Saturday, July 26, 2014
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Billionaire backed education groups battle teachers unions in state races

Michelle Rhee, left, speaks to staff and guests as Gov. Rick Scott looks on during a visit to a South Florida charter school in Opa-locka, Fla., January 2011. (Alan Diaz/AP)
Michelle Rhee, left, speaks to staff and guests as Gov. Rick Scott looks on during a visit to a South Florida charter school in Opa-locka, Fla., January 2011. (Alan Diaz/AP) Alan Diaz / Associated Press

Three weeks before Tennessee’s August 2012 primary election, state Rep. John DeBerry Jr.’s Memphis-area district was flooded with $52,000 worth of get-out-the-vote efforts supporting the then-nine-term incumbent. Six days later, another $52,000 in materials appeared.

By Election Day, the Tennessee affiliate of StudentsFirst, the education-focused organization behind the influx of support, had spent more than $109,000 backing DeBerry, a rare Democrat who supports voucher programs and charter schools. The state branch of the American Federation for Children, another education group, spent another $33,000.

DeBerry faced another Democrat, state Rep. Jeanne Richardson, whose district was eliminated through redistricting.

DeBerry won.

“I couldn’t counter it,” Richardson said of the funds StudentsFirst introduced late in the race. “I had to raise money by calling people. There wasn’t enough time left.”

StudentsFirst — created by former Washington, D.C. schools chief Michelle Rhee — is leading a new wave of “education reform” organizations, funded largely by wealthy donors, that are challenging teachers’ unions and supporting mostly conservative candidates up and down the ticket in dozens of states.

These groups promote charter schools, voucher programs and weakening of employment safeguards like teacher tenure, all ideas bitterly opposed by unions.

StudentsFirst flooded at least $3 million in outside spending into state elections in 2012, putting the group roughly on par with the Service Employees International Union, or SEIU, across 38 states examined by the Center for Public Integrity and the National Institute on Money in State Politics.

The Sacramento, Calif.-based group is far from the only education reform organization that has gained prominence in the aftermath of the 2010 Supreme Court decision that made it easier for corporations to fund political campaigns.

Among the biggest spenders: the American Federation for Children, 50CAN, Stand for Children and Democrats for Education Reform . The organizations flooded states across the country with independent advertising and canvassing efforts in the run-up to the 2012 primary and general election.

They have been funded by a slew of billionaire donors, like philanthropist Eli Broad, former New York Mayor Michael Bloomberg, hedge fund manager Dan Loeb and Netflix CEO Reed Hastings. However, the full list of funders opening their checkbooks for the education reformers remains a mystery since StudentsFirst and many of the other groups are so-calledsocial welfare nonprofit organizations, which fall under section 501(c)4 of the U.S. tax code.

Such groups are not required to reveal their donors.

StudentsFirst is a rising power in state political spending, but it didn’t come close to matching the National Education Association’s influence in 2012. That year, the National Education Association and its local and state affiliates accounted for roughly $15.7 million in independent spending, nearly five times what relative newcomer StudentsFirst spent.

Since 2012, the funding onslaught by these groups and their backers has shown no signs of slowing.

Spending has reached unheard of heights, even at the school board level.

The race for Los Angeles school board in May 2013 attracted nearly $4 million in spending on reform-minded candidates. Major supporters of the pro-reform committee include Bloomberg, StudentsFirst and Broad, a Los Angeles resident. The organization was countered by roughly $2 million from labor groups.

The American Federation for Children spent $110,000 in outside spending supporting three candidates for the Wisconsin State Assembly in the run-up to an election on Nov. 19, 2013.

Great Seattle Schools, an education reform-focused political action committee, spent just shy of $62,000 in outside spending in the months leading up to the city’s November 2013 school board election.

Democrats for Education Reform was among the committee’s backers, as were local wealthy figures like Chris Larson, a former Microsoft executive who owns a minor stake in the Seattle Mariners , and venture capitalist Nicholas Hanauer.

At the helm of this movement, StudentsFirst has dominated campaigns for state legislators and ballot initiatives that often seem outside the group’s education-focused mission statement. As StudentsFirst faces off with labor groups and labor-backed candidates, the group’s considerable financial heft may be shaping more than education policy.

Battling the unions

Rhee, the controversial former chancellor of Washington’s public school system, established StudentsFirst not long after resigning her post in 2010. The new organization’s goal, she said, would be to provide some much-needed opposition to the teachers unions’ political power.

“The problem to date has been that you’ve had these incredibly powerful teachers unions that have lots of resources, and they use those resources to have influence on the political process,” Rhee said last year during an interview at the Commonwealth Club of California.

