Comment
Actually, there are a number of charter schools being organized all over the country. A surprising number of them are being organized by political players. They make a fortune.
49 weeks ago
49 weeks ago Link To Comment
I hear New York City has a tiny little public library tucked somewhere. Possibly even some museums and such.
49 weeks ago
49 weeks ago Link To Comment
That's the point: they're paying $26,000 per student per year. And hell yes the tech budget is high -- this is purposefully meant to be a pretty palatial school environment. Instead, they get schools with no toilet paper.
49 weeks ago
49 weeks ago Link To Comment
Well, *that* close-bold didn't work....
49 weeks ago
49 weeks ago Link To Comment
Another part of cui bono is whoever provides textbooks and other supplies. In New York I bet their profits are very high, even net of bribes.
49 weeks ago
49 weeks ago Link To Comment
49 weeks ago
49 weeks ago Link To Comment
Don't forget that the students are required by law to attend school. Parents who wish to home school must jump through administrative hoops for the privilege. Students who are truant receive tickets which turn into fines. I have had students which truancy problems spend time in juvenile detention, like 2 weeks, for skipping school. This article is spot on.

Support the petition to Decriminalize school truancy<\h>
49 weeks ago
49 weeks ago Link To Comment
Fortunately Ohio's home schooling regulations are easy to comply with, but I still have to pay far more than my share of tuition to the public schools, because not only am I a ranch owner, but I own multiple rental houses and owe all those propety taxes.

Nevertheless, I would never accept any voucher or tax credit -- no doubt if the government felt like it was "paying" for my homeschooling (funny how they always think that letting you keep some of your own money is a gift), they'd want to further involve themselves in directing that homeschooling.
49 weeks ago
49 weeks ago Link To Comment
50 weeks ago
50 weeks ago Link To Comment
But you left out the primary functions of high schools and more and more middle schools: sports programs. Who cares if kids become educated as long as the football and basketball bleachers are packed each Friday night?
50 weeks ago
50 weeks ago Link To Comment
Same thing that should happen to college athletics: privatize it. It becomes another afterschool activity / job, like ballet or karate or working at Domino's. Let someone start the team, license the logo and uniforms, and recruit at will.
49 weeks ago
49 weeks ago Link To Comment
The purpose of schooling is not to bring mastery to students. The purpose is to prepare students for a future life where they believe their 'leaders' and look to them for guidance. Its obvious that one-room schools are preferable to grade-segregated schools from an educational perspective, but they were replaced for reasons other than education.

See John Gatto's Book "The underground history of American Education" found at http://www.johntaylorgatto.com/bookstore/index.htm

50 weeks ago
50 weeks ago Link To Comment
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