These were the questions I posed to Joseph Pagnozzi, co-founder and President of The Montfort Academy, at the end of the first installment of my interview with him several weeks ago.

Continue reading at Forbes Opinions…

Continue reading at Forbes Opinions…

In a smaller minority of cases, a private school is selected and paid for, often while simultaneously paying the local taxes that fund their would-be public school.   Some of these private schools choose their students with rigorous admission processes, where the applicants voluntarily subject themselves to all sorts of trial and tribulation, firm in their beliefs that the rewards will justify the means.

And in the tiniest minority, when like an “oversubscribed” bond offering the school has more applicants than slots, the school chooses the students randomly, by lottery.

What would make any parent reach for such a brass ring? A powerful independent documentary, “The Lottery”,  directed by Madeleine Sackler and released late in April seeks to shed some light on this situation.   It’s a film that no parent, voter, or teachers union member, should miss.

Within the first ten minutes of the film, the stage is set:

“The notion that one has to get lucky to get a first rate free public education, it shouldn’t be that way.”

- Eva Moskowitz, Founder and CEO, Harlem Success Academy

“The frustrating thing for me, frankly, is that we’ve proven we can do it.  We have proven in every city, in every community around the country that any child can learn at the highest imaginable levels.  We see kids coming from the most challenging of circumstances that are fortunate enough to get into a good school be it a private school, a good public school, a good public charter school and that just excel.  And so there really can’t be any more excuses.  The question is, is why we don’t have more of them?”

- Cory Booker, Mayor of Newark NJ and a member of Democrats for Education Reform

“The charter schools are essentially an option, where we call them public charter schools, because they are schools that are created with public dollars so that they get funded by our state through our city.  They’re able to hire teachers exempt from the traditional union strictures on who you can hire, and you are able to create curriculum that you think will best educate young people.  You get the charter for five years.   Now one of the great things about charter schools is that it is totally accountable.  If you don’t run a decent school you will not get your charter renewed and essentially, your school will be closed, and we think that’s fair, that in the end, if you take money to do this kind of work you have to deliver for children.”

- Geoffrey Canada, President and CEO of Harlem Children’s Zone

One is immediately compelled to imagine the impact if all government programs were “closed” if they were found to not be delivering for society, but that’s another story…

The film introduces four families, each with their own special challenges, and follows their progress through the state-mandated lottery process, each hoping to win a spot at New York’s Harlem Success Academy and be instantly transported out of their educational despair.   Watching the events unfold is heartwarming, heart-wrenching, and everything in between.

An Economic Wolf in Sheep’s Clothing

President Obama makes this observation in the film:

“African American, Latino students, are lagging behind white classmates, in one subject after another, an achievement gap that by one estimate costs us hundreds of billions of dollars in wages that will not be earned, jobs that will not be done, and purchases that will not be made.”

Similarly, Geoffrey Canada points out that in New York City, it costs around $13,000 per year to educate a child, but in comparison, it costs two to three times that amount to imprison someone.   He also notes that as a country we lock up millions of people at these kinds of costs.

One can rightly deduce that the issue of under-educating our population is ultimately one with profound economic consequences:   Wages never earned are also never saved, invested or taxed.   Jobs not done represent goods and services not produced.   And purchases not made affect the very demand side of the equation that believers in big government insist can be stimulated with government spending.

Yet many people often assume that charter schools can produce good results because they have better funding, logistical, and/or demographic advantages when compared with public schools.   And sometimes these people sit on the boards and city councils of public schools.  Witness this exchange between Moskowitz and a board member, during a hearing on charter school expansion, in which Moskowitz is introduced as “a former colleague, the former chair of the Education Committee”:

Eva Moskowitz: “PS194 was failing when I was a kid, and we’ve had reform after reform after reform after reform and I think parents deserve in real time, something better.  You know, if you’ve got a kindergartner, you can’t wait five years.  Your kid will have already not learned to read.”

