Firm That Aids Investors Now Studies Schools

ANN ARBOR, Mich. —  In this leafy university town it’s a point of pride to claim that the public schools are among the best in the state--competitive nationally with Scarsdale, Evanston, Beverly Hills and so on. After all, the real estate prices are as high as the test scores, so that’s proof, right?

Well, perhaps.

Starting Friday, anyone who wanted to debate the issue could turn for information to an unlikely source--Standard & Poor’s Corp., the company that for the last 85 years has been providing investors with information about the credit-worthiness of companies and local governments.

Beginning with Michigan, S&P; is providing assessments, available on the Internet, on what sort of “return on investment” taxpayers get from school districts. The effort marks the first attempt by a major company to cash in on the nation’s seemingly insatiable appetite for information about the performance of its public schools. The service will be free to individuals, but the company will charge states to compile and analyze a vast amount of financial, academic and demographic information.

Michigan, the first customer, will pay $10 million over four years for the service. A report for Pennsylvania is to go online in late summer, and S&P; says it is nearing completion of negotiations with other states as well.

William Cox, managing director of S&P;’s School Evaluation Services, declined to say whether talks were underway with California but added that “there’s an overwhelming amount of interest in the service.”

Over the last decade, governors and business leaders have pushed for more rigorous academic standards. That led to more tests and, in turn, more test scores. Therein lay a business opportunity.

“You have a convergence of technology, an institution that has a tremendous reputation for independence and rigor, and the public sector, which is vastly underanalyzed and underbenchmarked in terms of performance issues,” Cox said.

Visitors to the S&P; Web site, https://www.ses.standardandpoors.com, can learn that Ann Arbor’s average test scores are strong, but its results for blacks and the relatively few students from low-income families are not. In addition, administrative costs are among the highest in the state. That, and high per-student costs, make the district’s “return on investment” look a bit anemic.

The district is portrayed “warts and all,” said Supt. Rossi Ray-Taylor.

The demand for such services is apt to grow in the years to come as the volume of test scores available nationally expands. Education bills now in Congress require testing of every student in grades three through eight in math and reading. But test scores alone, educators say, do not provide them the information they need to figure out how to get better.

“School improvement relies on having good information,” said Diane Ravitch, a former assistant secretary of Education in charge of research and a member of the advisory board for the new service. “What are you doing? How well is it working? What kind of kids are involved? Unless you can answer all these questions, you don’t know if you’re making progress or not.”

As S&P; has discovered, finding even basic information for analysis is not easy. In Michigan, for example, the company found that the state does not keep track of student attendance and lacks good information about teachers and the condition of buildings.

In order to avoid alienating educators, the new Web site scrupulously avoids ranking school districts. Rather, in a 12- to 15-page overview, S&P; describes each district’s “strengths” and “challenges and concerns.” It also compares every aspect of each district to the state average and to a group of “peer districts,” and allows users to create customized comparison groups. That means that, inevitably, users of the service will make judgments of their own.

Groups representing teachers, administrators and school boards all have welcomed the new service. “We invest $13 billion in our education system, and this is a tool where we can see what our return on our investment is,” said Susan Shafer, press secretary to Gov. John Engler, who proposed contracting with S&P.; “We’ll be able to see where we’re doing well and where a district needs to make improvements and how they’re spending the money.”

Kenneth S. Burnley, the chief executive officer of the Detroit Public Schools, said the new report dramatizes the need to improve student achievement and reduce the dropout rate. But he said it also showed that his district’s administrative costs are below the state average, its property values are less than a quarter of those statewide and that the percentage of single-parent households is triple that for the state as a whole.

The Detroit district’s revenue, he said, is “insufficient to compensate for the unique challenges faced by a large urban district.”

In Ann Arbor, Ray-Taylor said officials knew about the relatively weak performance of its black students. With the information widely available, it will add to the pressure to work on the problem, she added.