No Test Left Behind

No Test Left Behind
How Pearson Made a Killing on the US Testing Craze
Owen Davis

2016

Three days after taking office, George W. Bush unveiled his signature domestic policy, No Child Left Behind. The bill would triple the number of exams the federal government required of students, while dangling stiff penalties over struggling schools. For many educators it felt like a depth charge.

The mood was different at Pearson Education, a division of the London-based conglomerate Pearson PLC. As the education community was still absorbing the shock in February 2001, Pearson Education chief executive Peter Jovanovich spoke to a group of Wall Street investment analysts. He pointed them to the proposed annual testing requirements and school report cards. “This,” Jovanovich said, “almost reads like our business plan.”

Pearson Education was a relative newcomer to the education market. Three years earlier, Pearson PLC had paid $4.6 billion to buy the textbook wing of publishing house Simon & Schuster. In 2000, the company acquired a leading standardized test provider. Now Pearson’s stars had aligned.

“Content has been king,” Marjorie Scardino, Pearson’s top executive, said at the time. “But now we’ll have the ability to put content and applications together and that will really allow us to be king.” With a hand in both delivering curriculum and testing students over that curriculum, Pearson would capitalize on America’s newfound school accountability kick.

Pearson Education’s profits increased 175 percent in the decade following No Child Left Behind. The company, whose properties included Penguin Books and the Financial Times, soon derived most of its profits from American education. Test sales jumped fivefold between 2000 and 2006. “Our assessment businesses are in the sweet spot of education policy,” Scardino told investors in 2005 – a year when more than 60 percent of American school kids lived in states giving Pearson tests.

Since 2000, the testing market has roughly tripled in size, to nearly $4 billion a year, with annual achievement tests spawning a range of more frequent tracking assessments. As testing has flourished, more and more functions of the school publishing industry the have fallen into fewer and fewer hands. In 1988, ten publishers shared 70 percent of the textbook market. Today, the “Big Three” —McGraw-Hill, Houghton Mifflin Harcourt and the juggernaut Pearson—control at least 85 percent of the market. These lucky few have since expanded their offerings; Pearson hawks everything from student data trackers to online credit-recovery courses to ADHD diagnostic kits.

But along the way the American public grew wary of the companies’ influence in education. Parent groups on both the left and right have cast testing mandates as political favors to test makers, a notion that has helped spark a recent nationwide pushback against accountability policies. Hundreds of thousands of parents across the country have opted their children out of mandatory tests last year, and entire schools have held test boycotts.

The sense that students are over-tested is no illusion. A 2013 study from the Organization for Economic Cooperation and Development found the stakes attached to testing in the U.S. to be the highest in the developed world. One study of the 66 largest urban school districts found the average student took 112 standardized tests from kindergarten to graduation, spending an average 22 hours a year just taking the exams, let alone preparing for them.

The efforts of testing companies to secure and expand their business have helped pushed American schools toward an overbearing focus on assessment – one that has failed to achieve its desired result of dramatically improving student and school performance. Here’s the story of how we got to this point.

A Nation at Risk

There is nothing new about private companies selling test materials to schools. In 1920 there were no fewer than 20 test manufacturers peddling their wares, from Lohr’s Latin Test to Hillegas’ Scale for the Measurement of Quality in English Composition for Young People. But a national market was lacking. The U.S. is unique for the fragmentation of its public education system. Most power lies with states and districts. That began to change about forty years ago.

Calls for a national focus on education culminated in the Reagan administration’s 1983 report “A Nation At Risk.” It warned that the American lead in commerce and science was imperiled by what it identified as slipping school performance. Among its recommendations was to establish “a nationwide . . . system of State and local standardized tests.”

The report spooked the business community into action. By one count, the number of business-education partnerships jumped from 40,000 to 140,000 within five years of “A Nation At Risk.” The methods these groups advocated borrowed chiefly from business principles: increase competition between schools and hold each accountable as an executive would a franchise.

But free-market-style reforms required a way for reformers to evaluate outcomes and for education consumers – that is, parents – to rank their options. That meant testing. “In order to have a functioning market you need information, and test scores would be that information,” said Jack Schneider, a historian of education at Holy Cross. As a report from the conservative Heritage Foundation explained: “Business leaders can make change occur by mobilizing their local communities. But to do so, business leaders must arm themselves with the data about education’s failure.”

And arm themselves business leaders did. By the late 1990s many states had latched onto educational accountability, instituting tests and sanctions in equal measure. Liberal groups, too, began to line up behind accountability measures, which were seen as a potential remedy for educational inequities that had grown intolerable, particularly between white and minority students. The testing companies, meanwhile, were more than willing to offer their services.