Lewis A. Fidler:  “You’re comparing apples to bananas.  If you’re going to look at the factors that are most important in a quality education and compare them… I didn’t ask why your class sizes are smaller…”

Moskowitz:  “But ‘why’ matters…”

Fidler: “…I just aspire to having my class sizes smaller, too.”

Moskowitz: “OK, well you wouldn’t like our schools very much because our class size is very big.  In kindergarten, we have about 27 kids in kindergarten.”

Fidler: “Alright, so your class sizes are higher than the average?”

Moskowitz: “Correct.”

Fidler: “How about special ed and IEP’s?”

Moskowitz: “We have higher than the zone schools we’re co-located with.  We have about eighteen percent on average in the four schools.   I have one school where it’s higher, it’s about 23%, and at my other schools it’s about 16%.”

But that’s not the most remarkable exchange in the film:

Maria Del Carmen Arroyo:    (to Moskowitz) “You, in your testimony, said “Council member Jackson, we both live in Harlem.’   I… for the record…  Do you live in Harlem?”

Moskowitz:  “I grew up in Harlem and I live in Harlem.”

Arroyo: “You live in Harlem currently?”

Moskowitz: “I do.”

Arroyo: “Would you share with us a street?”

Moskowitz: “I, I have three young children, so I would prefer not to.  Are you questioning that I’m telling the truth?”

Arroyo: “Yeah, uh, I am.”

The crowds are audibly uncomfortable, but it is Arroyo who continues at this point with an explanation as to why Moskowitz is arrogant.  Truly incredible stuff.

The Wizard Behind The Curtain?

What becomes quickly obvious in the film is the role of the teachers unions in all of this.   Although it would be easy to cast the entire blame on them, it would perhaps be easier still to say their PR people made a catastrophic error not defending their point of view more thoroughly in this film.  According to Sackler, this was their choice. Simply put, charter schools are an existential threat to teachers unions.

The film notes that according to the US Department of Education, of New York City’s 55,000 tenured teachers, 10 were fired in 2008.  One reason for this is that a typical firing procedure runs about $250,000.   So given budgetary constraints, keeping a mediocre teacher on staff, in a perverse way, can be sold as a cost saving measure.

Community organizing, against the community

From references to “thuggish tactics”, to paying ACORN to attend anti-charter school rallies, to American Federation of Teachers president Randi Weingarten’s tortured response to Charlie Rose’s simple question of whether or not bad teachers should be fired, to multi-faceted descriptions of an “education-political-complex”, this film will rightfully put the unions on the defensive.   It is high time.

Some people claim that charter schools don’t produce results any better than good public schools.   Suppose that were true.   What these people miss is that these “same” results are being achieved without a union, which furthers the case that unions are not required to produce good results.   It’s a classic example of a productivity gain:  A process that suddenly produces equal or greater outputs with fewer inputs.

What is then also missed is that the union itself extracts an enormous real cost to the public itself.   Here’s the chain of events:

1. In states like New York, the teachers unions are the largest lobbying organizations to the state legislature and integral to the political process, almost exclusively on the Democratic side of the aisle.
2. The unions raise their funds from the salaries and wages of their “members” (where “membership” is often compulsory).
3. These salaries and wages are funded by the public, primarily through local taxes.

In a very real sense, the union represents a tax to the teacher, and like any other tax, one that is ultimately paid by the consumer.    I’ve argued before that I’d gladly see the best teachers paid even more than they receive now.   However, there should be no appetite for the public funding the very organizations that seek to bleed them dry.   Hundreds of millions of dollars in recaptured annual union expenses would go a long way towards providing better compensation to the best teachers.

But even more profound still, is the following:   Where is the union public relations campaign making the case that their very existence improves educational outcomes?

A rift in the making?

Lest you be led to believe that Moskowitz is some kind of Republican or Libertarian shill, it is interesting to note that in one of the “extras” of the DVD version of the film, Moskowitz describes herself as a “die-hard Democrat”, who notes that “thankfully, we have a Democratic president who gets this”, with ‘this’ being the need to make structural changes to the entire educational system.

