Campus Cash

New education reforms often translate into big money for private groups. Following the 2001 No Child Left Behind Act, states paid millions of dollars annually for companies to develop and administer the standardized tests required under the law. Companies also cashed in on a provision mandating tutoring for students at struggling schools.

Now, a movement to overhaul the teaching profession is creating another source of revenue for those in the business of education. More than half of states are changing their laws to factor student test scores into teacher evaluations and adding requirements for the classroom observations used to rate teachers. The main intent of the new laws is to identify which teachers are doing a good, bad, or mediocre job and to help them improve. One early outcome of such recent legislation, however, is a booming market that sells services and products to help states and school districts scrambling to meet the new standards.

“It’s an incredibly heavy lift for states,” says Sandi Jacobs, vice president of the National Council on Teacher Quality, a Washington, D.C.-based advocacy group. “Some have contracted out big pieces of it, whether it’s someone internal in the state or an outside provider.”

Nonprofit groups and for-profit companies alike are vying for contracts to design evaluations, train teachers and principals to use them, and set up online platforms to help sort the data that schools will be collecting. Private foundation money is subsidizing some of the contracts, but districts are also spending millions of public dollars, much of it from the Obama administration’s $4.3 billion “Race to the Top” initiative.

In Florida, the state paid Houghton Mifflin Harcourt, a for-profit textbook publisher, $4.8 million to develop classroom observation methods and nearly $4 million to the American Institutes for Research, a nonprofit, to create a model for grading teachers based on student test scores, according to state officials. (Full disclosure: The American Institutes for Research is among the funders of The Hechinger Report, which produced this article.)

This summer, New York also signed a contract with the American Institutes for Research to design its system for $2.7 million over three years. The state is also requiring school districts to hire state-approved contractors—which include for-profits, nonprofits, and the state teachers’ union—to design their observation rubrics. While most of the rubrics are free, schools may pay as much as $4,500 per day for training in how to use them.

Although private companies may offer expertise that many school officials lack, administrators worry that low-quality evaluation programs could take over, just as multiple-choice tests did under No Child Left Behind.

“The marketplace has become very, very competitive. All these simplistic models are coming out of the woodwork,” says William Sanders, the Tennessee-based researcher who has sold his own system for rating teachers based on their students’ progress on standardized tests—a method known as value-added modeling—to dozens of states and districts.

Worries about the coming teacher-evaluation boom stem from school districts’ experiences with No Child Left Behind, during which states spent more than $600 million annually on standardized tests, with the vast majority of the money going to the private sector, according to a 2009 Government Accountability Office report. If the pattern holds, administrators fear that education contractors will aim to make money off evaluations rather than improve teaching.

“There simply is not as much [money] to be made from professional development, or system design, as there is in testing students,” Charlotte Danielson, a researcher who developed a well-regarded teacher-observation method that districts around the country have adopted, said in an e-mail.

But private groups sense an opportunity nonetheless. “If these states could have bought something off the shelf, a lot of them would have,” says Jacobs of the National Council on Teacher Quality. “It wouldn’t be surprising if people do look at how you can package this.”

Nonprofits like the National Institute for Excellence in Teaching, which created a teacher-evaluation system used in Chicago and elsewhere, are offering their technical expertise to states. Mathematica, a research group that published a 2010 study warning about the use of modeling in high-stakes decisions because of high error rates, was paid more than $500,000 to design the model for the Washington, D.C., public schools, according to a DCPS spokesperson. Based on Mathematica’s analysis, about 275 D.C. teachers were fired because of low ratings.

Pearson, a U.K.-based company with profits of more than $1 billion in 2010, began marketing Teacher Compass, a new teacher-observation software program designed by researchers at Johns Hopkins University, in the United States last year.

Another company, Learning Sciences International, is selling iObservation, a computerized data system designed in collaboration with a group of researchers, including Danielson, who said she will get a small royalty from any sales. On its website, the company markets the system as a solution to the new mandates facing Race to the Top winners.

Others are likely to follow in their footsteps. “I would think you’d see testing companies as well as the data-driven decision providers jumping in there,” says Trace Urdan, a research analyst who focuses on the business of education for Wunderlich Securities, a brokerage firm based in Memphis, Tennessee.

Danielson says districts and states are doing the right thing by hiring outside experts as they design more rigorous classroom observations. “Entire states seem to be operating under the assumption that anyone can create a rubric. Then they want to use that for high-stakes decisions without having a clue what it takes,” she says.

Aside from the amount of money being sent to private contractors, observers worry that the fiscal crisis battering school districts could drive administrators to race to the bottom in search of the most affordable rubrics, regardless of quality.

“There are real dangers,” says Monty Neill, director of FairTest, a group critical of standardized testing. “While observations make good sense, if you start bringing in outside people … you’re more likely to end up with arbitrary and capricious decisions from which someone makes money.”

This story was produced by The Hechinger Report, a nonprofit, nonpartisan education-news outlet affiliated with Teachers College, Columbia University.