The Texas Miracle

Nowhere was the drive to test stronger than in Texas, the birthplace of No Child Left Behind. “The high-stakes testing industry came into being at the dangling of a chad,” W. James Jonas is fond of saying. A former Pearson lobbyist in Texas and later in Washington, DC, Jonas had a front-seat view of the birth of the standardized testing leviathan. “Had George W. Bush not become president, the high-stakes industry would not have blossomed the way it did,” he explained.

The blueprint that Bush brought to Capitol Hill was crafted a decade earlier by an ambitious Dallas attorney named Sandy Kress and then adopted by Bush as governor. A New Democrat who had served in the Carter administration, Kress moved to Dallas in the 1980s with a passion to reform education. After winning a seat on the Dallas Board of Education, he crafted one of the first true accountability programs, rewarding schools that got high test scores and punishing laggards. “The word accountability had been used loosely,” Kress later said, “but ours was the first systemic deal.”

With some sharp-elbowed politics, Kress got the measure passed, though he fell out of favor with the rest of the board. The effort earned him the attention of Governor Ann Richards’ Lieutenant Governor Bob Bullock, who asked Kress to join a Republican mutual fund executive in drawing up a statewide accountability system. Together they outlined what they called a “sound market-based approach for schools.” Students would be tested annually, failing schools would face closure, and families would have their choice of schools. “Annual testing is central to the whole idea of accountability,” they wrote. In 1993, a version of the proposal became law, launching the modern era of standardized testing. Kress himself would end up working for the industry, beginning in 1999 when McGraw-Hill paid him as much as $25,000 to lobby the Texas legislature.

NCLB pic: Jan. 8, 2002, file photo President George W. Bush, seated, signs into law a sweeping federal education bill, No Child Left Behind, at Hamilton High School in Hamilton, Ohio. (AP Images)

As accountability policies grew more stringent in Texas, assessments took on a larger role in government and business alike. For the private sphere, lucrative assessment contracts drove business plans. Though textbook funding suffered the whims of budget-conscious lawmakers, the testing contract was sacrosanct. For Pearson—whose subsidiary NCS, acquired in 2000, for three decades held Texas’s coveted testing contracts, agreements maxing out at nearly $500 million for a five-year deal—that meant a singular focus on testing.

“Increased revenues in high-stakes testing were coming at same time that securing additional funding for student materials was under attack,” Jonas, the Pearson lobbyist, said. “Those executives leading the high-stakes testing continued to gain more stature, while those involved in traditional instructional materials were losing ground.”

A similar evolution occurred in the public sector. According to interviews with former state administrators, the Texas Education Administration saw its focus shift from teacher training programs and curriculum support—crucial components of Bush’s Texas reforms—to simply measuring students and punishing schools. “The tests and the accountability system were driving almost everything,” said Jim Nelson, TEA Commissioner from 1999 to 2002.

By the early 2000s, the education contractors had carved out a powerful perch in Austin. “The testing companies and their representatives had become more bold, and were lobbying the legislature for more money for testing,” said Mike Moses, who led the TEA from 1995 to 1999. “Not only were people pushing for more testing, but for all the tests to be included in the accountability system,” he said. Industry executives testified before legislative committee meetings on matters ranging from test performance to high school dropout rates.

By then, however, Texas was become a cautionary tale for testing excesses. Researchers were questioning some of the celebrated achievements undergirding the “Texas Miracle.” Evidence mounted that districts had covered up a spike in dropouts resulting from tough new high school graduation tests, while cheating scandals hit large districts like Houston, where future Bush administration Education Secretary Rod Paige was superintendent. But these warning signs didn’t deter Bush from making the “Texas miracle” a centerpiece of his 2000 president campaign. It became the hallmark of his claim to be a “compassionate conservative.”

No Child Left Behind

Soon after winning the presidency, Bush assembled an education team to begin drafting No Child Left Behind, or NCLB. Its members included old Texas allies, including Kress and future Secretary of Education Margaret Spellings, along with several Heritage Foundation staffers. Harold McGraw III, a member of Bush’s transition team and then chairman of McGraw-Hill, was on hand in the Oval Office Bush’s first day on the job. “A great day for education,” he exclaimed.

As NCLB wound its way through Congress, a diverse group of supporters emerged. On the left, civil rights groups championed increased testing as a way of identifying the achievement gaps between affluent white students and their minority peers. Widespread assessment would be a first step toward true educational equity, particularly in areas like the South, where state governments had long allowed poorly resourced public schools to languish. The bipartisan bill, whose cosponsors included Senator Ted Kennedy and Ohio Congressman John Boehner, passed Congress by overwhelming margins.

