Articles Posted in Economy & Education

Gas Shut Off SignWe’ve all heard the voices of DOOM about the looming budget cuts from the sequester. I call BS, at least as it affects K12 education.

Laziness often drives how we talk about education funding. Because it is easy to track federal spending we focus our energy there. But this willfully ignores the plain fact that 90% of funding for education comes from state and local government, the Feds only account for 10%.

Do the math. A 10% sequester driven cut in Federal spending means a 1% cut to total education spending.

Foot on nailsLast December I penned (keyed?) a relatively optimistic piece about education spending, with the conclusion that the textbook adoption market was in a crash but supplemental materials were in a short-term stall. I had it right on the first point and wrong on the second – we have seen a full blown market crash across the board this year. There are still sound reasons for long term optimism, but the near term remains grim.

After the election I decided to read Nate Silver’s book “The Signal and the Noise: Why So Many Predictions Fail – But Some Don’t”. I was hoping to find insights on why I’d gotten it wrong, and so far I’ve not been disappointed.

Early on he outlines the distinction between risk and uncertainty in a way that is highly relevant to how we understand where we are in education publishing.

hope streetThese are grim days for the world of education. Funding cuts past, present, and future loom over schools and districts. Class sizes are swelling, essential services are being trimmed, and any spending decision that can be delayed is sitting in limbo.

The companies that serve schools are feeling the pinch even deeper – while school budgets are down roughly 10%-15% scuttlebutt around the industry has most education companies down 20%-40% from 2011. Data systems, some technology niches, and companies with strong international presence are doing better, but those are the exceptions not the rule.

Relatively speaking schools have bad colds, we have pneumonia.

From a Publisher’s perspective Apple’s iPad textbook initiative is a decent 1.0 release with promise. I’ve had a few weeks to play with iBooks Author and iBooks2 and discuss them with colleagues. I’ll write about the many positives in future posts.

But there is a worm in this apple. All the sweet promises Apple is making are going to slam headfirst into the funding issue. It will cost a school 552% more to implement iPad textbooks than it does to deploy books. That ain’t happening in THIS economy. The press reports I’ve seen have completely missed this because Apple “hand waved” their way around it.

Update – A follow on post discussion of reader responses is here.

UPDATE: For those who took offense at this graphic know that as I saw it the teachers’ drinking was a result of the cycle, not the cause. I interpreted this graphic as a slag on parents (myself included). If you are a teacher and were offended please accept my apology. If you are a parent and were offended – go volunteer in your local school. Regular readers will know that I have nothing but the highest respect for teachers.

One simple graphic from the always brilliant Jessica Hagy untangles the whole complicated mess.

Nuff said.

500px-Train_wreck_at_Montparnasse_1895Is the instructional materials market in the tank? I’ve spoken with people at a dozen companies who are all seeing the same thing – since November 1st a moderately down market has dropped like a stone. A senior executive at one of the big 4 publishers flatly stated that this was the worst he’d seen it in 35 years. I’m inclined to agree.

Since this appears to be an industry wide phenomena how should companies react? That depends on whether you think this is a temporary stall or a permanent realignment of funding for materials. How you see that depends on whether you focus on the supplemental or basal market.

For the supplemental market the evidence points towards a stall – at least so far. Low sales numbers don’t match the funding availability, there is no evidence that a huge amount of funding has been pulled from the market all of a sudden, What we do have is an abundance of uncertainty which is prompting districts to sit on the funds they have.

r67ye5tertgrgtreBooks, iPads, and the Kindle are changing the fundamental structure of the publishing industry. From a strategic perspective they are having the largest impact on the development and pricing of products. In other words it is affecting the “what” deeply. The “how” has not changed all that much, regardless of whether you are selling print and/or technology.

There are four fundamental strategies for a growing a company in the K12 sector because even in the best of times K12 is (mostly) a zero sum game. In 2008 I wrote a post about this competitive dynamic:

In normal times education budgets grow at 2%-5% a year. Most start-ups or new products need to grow at a huge multiple of that – 30% to 300% or even more. Mathematically in order for you to grow someone else is must lose out.

We are most definitely not living in “normal times” these days. Any growth strategy in today’s market is fighting gravity as school budgets are expected to fall next year after the stimulus has expired.

Distilling the range of policy positions on our current economic malaise is a huge challenge, but fortunately Rortybomb is up to the task. I recommend his post – A Topological Mapping of Explanations and Policy Solutions to Our Weak Economy.

Not only does he provide spiffy venn diagrams that distill people’s positions he also provides extremely useful links to articles that lay out those positions.

As a business leader I recommend this post for those wanting to dig deeper on what the road ahead might look like for our organizations.

In an age of information overload Librarians are the pilots who can help us quickly navigate to what is meaningful.

Said differently – librarian’s rock and they make a huge difference in schools. Here is a video made by a school for a library aid who got laid off due to the budget crisis. Think this “saving” won’t make a big difference in the education of these children?

Watch the video.

I’m surprised we haven’t seen more of this.

Notice to All Banker Types from a Teacher

Also too:

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Crisis in Dairyland – For Richer and Poorer – Teachers and Wall Street
www.thedailyshow.com
Daily Show Full Episodes Political Humor & Satire Blog The Daily Show on Facebook

The hypocrisy is staggering. Bail out banks with trillions of taxpayer dollars – “bonuses are contracts and you can’t touch them.” Banks drive economy into the ditch and cause funding crisis for schools – “teachers are overpaid and coddled so unwind teacher contracts to solve the problem.” Sociopaths is the most charitable term I can think of to describe the people making these arguments.

My take from another angle on this subject from the middle of the healthcare debate:
Pre-Existing Ignorance – Healthcare vs. Education

OPOL