Should Donors Invest in School Districts?

Charter-like deregulation might open a door for effective philanthropy on the district level

With all the philanthropic energy surrounding K-12 education, few donors invest in school districts. The reasons why are reflected in our recent survey of 289 Philanthropy Roundtable members. It revealed that broad support for improving the quality of public schools coincides with a lack of confidence, in the minds of most funders, in the ability of administrators of conventional school districts to innovate and enact real improvements. 

That’s why 70 percent of respondents to the survey said that when they want to invest in serious reform models, they primarily do that in charter schools. Six in ten lack confidence in district efforts to “turn around” dysfunctional schools. An equal number question local political commitment to reform, and the ability of typical districts to execute credible improvement strategies. As one respondent put it: “As a matter of policy, we would not fund a school district directly. There is no way to be certain that dollars add value for the intended purpose rather than just replacing dollars reallocated to other purposes.” 

None of this comes as a surprise. In fact, we typically counsel philanthropists to approach school-district investments with a high degree of caution. Funders who do invest in school districts usually make smaller gifts for discrete programs, like enrichment activities, extended-day programs, technology investments, or teacher training.

Two thirds of survey respondents said they would be more willing to support school-district initiatives under two conditions: districts must demonstrate sustained improvement in student achievement, and they must give the schools the autonomy they need to achieve better teaching and improved learning.

In some places, this is already happening. An article earlier in this issue (see page 25) describes how Barbara and Pitt Hyde have invested in an “innovation zone” where traditional public school districts allow more flexible experimentation with new ways of doing things. Innovation zones provide schools within the “zone” more control over their own staffing, curriculum, and ­budgeting—freeing them, for instance, from some union contract strictures. The schools remain under the district’s jurisdiction, and are held accountable for significant improvement in student outcomes.

Over the past few years, the Hydes and other donors have become increasingly involved in innovation zones in Denver, Indianapolis, and Memphis, with some investments exceeding $10 million. While each zone is tailor-made to fit local conditions, the versions in those three cities all loosen strictures to facilitate better teaching, more learning, and accelerated student outcomes—with an emphasis on turning around low-performing schools.

Interest in innovation zones has picked up in recent years as legislatures in six states have given school districts the authority to grant select schools varying degrees of autonomy from school-­district and state policies. Early results from this new wave of innovation zones show potential. Some funders see a new path that might allow givers to invest in districts and still demand results and accountability.

Denver dares to differ

High-quality charter schools have for years been philanthropy’s go-to method of delivering significant improvements in student learning, particularly in the most neglected neighborhoods. But innovation zones—with their operational autonomy, promise of improvement in student achievement, and money-saving use of existing district facilities and other resources—have given some funders reason to reconsider ­district-led reform initiatives. 

The Denver-based Gates ­Family ­Foundation (no relation to the ­Seattle-based Bill & Melinda Gates ­Foundation) is one such donor. The foundation has long supported improving educational outcomes in Denver, but until recently put its education funds to work mostly in charter schools or nonprofits that support them. It had learned, explains foundation executive Mary Seawell, that its most effective investments were those taking place outside of conventional district schools.

In 2016, the foundation revisited this strategy. While continuing its support for charters, the leadership saw promising attributes in Denver’s growing number of innovation schools. Authorized by a 2008 state law, the Denver public school district had 38 innovation schools by 2016, all operating with waivers from certain state and district rules. Four innovation schools were interested in banding together in an innovation zone to gain even more autonomy. The foundation funded Empower Schools, an education nonprofit, to design the zone, which became known as the Luminary ­Learning Network, and provided two years of launch support. It also helped support the incubation and ultimate approval of the network by the board of education. It was one of the foundation’s first major investments outside of charter schools.

Schools in the innovation zone answer to an independent, nonprofit board that guarantees enhanced flexibility over hiring, curriculum, and budgets via a memorandum of understanding with the Denver board of education. In turn, the nonprofit board is held accountable for the schools’ performance. 

Patience is a virtue

Another philanthropic collaborative worked patiently to create an innovation zone in Memphis. The donor partners include the Hyde Family, Poplar, and ­Pyramid Peak foundations. All had previously made significant investments in improving Memphis schools by focusing primarily on growing high-performing charter schools and supporting effective teachers. 