As the DC bureaucracy lumbered toward implementing the bill, test manufacturers kicked their lobbying into high gear. “Before any regulations were final, everyone recognized that testing would become a growth industry in American education,” Bush’s deputy secretary of education, Eugene Hickok, wrote years later.

Bruce Hunter, who spent three decades lobbying on Capitol Hill for the American Association of School Administrators, recalls watching industry lobbyists start showing up to meetings that had once been attended primarily by representatives from school organizations. “The first time I saw testing companies really all-out lobby was No Child Left Behind,” he said. “The testing companies worked their butts off.”

Pearson upped its DC lobbying expenditures from essentially nothing in 2001 to $400,000 the next year. McGraw-Hill tripled its lobbying spending during the period. By the end of the decade, the Big Three test publishers would be spending millions of dollars a year apiece lobbying in DC and in statehouses nationwide. “They took advantage of the opportunity and they held onto it with a vengeance,” Hunter said.
Among the beneficiaries of this lobbying blitz was Sandy Kress, Bush’s point man on education and lead NCLB author. Although Kress has consistently characterized his business interests as incidental to his passion for reform, between 2002 and 2005, he made more than $4 million on lobbying contracts, much of it from Pearson and other educational firms.

Among the beneficiaries of this lobbying blitz was Sandy Kress, Bush’s point man on education and lead NCLB author. Although Kress has consistently characterized his business interests as incidental to his passion for reform, between 2002 and 2005, he made more than $4 million on lobbying contracts, much of it from Pearson and other educational firms.

The Big Three Take Over

As the test industry exploded, struggling schools felt the weight of the new requirements. A study conducted in 2007 found that 44 percent of school districts had cut time in science, social studies, art, music, physical education, lunch or recess in order to make more time for tested subjects. Districts with at least one struggling school—which tended to have poorer students and fewer white ones—were more than twice as likely to slash time from art and music.

District administrators also devoted closer attention to the curricular products they were buying. “The freakout of our school potentially getting shut down led them to be more mindful of which textbooks they were adopting, and which curricula they were adopting,” Schneider, the education historian, said. “It created this window for reshuffling the market that inherently advantaged the largest players in the market.”

As the education industry consolidated, the ties between the largest players and district administrators grew ever cozier. Contracts ranging from small local textbook deals to statewide testing contracts attracted intense interest, and companies with the broadest set of offerings captured the most business. In crucial year of 2005, as NCLB mandates came into force, Pearson pulled down more than half of all U.S. testing contracts—nearly $900 million worth.

The massive testing contracts handed out once every few years also provided publishers opportunities to expand other business offerings and profits. “One of the great advantages of having these contracts is you get in and, as contracts change, and they pretty consistently do, you have an opportunity to build scope in those contracts and also increase your margins,” then-executive vice president of Pearson Steve Dowling told investors in 2006.

Pearson also branched into setting up its own schools. The New Mexico Connections Academy is part of a Pearson-owned virtual school network operating in 30 states. Students work from home using materials provided by the school – mostly Pearson textbooks. They follow a Pearson-designed curriculum aligned to the Common Core standards, an initiative that received substantial support from Pearson. To teach at NMCA or any other New Mexico public school, teachers must pass a test administered by Pearson VUE, Pearson’s professional licensing arm. “Chances are you, or someone you know, has recently tested with us,” the Pearson VUE websiteboasts. At the end of the year, NMCA students take standardized state tests scored and administered by Pearson.

Aggressive Lobbying

To win contracts in districts and states, Pearson used aggressive and sometimes questionable lobbying tactics. When Pearson won a six-year, $22 million no-bid 2012 contract in Huntsville, Alabama to supply digital curriculum, the company elevated Superintendent Casey Wardynski to something like a company spokesman. The administrator led Pearson seminars and appeared on Pearson’s website as part of its “team of experts,” as Politico reported in 2015. Huntsville acted as a Pearson showroom, hosting visits from hundreds of educators who watched the partnership in action—followed by a pitch from a Pearson sales team.

Pearson also lobbied shrewdly at the state level. In Tennessee, for instance, Pearson’s top lobbyist was Chuck Cagle, attorney and husband of a longtime Pearson account executive. Cagle’s other clients included a reform organization called Tennessee SCORE, as well as the Tennessee Organization of School Superintendents and the Association of Independent and Municipal Schools—groups that exert substantial influence on district contracts. According to meeting minutes, Cagle gave Pearson-sponsored presentations and introduced Pearson executives to the school groups.