Unfortunately, that traditional Democratic funding engine has literally passed a “vote of no confidence” on President Obama’s plans.   But with more and more of the media piling on to the enraging truth that public employee unions are one of the chief catalysts of federal, state and local financial distress, Obama may be able to get away with thumbing his nose at this constituency.

Perhaps largest impediment to real change is summed up best here, along with a fantastic counter-perspective:

“The controversy comes about because of adult politics and because adults are affected by it.  When I close down a large high school, not everybody in that high school is able to find another job immediately and that causes concern.  But we don’t view the school system as a job system.  We view the school system as an education system for our children”

-Joel Klein, Chancellor, New York City Department of Education, on shutting down failing schools

Early in the film, there is a scene of children reciting the multitude of times Dr. Martin Luther King includes the words “let freedom ring” in his famous “I Have A Dream” speech.   The irony of our current system putting the needs of adults before those of children, in many ways robbing them of their freedom, is too rich, and all too sad.

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In discussing income inequality, the liberal commentariat will invariably point to some kind of statistic showing that the gap between the people at either end of the earnings bell curve “has never been wider”.   Or put differently, “the rich are getting richer and the poor are getting poorer”.    What these people miss, as economists like Thomas Sowell and Alan Reynolds have repeatedly demonstrated, is that the people at any given percentile of the curve change over time.   As Sowell says when talking about supposedly stagnant household incomes:

“The problem is you’re talking about households, rather than flesh and blood human beings.   One of the real fallacies that runs through a lot of talk about income is confusing statistical categories with actual flesh and blood people.”

“Income Inequality Sowell vs. Krugman“

Essentially then, static comments made about a dynamic curve are meaningless.   By contrast, longitudinal studies following particular people over the course of their earning careers tend to show upward trends.

It turns out that one group of people, tracked longitudinally, have been on a particularly nice up-slope: public sector employees.   And within that group, unionized public employees enjoy the greatest income differences when compared to their private sector counterparts, with a big chunk of that difference coming from sweetheart benefits packages.

The Real "Income Inequality" Gap

Numerous reports and articles are finally presenting the blizzard of statistics that all point to the same conclusion:  public sector jobs, relative to their private counterparts, have become a great gig that are also bankrupting their financiers. The Cato Institute published Chris Edwards’ “Public Sector Unions and the Rising Costs of Employee Compensation” in their Winter 2010 Cato Journal.    Steven Malanga, Senior editor of the Manhattan Institute’s City Journal, chronicled the issue with specific regard to California.  It is a sorry tale. Even sorrier is that it has become epidemic amongst towns, cities and states across the country. Reason magazine’s excellent February 2010 cover story on the topic was entitled “Class War“.    And in a recent Wall Street Journal editorial, there is this eye-popping statistic:

What if government workers earned the average of what private workers earn? States and localities would save $339 billion a year from their more than $2.1 trillion budgets. These savings are larger than the combined estimated deficits for 2010 and 2011 of every state in America.

Zeroing in on New York’s infamously dysfunctional state government, one quickly encounters the union-front “Working Families Party”.  I’ve always wondered if a dual-income couple with a few kids in the public schools, working a combined 100+ hours a week but being in the top tax bracket, qualified as a “working family”.   The WFP was almost single-handedly responsible for getting the legislature to pass 2009′s tax hike for top earners, matching neighboring New Jersey’s top bracket of 8.97%: a true race-to-the-top-which-is-actually-the-bottom.   The tax hikes were ostensibly to avoid cuts to “necessary” state programs and services, often staffed, of course, by union workers.

New York’s Triborough Amendment, (a form of “evergreen clause”), allows unions to keep their existing contract terms if negotiations fail to reach a new contract.  In other words, a local school board, for example, has absolutely no ability to compel their teachers union to accept reduced raises or benefits in a new contract; the teachers can “fail to reach a new contract” and enjoy the more generous terms of the existing contract instead.

