No Funds Left Behind: As States Slash Education Budgets, Private Foundations Have Picked Up the Slack-And Pushed Some Controversial Reforms

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Last spring, as the Texas Legislature debated massive cuts to public schools--one of many desperate measures to close a $27 billion biennial budget deficit--10,000 protesters massed in Austin for a "Save Our Schools" rally. In the end, the damage to the state's already-underfunded schools added up to $5.4 billion, forcing districts to lay off tens of thousands of teachers and staffers. In the city of Austin, public schools with rapidly growing enrollment found themselves facing a 5.5 percent cut in the 2011-2012 school year and 8.5 percent the next year. The quandary was far from extraordinary--37 states spent less on education in 2011 compared to 2010. Neither was one of the Austin schools' solutions: seeking grant money from the world's largest philanthropic organization, the Bill and Melinda Gates Foundation.

One of Gates's latest education projects is called the District-Charter Collaboration Compact. When school districts sign a pledge to collaborate and share resources with local charter schools, Gates awards the districts--14 so far--$100,000. These districts also get a shot at another $40 million worth of grants. Last fall, the Austin school board signed such a pledge with local charters. The agreement, Superintendent Meria Carstarphen said, would make Austin eligible for grants "from people and places that otherwise would not have given us the time of day." A month later, the city again became a venue for protests--smaller, but equally vociferous--arguing against a new partnership. Austin already had 25 charter schools, but all operated independently of the district. Now the board wanted to take collaboration to the next level, letting a private charter-school operator take over an elementary school and a high school as "in-district charters." While some argued that the charter schools could serve students whose needs weren't being met in traditional schools, many parents and teachers (as well as three board members) worried that the charters would take good students out of traditional schools and questioned the track record of the charters. When the board debated the in-district charters in December, protesters chanted outside; inside the packed hearing room, arguments for the charter arrangement were hissed and booed. The board still voted yes.

It's a story being repeated across the country. With most states cutting school funding, Gates and other private foundations are wielding outsize influence over public education, using their much-sought-after millions to fund and shape a top-down reform agenda. Like the other major (but smaller) players, the Eli and Edythe Broad Foundation and the Walton Family Foundation, Gates uses its funds to encourage public schools to adopt a more corporate approach. The three foundations, which in 2009 gave around $560 million in education-related grants, support creating charters to foster competition between local schools, rewarding or punishing teachers for their students' performance on standardized tests, and replacing local curricula with national standards.

"The danger is that philanthropic investments will drive education policy to a greater degree than might be healthy or democratic," says Aaron Dorfman of the National Committee for Responsive Philanthropy, which recently commissioned a study on how philanthropies can be more effective in improving public schools.

Gates and Walton have invested heavily in charter schools--and in advocacy groups that push state lawmakers to remove limits on the number of charters. "Before you can fund the charter school, you have to fund an advocacy organization that can create a climate for the charter school to exist," says Debbie Robinson, a spokesperson for the Gates Foundation's education efforts. The organizations also advocate for school choice--letting parents decide where their children go to school rather than letting zip codes dictate, as supporters of neighborhood schools prefer. …