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K-12 Education – The Sector Productivity, Quality, and Innovation Has Bypassed

Nate Lentz
July 18, 2011

We need to fix education in this country – but not just by throwing dollars at it.   As per the chart below, the cost of educating one student has gone up 2x in real dollars since 1970 and has gone up more than 3x since 1961 – IN REAL DOLLARS!  While the quality of education – based on just about any reliable metric you could use – the quality has declined, in many cases precipitously.

SOURCE: U.S. Department of Education, National Center for Education Statistics. (2011). Digest of Education Statistics, 2010 (NCES 2011-015), Table 188 and Chapter 2 .

Current expenditures per pupil in fall enrollment in public elementary and secondary schools: Selected years, 1961-62 through 2007-08
School Year Current expenditures in unadjusted dollars Current expenditures in constant 2008-09 dollars1
1961-62 $393 $2,808
1970-71 842 4,552
1980-81 2,307 5,718
1986-87 3,682 7,105
1990-91 4,902 7,857
1995-96 5,689 7,904
1996-97 5,923 8,002
1997-98 6,189 8,214
1998-99 6,508 8,490
1999-2000 6,912 8,765
2000-01 7,380 9,048
2001-02 7,727 9,309
2002-03 8,044 9,482
2003-04 8,310 9,586
2004-05 8,711 9,754
2005-06 9,145 9,865
2006-072 9,679 10,178
2007-08 10,297 10,441

1Constant dollars based on the Consumer Price Index, prepared by the Bureau of Labor Statistics, U.S. Department of Labor, adjusted to a school-year basis.

2 Revised from previously published figures.


Let’s think about this data another way.   If educating a student is output of a system, then in the past several decades, productivity had declined (because it now costs us much more to do the same thing we did before) and quality has also declined.   I share the frustration that the system is not working.   I share the desire to reduce costs and improve productivity.   The real question is why productivity and quality have both declined so significantly in public education (and possibly private as well although the data is less clear) when innovation and technology have been applied in so many other areas of the economy to drive massive productivity improvements over the same period.  I think the answer is that true, broad sweeping innovation has been stagnant in public education.   We have failed to rethink the manner in which our children are educated and the best way to deploy capital to achieve the highest outcomes.

I recently had a discussion with a venture investor colleague who focuses on the education sector.  We were discussing areas of interest in terms of investment trends in the EdTech sector.  As an opening remark he stated that, of course they were avoiding the k-12 education sector because of the challenge of selling to individual schools or local districts and dealing with the local bureaucracies which rarely define objectives or have focused buying processes (or defined budget for technology innovation.)   My colleague David Drahms and I nodded because we too, have a similar view of K-12.  It is just really hard to sell innovation school by school or district by district.

So – this is the way it is.   There are no budgets in the hands of innovators in schools – especially public schools.  To sell an innovation, one needs to sell a teacher or a principal – they then need to sell it upstream because the principal or teacher certainly doesn’t have budget.  The higher one goes in most school districts, the further they are from the mission, the needs, or the impact of innovation and the closer they are to the politics of running a district or the entrenched concerns of the unions.

I am not naïve enough to believe that I have the answers to the challenge of a broken education system.   What I do know is that the answers lie in unlocking innovation – at the district, state, and federal level -instead of just the classrooms of brave pacesetter teachers.   The answer also lies in true metrics of quality AND productivity.  We can educate more for less.  Why is it that my children are educated much as I was and my parents were and their parents were?  In a century which has seen the greatest age of innovation, why have we failed to apply these innovations to our future?

I am ready to fund those who will be agents for change – entrepreneurs and start-up businesses.   Osage sees EdTech as a great source of opportunity.  Innovation will come from the bottom of the economic ladder – not from governments or large corporation.   Yet I will not fund a business which has no chance of finding buyers.  We need to open up the purse strings of public education, create an innovation mandate, and let productivity rise, quality improve, and our children benefit.   Educators need to define return on investment and productivity goals and spend to achieve those goals.  When ROI objectives are clearly defined by the buyers – the schools, the districts, the states, or federally – then innovators and the venture capital industry which funds those innovators will focus on the k-12 segment.  I look forward to making those types of investments.