Then there’s the issue of pension liabilities.   In the private sector, if you have a 401K or IRA and you take a hit in the stock market or elsewhere, you’re stuck.   But in states like New York, with guaranteed pensions that can’t be reduced once payments begin, those losses need to be made up by the taxpayers.   A local school board can suddenly have a multi-million dollar swing in their annual contribution requirement to the state, potentially wiping out attempts to hold the line on other spending over which they have more discretion.   Reason magazine reports that “[i]n New York state, local governments may have to triple their annual pension contributions during the next six years, from $2.6 billion to $8 billion, according to the state comptroller.”

So in summary, we have unions using their members’ dues to lobby for maintaining the status quo, and being successful at that. All of this now takes place in the face of the weakest economic environment in at least a generation.    It would seem that this issue should result in disgust from the overwhelming majority of people, i.e., the group that does not belong to a union. Rather than the government serving the people, the people are serving the government, and (switching metaphors, I know) the government diners are super-sizing their orders when instead they should be counting calories.  Like some genetically doomed organism, this parasite is killing its host.    One wonders how this situation persists.

I’d suggest that non-reporting of simple math has a lot to do with it.

What a difference a few percentage points make

Albert Einstein is reputed to have said that “the most powerful force in the universe is compound interest”.    Likewise, the compounding growth of state and local deficits, caused in large part by Kevlar-encased union compensation contracts, is beginning to present itself like the smoking van recently found in Times Square.

At any given vote, a union pay raise of say, 4%, might not sound so bad.   But compared with a raise of 2%, over time, as the chart to the right shows, the magic of compounding is going to make all the difference.  And for illustration purposes only, by looking at 6%, it is clear that “reaching for yield” pays off handsomely (swap in the words “Retirement Account Balance” for “Annual Salary” and this one chart should motivate any new college grad to start saving early).

This week in New York, local voters will be entering their voting booths to decide the fate of their school budgets and other initiatives.    Let’s hope that they begin to diffuse a bomb whose fuse is already lit.

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As reported by Neil King Jr. in a September 30th Wall Street Journal article,  Education Secretary Arne Duncan is staring down opposition from the teachers’ unions in his bid to (gasp!) improve outcomes within public schools through the promotion of charter schools, merit pay, and changing the rules for hiring and firing teachers.   Duncan’s plans reflect Obama’s vision from his campaign, and as someone who considers himself entirely pro-teacher, but anti-teacher-union, I want to applaud and give credit where due.

But such support flies in the face of Obama’s otherwise strong support for union organizing and one would think by extension, what unions are all about.   Such support includes the promotion of the Orwellian-named “Employee Free Choice Act” where simply put, workers would lose their right to a secret ballot on whether or not to have a union.   You read that correctly, and it is comical to listen to union leaders try to defend the proposal.      Note that the March 6, 2009 low in the S&P500 was within days of the revelation that EFCA  might not be the legislative layup many people anticipated.

Reviewing the text of Obama’s September 15th speech to the AFL-CIO, where he spoke of the need to grow the nation’s labor unions, it is impossible to not see the similarities in his descriptions of the state of labor in the early 1930′s and the state of big government today:

“It was a tough place for workers in the 1930s. “A benevolent dictatorship,” said the local steel boss. Labor had no rights. The foreman’s whim ruled the day, and the company hired workers from different lands and different races, the better to keep them divided, it was thought at the time.”

Isn’t Obama himself relishing the opportunity to be nothing less than a benevolent dictator?   His stable of “czars”, upwards of two dozen depending on who’s counting, could be straight out of Stalin’s Russia of the 1930′s.   Rahm Emanuel, Nancy Pelosi and Harry Reid play the roles of foremen very well, thank you.   And the very presence of a union in any company acts to keep labor and management divided.

Specifically regarding merit pay, if it is appropriate for teachers, how is it not appropriate for all workers?    Yet one does not suspect that unions are chomping at the bit to see EFCA passed so that they can then push merit pay for all.   As Dennis Van Roekel, president of the National Education Association has said, “If you pay one teacher more you have to pay someone else less.”    Merit pay contradicts the very essence of a union’s purpose, which is to promote equality and unity of the group at the expense of the individual.   Any principal who might be inclined to pay their standout teachers more may in fact be restricted by their need to then pay all teachers more, including those not deserving.   Obama can not simultaneously encourage the creation and expansion of unions, but be against their most fundamental philosophies.

