The DeHavilland Blog

Tuesday, September 20, 2011

Beyond government

One of the soundest pieces of advice a businessperson can get is to not rely on a single source for all your revenue: that kind of total dependence can put you in a very vulnerable spot should fortunes change. To be sustainable and to grow, businesses need to actively develop a range of revenue streams from different sources.

Today, public education finds itself in just such a position, dependent upon just one source – government – for virtually all of its revenue. And, while that customer has grown steadily over time, it only takes a quick glance at recent headlines to see that circumstances have dramatically changed. And it only takes a bit more time with the underlying trends to realize those changes could well be permanent, leaving substantially less government funding available for public education going forward.

Schools’ sole customer is facing multiple challenges that severely impact its ability to pay now, and will limit its ability to rebuild to past funding levels for years – perhaps decades – to come. Property taxes, for example, which make up 30% or so of school revenues, are taking a severe hit as home values drop up to 50% from peak to. States are seeing dramatic revenue reductions due to decreases in income and sales taxes. Certainly the federal government’s stimulus package put off the pain of dealing with these shortfalls to an extent, but those funds are essentially spent, and not likely to reappear.

Will revenues recover? It’s possible – but as we wait for that to happen, other government expenses increase (particularly for Medicare, Social Security, pensions, and employee healthcare), and public schools see the numbers of students they serve grow from 49.8 million in 2008 to a projected 53.3 million in 2016. The bottom line: with less revenue, more expenses, and more kids to serve than ever before, it would be unrealistic to expect government funding to return to anything like recent levels. In fact, it’s a good bet that they’ll continue to slide further for at least the next few years before bottoming out.

To date, the way that schools have responded to their lone customer’s belt-tightening is to do some tightening of their own. Budgets, programs, and staff are all being cut in order to accommodate reduced revenues from the government. And over the past few decades, that’s been sufficient: batten down the hatches and wait for the next boom, because there’s always been an upturn behind each downturn.

But the days of such cycles could well be behind us – and to focus solely on cutting budgets hardly seems like the right answer. Considering the increased performance expectations put on public education in the elementary and middle grades, coupled with the need to produce qualified workers and college-ready students in the upper grades, it’s easy to see that dramatic budget reductions and a demand for improved outcomes are an unlikely fit.

Yes, schools have to reduce expenses; every organization does in a downturn. But schools and districts have been overlooking another option: increasing support from other sources.

Traditionally, non-governmental support has made up a very small part of total revenues, around 1% to 2% of the $500 billion we spend each year. That includes direct contributions as well as the value of goods and services, including contributions like volunteer time and the like. The good news is that there is tremendous upside here for those schools and districts willing to engage their communities.

To dramatically ramp up the levels of support from community members, educators must start to think outside the box (specifically, outside the classroom). Donations, volunteering programs, and mentoring initiatives, the traditional models of community support, are critical elements of any community engagement plan; however, they comprise only one band of what should be a wide spectrum of community support. For schools and districts to scale up they must look at alternate models, some of which may involve thinking differently about longstanding structures and processes.

Consider “Operation Excellence,” a partnership in Maryland between the Montgomery County Business Roundtable for Education and the Montgomery County School District. They put together teams of business and district leaders to analyze district operations (including management of finances, facilities, and technology) and identify opportunities for efficiencies and improvements. Their work yielded operational improvements, reduced hiring requirements, saved the district hundreds of thousands of dollars each year, and allowed saved funds to flow from operations into instruction.

Or think about the efforts of Simon Property Group, one of the largest mall developers and managers in the country. After noticing teens hanging out at their malls during school hours, company officials approached local school districts to see about setting up alternative school sites at the malls. Through their Simon Youth Foundation, they now have 25 such Education Resource Centers in 13 states: these sites are essentially free to their partner districts, and the foundation provides numerous other benefits to help improve graduation rates and post-secondary prospects.

There are partnerships like these in various forms all across the country, helping schools and districts ease financial hardships and improve student services and outcomes. As government funding falters, education leaders might wish to consider the full range of opportunities for working with businesses and community organizations to help them provide a great education despite these hard times.


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