Karen Leach had never won a lottery of any kind. “Never even play them,” she confirms. Still, she found herself hoping April 29, 1998 would be her lucky day. When the phone call came, Leach recalls, “I turned to my sons and said, ‘We got it!’”
Leach’s boys had been chosen as two of the 1,000 winners of a private school scholarship sponsored by the Washington (D.C.) Scholarship Fund, one of a growing number of privately-financed school choice programs springing up around the country. A single mother working nights as a security guard, Leach had struggled financially to find a way to enroll her oldest son Christopher in Assumption School, a Catholic grade school in Southeast D.C. Yet with Christopher entering third grade and her younger son Christian going into kindergarten, the cost was simply prohibitive. Reluctantly, Leach enrolled both of her sons in public school, her hopes of providing them a private school education on indefinite hold. Then came word that 1,000 children from low-income families would be chosen in a random drawing, with the winners receiving partial tuition grants to the school of their choice. Overcoming her initial skepticism, Leach filled out an application.
“I put in the form,” Leach recalled, “and I just prayed and prayed. What’s that show, Touched by an Angel? That’s what I was praying for for my sons.” When her name came up in the lottery, Leach called Assumption and told them her children would be back at school in the fall.
Who were the angel investors who made Leach’s dream possible? Theodore J. Forstmann, pioneer of the leveraged buy-out, whose firm’s $13 billion in acquisitions over the past 20 years include the purchase of Gulfstream Aerospace, Ziff-Davis Publishing, Dr. Pepper, and Topps; and John T. Walton, a son of Wal-Mart founder Sam Walton and heir to one-fifth of a $48 billion fortune. The two men had split the cost of a $6 million donation to the Washington Scholarship Fund, at that time the largest single grant to a private school choice program.
The Washington donation that helped Christopher and Christian Leach and a thousand other children turned out to be only the first installment of Forstmann and Walton’s grander vision: Taking the private school choice program national. As the 1997-98 school year drew to a close, the two announced the creation of the Children’s Scholarship Fund (CSF). The effort would begin with $100 million, a sum underwritten by Forstmann and Walton themselves, with a plan to bring in other philanthropic partners to take the total to as much as $200 million. CSF will focus first on programs in five cities: Washington, New York City, Chicago, Los Angeles, and Jersey City, New Jersey. At the same time, CSF is putting out the call to other cities to join the program and to other philanthropists to partner-up, with plans to expand to 30 to 50 cities by the 1999-2000 school year. Overall, CSF plans to sponsor scholarships for 40-50,000 children across the country.
The idea behind private school vouchers is to level the economic playing field that limits parents’ educational options. For millions of American families privileged enough to pay their way into private schools or buy their way into neighborhoods with better public schools, school choice is part of the nature of things. For people on the lower rungs of the economic ladder, those options do not exist, giving public schools an effective economic monopoly. The result, says Forstmann, is predictable: “Monopoly equals bad product at high prices. That’s true if what you’re buying is education, just as it is for anything else.” In this captive market, private school choice is one way to provide parents with options and the public schools with some needed competition.
Taking private choice private
Forstmann notes that in the past four years, $3 trillion in new wealth has been created by Wall Street’s relentless bull market. Clearly, CSF is Forstmann and Walton’s effort to divert some of that torrent of new wealth into the school choice stream.
What’s new about the Forstmann-Walton foray is less its pedigree than its price tag. Privately-funded private school choice programs have been around since 1991, when Indiana insurance magnate Pat Rooney bankrolled half-tuition grants for 750 underprivileged Indianapolis schoolchildren. Since then, such private school choice programs have proliferated. Last year, more than 15,000 children in 31 cities attended the school of their choice with the help of such private grants; this school year ten more cities will join the private school choice movement to bring the number to 41 in just seven years. Some of these independent programs have joined in a loose-knit alliance under an umbrella organization called CEO America, a clearinghouse for information and advice on how to implement a private school choice program.
You wouldn’t know it from listening to the news media, but some CEO America programs are actually quite large. Earlier this year, for instance, CEO announced its HORIZON program to assist San Antonio-area schoolchildren. Its terms: $50 million over ten years—or until the state of Texas enacts a school choice program to help the community’s low-income children. HORIZON is noteworthy in another way as well; it is the first privately-funded school choice program to extend its scholarship offer to any and all students in an entire school district. The Edgewood Independent School District on San Antonio’s southwest side is 97 percent Hispanic and 93 percent low-income. Just 50 percent of Edgewood’s 14,000 students pass the state achievement test. Since the program launch in April, HORIZON has received inquiries from the parents of nearly 2,000 schoolchildren. “We chose [the Edgewood district],” explains CEO America President Fritz Steiger, “for two reasons: It’s big enough to make an impact, and at the same time small enough to be affordable.”
The programs have a number of features in common. While most of the programs call their grants “scholarships,” the term is a bit of a misnomer, since they are awarded regardless of the students’ level of educational achievement—and, increasingly, by lottery if (as it invariably does) demand exceeds supply. Typically, the grants are means-tested; to be eligible, families must earn no more than the federal free- or reduced-price lunch level. Most earn a good deal less; in the program assisting Karen Leach’s children, the average family income is around $18,000 a year. Finally, the programs typically require participating families, no matter how poor, to contribute to their children’s tuition. Percentages vary from program to program, from 10 to as much as 70 percent. Given the paucity of disposable income that plagues families at or under the poverty line, that’s a “market test” of the most impressive kind, and a clear indicator of how serious even the least privileged parents are when it comes to their children’s education. Parents are “buying-in” to the programs in other ways as well. When money is short, parents turn to sweat-equity, volunteering to do everything from answering office phones and performing clerical chores, to painting classrooms and cleaning lavatories.