In 2010, the Tennessee legislature passed a law creating a state-run ­Achievement School District with a mandate to take over the state’s lowest-performing schools—the bottom 5 percent—and either run them directly or hand them over to a charter operator. The Achievement School District set the ambitious goal of moving schools from the bottom 5 percent to the top 25 percent. Memphis had the highest concentration of such schools—69 out of 85 statewide. By the 2016-17 school year, the ­Achievement School District managed directly or via charters 29 Memphis schools serving 13,000 students. 

The Tennessee law also offered school districts extra flexibility to try out their own reform initiatives. The ­Memphis-area Shelby County Schools created a homegrown turnaround plan by launching the “iZone” in 2012 to improve a group of under­performing schools. The iZone emulated the ­Achievement School ­District—setting its sights on moving schools from the bottom 5 percent to the top 25 percent. The school board appointed a regional superintendent, Sharon Griffin, to oversee the iZone. Griffin, a successful turnaround principal, empowered iZone principals to pick their teachers without the usual tenure strictures, and she created a high-quality coaching model to support them. By the 2016-17 school year, the iZone had grown to 21 schools. 

Jim Boyd, executive director of the ­Pyramid Peak Foundation, saw promise in the iZone but was cautious based on the rise and fall of other reform efforts over the years. “We wanted to see the will of the district to be a true partner,” Boyd says. “It took a while and several conversations with ­Superintendent Dorsey Hopson pushing us and our pushing back to get to a place where were able to reach an agreement about how we would fund this and work together.” 

To lay the groundwork for a potential larger investment, the Memphis ­Philanthropic Collaborative provided modest financial support for the iZone’s leaders to develop a strategic plan. They also provided funding for improved recruitment and development for high-performing principals and teachers. Boyd explains: “We began exploring investments in specific areas that would not get lost in the district’s general budget.” For its part, the school board ensured that the iZone wouldn’t falter when federal funding ran out in 2016, allocating district funds to make up for the shortfall. Moreover, the school board consistently demonstrated its commitment to the iZone, including the promotion of Griffin to the district’s number-two position, chief of schools. 

Three years after launch, an outside evaluation showed encouraging results. In a 2015 study by Vanderbilt University, several of the iZone schools were on track to become top 25 percent schools, with many more posting annual double-digit gains in reading and math test scores.

Student performance, buttressed by ongoing school-board support, convinced Boyd that the effort merited substantial foundation investment. In 2016, Pyramid Peak and other Memphis funders committed more than $10 million over three years to expand and sustain the iZone. While the Memphis funders showed patience, they weren’t passive. They continued to advocate at the state level to ensure that the state policy remained in effect. And they laid out certain “eligibility” requirements that the iZone needed to achieve to merit substantial funding, including real improvement in student learning and evidence that the district could maintain the initiative over time. 

Mind the gap

Districts don’t typically design reform initiatives in a way that donors find attractive. In our experience, donors want a clear “investable entity”—a dedicated team they can hold accountable, with control of donated funds that are not allowed to disappear into the school district’s operating budget. Donors also expect to invest for a limited period of time during which the reforms take root and thereafter do not require sustained philanthropic support.

These were the key criteria followed by the Mind Trust, an Indianapolis nonprofit that over the past decade has raised more than $73 million to bring creative ideas to that city’s schools. Only recently has the Mind Trust considered district-led school reform. The group was founded in 2006 to increase the number of high-­quality schools in Indianapolis, and charters now serve over 35 percent of the roughly 45,000 students who live within the Indianapolis Public Schools boundaries, many of them quite effectively.

Yet meanwhile, many of the conventional district schools consistently got D or F rankings from the state. So the Mind Trust released a 150-page report in 2011 that called for increasing autonomy for all IPS schools, to mirror the autonomy that had enabled many of the city’s charters to thrive. While initially met with skepticism, the report eventually helped spur the district’s board and superintendent to embrace many of the Mind Trust’s suggested reforms. 

That community support set the stage for the state legislature in 2014 to pass a law that gives school districts authority to create Innovation Network Schools. Such schools operate with the autonomy to make decisions about all aspects of their school—both academic and ­operational—but they are held accountable by the school board for agreed-upon student outcomes. Nonprofits manage the schools under contract with the school board, guaranteeing crucial independence and stipulating clear expectations. 

