“My recommendation would be to turn every single school in the district into a charter school and to turn the central office into a support center for the charter schools. As charter schools, the schools would be schools of choice and the funding would follow the child to the school. At the same time, the principals of the schools would be held accountable by regular performance audits.”
In advocating for the establishment of a public school system in 1841, Horace Mann called the common school “the greatest discovery ever made by man.” If a public school system were adopted, he said, “nine-tenths of the crimes in the penal code would become obsolete.”
A century and a half later, Mann’s vaunted institutions have in many instances become harbors of the very vices they were supposed to eliminate, a situation documented with disturbing clarity by law professor Lydia G. Segal in a new book, Battling Corruption in America’s Public Schools (hardcover Northeast University Press, 2004; paperback Harvard University Press, March 2005). Drawing on her own undercover investigations in the New York City schools and research in other urban school districts, Segal describes how hundreds of millions of dollars intended to educate children are consumed by waste, fraud, and “legalized graft” within the public school system.
Segal is associate professor of criminal law and public administration at John Jay College of Criminal Justice, City University of New York. Before taking up her academic post, she served during the early 1990s as special counsel to the special commissioner of investigation for the New York City School District. A graduate of Harvard Law School, Segal has published extensively in academic journals and popular magazines and is coauthor of Making Schools Work: A Revolutionary Plan to Get Your Children the Education They Need (Simon & Schuster, September 2003).
Segal spoke recently with School Reform News Managing Editor George Clowes.
Clowes: How did you become involved in school reform?
Segal: I’ve long been passionate about public education, but I started off in a very unusual way. I was working in the Manhattan District Attorney’s office in the Rackets Bureau, and my boss at the time, Ed Stancik, was appointed to head up a new organization called “The Special Commission of Investigation for the New York City Schools.” This agency had just been set up because of the scandals that were flooding the airwaves at that time–missing pianos, disappearing computers, teachers claiming they had to have sex with people in order to advance, and principals being hit up for money in order to keep their jobs.
Stancik wanted to hire a team of lawyers to help him, and I jumped at the chance. I worked at the Special Commissioner’s Office for three years, and it really gave me an insider’s view of what was going on in the public schools. It completely blew my mind.
I was just out of law school, and it was shocking to hear undercover tape recordings of conversations of school board members in New York City. The words “education” or “children” were rarely used in the conversations–it was all about how much money programs were worth, how much could be skimmed off, and how many jobs could be given to friends, relatives, mistresses, and lovers.
Clowes: Was this mainly to do with construction projects?
Segal: It wasn’t just construction; it was transportation; it was food; and it was hiring people who come into contact with children on a day-to-day basis. I did not expect to see this kind of underworld. Schools benefit from a “halo effect”: People believe that those involved in schools must be angelic. This experience showed me that isn’t always so.
There were two worlds that were exposed through these secret, undercover tape recordings. One was a world like that of mob under-bosses, where people used mafia-type language to talk about ripping off schools.
The other world was that of conscientious teachers and principals who wanted to do their jobs but couldn’t. They bore the brunt of the fraud. They were asking questions like, “Where’s my chalk?” “Where’s the money for my pencils?” “Do I have to fish into my own pockets again to buy paper and crayons for my children?”
It was a Kafka-esque universe where on the one hand you had people who were just interested in ripping off the system, and on the other hand you had people who really wanted to do their jobs but were prevented from doing so, mostly by the bureaucratic rules and regulations designed to stop fraud. These rules were not stopping the mobsters from stealing, but they were stopping good people from doing their jobs.
Clowes: So the rules and regulations to prevent wrongdoing got in the way of people who were actually trying to do good within the system?
Segal: Exactly. Most of the people who were out to bilk the system were not caught by the rules, but the good people who were trying to help children always got stymied by them. The tragedy is that some of these people had to find ways to break the rules themselves, simply to help children. And they would sometimes get caught.
I really wanted to do something about the problem and I decided the most important thing I could do was to write a book, telling people what was going on. So I joined the university, which allowed me to research and write about the problems. I expanded my research beyond New York to cover six different school districts in North America: New York, Chicago, Los Angeles, Houston, Seattle, and Edmonton, Canada.
I studied Edmonton from many perspectives, and in my Battling Corruption book, I talk about how the structure of the Edmonton district affects the incidence of corruption and waste. When I broadened my research to six different districts, I began to see patterns. I saw that school systems that were structured in similar ways–i.e., very centralized and top-down–tended to have the same kinds of waste, abuse, and corruption. However, districts that were more decentralized, like Edmonton, did not have those problems.
For example, Los Angeles and Chicago–at least, Chicago before it was re-vamped by Paul Vallas–had the same kind of scams that New York City had. Contrast that to Edmonton, where there has not been a major fraud case in 24 years, even though the principals there control their own budgets, some with over $10 million a year.
Now, each of those schools in Edmonton is audited. There is oversight, but the oversight is not so excessive that it paralyzes management, as it does in many large, centralized school districts in America.
Clowes: Why is it that adding more regulations doesn’t seem effective in curtailing fraud?
Segal: It’s not a problem of regulations in themselves. It’s the type of regulations, the quantity of regulations, and the intrusiveness of the regulations. You can look at oversight as a spectrum, with the tightest oversight on one end of the spectrum and the most lax oversight on the other end. Having no oversight is a recipe for disaster.
Most of the time when there’s a scandal, the knee-jerk reaction of the central bureaucracy is to adopt the most extreme form of oversight, where rules prescribe exactly how everything must be done–exactly how money must be spent, exactly how contracts must be bid, and so on. That’s very restrictive, and it often means people can’t do their jobs because the focus is on compliance at the expense of performance.
