WEEKLY NEWS DIGEST (September 27-October 3, 2010)



Philanthropists move to rescue ICEF Public Schools; Broad, Riordan and Baxter donate $700,000 to help stabilize the operator of 15 schools in mostly low-income minority L.A. neighborhoods.” By Howard Blume. Los Angeles Times. September 28, 2010. A group of the city’s leading philanthropists, including billionaire Eli Broad and former mayor Richard Riordan, rallied Monday to save ICEF Public Schools, one of the nation’s largest and most successful charter school companies, which was teetering on financial insolvency. ICEF, which operates 15 schools in low-income minority neighborhoods of Los Angeles, was virtually out of cash, unlikely to meet its Oct. 1 payroll. The nonprofit faced a $2-million deficit in the current budget year as well as substantial long-term debt. The collapse of ICEF would have been a blow to the charter movement and to the 4,500 students and several hundred employees of an organization whose results have impressed many observers. Charters are independently run public schools that are free from many regulations that govern traditional schools. ICEF representatives and others said the group’s budget problems were caused by insufficient reserves; an overly ambitious expansion — 11 new schools in three years — that resulted in costly debt; and a reluctance to make cuts affecting students. These factors were exacerbated by the recession, which sharply reduced state funding to schools, and this year’s late state budget, which has delayed payments to schools.

Is Michelle Rhee’s Revolution Over?” By Judith Warner. New York Times. October 1, 2010. Around the country, supporters of education reform — or at least of the test-scores-driven, tenure-busting, results-rewarding sort of reform epitomized by organizations like Teach for America and championed by Education Secretary Arne Duncan — gave a collective gasp of dismay last month when voters in a number of districts handed primary defeats to candidates closely associated with just this type of reform. In New York, three state-senate candidates who ran on pro-charter-school platforms each failed to garner more than 30 percent of the vote. In Washington, voters overwhelmingly rejected Mayor Adrian Fenty in favor of the City Council chairman, Vincent Gray, as the Democratic candidate in this year’s mayoral election. The Fenty defeat worried many people particularly because he was inextricably linked with his crusading, nationally celebrated schools chancellor, Michelle Rhee. Rhee, who was appointed by Fenty in 2007 and given unprecedented power to shake up the ailing school system, fired hundreds of teachers and dozens of bureaucrats and principals, even removing the popular head of her daughters’ elementary school in the northwest part of the district. She demanded that the city’s tenure system be replaced with one that would reward teachers for producing measurable performance gains in their students. For her efforts, she became a heroine to some — gracing the cover of Time magazine, earning the praise of the Obama administration and an invitation to appear on “Oprah” — but she also received enormous enmity from teachers, their unions and, surprisingly enough to outside observers, many public-school parents, not a few of whom were profoundly offended when, the night after the mayoral primary, Rhee appeared at the Washington premiere of Davis Guggenheim’s much-talked-about education documentary, “Waiting for Superman,” and told an assemblage of prominent Washingtonians that the election results “were devastating, devastating. Not for me, I’ll be fine . . . but devastating for the school children of Washington, D.C.”


For-profit colleges under fire over value, accreditation.” By Mary Beth Marklein. USA Today. September 29, 2010. In 2008, about 2,000 for-profit colleges eligible for federal student aid enrolled nearly 1.8 million students — an increase of 225% in 10 years. About 9% of all college students now attend for-profits; most attend schools owned by one of 15 large, publicly traded companies that each enroll tens of thousands of students. Last year, federal student loans and grants made up an average 77% of revenue at the five largest for-profits. Advocates of for-profit colleges say their programs, which often operate online or in rented office space, serve a key role in educating students who juggle work and family demands. But the U.S. government has stepped up its scrutiny amid growing concern that for-profits are reeling in billions of dollars in federal aid by using aggressive — some say deceptive — practices to lure students to programs that might not yield a useful education.
Related stories:
For-Profit Colleges Hold Rally Against Loan Rules.” Morning Edition/National Public Radio. September 30, 2010.
For-Profit Colleges Under Senate Microscope.” All Things Considered/National Public Radio. September 30, 2010.


