Standard & Poor’s to Take Stock of Public School Spending

The company that issues A’s, Bs, Cs and Ds to rate the credit worthiness of companies and public agencies will now be evaluating school districts based in part on how much they spend to educate their students.

Standard & Poor’s, also known for its stock indexes and extensive data showing the good, bad and ugly of publicly traded companies, is getting into the business of analyzing the performance of public school districts.

Rating schools is definitely a growth business these days. Most states require schools to issue report cards on their performance and about half of them use that information to publicly rank schools. The information usually includes test scores, average class size, student ethnicity figures and attendance rates. Private firms that repackage and sell that information also are gaining a toehold.

Standard & Poor’s will add another element to the mix. Its School Evaluation Services reports will include a precise calculation of “return on investment,” a bottom-line concept that no doubt will irk some educators who fear it will be used to cut quality programs.

So, for instance, a school district would learn how much it spends producing a graduate with a score on the SAT college entrance exam over 1,200 compared to other districts.

“In the end . . . you want the lowest amount of dollars to outcome as possible,” said William Cox, the Standard & Poor’s managing director who heads up the new business.

Cox said the nationwide movement toward setting academic standards and tracking school performance against those standards has created a demand for the information his company can provide. He said districts will be able to determine whether, to raise achievement, they need to spend money differently.

Cox understands that “performance cost indicators” could be controversial, if used by educators to justify cutting some programs and enhancing others. “In isolation, we feel pretty strongly that is a dangerous number,” he said.

But he said it will be useful when combined with data on hundreds of variables, including class size, the ratio of adults to students, graduation rates, technology, on-campus crime and student demographics.

Michigan, which already has an elaborate school accreditation system, was the first to sign up for the service and plans to spend about $12 million. Pennsylvania proposes spending $2.5 million for the service.

Larry Picus, of the Center for Research in Education Finance at USC, said the Standard & Poor’s service could show low-performing districts how successful districts spend their money. That information, he said, “could make our schools more productive.”

It’s not clear, however, whether the detailed data Standard & Poor’s will need to do its analyses will be available in all states. In California, for example, the information collected by the state on how districts spend money may be too general for a specific cost analysis.

Unlike it does with its popular debt ratings, the company will not give school districts letter grades.

“We don’t want to unduly focus on one statistic or letter symbol because . . . that would dilute the value of all the other information we’re providing,” Cox said.