Education Funding and Economic Downturn – Part 2

Today a look at education funding in the current economic crisis from guest blogger Doug Stein. Doug details how the market will react over the next two years and then lays out an interesting theory about how districts will bifurcate into factory and craftsman models on the rebound. Doug is one of the smartest thinkers in the business. His consulting company is Memespark.

Link to Part 1 – Education Spending and the Economy

618869_glass_ballBy Doug Stein

Education budgets will go through three phases in this business cycle.

Phase 1 – In response to a rapid decline in local property taxes, K12 spending will pull back significantly. Everything outside of basic literacy (and possibly Math) will drop pretty hard for about 2 years. It’s possible that “oil/energy” states will invest more, but those investments will depend on visionary leadership at the state level.

Phase 2 – The next administration will make significant changes (possibly even “scuttling/gutting”) the NCLB regime. This will lead to a bifurcation of the market into two big pieces:
a) Districts dependent on Title I (mostly urban) which will revert-to-form and do what they had always done (use comprehensive basal textbooks to compensate for uneven teacher quality). Teachers will generally teach to the text/test. As always, there will be pockets of innovation, but for the most part, the faculty will hunker down and wait for retirement.

b) Districts that don’t need Title I will be able to redirect their efforts away from Average Yearly Progress (AYP – which was a bit of a distraction for them). Many will leverage their investments in data-driven decisions and move to a “growth model” – trying to measure value-add for each student (because the parents and local taxpayers will demand proof that the investment is being well-spent).

In states where local taxing authority is restricted based on “equity” arguments, there will be major battles to keep K-12 funding from sagging. As the funding slips, so will the central state control of curriculum. (No pay, no play.)
Phase 3 – As funding returns (2010+), the schools and districts which have had some success will be empowered to try new curricula and new technologies. In particular, some companies are going to figure out how to apply social networking tools to enable the formation of “practice improvement networks”. Some of these will be accredited professional development – usually a blended model. Some of these will be content creation focused – similar to a blog with an authorial voice and community participation.

Maybe someone will learn from what Flat World Knowledge is attempting in higher-ed (whether FWK succeeds or fails) and figure out how to build a profitable business where “tentpole authors” attract a community that develops and increases the value of new educational content – and where the community is truly a “community of best practice.”
In short, I suspect that after a big dip in funding, we’ll see market bifurcate into “factory” and “craftsman” models. Factory districts will look to big publishers and demand complete solutions (SIS + LMS + content); craftsman districts will look towards more “Web 2.0” horizontal collaboration with “just enough” data management to generate metrics that substantiate value-add. Content will come from the more innovative supplemental publishers (if they can adapt to a world of “users not units”); we’ll also see a growth in user-generated content (with a revenue share model).

Why do I believe this?
I”ve seen clients serving the “must have” content areas growing quickly when they deliver a complete solution (content + data management + PD). Clients delivering “nice to have” or “innovative/unconventional” solutions are already seeing flattening sales.

In both cases, the sales cycles are growing longer and customers are having to cobble together money from more diverse sources. On the educator side, there have always been excellent craftsmen, but they are scattered across the US and have had a hard time receiving support from their peers (whom they couldn’t find). They are starting to find each other.

Relevant Links:

Global Scholar

Wright Group