Rhee said StudentsFirst is the first education-oriented national interest group to seriously challenge the unions.

Since leaving Washington, Rhee has backed legislation curbing collective bargaining rights in several states. In the 18 states where the group is active, StudentsFirst has fought to eliminate “last in, first out” provisions in teachers’ contracts and to increase the role that quantitative evaluations play in teachers’ job security.

Accordingly, StudentsFirst tends to oppose candidates who align with unions.

Among these union-supported candidates in 2012 was Michigan state Rep. Rashida Tlaib, an incumbent who ran against fellow incumbent Rep. Maureen Stapleton in the Democratic primary as a result of statewide redistricting.

Though Stapleton was a former teacher in the Detroit Public Schools, Tlaib received the endorsements of the Michigan Education Association and the Michigan Federation of Teachers. Stapleton, on the other hand, backed charter schools and linking teacher salaries to performance, both key components of StudentsFirst’s mission.

Between July 20 and the Aug. 7 primary, StudentsFirst poured $195,000 in outside spending supporting Stapleton. Meanwhile, the Michigan Federation of Teachers, the Michigan Education Association and several other labor groups contributed directly to Tlaib’s campaign.  

“You almost never see a state house race in the city of Detroit go over $30,000, so when StudentsFirst put $190,000 into that, that was an extraordinary amount of money for a Democratic primary,” said Rich Robinson, executive director of the Michigan Campaign Finance Network.

A couple months earlier, voters in Whittier, Calif., saw a similar phenomenon. The teachers unions supported Democrat Rudy Bermudez  to represent the overwhelmingly Democratic district in the state assembly. But StudentsFirst backed a different Democrat, Ian Calderon.

A then-26-year-old surfing champion who had never held public office, Calderon’s dad is former state Sen. Charles Calderon and his uncle is state Sen. Ron Calderon.

According to Al Jazeera America, Rhee’s representatives met in February 2012 with former Assemblyman-turned-lobbyist Thomas Calderon, brother of Ron and Charles, to gain support for a bill that would eliminate the last-in-first-out clause of California teachers’ contracts. The next day, Ron introduced the bill.

Rhee’s group then spent more than $378,000 backing Calderon in the 11 days before the primary election on June 5, most of which paid for broadcast advertising, campaign finance records show.

Calderon defeated Bermudez by 337 votes in the primary before handily defeating Republican Noel Jaimes in the general election.

A new player in the game

Historically teachers unions have been the major voices in education politics with little education-specific opposition.

“In the old days, it was all the service-provider organizations — so all the unions — or the consumers,” said Kenneth Wong , an expert in education policy and education reform at Brown University. “We are seeing the broadening in terms of the type of actors who get involved in campaign issues in education.”

Even parents, who in the past often took a backseat to the unions when it comes to politics, are becoming more engaged in campaigns surrounding education issues, he said. The result is a highly competitive, highly expensive environment in which the still-powerful teachers unions face coalitions of traditional conservative, anti-union players aligned with education reform activists.

Politics aren’t new to education. For example, the American Federation for Children has been around, though under a different name, and has been fighting the teachers’ unions for more than 15 years.

What’s new is the unprecedented level of education-focused political spending at state and local levels.

“They’re the recipients of money from Wall Street and Silicon Valley and some of the wealthiest people in America,” American Federation of Teachers spokesman Michael Powell said of StudentsFirst. “And they’ve raised it at a fairly high clip, and it makes them more competitive in these races around the country, there’s no doubt about it.”

Karen White, national political director for the National Education Association, traced the new dynamic to the aftermath of the Citizens United Supreme Court decision that invited corporate spending into the political process.

White said, she sees no distinction between Rhee’s StudentsFirst and the other corporate-backed special interest groups the union has begun to face in recent years.

“We’re going to get outspent,” she said. “We’re going to do everything we can to fight back and be strategic with our spending, but we are never going to be able to compete with the folks who are trying to corporatize education … It’s clearly a national battle that they’ve taken on all across the country.”

Despite White’s concerns, the NEA’s outside spending in 2012 state races was at least $6.4 million, more than double the amount spent by StudentsFirst in the states examined by the Center for Public Integrity.

Any comparison between education reform groups and the NEA is “really a David and Goliath situation,” said Matt Frendewey, spokesman for the American Federation for Children.

“They are one of the largest unions in the country. Period,” he said. “They carry a tremendous amount of clout, especially in relation to how many members they have, and they have a tremendous influence.”

‘Education reform’ or just ‘reform’?

The unions demonstrated their strength in numerous races across the country.

Brian Johnson, who lost the 2012 primary race for a seat in the California Assembly, was the beneficiary of outside spending by StudentsFirst and other education reform advocates.

