Rahm Emanuel is about to unleash the greatest carnage on public schools in our nation's history. Both the Chicago Public Schools' school board that he appointed and the CEO that he appointed have reviewed all of the data, listened to public comment, and determined that the trauma of closing 50 schools and displacing 30,000 students will be in the best interest of students and parents in the long run. This decision makes intuitive sense according to the portfolio management model that is in vogue in many school districts. In this model, if a school is not helping the vast majority of its students to meet the standards there must be something wrong with the school, the administration, and its teachers. This portfolio model of school management is metaphorically similar to how brokers manage stock portfolios. Brokers buy and sell stocks based on which company is performing well. If one company is not performing well in the stock market, brokers will move their money (e.g., children) to a different company that is performing well. By actively managing clients' money and making smart decisions about which company will be performing well, brokers get the best return on investment. High quality brokers get insanely rewarded for high returns on investment, irregardless of the impact on companies, communities, and the environment for those investment decisions. Also the riskier the investment the greater the reward, but also the easier to be discarded for one bad investment decision (see the rise and fall of the London Whale).
Last month's decisions by the CPS school board is the culmination of almost a decade of operating under the portfolio management model. In 2004, CPS initiated the Renaissance 2010 initiative, under Arne Duncan, that sought to create 100 new contract schools by 2010. These contract schools could be discarded after 5 years if they are not performing well. The portfolio mentality seeped into the management of the neighborhood school. If a neighborhood school is not performing well or becomes underutilized because students go to other schools, it too can be discarded. In fact from 2001 to 2009, 44 schools in CPS were closed for underperformance or underutilization (p. 1). As is promised now, the district had promised that students who are in closing schools would be sent to higher performing schools and our overall return on investment would increase for the district as a whole.
As much as this makes sense if take the perspective of thinking about schools the way stock brokers think about their money, let's evaluate CPS's past return on investment from their portfolio approach as a gauge for the likelihood of success for their future portfolio management. A recent report from the University of Chicago's Consortium on Chicago School Research (CCSR), evaluated CPS's return on investment of their portfolio of underperforming schools from 2001 to 2006. In that time frame, CPS closed 38 schools. In other words, CPS sought to move their children from lower performing schools to higher performing schools to boost the return on the overall portfolio. These school closings were smaller in scale than the current 50 and spread out over 5 years, as opposed to one year. Since there were a relatively small number of schools that closed each year, the district could focus their efforts on actively managing the portfolio of students to ensure they were placed in new schools that had higher average performance on standardized tests.
CCSR found that students who transferred to schools performing in the top 25% of the portfolio did indeed score higher in both reading (1 month higher) and math (almost three months higher) than they would have had they stayed in their closed school. However, only 6% of the students from closed schools were placed in these top performing schools. Those schools were on average 3.5 miles further from home than their closed schools. The overwhelming majority of students ended up at schools in the middle to lower end of the CPS portfolio. A year later in their new schools, students on average scored equivalent to what they would have done had they stayed at their old school. In other words, after five years of active portfolio management of 38 schools, the return on investment is zero. Some students did better, some did worse, but overall the portfolio remained unchanged.
If a bank allowed a stock broker with a track record of zero return on investment to double down on their investment with a much riskier bet, the bank would be hauled before Congress. When JP Morgan Chase was hauled before Congress over the London Whale, they were chastised for letting a broker with a track record of outstanding returns place a huge bet that failed. In the public sector it is much easier to second guess the private sector than it is to second guess and hold themselves accountable. While these data only point to a failed implementation of the portfolio model, it also raises the question of whether the value system that treats children like money that can be shifted around at will can really be successful at all. Perhaps even a slight shift towards a socially responsible investment approach might be an improvement in which the broker chooses the best possible investment that balances both the return on investment as well as the overall social good of the investment. Perhaps a zero return on investment would be more palatable if the carnage to local communities had been minimized.
