Much has been made about the influx of investment in education by the new Federal Administration. It is surely likely to be impactful, but in order to take advantage of it, it’s necessary to understand the bits and pieces, the nuances in detail, the specifics of the who, what and when that will be a part of the process.
Setting the stage
Understanding the psychology of how the marketplace works is a necessary backdrop for the upcoming events.
Education is notoriously slow at decision-making with regards to expenditures. But in this situation, districts are being asked to make quick decisions, buy relatively quickly, implement, and ensure that these are sound, secure decisions that will have long-term benefit to student performance. Decisions should be made carefully, but fast. These requirements are antithetical to how educational sales traditionally happens. Getting support for your product and a quick decision, while ensuring that the decision is safe and will have long term benefit will require careful communication and intelligent product packaging into offers that meet the requirements the funding has dictated. Administrators are sensitive to making safe choices through an understanding of the research bases of products, brand knowledge, historic spending and government mandates. Companies that can meet three of four of these criteria will have an advantage. The trick will be in creating enough comfort to have decisions happen quickly.
What’s new, what’s not
Some elements of the funding available will fall into familiar categories. Where funding is being routed through provisions like Title I and IDEA, the methods and measurements for distribution will stay the same as they’ve always been. The formulas for distribution to the LEAs will not change, (with the exception that districts with less that 5% Title I population will not get any of the new Title I monies.) In other cases, the distribution of funds still needs to be worked out. We’ll share more information as we get it, and the data in the charts in this document reflect the best information we have so far. Some disbursements will be competitive, though the guidelines for that competition still have to be articulated.
You've heard that a good chunk of the money has already been sent to the states. Much of the IDEA and Title I money has been sent, and it should be winding its way to the local districts in the June to July timeframe.
One concern for districts and states is that, if they cannot demonstrate that they spent this money wisely, they may lose out on the other 30% of the money, which will be parceled out to the states starting in September, and to the districts starting in late October. In talking to districts, you should address this concern. Districts and states will be asked to show that purchases:
- Drove results for students
- Increased capacity to do more with less
- Accelerated reform along the lines of school improvement plans
- Avoided the funding cliff, making long term gains with moneys spent by November, 2010.
- Fostered continuous improvement, including measurement of results and feedback loops
Solutions that deliberately address these five concerns have a greater chance of acceptance.
50 states, 50 Rules
We’re all familiar with how state-based education is, and this additional distribution of funds is no different. While much is articulated in the federal guidelines, how monies finally flow in non-formula disbursements will still be determined at the state level. It’s also unclear, in many cases, how long the states will hold the money. The intent of the legislation is to have monies flowing quickly, but quickly, in education terms, can be weeks and months. The best way to know what’s happening will be to stay in close communication with your prospects at the LEAs. And of course, there’s money that will be kept by the state DOEs, particularly for things that involve data and reporting, that need to be centralized.
Long term impact- on Subscription Pricing
Many companies have shifted to annual subscription models which are problematic for short-term spending for long-term impact. It will be important to repackage offerings to front-load the cost, but extend the terms. Examples: Five-year contracts, perpetual licenses, product purchase with small service charges in subsequent years. In all of these cases, like any subscription service, the trick will be in ensuring usage and satisfaction. Managing the growing client base will have to be planned for. And cost of client acquisition may go down, but cost of support and maintenance will be on-going. We’re recommending that you plan carefully for this shift when projecting cash flow and support costs. Also, we’re hearing that five years is considered pretty long range. We’ll watch for confirmation of that, but it does seem to be commonly understood. More to come on that point, and other subscription concerns.
It’s the PD, Stupid.
There’s mention of Professional Development everywhere in these documents, and School Improvement even has its own fund. The language frequently refers to the adequate training of teachers, highly qualified teachers, and teacher training as a critical component of all product implementation. That means you can charge for it. That means you should charge for it; it is an articulated objective. Think about that as you pull together your product offerings and configurations.
These are initial thoughts; we’ll be sharing more information as we get it. These are our opinions and interpretations and should be understood as such. The facts are included in the pages attached. We will be working with clients individually to discuss what the implications are for each company, and you should feel free to contact us with questions.
On the following pages, we diagram all of the different education spending buckets. Please let us know if you find this helpful and/or if you have further questions.
We hope to see as many of you as possible at the SIIA Ed Tech Industry Summit in San Francisco, starting Sunday, May 3. Mitch will be unveiling the results of the SIIA Postsecondary Market report on Sunday, and we will both be participating in various panels on Monday and Tuesday.
Sincerely,
Farimah Schuerman and Mitch Weisburgh
Managing Partners
Academic Business Advisors
The above chart is a summary of the different buckets of funds. The following pages explore each of these boxes in greater detail. Note that you can click on any chart to make it larger.
This is the first of three pages on the SFSF funds. This page describes the $39.8 billion formula grants. Then there is a page to explain the $8.8 Billion and one for the Race to the Top funds.
Note that the Title I funds are an increase over existing Title I funds.
There are also IDEA funds allocated for early education, detailed on the previous page.
There are a slew of “little” programs that total up to about $2 Billion. These are some of the larger ones.
While most of the funds on the previous pages may also be used for school construction, the funding above gives communities an opportunity for long term funding.
Those are the major spending buckets, when they will be distributed, and the criteria for their distribution.