Before running for office, Johnson was the executive director of Los Angeles’ Larchmont Schools, a network of charter schools, and before that he was the executive director of Teach for America in Los Angeles. He now works for the Teach for America-affiliated Leadership for Educational Equity.

So it’s unsurprising that Johnson benefited from $1.5 million in outside spending by education reform advocates, including $419,000 from StudentsFirst. Most of Johnson’s support came from political action committees whose major donors included Broad, Hastings and Walmart founder Sam Walton’s granddaughter Carrie Walton Penner. Bloomberg, Hastings and the California Charter Schools Association — which received 52 percent of its funds from Hastings — also gave directly to Johnson’s campaign.

Meanwhile, the California Teachers Association, the California branch of the National Education Association, spent nearly $467,000 opposing Johnson, and the campaign of Adrin Nazarian, Johnson’s top opponent, was funded largely by labor groups.

In other races, the education connection was less apparent.

In Michigan, StudentsFirst spent nearly $187,000 in independent expenditures to back then-state Rep. Deb Shaughnessy in what was ultimately a losing bid for re-election.

StudentsFirst was just one of many groups supporting Shaughnessy’s bid for re-election. The Michigan Chamber of Commerce, the Michigan Republican Party, the National Rifle Association, Business Leaders for Michigan and Right to Life Michigan all funded outside spending campaigns either supporting Shaughnessy or opposing her labor-backed opponent, Theresa Abed. More than half of the contributions to Shaughnessy’s campaign came from the House Republican Campaign Committee.

And neither Shaughnessy’s background, nor the issues at the forefront of her campaign emphasized education.

Lawmakers like Shaughnessy have become targets of education spending thanks to an ongoing national debate surrounding the new federally endorsed Common Core curriculum in public schools and the role charter schools should play in public education, Powell said. State legislators will have leading roles in deciding these issues.

Federal government gridlock in Washington also means political action committees and political nonprofits are increasingly turning to state lawmakers as the country’s primary policy makers.

“Nothing’s really happening in Washington,” Powell said, “so anything that’s happening is happening in the states.”

The influence web

StudentsFirst is made up of a coalition of nonprofit organizations and affiliated political action committees in a handful of states, a structure that’s common among political groups.

There’s StudentsFirst, the main “social welfare” nonprofit or 501(c)(4), and the Great New England Public Schools Alliance, another 501(c)(4) nonprofit that operates mostly in Connecticut. There’s also the StudentsFirst Institute, which is not allowed to participate in elections since it falls under section 501(c)(3) of the U.S. tax code. Together these groups spend millions on lobbying, direct campaign contributions and outside spending.

Since 2011, the StudentsFirst Institute received $9 million in grants from the Walton Family Foundation, $7 million from billionaire philanthropists Laura and John Arnold, and $1 million from billionaire hedge fund manager Steven Cohen and his wife Alexandra.

The StudentsFirst Institute reported spending just shy of $1 million on lobbying between Aug. 1, 2011 and July 31, 2012, the most recent fiscal year whose tax reports are available. The group also gave $1 million in that period to the affiliated Great New England Public Schools Alliance, or GNEPSA. 

GNEPSA, in turn, made just shy of $158,000 in independent expenditures in Connecticut legislative races in 2012 and received contributions from Bloomberg and venture capitalist Nick Beim, campaign finance records show.

StudentsFirst, the 501(c)(4), spent another $346,000 on lobbying during the 2012 fiscal year. State records suggest the group far exceeded this number in the following fiscal year, between Aug. 1, 2012 and July 31, 2013, though the group’s tax filing isn’t yet available for that time period.

Because StudentsFirst is not required to disclose its donors, it’s impossible to know where most of the group’s funds come from, a point that detractors use as a reason to question the group’s motives.

Those donors whose names appear on the occasional lobbying disclosure report or tax filing include high-profile figures in political, financial and technological industries.

For example, StudentsFirst spokesman Francisco Castillo indicated a 2012 Huffington Post story that named billionaire New Jersey hedge fund manager David Tepper, a major Mitt Romney supporter, among StudentsFirst’s funders. The article also named the Broad and Arnold families.

Castillo declined to further detail the group’s donors, citing organization policy.

Many other education reform groups are more open about who’s providing the means to their methods. As a result, they offer a small window into the rolls of donors injecting cash into the education reform movement as a whole.

An example of this is the Coalition for School Reform, which spent nearly $4 million on school board races in Los Angeles last year. The group received $1.4 million from Bloomberg, $500,000 from Broad and $250,000 from former Univision owner Jerry Perenchio, according to city campaign finance records.

