Back to School for the Billionaires

Brent Humphreys / Redux

This story was reported and written by Center for Public Integrity.

The richest man in America stepped to the podium and declared war on the nation’s school systems. High schools had become “obsolete” and were “limiting—even ruining—the lives of millions of Americans every year.” The situation had become “almost shameful.” Bill Gates, prep-school grad and college dropout, had come before the National Governors Association seeking converts to his plan to do something about it—a plan he would back with $2 billion of his own cash.

Gates’s speech, in February 2005, was a signature moment in what has become a decade-long campaign to improve test scores and graduation rates, waged by a loose alliance of wealthy CEOs who arrived with no particular background in education policy—a fact that has led critics to dismiss them as “the billionaire boys’ club.” Their bets on poor urban schools have been as big as their egos and their bank accounts. Microsoft chairman Gates, computer magnate Michael Dell, investor Eli Broad, and the Walton family of Walmart fame have collectively poured some $4.4 billion into school reform in the past decade through their private foundations.

education-inc-tease Interactive Map: Click to view a breakdown of graduation and proficiency rates by state.

Has this big money made the big impact that they—as well as teachers, administrators, parents, and students—hoped for? In the first-of-its-kind analysis of the billionaires’ efforts, NEWSWEEK and the Center for Public Integrity crunched the numbers on graduation rates and test scores in 10 major urban districts—from New York City to Oakland—which got windfalls from these four top philanthropists.

The results, though mixed, are dispiriting proof that money alone can’t repair the desperate state of urban education. For all the millions spent on reforms, nine of the 10 school districts studied substantially trailed their state’s proficiency and graduation rates—often by 10 points or more. That’s not to say that the urban districts didn’t make gains.

The good news is many did improve and at a rate faster than their states 60 percent of the time—proof that the billionaires made some solid bets. But those spikes up weren’t enough to erase the deep gulf between poor, inner-city schools, where the big givers focused, and their suburban and rural counterparts.

“A lot of things we do don’t work out,” admitted Broad, a product of Detroit public schools and Michigan State who made a fortune in home building and financial services. “But we can take the criticism.”

The bottom line? The billionaires aspired to A-plus impact and came away with B-minus to C-minus results, according to the NEWSWEEK/CPI investigation, which was based on specially commissioned data and internal numbers shared by the philanthropists’ foundations.

Despite the money, graduation rates in Oakland actually fell by 6 percentage points—though less than the rest of California’s schools, which fell by 9 points. In Houston, graduation rates dropped about 6 points, while the remainder of Texas fell only 2. Graduation rates in New York City, on the other hand, while still trailing state averages significantly, improved markedly—up 18 points, compared with the state’s 10-point rise. Washington, D.C.’s graduation rates dropped slightly, while students’ math and reading proficiency generally improved (not being part of a state, its reading and math performance was measured against the district’s independent charter schools). The city’s education achievements, which have helped fuel a national debate over education reform captured in the hit documentary Waiting for Superman, have lately come under investigation amid suspicions of cheating (a charge the city’s recently resigned schools chancellor, Michelle Rhee, denies).

Oakland more often than not was improving faster than the rest of California, but still fared poorly at the high-school level, where reading scores trailed the rest of the state’s average by 18 percentage points in 2010. Similarly, Los Angeles over the five years often outpaced the state’s rate of improvement, but its scores lagged, including by 19 points in middle-school reading.

The confidence that marked Gates’s landmark speech to the governors’ association in 2005 has given way to humility. The billionaires have not retreated. But they have retooled, and learned a valuable lesson about their limitations.

“It’s so hard in this country to spread good practice. When we started funding, we hoped it would spread more readily,” acknowledges Vicki Phillips, the director of K–12 education at the Bill & Melinda Gates Foundation. “What we learned is that the only things that spread well in school are kids’ viruses.”

Gates has abandoned his $2 billion high-school campaign focused largely on shrinking the overall size of schools in favor of a massive new effort to encourage effective teaching. And Broad put a school-principal training initiative on pause—and focuses instead on charter schools, training administrators and improving teacher performance.

Meanwhile, on the ground in the districts these billionaires selected, the excitement of being chosen for philanthropic funding has all too often given way to diminished expectations.

“The foundations are looking for rapid-fire turnaround. That’s not realistic,” said Hae-Sin Thomas, a former principal who helped manage the Gates-backed small-schools effort in Oakland before the Microsoft guru dropped that campaign.

Oakland’s school system was a case study in dysfunction. Eight years ago, the district’s financial woes led to a state takeover.