Endowment posts 8.9 percent gain; Return is lowest in the Ivy League so far.” By Vivian Yee. Yale Daily News. September 27, 2010. in the black — even if its growth pales in comparison to other schools’ and its own past performance. The endowment’s 8.9 percent investment return from the fiscal year ending June 30, 2010, which the University announced Friday morning, recovers some of the $7 billion the endowment lost last year. But Yale, for many years the envy of the investment world because of its annual returns of over 20 percent, trails the five Ivy League schools that have released their endowment results so far this year. Though it still claims the second-largest university endowment in the world behind Harvard’s, the fund’s performance trailed its peers at Columbia, Dartmouth, and the University of Pennsylvania as well as Harvard. The returns lagged behind those of Yale’s peers in part because of its exposure to real estate investments, which lost value this year even as other parts of the endowment outgained benchmarks. Taking into account endowment spending of $1.1 billion, the fund grew 2.5 percent, rising from $16.3 billion in 2009 to $16.7 billion this summer. That includes a total investment return of $1.4 billion and gifts of $136 million, according to Friday’s announcement.

Stanford investments up 14.4%.” By Lisa M. Krieger. San Jose Mercury-News. September 27, 2010. Stanford University’s investment portfolio grew more than 14 percent this fiscal year, a stunning reversal from one year ago when it plummeted in value by 26 percent. This is a strong performance compared to Ivy League competitors Harvard, Yale and University of Pennsylvania, which reported gains of 11, 8.9 and 13 percent, respectively. The school’s investments — called the “merged pool,” comprised of the endowment and money set aside for future hospital projects — now total $15.9 billion. But that is still far short of the $20.4 billion peak reached in 2008. The school’s money managers say they retooled the portfolio to take advantage of strong stock and credit markets in the beginning of the 2010 fiscal year, “allowing us to make up some of the ground lost in fiscal 2009,” said John Powers of Stanford Management Company. This diversification helped it withstand June’s market downturn, he added. The endowment, which bankrolls much of Stanford’s day-to-day operations through an annual “payout,” rose in value by 9.6 percent. That growth results not only from investment gains, but also gifts. The endowment was valued at $13.8 million on August 31, the last day of Stanford’s fiscal year.

Swensen model still highly regarded among investors.” By Vivian Yee. Yale Daily News. September 28, 2010. Friday saw the $16.7 billion endowment managed by Yale investments chief David Swensen fall to the bottom of the Ivy League in its most recent investment gain. But that hasn’t diminished Swensen’s standing among Yale officials and onlookers. “Anybody that makes money is going to have a really bad year at some point,” said David DeRosa, the founder of DeRosa Research and Trading, a Connecticut-based consulting firm. “The question is whether or not you chuck the whole thing or you stay the course. I think [Swensen’s] plan was well-thought out, and I don’t think you could hold him responsible for a really awful environment.” Though Swensen is just one of many institutional endowment officials, he has an outsized presence in the investing world. At Yale in the 1980s, he pioneered a model of institutional investing that several other large university endowments now emulate — one that bears his name. The “Swensen model” — or “Yale model,” as it is sometimes known — emphasizes investing in alternative assets, including private equity, real estate, gas, timber and other “illiquid assets.” Yale racked up endowment gains of up to 41 percent in previous years under Swensen’s guidance, and returns of 20 percent or more became routine for the University in the years leading up to the financial crash of fall 2008. That crisis, which produced a 24.6 percent loss for Yale’s endowment, brought the Swensen model under closer scrutiny

Black Colleges Need a New Mission; Once an essential response to racism, they are now academically inferior.” By Jason L. Riley. Wall Street Journal. September 28, 2010. President Obama has shown a commendable willingness to shake up the status quo in K-12 education by advocating reforms, such as charter schools, that have left his teachers union base none-too-pleased. So it’s unfortunate that he has such a conventional approach to higher education, and to historically black colleges and universities (HBCUs) in particular. Earlier this month, Mr. Obama hosted a White House reception to celebrate the contributions of the nation’s 105 black colleges and to reiterate his pledge to invest another $850 million in these institutions over the next decade. Recalling the circumstances under which many of these schools were created after the Civil War, the president noted that “at a critical time in our nation’s history, HBCUs waged war against illiteracy and ignorance and won.” He added: “You have made it possible for millions of people to achieve their dreams and gave so many young people a chance they never thought they’d have, a chance that nobody else would give them.” The reality today, however, is that there’s no shortage of traditional colleges willing to give black students a chance. When segregation was legal, black colleges were responsible for almost all black collegians. Today, nearly 90% of black students spurn such schools, and the available evidence shows that, in the main, these students are better off exercising their non-HBCU options. Black colleges are at a crossroads.At one time black colleges were an essential response to racism. They trained a generation of civil rights lawyers and activists who helped end segregation. Their place in U.S. history is secure. Today, however, dwindling enrollments and endowments indicate that fewer and fewer blacks believe that these schools, as currently constituted, represent the best available academic choice.

