Wednesday, May 11, 2005

Houston ISD Mixes Business, Education

This is really interesting. The Houston Idependent School District IS a business now, selling a whole range of things. See their Doing Business with HISD Website for more specific information.

The Houston Independent School District is even more of a business now, selling a whole range of things, even "virtual" schooling (also termed “virtual vouchers” by opponents) delivered over the Internet for home-schoolers. I wonder what the district’s position is on the virtual voucher bill making its way through the legislature right now. H.B. 1445, the virtual schools bill is being heard in the House this PM (Wednesday). If it passes, more than 300,000 home-school and private school students will become eligible for taxpayer dollars in order to fund approved virtual school course offered via CD or DVD, that is, on-line via the Internet.

Yes, the question is correct. Who does profit from all of this? And how can a business count on serving the needs of all children adequately when those interests collide with the “bottom line,” or with that which is profitable?

Though I honestly don’t know the district’s position on this, a look at who’s pushing this legislation right now might provide some insights. Last session, former Secretary of Education Bill Bennett was on hand lobbying for this as his curriculum software company, K12, Inc., was going to profit directly.


District sells products to aid budget, but do the children profit?
Wednesday, May 11, 2005

By BRUCE NICHOLS / The Dallas Morning News

HOUSTON – School districts around the country have sold exclusive rights to soft drink companies, put paid ads on buses and even let advertisers pipe music into hallways – all part of the new rage of running public education like a business.

But few have gone so far as to sell products and services to outside buyers.

One big exception: the Houston Independent School District. It dipped its toe into the marketing waters a decade ago and is now selling nine HISD-brand products and services to other districts, including Dallas.

"School districts are clearly taking lessons from the private sector," said Charles Casserly, executive director of the Council of the Great City Schools, a coalition of the 65 largest districts in the nation. But "nobody has been as aggressive for as long as Houston."

At a recent Austin meeting of school business officials, Houston ISD fit right in with the sellers of buses, janitorial supplies and gym equipment. Standing under a large HISD logo, the district's retired chief financial officer, Leonard Sturm, handed out brochures and answered questions about curriculum software, construction services and other wares the district sells inside and outside Texas.

Some question whether becoming more like a business detracts from a school district's core purpose of educating children – especially in Houston, where the school system has suffered embarrassing scandals involving cheating on standardized tests and under-reporting of dropout rates.

But Mr. Sturm – rehired as a consultant to lead the sales push – said the effort is a response to the rising pressures of tighter budgets, topped-out tax revenues, ratcheted-up performance demands and a political environment that favors private-sector solutions.

"Everybody that was coming to look at us was saying you guys need to treat the district more like a business," Mr. Sturm said. "That's really the origin of what we're doing."

He's had some success. Sales totaled $12.5 million in 2003-04, the last complete year for which figures are available. Nearly $1.7 million of that was net gain that could help defray operating costs. It's a drop in the bucket when you look at the district's $1.2 billion budget, but it's a start, he says.

The upside: Taxpayers, theoretically, save every time HISD sells something to another district. HISD recovers some of its operating costs. And customers save through the buying power of the nation's seventh largest district, with more than 200,000 students.

Detractors' concerns

But some see big downsides.

"It's a bad thing because what it does is it creates an organization whose focus is further and further removed from actual teaching and learning of children," said Alex Molnar, director of the Education Policy Studies Laboratory at Arizona State University. He also decries the drift toward turning schools into businesses, the "erosion of the idea of public education as a public good instead of a market-driven commodity."

Mr. Sturm says HISD's main mission, education, will always come first. The district's a long way from becoming a business, he says.

With its recent problems, why would anyone buy anything stamped with the HISD brand.

"It's not like HISD is a shining star for management," chuckled Gayle Fallon, president of the Houston Federation of Teachers.

Mr. Sturm says HISD's problems haven't hurt his efforts because the district's products are "state of the art. I believe strongly in HISD's products and services."

The main problem, he says, is that he's doing something new for most districts.

"We're breaking down barriers as we do this, and that's why we haven't grown as fast as I'd like to go," he said. "It's a mindset thing."

Although Dallas hasn't made the leap, other districts are considering it.

"We're not marketing like HISD at the moment, but we're thinking about it," said Ruben Rojas, director of revenue enhancement for the Los Angeles Unified School District in California.

There appear to be no comprehensive statistics on the phenomenon, but Charlotte, N.C., schools sold a curriculum to a private company and collect royalties. Round Rock, Texas, ISD markets construction services. And Texas' 20 regional education service centers have long offered districts cooperative buying and other services for a fee.

Still, no program appears as far along as Houston's. HISD started selling its services in the mid-1990s, helping other districts collect Medicaid for the nursing support given special education students. Most districts are too small to do it themselves, but with HISD's help, 193 are collecting it.

Over time, the Houston district's stable of brands has grown. It now includes professional development training, printing, construction services and lighting retrofits. HISD also sells access to its list of minority-owned vendors to help others meet diversity goals.

Mr. Sturm opened what may be the first marketing office of its kind in 2002, concentrating on selling employee benefits management services and a curriculum package. He's looking into marketing other products, including "virtual" schooling delivered over the Internet to enrich smaller districts' programs or educate home-schoolers.

Mr. Sturm is paid a commission on his sales. His contract caps his income at $9,500 a month, but the ceiling will rise if sales take off, said HISD chief financial officer Melinda Garrett.

"You've got to have somebody who knows how to open doors," she said. "Leonard knows everybody."

Mr. Sturm has sold HISD products and services to districts as far away as Charleston, S.C., and St. Louis, though most customers are in Texas.

DISD is a customer

Since 2002, Dallas ISD has bought the benefits management services Houston sells in tandem with an HISD contractor, Mercer Human Resources Consulting. Mercer does the work and gets most of the money. HISD makes the deals and gets $2 per employee per month. This year's deal is for nearly $5 million.

"If it wasn't them, it would be somebody else," said Charles Fridia, DISD division executive for business operations, benefits and compensation. "We don't have the resources internally to deal with Web site and benefits management. We'd have to have a larger staff."

A key to HISD's sales is a state law allowing special agreements between districts. Through such an agreement, a district can get a product or service without spending its own time and money to take bids. It satisfies bid laws by using Houston's low-bidder.

Because the law also applies to cities and counties, it has resulted in some interesting linkups.

Collin County government hired HISD's contractor for a flooring job. Grand Prairie bought some roof repair. Edinburg, in the Rio Grande Valley, had some work done at the airport.

Cities and counties find this "job order construction" service through the BuyBoard, a statewide purchasing cooperative run by the Texas Association of School Boards, which posts the availability of HISD's low bidder to do work elsewhere through interlocal agreement.

It hasn't been all smooth sailing.

HISD's partnership with Mercer has led to lawsuits alleging illegal practices in the sale of employee insurance. And people familiar with the matter say the Texas Department of Insurance is investigating. HISD and its contractors say their operations are legal and above board.

The dustup hasn't slowed Houston's sales effort. The district would like to market other products the same way it markets job order construction, through a single statewide source. One candidate: its curriculum software, known as CLEAR. The district would stand a better chance of recovering the $17 million development cost if it could persuade the Texas Education Agency to sell CLEAR statewide.

"We're having discussions about that," Ms. Garrett said.

Don McAdams, an education consultant and former Houston school board member, said he hopes HISD's marketing effort keeps growing because it improves efficiency and saves money.

"This has been a very valuable revenue stream for HISD," he said.

It makes sense all the way around, Dr. McAdams argued. "Why should anyone have to reinvent the wheel when they can buy from Houston? If Houston can sell it, recoup the cost of development, why shouldn't they?"


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