A clear alternative

It is instructive to envision a potential public school system without a union.   It would start with the district superintendent, hired by the school board, a body that must answer to the voters.   The superintendent’s mandate would be to implement the vision and objectives of the voters as discerned by the school board.   The superintendent would in turn hire the management staff of each of the schools in the district: principals, assistant principals as well as district-wide administrators.    In turn, each of the principals would hire the staff of their particular school, coordinating with the district wherever operational efficiencies can be gained.   Department heads, working closely with the principal, would complete the staffing process with teachers and assistants.

Teacher compensation and school operating procedures would be dictated entirely by the management of the school district, according to whatever standards and requirements were necessary to hire the proper staff.  Principals could use any number of techniques, including sign-on bonuses, short or long-term contracts and performance bonuses, customized work schedules and job descriptions, etc., as they see fit. The principal might consider soliciting regular feedback from parents about all aspects of staff performance, and the superintendent might do likewise for their principals.

Competition between school districts would ensure that they treated their teachers fairly.  The best teachers would quickly see their value rise in the marketplace, and a district would have every incentive to keep them happy, according to a personalized definition of happiness as defined by each particular teacher.   To some it might mean more pay.  To others, greater flexibility in scheduling or job description, or any combination of factors.  Likewise, principals would have total flexibility over replacing teachers that were not meeting performance standards.    Measurement of performance would exist at all stages in the system, with the buck ultimately stopping at the public voting booth.

There’s actually nothing novel about such a system.   It’s already in place at thousands of highly successful public companies large and small around the world, with shareholders and customers voting with their dollars in real-time.  And they don’t have unions.

“But hey, schools are different!   How can a principal have so much control over a teacher’s job when their class may have any number of challenges that change year to year? A teacher can’t pick their students!  How could a teacher’s performance ever be fairly evaluated, with their compensation controlled by that?”   Indeed, at a dinner years ago where I sat next to the local teachers’ union president, he described these very concerns to me at length.

These concerns are a complete red herring.  Hundreds of millions of employees work effectively with their management teams to solve tremendously difficult problems all the time and have done so for decades.    It is what makes them “professionals”.    None of this is to suggest that today’s teachers are not professionals.   Hardly.   But the above system would respect that professionalism more, attract and retain the best and most qualified personnel, treat them as individuals and not segregate them into groups of convenience, and produce a better product for the customer – the students, parents and taxpayers.

Perhaps you think that the school dynamic represents the most challenging managerial problem conceivable.   It still does not follow that the solution would involve inserting a group of people unaccountable to the customer, a group whose very presence guarantees the introduction of additional complexity and inefficiency between the two parties involved, into the equation.   Yes there are occasionally times for “mediation”, but why require building that in from the start?

As parents we’ve already done the hard part:  We’ve entrusted our most valuable possessions, our children, to the staff of our school system.   So why can’t we trust the school staff, working closely with us as parents and voters to come up with fair and reasonable organizational systems that all can live with, ones that work best to meet the objectives of the voters?  And if there are laws in place that prevent the above from happening, like New York’s Taylor Law, then that is where legislative action must take place.   We need to start thinking about some basic questions:  What do the teachers’ unions do to advance the goal of providing a great education at a reasonable and sustainable cost, and why is their existence even necessary?  Just who’s running our school districts anyway?   Who should be running them?

With successes like those seen in Philadelphia, teachers’ unions are terrified by the prospect of more widely exposing themselves as an emperor with no clothes.   Unions in general have seen their ideas losing attraction in the marketplace, in the form of steadily declining memberships, and are now seeking to use the force of big government to achieve their goals.  We should all have the “audacity of hope” to see that campaign politics stay out of this trend.