Debt forces Harvard back to drawing board; Facing big payments, school reduces, rethinks major projects.” By Beth Healy. Boston Globe. September 28, 2010. It is no secret that Harvard University ran into a short-term cash crunch when the markets plunged in late 2008 and had to cut costs sharply. But there also has been a longer-term toll: Harvard borrowed heavily to get through that period, and now finds itself grappling with big debt payments and scaling back ambitious plans. The nation’s wealthiest university doubled its debt load over the last three years, to $6 billion. It spent $204 million to pay down its debt in fiscal 2009, or 40 percent more than the prior year — money that deans would rather have spent on projects and programs. And Harvard is now spending a larger slice of its $3.8 billion operating budget on debt service than its peers. All of this puts the university’s president, Drew Faust, in the unenviable role of seeing Harvard through much leaner times than her predecessors, who enjoyed large endowment returns for more than two decades. “We are managing debt very carefully right now,’’ Faust said in a meeting with Globe reporters and editors last week. She also acknowledged, “We’re paying a significant amount of the operating budget in debt service.’’ Harvard is maxed out on debt for the foreseeable future. In order for the university to keep its AAA bond rating, its usual way of financing buildings, borrowing from investors, is effectively off the table for now, beyond projects already identified in its three-year plan.
Related story:
Fixing Harvard Endowment Failures Will Take Mendillo Five Years.” Bloomberg.com. September 29, 2010.

CUNY, IBM to open high school-college hybrid.” USA Today. September 28, 2010. The City University of New York and IBM will open a unique school that merges high school with two years of college, allowing students to earn an associate’s degree, Mayor Michael Bloomberg said Monday in announcing a series of ambitious educational initiatives. Those students will be “first in line for a job at IBM,” Bloomberg said in his announcement.

Stanford University opens first new medical school facility in five decades.” By Lisa M. Krieger. San Jose Mercury-News. September 29, 2010. The patient on the operating table is dying. There’s no pulse, no consciousness — but no panic among the young doctors. That’s because they’ve practiced this moment before, on this same plastic patient, a bionic mannequin named Lee Majors. And each time, they get better. “He’s a patient with patience,” said Kam McCowan, an engineer with Stanford’s new Center for Immersive and Simulation-Based Learning, a mock hospital floor that is one of the largest and most advanced medical facilities of its type in the world. Just a block away from real life-and-death drama at Stanford’s hospitals, the simulation facility is part of the $90 million Li Ka Shing Center, christened on Wednesday. The modern center, built of warm, cream-gray French limestone, is the educational hub of the Stanford University School of Medicine. It also holds classrooms, lecture halls, a conference center and $9 million in state-of-the-art audiovisual equipment. Although the school’s reputation is world- renowned, its infrastructure is dated. The new structure, the medical school’s first new building in 50 years, is a gift of Li Ka-shing, a Hong Kong philanthropist with a reputation for a simple lifestyle.

Alumnus creates fund for new environmental ventures.” By Natasha Thondavadi. Yale Daily News. September 29, 2010. The Center for Business and the Environment at Yale is sponsoring several new awards for environmental entrepreneurs and researchers as well as tweaking its flagship Sabin Environmental Venture Prize, program director Bryan Garcia said. The Center will offer an additional $100,000 in research grants — funded by a donation from Merrill Lynch senior vice president David Sobotka ’78 — for both students and faculty, Garcia said. The $25,000 Sabin Prize will also no longer be open to non-profit organizations, he added. “My motivation [for funding the grants] comes from a deep concern about society’s ability to effectively deal with environmental issues without direct business involvement,” Sobotka said in an e-mail. “Money is simply an enabler.” The Sobotka Research Fund will enable the center to provide three new grants, Garcia said. The Collaborative Research Grant will fund student and faculty research with grants ranging from $10,000 to $25,000 to develop research projects. The Joint Degree Capstone Research Fund will make $2,500 available to third-year joint degree students in the Yale School of Management and the Yale School of Forestry and Environmental Studies for their final research project. Finally, five $5,000 Seed Stage Venture Grants will be awarded to student and faculty teams who put together environmentally-friendly business prototypes, similar to the $25,000 Sabin Prize, established in 2008.