That made it a magnet for the billionaires. The Michael & Susan Dell Foundation chipped in $6.2 million for its first experiment with broad data-collection methods used to monitor student and school progress. The Bill & Melinda Gates Foundation ponied up some $30 million to help expand on a grassroots effort to shrink the schools. And Broad’s foundation invested $7 million for charter and district schools. “It was a chance to rethink how the district was designed, moving from a concept of a highly bureaucratized school system to a portfolio of schools,” explains Kevin Hall, chief operating officer for Broad’s foundation at the time.

Hopes soared—only to crash back down to earth. The district went through five superintendents in seven years. Enrollment at many schools shrank, and the district is still plagued by a 40 percent high-school dropout rate. In lower grades, better-performing students are fleeing: a third of the kids who are deemed academically proficient by sixth grade are defecting to private, suburban, or charter schools. And at least seven of the 49 new, smaller schools funded by Gates have closed; others are hanging on by a thread.

“There wasn’t a clear and thoughtful long-term plan on how you scale something that everyone needs and sustain it over the long haul,” concedes Tony Smith, the cur-rent school superintendent. “There was a strategy in place to support the creation of schools that would hopefully get to those kinds of ends, but there was no comprehensive shared commitment or framework.” What’s worse, the students who needed the most help, from the “most distressed” families, were often unaware there were better school choices available, he says.

These days, Smith is trying out his own vision of a “full-service community district”—one that tries to address challenges outside the classroom like nutrition and racism. But Gates, Broad, and Dell did leave a legacy for Smith to build on, at least in the lower grades where some schools have seen strong academic growth. The district increased from 11 to 50 the number of schools attaining a score of 700 toward the California achievement target of 800. And between 2008 and 2010, Oakland has outpaced the rest of California in improvement at the elementary- and middle-school levels.

The reform era also left its own financial mess. The officials imported during the salad days left Smith a $25 million deficit, including nearly $6 million in state fines for audit failings.

Smith sees another factor for failure inside a horrific scattering of red dots on a city map he displays on a PowerPoint in his office. Each dot is a student lost to gun violence—a dozen African-American and Latino boys gone since last summer, all slain on the hardscrabble streets of the city across the bay from San Francisco’s famed skyline.

The business titans entered the education arena convinced that America’s schools would benefit greatly from the tools of the boardroom. They sought to boost incentives for improving performance, deploy new technologies, and back innovators willing to shatter old orthodoxies.

They pressed to close schools that were failing, and sought to launch new, smaller ones. They sent principals to boot camp. Battling the long-term worry that the best and brightest passed up the classroom for more lucrative professions, they opened their checkbooks to boost teacher pay.

It was an impressive amount of industry. And in some places, it has worked out—but with unanticipated complications.

One of those places was New York City. Boasting 1 million students spread across 1,700 schools, New York City drew the lion’s share of philanthropy—$270 million from the four billionaires—and saw results. Graduation rates improved from 37 percent in 2002 to 55 percent by 2007 (New York state’s overall graduation rate by the end of that stretch: 71 percent).

The big-money donors benefited from a well-placed ally. New York Schools Chancellor Joel Klein, a former Clinton White House lawyer, launched his own package of reforms that dovetailed with the billionaires’ goals—reorganizing the power structure and replacing failed schools with smaller, mission-driven ones.

He also installed “CEO”-style principals, and bucked criticism that his laser focus on core math and reading curricula was narrowing the scope of learning.

“From our point of view we were getting good results,” Klein said in an interview. “[The problem] wasn’t about the breadth of the curriculum. It was the failing of the kids.”

The numbers began to move in the right direction. But the tactics bred resentment among some educators and parents. Klein stepped down last year with low approval ratings. The CEO approach took a further hit when his successor—publishing executive Cathie Black, who had no background in education—flamed out after just 100 days on the job.

What’s worse, last year, New York state declared only a quarter of the city’s graduates college-ready, sending officials back to the drawing board. While acknowledging gains in New York, Gates decided to scrap the small-schools project, decreeing that the initiative overall had failed to produce students who were ready for the rigors of college.

“The call in many ways was made prematurely, based on evidence that wasn’t as comprehensive as it should have been,” says James Kemple, author of a study just published by Harvard Education Press that cites real gains from the Klein reforms in New York. “We are now finding the positive effects.”

No reform has won more philanthropic favor than public charter schools. Now numbering 5,000 across the country, charters receive tax dollars to operate with considerable autonomy and innovation. The quality of charter schools varies widely, and some have posted dramatic gains, owing to strategies like longer school days and strong teacher support for students. Drawn by the results of charter networks like KIPP, the Knowledge Is Power Program seen in the Waiting for Superman documentary, the billionaires have poured more than $900 million into charters, including $466 million from the Gates foundation alone.

