fyi wsj

[Guest guest]

Subject: [greatschools] WSJ: Education Firms See Money In Bush's

School-Boost Law

http://online.wsj.com/article/0,,SB107222132619993400,00.html

The Wall Street Journal

December 24, 2003

MEDIA & MARKETING

Education Firms See Money

In Bush's School-Boost Law

By JUNE KRONHOLZ

Staff Reporter of THE WALL STREET JOURNAL

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

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.

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.

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.

PROFIT POTENTIAL

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