The new law gave Mind Trust the green light to “work collaboratively with the district to grow the number of schools that have the key conditions for ­success—true autonomy, outstanding talent, and public accountability,” says Brandon Brown of the Mind Trust. His nonprofit was confident that the contractual agreement between the district and Innovation Schools created an opportunity that was built to last—despite any changes in district leadership.

So the Mind Trust joined with the ­Indianapolis Public Schools and mayor’s office to create the Innovation School Fellowship, an incubator for Innovation ­Network Schools. Fellows have unprecedented opportunities to launch schools that have freedoms and flexibilities similar to a charter school, with the financial support and services of a district school (including a school building at little to no cost).

The Mind Trust has worked with IPS to select four cohorts of fellows who have gone on to develop ten Innovation Network Schools, with eight more in the pipeline. Many of the city’s leading charter operators have agreed to take advantage of the fellowship to restart some of the district’s low-performing schools. “This type of charter-district collaboration would have been unfathomable just a few years ago,” says Brown. Early results are promising: enrollment at Innovation Network Schools is up and indicators demonstrate strong academic growth.

The Mind Trust carefully structures its giving to meet the unique needs of each school it incubates. It supports planning fellowships for the schools’ leaders, and it provides startup funding to help pay for items associated with a school’s launch. Afterwards, the Mind Trust expects that schools sustain themselves on per-pupil funding from the state. Thus, the Mind Trust’s support for an “accountable entity” provides a catalytic investment for a limited period.

And by giving support directly to individual Innovation Network Schools, its investments avoid becoming comingled with the school district’s operating budget. “Our investments are directed toward talented operators and individuals that agree to launch schools with the key conditions for success,” says Brown.

Key features of a healthy innovation zone

The early gains of these innovation zones show signs of reinventing what it can mean to invest in school-district reform. Unfortunately these examples are still very much the exception to the rule. Funders interested in following suit would be wise to emphasize the following criteria if they want to work with their own district schools:

Set ambitious goals. The most promising innovation zones commit to and hold schools accountable for ambitious goals in teaching and learning. Rather than settle for incremental improvement, such as moving off a list of low-­performing schools, they aim to accelerate student learning toward the top quartile of schools. Innovation zones hold schools accountable for such performance via contractual agreements or principal evaluations. 

Guarantee autonomy. Innovation zones have the flexibility to pick principals and teachers best able to lead classroom improvement, add time to the school day, tailor professional developmental and other supports for teachers, and allocate financial resources as necessary to support the improvement effort. In most cases, the ability to provide such autonomy was created by state law. At the local district level, the autonomy is often guaranteed via a performance contract or board policy that can withstand superintendent transitions or changes in district practices. Guaranteed autonomy distinguishes innovation zones from most turnaround efforts, and is a crucial enabler for putting teaching and learning front and center. 

Prioritize excellence in teaching. A large proportion of students in low-performing schools live in high-poverty neighborhoods where student achievement lags behind national averages and economic mobility remains elusive. Closing this gap requires a significant improvement in teaching and learning over multiple years, and the most promising innovation zones recognize this. As a result, they provide financial incentives for well-prepared teachers to serve and use teacher residencies and hearty preparation programs to keep talented teachers in the classroom. They provide instructional supports and professional-learning opportunities at the school level.

Follow the students. The most promising innovation zones include each of the schools that feed students from kindergarten to high-school graduation. By ensuring that students receive multiple years of great instruction without gaps that throw them back into dysfunctional schools, children are able to “pick up steam” and narrow academic deficits as they age. 

Aim for sustainability and scalability. The most promising zones have long-term sustainability and scalability as an aspiration from the start. There is a clear commitment to the improvement effort—led by the superintendent and leadership team—often codified in a board policy or contract. There is a clear “investable entity” other than the overall district fund. Districts ensure that the maximum possible state and federal funding goes to the schools. And districts agree to support zone leadership over periods of years. Designs often start small and aim to demonstrate that effective reforms can be sustained and expanded once proven. With success, there is a vision of using the lessons learned to drive improvement across the broader district.

Mike Perigo is a partner with the Bridgespan Group's San Francisco office and co-head of the Education Practice. Nithin Iyengar is a manager and Kate Lewis-LaMonica is a consultant in the San Francisco office.

Read more Bridgespan case studies about school innovation zones in Denver, Colorado; Indianapolis, Indiana; and Shelby County (Memphis) Schools in Tennessee.