Elite Colleges, or Colleges for the Elite?” By Richard D. Kahlenberg. New York Times. September 29, 2010. TODAY’S populist moment, with a growing anger directed at the elites who manipulate the system to their advantage, is an opportune time to examine higher education’s biggest affirmative action program — for the children of alumni. At our top universities, so-called legacy preferences affect larger numbers of students than traditional affirmative action programs for minority students, yet they have received a small fraction of the attention. Unlike the issue of racial preferences, advantages for alumni children — who are overwhelmingly white and wealthy — have been the subject of little scholarship, no state voter initiatives and no Supreme Court decisions. Among selective research universities, public and private, almost three-quarters employ legacy preferences, as do the vast majority of selective liberal arts colleges. Some admissions departments insist they are used only as tie-breakers among deserving applicants. But studies have shown that being the child of an alumnus adds the equivalent of 160 SAT points to one’s application (using the traditional 400-to-1600-point scale, and not factoring in the new writing section of the test) and increases one’s chances of admission by almost 20 percentage points. At many selective schools, legacies make up 10 percent to 25 percent of the student population. By contrast, at the California Institute of Technology, which has no legacy preferences, only 1.5 percent of students are the children of alumni. Legacy preferences are often justified as a way of building loyalty among alumni, sustaining tradition and increasing donations. But there is no hard evidence to prove this.

In focus: How one department coped with budget cuts.” By Vivian Yee. Yale Daily News. September 30, 2010. The Near Eastern Languages and Civilizations Department’s annual reception, once an elaborate affair, has been pared down to half its former size. Guest lecturers invited by NELC, who numbered up to a dozen in previous years, have become scarcer around the Hall of Graduate Studies. The department has also had to delay hiring more language lectors, trim its copying budget and cut down on office supplies to make ends meet through three successive rounds of budget cuts as Yale tried to fill in a $300 million budget gap. Like all other Faculty of Arts and Sciences departments at Yale, NELC has had to make serious choices about how to preserve its academic programs while also cutting its budget. And the choices it made provide a peek into what departments across the University have done since Yale’s endowment tumbled 24.6 percent in fall 2009. Though Yale is now emerging from two years of relative frugality, the 2009 decline in the endowment prompted Yale administrators to warn all departments they would have to make serious budget cuts. Construction projects would be frozen. Faculty hiring would be slowed. And Yale’s cluster of Faculty of Arts and Sciences departments would have to trim whatever fat they could, from the crackers and cheese at receptions to entire jobs.

Ivy Endowments Turn Upward.” By Elias J. Groll and William N. White. Harvard Crimson. September 30, 2010. On the heels of an abysmal year for money managers in 2009, university endowment results released in recent weeks show strong investment returns for the year ending June 30, 2010, although different forms of asset allocation have led to significant variations in performance between different schools. Endowments that invested more heavily in publicly traded assets tended to see stronger returns than those that remained heavily involved in less liquid assets. Columbia reported the strongest growth among the Ivy League members that have reported results. The school posted a 17.3 percent return that beat internal and market benchmarks and was bolstered by an asset allocation that favored stocks and bonds. Harvard’s endowment, the largest in higher education, grew by 11.4 percent to $27.4 billion. “Funds that had more exposure to public equities, to public fixed income have done very well over the last 18 months,” said Michael C. Schlachter, a managing director of Wilshire Associates, a consulting firm that tracks endowment performance. “Those funds that had more allocation to real estate and commodities have done less well.” Yale, whose 8.9 percent endowment return was the lowest of Ivy League schools that have released figures, has remained committed to real estate and private equity investments that have not recovered as quickly as other sectors of the economy, most notably publicly traded equities. Only Brown and Princeton have yet to release their financial results.

Notable & Quotable: Historian Victor Davis Hanson writes that the American university is the most politically intolerant and monolithic institution in the country.” Wall Street Journal. October 2, 2010. Most of what we are told about universities is untrue. America’s reputation for higher learning excellence (in business, sciences, medicine, engineering, and finance) is despite not because of the humanities and social sciences. Current research in the liberal arts (the portfolio the English or sociology prof is tenured on) increasingly has almost no relevance to the general public or applicability to teaching or even scholarly merit. At some point, all this cannot go on, and we will have the academic version of September 15, 2008—as parents no longer choose to take on $200,000 in debt to send their children to 4-year liberal arts schools, in which they will be likely indoctrinated that they should oppose the very American institutions that created the wealth and freedom that fuel their colleges and pay their faculties.