Other donors included StudentsFirst, Hastings, the Arnold family, former Los Angeles Mayor Richard Riordan, former New York School Chancellor Joel Klein and DreamWorks Animation CEO Jeffrey Katzenberg.

The high-profile donors help give prominence to the groups and their causes, according to Jessica Levinson, a law professor at Loyola Law School who serves on the Los Angeles Ethics Commission.

But above all, these donors have money to spare — a lot of money to spare.

“It’s clear that these groups are funded by people who seem to have an endless supply of corporate money,” said Tenoch Flores, spokesman for the California Democratic Party.

Motives vary

Why the groups and their donors have chosen to support charter schools and voucher programs is sometimes less clear.

The American Federation for Children chooses which races to back based on where the group feels it can help increase educational options available to parents, according to Frendewey.

StudentsFirst’s Castillo echoed these sentiments.

“Our organization supports candidates that will be important partners in our ongoing push to ensure that every student attends a great school and is taught by a great teacher, and that's the reason we're pleased to support local and state reform-minded candidates,” he said in a written statement.

Rhee’s group and many other education reform organizations believe that privatizing education will prove beneficial for the country’s students, explained Michael Apple, who specializes in education policy at the University of Wisconsin. The same is true of the groups’ donors.

“If you look at Broad, Bloomberg, they’re in favor of strong mayoral control of education,” he said. “Some of it is also this belief that the corporate sector is the last remaining set of institutions that form the engine of our society.”

But changing the way public education functions also opens windows for private corporations and individuals to make a profit, which is likely a factor in at least some donors’ decisions to open their wallets, he said. He compared education to healthcare, “meaning the sources of profit are immense.”

The education reform agenda creates opportunities for companies that operate online learning programs and computerized testing, said White, of the NEA. The agenda also places a heavier emphasis on standardized testing, offering potential financial benefits to companies that offer those services.

In the past, K-12 education has been a “sluggish,” highly regulated market that investors were wary of jumping into, said Patricia Burch , an education professor at the University of Southern California. Not so anymore.

The technology schools use to administer tests and supplement coursework has emerged as a multibillion-dollar industry, according to Burch’s research, slated to be published in May in her new book, “Equal Scrutiny: Privatization and Accountability in Digital Education.”

In 2002, the education sector spent an estimated $146 million on technology. By 2011, that number was estimated at $429 million, according to Burch.

Burch’s book points to recent transactions and mergers as signs of the potential windfalls this market can offer.

In 2011, textbook giant Pearson purchased SchoolNet, a tool that helps districts track students’ achievement on standardized tests, for $230 million. Providence Equity Partners bought online educational platform Blackboard Inc. for $1.6 billion. For the low price of $13 million, K12 Inc. acquired Kaplan Virtual Education, which offers computer-based learning for public and private schools in nine states.

In 2012, Apple also partnered with Pearson, McGraw-Hill and Houghton Mifflin Harcourt to offer digital textbooks for the iPad.

“It’s in the early stages. We know that there’s potentially tons of revenue to be generated,” Burch said.

Campaign costs spiral

Though few elections occurred in 2013 around the country, the education reform movement continued to inject an historic volume of funds into local and state races.

The most expensive was the race for school board in Los Angeles that attracted more than $6 million in outside spending.

In the month leading up to the May mayoral and city council election in Jersey City, N.J., the Better Education for New Jersey Kids, Inc., PAC dumped more than $342,000 into advertising and mailers. The PAC is associated with the nonprofit Better Education for Kids, which is not required to disclose its donors but lists Tepper among its trustees.

A special legislative election in Wisconsin and a school board race in Seattle proved ripe battlegrounds for political spending arms races between education reformers and their opponents.

In Denver County, Colo., a committee whose largest donors were Bloomberg and the political arm of education reform nonprofit Education Reform Now spent $103,000 on a school board race.

In nearby Douglas County, Colo., the labor-backed Committee for Better Schools Now spent $935,000 on a school board race. That spending was countered by the Colorado chapter of Charles and David Koch’s Americans for Prosperity Foundation, which claims to have spent $350,000 on campaign efforts . No public records exist of the group’s spending.

Each of these races suggests that education reform spending is going to continue on an upward trajectory, at least for the near future.

“Historically we haven’t seen that kind of spending on school board races here [in Los Angeles], but it’s likely to become a lot more commonplace in the future,” said Dan Schnur, a former Republican strategist who is running for California secretary of state. “My guess is in five years, we’ll be looking back at the relatively restrained fundraising levels of 2013 with some nostalgia.”

The Center for Public Integrity is a non-profit, independent investigative news outlet. A list of its funders can be found here. For more of its stories on this topic go to publicintegrity.org.

Rachel Baye CENTER FOR PUBLIC INTEGRITY
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