The New Philanthropists

The New Philanthropists
January 1, 2000

George A. Clowes

George Clowes is a Heartland senior fellow addressing education policy. He served as founding... (read full bio)



The idea came from a successful Wall Street entrepreneur and a director of one of America's most successful retailers, but it didn't sound like a winning proposition. Here was the sales pitch they made to Americans on September 28, 1998:

  • Why give your child that free product?
  • Here's your chance to choose a different product for about $1,000 a year for the next four years!
  • Offer good only for families who don't have much money!
  • Apply by March 31, 1999--only 40,000 children can win!

The response to this unlikely sales pitch was overwhelming. Six months later, 1.25 million applications had been received from families with average incomes of less than $22,000 a year--families who would rather pay out $4,000 than give their children a free product.

The free product they rejected was an education in the public schools, the offer was a privately funded half-tuition scholarship to a private school, and the businessmen were Ted Forstmann and John Walton, who donated $100 million to launch the $170 million Children's Scholarship Fund.

When the huge response to the scholarship offer was announced, April 21, 1999 became the D-Day of the American school choice movement. The argument about whether families wanted choice in education ended on that day. The response not only demonstrated widespread dissatisfaction with the present public school system, it also showed just how desperate poor families were for a choice of schools, with 31 pairs of hands clutching at each single $1,000 scholarship.



The Private Voucher Movement

Privately funded scholarship programs have grown rapidly since 1991, when Golden Rule Insurance Chairman J. Patrick Rooney first created the Educational Choice Charitable Trust to provide scholarships to low-income children in Indianapolis. This inspired similar efforts in other cities and led to the formation of the Children's Educational Opportunity Fund of America (CEO America), which has helped launch dozens of new private scholarship programs. With each effort tailored to meet local needs, programs serving 48,128 children now operate in 68 cities nationwide, with a waiting list estimated at 1.25 million students.

The success of the Children's Scholarship Fund, which ultimately awarded $170 million in scholarships to 40,000 low-income children, has transformed the private voucher movement into a large-scale rescue operation that saves more children from failing schools than all the legislative efforts of the past decade combined. What lessons can we learn from these programs?



First, Do Good

The primary focus of the programs is to create equal educational opportunity. Equality will never be meaningful in America "if we continue to give black children such an inadequate education," said Rooney. Forstmann, Walton, and fellow investor-philanthropist Bruce Kovner want to help children in needy families get out of a broken system. Daniel Murphy Foundation President Jim Murphy and his brothers Bob and Tom are committed to providing disadvantaged Chicago children with the same educational opportunity that their own father sacrificed to give them.

"Giving kids the opportunity to go to a better school is an end in itself," said Jim Murphy.



Been There, Done That

Responding to the creation of the Children's Scholarship Fund, American Federation of Teachers President Sandra Feldman said she would much prefer that the money had been contributed directly to the public schools. However, Forstmann noted that the financial commitments businesses have made to many public schools have had little discernable effect. More firms are realizing they can do more good by "by cutting out the public school middleman" and helping kids directly, according to Investors Business Daily.



Go Where Need Is Greatest

Giffen Elementary School was the worst public school in Albany, New York, when philanthropist Virginia Gilder offered scholarships from A Better Choice to allow any student enrolled at Giffen to escape to a private school. After about 100 students took up Gilder's offer, Giffen got an overhaul: $125,000 in extra funding, two additional administrators, twelve new teachers, and a new principal who immediately implemented initiatives to improve student achievement.



Challenge the Monopoly

Forstmann and Kovner contrast the government's intent on protecting its own monopoly in education with its employment of "thousands of bureaucrats" to break up private monopolies. Without competition, they say, "monopolies are free to impose high prices and shabby products on consumers."



Leverage Scarce Dollars

For the Children's Scholarship Fund, Forstmann and Walton each contributed $50 million and sought matching funds from local partners in cities across the country, ultimately securing a total of $200 million for scholarships. The Murphy Foundation takes a different approach, using partnerships with some 36 schools to leverage the value of its high school scholarship awards.



Involve Parents

Parents are involved, first, because private vouchers go directly to them rather than to bureaucracies, and second, because a financial commitment is required. For example, CEO America scholarships generally are limited to children in grades K-8 whose families qualify for the Federal Free or Reduced Price Lunch program. Those scholarships usually cover only one-half of private or religious school tuition, up to a maximum of $1,000 to $1,500.



Poor Families Do Care

Privately funded vouchers have demonstrated unequivocally that low-income families care deeply about the education of their children. They are willing to make significant sacrifices to make it a good education. According to the Children's Scholarship Fund, a typical scholarship family has an income of only $18,000 a year, yet it manages to contribute an average of $1,000 a year towards the total cost of tuition at the scholarship schools.



Experiment!

Virginia Gilder's offer of scholarships to Giffen students in 1997 was a school-level experiment, but a more recent experiment involves a whole school district in San Antonio, Texas. The CEO Horizon program, funded primarily by local business leaders like James Leininger, offers full-tuition scholarships to almost all of the 14,000 students in the Edgewood Independent School District, making school choice available to an entire school district for the first time.



Design for Research

While there is great interest in understanding the effects produced by a voucher program, the legislative compromises involved in gaining approval for even limited choice programs often make analysis troublesome. However, collaboration with researchers before new programs are launched--such as those in Dayton, Ohio, the District of Columbia, and New York City--permits the use of CEO America's private voucher programs as laboratories for school choice.



Demand Is Huge

Even before this year's massive response to the Children's Scholarship Fund, there were clear indications of a huge demand for school choice.

When New York's School Choice Scholarship program offered 1,200 scholarships in 1997, 22,700 applications were received from families with an average annual income of only $9,634. In 1998, the Washington Scholarship Fund offered 1,000 scholarships and received 7,573 applications from 17 percent of the eligible population.

"We have found that there is a huge demand for quality education, and we hope that our support will help encourage a more competitive educational environment to benefit all of America's children," said Forstmann.


George A. Clowes is managing editor of School Reform News.

George A. Clowes

George Clowes is a Heartland senior fellow addressing education policy. He served as founding... (read full bio)