Few deny that we're living through a time of immense change on many fronts. Just the other day, William Kristol wrote in his final New York Times column that Barack Obama's election signaled an end to the modern conservative era; pretty much everyone agrees that the federal response to the banking crisis indicates the end of a certain sort of freewheeling capitalism. Let us now add another marker: this time of economic hardship may also be the end of modern school reform. 

How so? Because of what turns out, in retrospect, to be a tragic flaw in the strategy of many reformers in recent decades: offer the education establishment a lot more money in return for a little reform. Understandable, sure, and in many state capitols and along the banks of the Potomac there probably was no other way to go about it. But what happens when the extra money dries up? When even the pre-reform money sinks into the recessionary soil? During flush times, buying reform seemed to make a certain kind of sense and to be relatively low risk, a bit like buying a big new house or fancy new car. During hard times, however, that turns out to be the very definition of unsustainability.

The current fiscal climate is tough--and apt to get even tougher. In the short term, that's because, as AEI's Frederick M. Hess has pointed out, school budgets, funded largely on the basis of property taxes, still reflect housing values from the height of the real estate bubble. In the next few years, as home valuations return to earth (and then some), education revenue is likely to glide even further downward. That's what Hess had in mind when he told the Times that the big stimulus bill now before Congress resembles "an alcoholic at the end of the night when the bars close, and the solution is to open the bar for another hour." Even $100 billion of federal largesse won't be enough to plug the holes in school budgets over the next several years. The sick patient isn't cured. Rather, this whopping cash injection is more like an anesthetic that delays the pain for another day--when, no doubt, education lobbies will call for still more cash from Uncle Sam.

The long-term education-funding outlook is gloomier still. Unless major changes are made, or taxes raised sky-high, spending on baby boomer retirements (for Social Security, health care, public employee pensions, etc.) is going to eat up almost every morsel of discretionary funding that could otherwise go to social services like schools. In the boom years, "investing" in education has been a popular choice for governors and other politicians. But school kids are about to encounter fierce competition from their grandparents.

Understand that gloomy fiscal news does not necessarily portend worse schools or an end to serious reforming. To the contrary, an earnest campaign to "trim the public sector's fat" would not only turn up many candidates for cuts, it could actually make our education system more effective. Take the issue of "teacher quality." Mounds of research show that it's the most important factor that schools control. Multitudes of policy papers have been written describing myriad ways to enhance it, from instituting merit pay to reforming ed schools to offering alternative routes into the classroom for high flyers. All these ideas have merit. Yet the most straightforward solution to improving teacher quality fast is to lay off the system's least effective instructors. That latter strategy is better than free; it actually saves money. Yet most reformers consider it a non-starter--because it doesn't add money.

Absent new money, reformers (and many politicians) assume, the unions will emasculate, if not eliminate, all such ideas. And historically that's basically accurate. Which brings us to a little-recognized fact about the education reform movement since A Nation at Risk: It can claim few outright victories in the face of union opposition. Rather, it has achieved a series of negotiated settlements, almost all of which lavish more resources on the status quo in return for a little reforming.

Consider charter schools. Many states passed charter bills only after ensuring that traditional public schools would be "held harmless" if they lost students. And/or the number of charters and/or students attending charters was capped. And/or charters were under-funded. (Some Sun Belt states didn't have to make those compromises because burgeoning enrollments meant district schools already had more students than they could handle.) Savvy charter school lobbyists have worked hard to find "new money" for these innovations--sometimes private money--to avoid bruising resource battles with the establishment.

So, too, on the standards-and-accountability front. Consider Massachusetts, whose landmark 1993 reform act came with millions of dollars in new spending. Even No Child Left Behind was enacted only after the Bush Administration promised a sizable bump in federal spending on the schools (a bump that was immediately decreed as inadequate by the protectors of the status quo).

Or consider Joel Klein's New York City, where spending (in current dollars) has risen about 75 percent under his tenure and where teachers have been promised raises north of 40 percent, and generous retirements at age 55. It's true that he's been a champion of charter schools, an energetic enforcer of accountability, and a forceful (and often successful) propagator of sundry other worthy reform strategies. But in weighing the costs and benefits, it's not surprising that NY union chief Randi Weingarten is said privately to murmur "if this is reform, I'll take it."

Or consider Washington, D.C.'s Michelle Rhee, whose transformational teacher-pay plan was predicated on the notion that all instructors in the system would receive hefty raises, whether or not they signed up for greater accountability. (Those who did would get heftier raises.)

Put aside the unconcern that such reformers have shown toward taxpayer pocketbooks. Note, though, that built into their strategy was the assumption that more money for education would always be on the table. After all, hasn't it always been? But take away that assumption, and what's Plan B? 

If Americans truly care about education, and their pocketbooks aren't bottomless, sooner or later any serious reformer must tackle the truly tough issue: pushing for greater productivity from our schools. That means trimming payrolls, reconsidering pension promises, making better use of technology, and doing umpteen other things that the unions will abhor. But there's no way around it: eventually we must win these battles outright or the reform movement will run out of steam because it has run out of dollar bills to fire the boiler.

A slightly different version of this piece appeared today on Forbes.com.

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