In Texas, as money flowed from taxpayers to the testing companies, so too did state education personnel. An internal audit last year found that between 2010 and 2015, at least 11 TEA employees left the agency to work for Pearson. “We had some psychometricians who worked for us,” Moses recalled. “Now they all work for the testing companies.”

Often, Pearson’s lobbying efforts were lubricated by its nonprofit arm, the Pearson Charitable Foundation. Funded primarily by the corporate parent, the group flew superintendents and other officials worldwide to attend Pearson-branded confabs, often featuring Pearson sales pitches. A 2012 foundation meeting in Nevada, for example, helped set the stage for a major scandal in Los Angeles. In 2013, superintendent John Deasy inked a $30 million contract with Pearson and Apple to distribute iPads to students. Emails released soon after showed that the contract had been improperly solicited, with Pearson officials playing a behind-the-scenes role in shaping the contract before the bidding process began. That included private meetings at the Nevada event, attended by several L.A. school officials. Deasy resigned over the brouhaha.

One of the foundation’s top priorities was establishing the Common Core State Standards, an initiative that had support from President Obama’s Race To The Top educational stimulus program. Pearson plowed more than half a million dollars into the creation of the standards, at the same time that its foundation was developing Common Core-aligned courses later to be sold at a profit. That arrangement was just one of the improprieties cited by New York Attorney General Eric Schneiderman, who in 2013 fined Pearson $7.7 million for sidestepping state charity laws. Pearson mothballed the foundation in 2014.
But that didn’t stop company from reaping a windfall from the development of the Common Core standards. In 2013, a coalition of states under the banner of the Partnership for Assessment of Readiness for College and Careers, or PARCC, which had signed up to offer Common Core tests, put out a request for proposals for companies to run the assessments. The contract, deemed “unprecedented” by PARCC’s chief at the time, went to Pearson. It was the only bidder.

Adapting to ESSA

But the pendulum has begun swinging back on testing. From Texas to New York to California, state lawmakers have scaled back assessment policies, spurred on by parent and student protests. The policies have left little to cheer. Though standardized testing still inspires lively scholarly debate, the era of assessment has largely fallen short of its goals. Since NCLB passed, the U.S. has continued slipping in international education rankings. A thorough 2011 research review from the National Research Council found some minor successes, but concluded that for most test-based accountability programs, “the overall effects on achievement tend to be small and are effectively zero.”
Meanwhile Pearson, justifiably or not, has borne the brunt of public outrage over testing, losing several key contracts. In 2014, local media and school boards in Tennessee began to look askance at the cozy arrangement between Pearson and lobbyist Chuck Cagle. By 2015, Cagle was no longer registered as a Pearson lobbyist. In Texas in 2013, a coalition of parents and teachers convinced the state to reduce the number of tests required for graduation. Two years later, Pearson lost its bid to renew its coveted contract.

Student protest pic: Albuquerque, N.M, Monday, March 2, 2015, hundreds of students staged a walkout to protest a new standardized test they say isn’t an accurate measurement of their education (AP Images)

The winds have reversed at the federal level as well. Last year, the Obama administration devoted itself to reducing “unnecessary testing,” while Congress passed the Every Student Succeeds Act, or ESSA, its first major education bill since NCLB. The legislation gives states more leeway in assessing schools, opening up space for reduced testing burdens. That could mean a reduction in revenues for companies like Pearson. The testing companies may also get an indifferent reception from Donald Trump’s nominee for Secretary of Education, Betsy DeVos, who has championed vouchers and charters rather than testing.

But Pearson has assured its investors that ESSA won’t affect its margins. Test sales in the U.S. make up less than 10 percent of Pearson’s overall profits. And the company has prepared for the eventual shift from multiple choice from broader measures of school performance, such as school climate – a survey-based metric of students’ social and emotional wellbeing. “For the past four years, Pearson’s Research & Innovation Network has been developing, implementing, and testing assessment innovations,” Vice President Kimberly O’Malley said. “These innovations directly address the assessment innovation called for in ESSA.”

Whatever states end up doing with their accountability systems, Pearson and its similarly sized rivals aren’t going away. Though educational technology startups have proliferated in recent years, none has proven a challenge to the incumbents, whose towering market share makes true competition from below seem unlikely. They are determined that the largest contracts stay in their control, and believe they can adapt to any new challenges. Jonas, the former Pearson lobbyist, explained. “The dollar value is more obvious than the policy direction,” he said. “If you’re a huge construction contractor and you know someone is going to build a 200 million house, are you going to quibble with them over the paint color?”

Owen Davis is a New York-based journalist. He writes for the financial news site Dealbreaker.
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