Facebook film not making friends with some Harvard grads; Liberties taken with characters, motivations, they say.” By Joseph P. Kahn. Boston Globe. October 2, 2010. It’s witty and entertaining, with snappy dialogue and memorable performances bound to attract Oscar talk. But for one knowing slice of the audience for “The Social Network’’ — the new film about the birth of Facebook — there is an awful lot less to “like.’’ The movie opens this weekend to rave reviews from critics. For some people who were there during the website’s launch at Harvard University in 2003 to 2004, though, “The Social Network’’ is more than a cinematic revisiting of events and personalities. What’s portrayed onscreen is their own college experience, and that’s getting more mixed reviews regarding the film’s authenticity and accuracy. On Thursday night, four members of Harvard’s class of 2004 and one 2002 grad watched “Social Network,’’ then gathered afterward to share their reactions. All count themselves among Facebook’s first few hundred subscribers. The consensus? While well written and well acted, “Social Network’’ takes ample liberties with the reality they lived as undergraduates. Motivations and character traits have been distorted, the five agreed, sometimes amusingly but often less so.


Gates foundation grant goes to S.F. schools.” By Jill Tucker. San Francisco Chronicle. September 27, 2010. While about 60 percent of jobs in California require a college degree, only about a quarter of those who start high school in San Francisco will ever get that degree. It’s a problem that city, school and college officials are vowing to tackle together, spurred by a $3 million grant. San Francisco is one of four cities that will be awarded the funding today to boost college completion rates. The Bill and Melinda Gates Foundation, with the National League of Cities, also gave a grant to New York City, Mesa, Ariz., and Riverside.The grant, $1 million for each of the next three years, will help the city, along with San Francisco Unified School District and City College of San Francisco, expand programs designed to get students ready for college as well as others focused on keeping them there until they get a degree. “We have instituted new graduation requirements to align with the required coursework for any California state university, and we have expanded college and career preparedness curriculum starting in ninth grade,” said school district Superintendent Carlos Garcia. “There is still a long way to go and we only get there working together.” The money will be used to, among other things, expand access to preschool and allow more students to earn college credit at work, city officials said.
Related story:
Gates Foundation focuses on college graduation.” San Jose Mercury-News/Associated Press. September 27, 2010.

Newark’s Mayor Woos Schools Backers.” By Barbara Martinez. Wall Street Journal. September 28, 2010. Newark Mayor Cory Booker is expected to announce Monday that he has raised $40 million of the $100 million needed to match a grant put forth last week by Facebook founder Mark Zuckerberg to help Newark schoolchildren. On Friday, Mr. Zuckerberg, Mr. Booker and New Jersey Gov. Chris Christie announced Mr. Zuckerberg’s $100 million challenge grant on Oprah Winfrey’s television show, as well as Mr. Booker’s intent to raise another $100 million. Mr. Christie controls Newark schools but has made Mr. Booker his point person on its turnaround plan. The mayor, who plans to announce how much he has raised at an education conference in New York, has been calling on potential investors to explain why they should give. A person close to the contributions said other new donors include billionaire Bill Gates and the founders of New York investment firm Eagle Capital Management, Beth and Ravenel Curry.

School Reform Rainmakers: John Walton had the right idea for education donors.” No by-line. Wall Street Journal. October 2, 2010. The new Charter School Growth initiative is supported by the Walton Family Foundation, the Lynde and Harry Bradley Foundation, the Doris and Donald Fisher Fund and others. It will largely bypass the politicians and directly finance the growth of charter school networks, such as KIPP and the Harlem Success Academy, that have a record of accomplishment serving students that traditional public schools have consistently failed. The late John Walton’s reform strategy was to concentrate charters and vouchers in certain areas until an alternative school system is essentially in place. The goal is to create an educational market for the urban poor. Instead of neighborhood schools taking enrollment for granted, they should have to compete for students, with parents able to make choices based on what’s best for their children. More than 400,000 kids in the U.S. are on charter wait lists, and their parents will welcome this effort to replicate and expand the most successful charter school models. Like Walton and his fellow education philanthropists, they realize that it’s not how much you spend but how you spend it.

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