The Walton Family Foundation hoped that its $8 million investment in Milwaukee charters would produce strong schools and a competitive environment to raise the bar across all the city’s schools. But the charters failed to outperform traditional schools. Reading scores were mostly flat over the past five years citywide. In math, elementary- and middle-school gains were stronger than in the rest of Wisconsin, but high-school proficiency dropped 2 points.

“All good philanthropy is based on testing a hypothesis. If you really peel away, you can uncover each foundation’s hypothesis. Essentially we all have a theory,” said Jim Blew, education-reform director for the Walton Family Foundation. “All the foundations are trying to tackle the same problem. And that problem is very low student achievement, especially in low-income areas.” Blew said the Waltons maintain their theory that charter competition can raise scores across school districts, and still hope that all Milwaukee schools will improve.

Michael Dell’s family foundation, too, placed a big bet on charters, along with its signature work on data and technology systems that help schools track and respond to student needs. Dell, a University of Texas dropout who was in such a hurry to enter the business world he asked to take a high-school equivalency exam at the tender age of 8, has spent heavily on children’s causes through the foundation he launched with his wife in 1999. He started in his native Texas, where his foundation helped insert a high-performing charter school onto a traditional Houston high-school campus.

Lee High School officials were excited at the prospect of copying the strongest elements of the charter. But it turned out the district wasn’t ready to let Lee try charter practices like a longer school day and taking more control over hiring, said Steve Amstutz, Lee’s principal at the time. “The premise that we were going to learn from each other really never occurred,” he explained. “It evolved to just being a lease agreement”—that is, until the charter moved to another location.

The executive director of Michael Dell’s family charity, Janet Mountain, concluded: “Should we ever try it again, we now have knowledge we can bring to the table that will set it up for better success the next time.”

The setbacks had to be a humbling experience for titans accustomed to outsize success.

Broad entered the education-reform arena with riches amassed at two Fortune 500 companies. Thinking his billions might make a difference, as he did in the Los Angeles arts and cultural community, Broad embarked on a yearlong investigation of education. “It was clear to me that if we wanted to have an impact, we could look at what others had done and then what we could do,” he told NEWSWEEK. “There weren’t many positive results that we could identify with. There was always pushback from powerful interests.”

Undaunted, Broad plowed ahead—investing in attempts to upgrade school governance and management, charters, and experiments to pay teachers for their performance instead of their length of time on the job. “We said we were not going to just write checks,” Broad said. “We were going to make investments.”

School boards seemed an especially ripe target. Broad began training efforts to get them away from what he saw as mind-numbing minutiae, like choosing paint colors for buildings or fixing stadium lights. The effort proved frustrating. Board members themselves, as he saw it, were often problematic; too many were well-meaning but not especially savvy parents, micromanagers, or excessively political.

Broad moved on to the front lines: superintendents, principals, and school-district management, ultimately spending $116 million on training people to work in schools and district offices, and another $71 million on central-office reforms and teacher evaluation, preparation, and pay schemes.

“Our role is to take risks that government is not willing to do ... People question my motivation,” Broad said. Not least is a growing unease with the prominent role of private foundation money that doesn’t have the accountability constraints of public tax dollars. “The fact that I don’t concern myself about criticism or pushback helps,” Broad said.

He’s had to take some lumps. Several principal-training programs, to the tune of $45 million, were a bang-for-the-buck disappointment; student test scores under most of the principal graduates did not meet his expectations.

He pulled the plug and reevaluated before trying a “more rigorous” approach for the next round of training programs.

Graduates of his Broad Superintendents Academy and the dozens of M.B.A.s he has placed in school-district management, on the other hand, have largely measured up. Even so, superintendents sometimes shake things up only to see their efforts falter in the face of political pressures, Broad said. “Even if some of our original high expectations are not realized, we don’t give up. If we’re going to move America’s students forward, we must continue to be bold and try new approaches.”

—With Laura M. Colarusso

The analysis examined how graduation rates changed between 2002 and 2007—the most recent years for which the data is available from the nationally recognized Editorial Projects in Education Research Center—in 10 districts targeted by the big spending. The study also measured the holy grail of the education-reform movement—standardized test scores in reading and math for kindergarten through 12th grade—and compared the proficiency rates in the urban districts that benefited from billionaire bucks against the average for the rest of the schools in their states over the past five years. (That data was provided by MPR Associates, Inc., a respected education-statistics agency based in Berkeley, Calif.)

No yardstick is a perfect measure. And the billionaires’ gifts are a drop in the bucket when compared with the $600 billion spent annually on America’s schools. But the city-to-state comparison is one of the measures Broad’s own foundation uses in determining his annual award for the most improved school district. For complete data, go to

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