Yet perhaps the most impressive fact about the CEO America-style private school choice programs isn’t the number of children they’re serving, but the number that remain on their waiting lists: more than 50,000. Enter Forstmann and Walton, and the Children’s Scholarship Fund.
Philanthropy’s new odd couple
Forstmann brings to the enterprise the suffer-no-fools brashness that helped make him billions on Wall Street, and a sense of the sound-bite that makes him a favored source for reporters. Alongside the soft-spoken Walton, whose quiet passion on the school choice issue is rivaled only by his evident unease with press conferences and media campaigns, the two constitute a formidable odd couple in favor of education reform.
For their widely different personal styles, Forstmann and Walton share a strong philosophical commitment to the value of competition in education, a commitment that has made their philanthropic effort a counterpoint to the voucher wars roiling public policy debate. Indeed, Forstmann’s contempt for Congressional inaction on school choice is palpable. “It was a joke,” says Forstmann, recalling the 1997 battle over a pilot voucher program for several thousand Washington, D.C., students. “I mean, pick up the paper every day, Congress can’t make up its mind to pass $6 million? So we said, ‘Okay, we’ll do it. Let’s get this program going and see if this idea works.’” Forstmann and Walton announced their $6 million grant to the Washington Scholarship Fund (WSF) in August 1997. WSF had been sponsoring 225 children, with hundreds more on its waiting list. With the 1997-98 school year just weeks away, the Forstmann-Walton infusion immediately put scholarships in the hands of every child on the waiting list. Several weeks into the school year, the WSF began taking applications for the 1,000-scholarship lottery. Within four months, more than 7,500 applications poured in—17 percent of all District students eligible for the funds, and 9 percent of the school-age population in the District of Columbia. “That’s demand,” Forstmann says. It’s also an indication of the unmet need that sparked the idea that became the CSF.
While the voucher policy debate rages in state after state as well as on Capitol Hill, CSF is insistently apolitical. “That’s the only way this can work,” observes Forstmann. Noting the political pedigree of some of his fellow CSF partners, Forstmann says: “Some of our people want to see President Clinton out of office, and some of them have slept in the Lincoln Bedroom. We’re getting people across the political spectrum.” Indeed, the Children’s Scholarship Fund kickoff, which attracted New York City Mayor Rudolph Guiliani as well as Republican rising star Bret Schundler, Mayor of Jersey City, also featured former Congressman Floyd Flake of Queens, New York, a rare Democrat convert to the voucher cause. Flake, an ordained minister in the African Methodist Episcopal Church, has stepped down from Congress to return to his Queens congregation, while stepping up his support for private school choice.
Already, some big names have signed on, foremost among them agent to the stars Michael Ovitz, who flew out from Hollywood to attend the public launch of the CSF in New York City. “This is not about politics,” Ovitz said at CSF kickoff. “This is about the private sector coming in and giving individuals options. There’s no politics involved in this. It’s bipartisan, and it’s strictly about children and education.”
Return on compassion
Not everyone is willing to give CSF the benefit of the political doubt. The public education establishment, long accustomed to vitriolic denunciations of private vouchers, grasps for a rhetoric that will allow them to condemn what is, after all, a private philanthropic act of enormous generosity. American Federation of Teachers (AFT) official Bella Rosenberg slammed the CSF: “If I had money to invest . . . I would invest in what would help the greatest number of children, and [Forstmann] is saying ‘To hell with them. I’m just going to cherry-pick them.’”
Asked to respond to the AFT assault, Forstmann’s rejoinder: “My response? My job is not to help or hinder systems. I’m interested in helping parents who want an alternative.”
Despite the grinch-like grumbling of the AFT, it appears Forstmann and Walton’s effort may be Teflon-clad. Witness President Clinton, who maintains a blanket veto threat against any federal voucher legislation, yet has nothing but praise for the Forstmann-Walton effort. In what amounts to a bipartisan good housekeeping seal of approval, at the CSF kickoff in June Forstmann brandished a letter signed by the President, obtained just days earlier. “Innovative programs like CSF are helping to widen the circle of educational opportunity for thousands of young men and women,” President Clinton wrote Forstmann. “By reaching out to low-income families and supporting their investment in education, CSF assists some of our country’s neediest children.”
Whether Walton and Forstmann have found a private path around the public controversies attending school choice remains to be seen. For the moment at least, their philanthropic route offers a fast-track to educational opportunity that public policy, despite the growing groundswell behind school choice, has yet to embrace. Coming from a world ruled by return on capital, what kind of return on compassion are the founders of CSF looking for? Says Walton: “Any investment, whether in business or in philanthropy, has to be based on yielding a good return. I’m more confident of a better return on this than any other investment I’ve ever made.” “This is pure venture capital,” says Forstmann. “Money that helps two guys get their great idea out of their garage and into the market. What’s the worst thing that can happen? Forty to fifty thousand kids have their lives changed. Best case, we break the [public school] monopoly and change the system. Then everybody wins.”
Daniel McGroarty, Senior Fellow with the Alexis de Tocqueville Institution and Senior Director of the White House Writers Group, is author of Break These Chains, The Battle for School Choice (Prima Publishing) and Voucher Wars (Institute for Justice/Milton and Rose D. Friedman Foundation).