For example, a high school principal needed extra-large computer screens so his sight-impaired students would be able to see and do their work. He requested the extra-large screens but the central supplies office said, “No, you can only buy the model that’s permitted on our mandated list.” The central office would not make an exception, even for sight-impaired students. Nor would they make an exception even when the principal found extra-large screens that were cheaper than the approved model.
The result is that money is spent in a way that doesn’t benefit students. In this particular case, the principal eventually funneled money from another category and faked invoices to buy the screens his students needed. What you have is a good man with the most noble intentions–trying to get students what they need–who is forced by the rules to become a “crook.”
So it’s not regulations per se that are the problem, but tightly prescribed regulations.
Clowes: If regulation isn’t the solution, what is?
Segal: To decentralize.
Edmonton shows how we can have supervision and oversight without choking management. We can audit to see where money goes and focus on those situations where money looks as if it’s being misspent. That way we can catch problems before they become big and do not need to scrutinize every little step.
Let me give you an example of how this differs from the heavy-handed, top-down scrutiny found in most school districts. Let’s say you have a principal who has won a federal grant to put in a new playground at his school. In most centralized districts in America, the grant money would not go to the school but to the central bureaucracy, which would then prescribe exactly how the money must be spent and allocate the work, from design to construction to payroll, to its various central divisions. The result may or may not be what the principal had in mind.
In Edmonton, on the other hand, if a principal gets a grant to build a playground, the money goes to the school and the principal decides how to allocate it and whom to hire to do the work. The principal has the option of hiring someone from the central school bureaucracy or going to the private sector. What does that do? The principal’s power over the purse forces the central school bureaucracy to be responsive to the principal!
In most large, top-down school districts, workers from the central office have little or no incentive to respond to individual school principals. In decentralized districts like Edmonton, on the other hand, if the central office is unresponsive, the principal says, “OK. I’ll get someone from the private sector.” Immediately, the central office becomes responsive. It is forced to respond through the pressure of competition. Competition is the key.
Part of the problem with a large centralized district is its emphasis on trying to dot every “i” and cross every “t.” That makes it impossible for the system to be responsive. If you have a school with a leaky toilet, the principal needs someone to fix it right away, but that’s an impossibility if you go through the bureaucracy in an over-regulated system.
There were cases in New York where water leaked into classrooms because of faulty windows. When a principal saw the plaster crumbling and the paint peeling around the windows, he put in several work orders to fix the problem–one order for the windows, one for the plaster, and one for the painting–because the bureaucracy compartmentalizes all the maintenance work.
The bureaucracy does not coordinate the maintenance work. So, by some quirk, the painters were dispatched first and painted over the rotten plaster. Before the principal knew it, the paint started to peel again. Then the plasterers arrived and replastered, which then required another paint order. Meanwhile, the people who were supposed to fix the window took forever to get there, and so the problem area was re-plastered and re-painted a number of times before the leaking windows were fixed.
This is where our taxpayers’ money goes.
Clowes: And that’s just the waste, not the fraud.
Segal: Yes, but even the rules that are meant to stop fraud create waste, too. There are very strict rules controlling purchases in the large districts. For example, if you buy an item for the school and want to be reimbursed, you need to fill out a detailed form, attach the receipt, and provide a lengthy explanation for why you needed to buy this item. One high-level school coordinator bought a $4 battery pack to use in a school clock. He filled out the form, and sent it to the central office to get reimbursed.
But because he did not include enough detail on the form, by the time he was reimbursed, his $4 item had been reviewed and discussed by many layers of supervisors and middle managers, all making $80 to $90 an hour.
But not only do top-down rules often waste more money than they save, they often don’t even stop fraud. Workers at the central school warehouse were hauling boxes of supplies home in their cars while other central employees spent a fortune trying to prevent teachers from ordering a penny more in supplies than they were allocated.
Most telling, almost all the corruption and waste that I found in large, top-down school systems was located in their central offices, not in schools. That again reinforces the point that decentralization, with the proper safeguards, is the way to go.
Clowes: A state appeals court recently ruled that New York’s public schools needed more money. Did the court take into account just how much money is being wasted in the school system?
Segal: I don’t think they did, and I think that’s why more money is being poured in. I’m not saying more money isn’t needed, but if you’re going to pour it in, you’d better make sure it gets to the classroom. Right now, it isn’t getting there.
The way to get the money to the classroom is:
- put principals in charge; and
- put in controls that won’t choke management.
In my book, I talk about some districts that have succeeded in doing this. One of them is Edmonton. Another is Houston, which really turned things around six or seven years ago. The school construction division, for instance, used to be a very corrupt enterprise. People were walking off with equipment; schools were not being built on time; new schools had major structural problems; it was a real mess. The way they turned that division around should be a model for the rest of the nation.
Instead of having a top-down enterprise, with the bureaucracy running the show, the Houston school board got the bureaucracy out of the way and established real accountability–by decentralizing, by giving more responsibility to principals, and by creating competition in the system.
Clowes: How would a district go about decentralizing and pushing accountability down to principals?
Segal: My recommendation would be to turn every single school in the district into a charter school and to turn the central office into a support center for the charter schools. As charter schools, the schools would be schools of choice and the funding would follow the child to the school. At the same time, the principals of the schools would be held accountable by regular performance audits.
The central office divisions–food, transportation, construction, cleaning, and maintenance–would all have to compete to serve principals’ needs. Principals would have the choice of hiring from the central office or from the private sector.
Even if they don’t follow my full recommendation, districts should try to find ways to loosen the regulations and push power down to the school level. School districts need to move towards giving school managers more freedom and learning to trust them, but, at the same time, providing oversight in a way that doesn’t choke business. That’s what my book is all about.