Back to School: The K-12 Edition

By Berna Barshay

Wednesday, September 2, 2020

► Devoting most of this week’s Empire Financial Daily real estate to a ‘back to school’ theme turned out to be an ironic choice…

The tri-state area of New York, New Jersey, and Connecticut always goes back to school late, but I thought – or perhaps more accurately, I hoped – this was our last full week of summer vacation.

I may have jinxed myself, because yesterday – to the total chagrin (but not complete surprise) of myself and my fellow parents – New York City delayed the opening date for public schools. It turns out we have two more weeks of summer vacation after this one…

It was always a bold and ambitious choice to try and open public schools in the city… It’s the nation’s largest school system, with an enrollment of 1.1 million students.

With large class sizes often topping out at 30 students, the plan was to break classrooms into two to three cohorts and pursue a “hybrid” education model in which a cohort attends in-person classes between one and three days per week and learns remotely the rest of the time.

Of the 10 largest school districts in the country, only New York City decided to attempt in-person instruction for the start of the 2020 to 2021 academic year.

The eighth- and ninth-largest districts of Hillsborough (Tampa) and Orange (Orlando) counties in Florida both opened late August after a short period of being online-only. The rest of the top 10 largest school districts are all remote for now.

Facing a possible teacher strike, New York City had no choice but to postpone reopening…

Despite the mayor and school chancellor’s insistence they were ready to open as scheduled on September 10, it was pretty clear that they weren’t. As the New York Times stated yesterday…

While the city has made progress in distributing personal protective equipment to schools, hiring nurses for every school building and upgrading ventilation systems in classrooms, that work is far from complete. And even with the extra time, principals will need to scramble to address the staffing issues necessary to create two complementary versions of school, one in-person and one online.

Teacher unions are often criticized for their lack of flexibility… but in this instance, they were 100% in the right from my perspective. Many schools were set to open without a nurse when safety protocols were reliant on having one. Desperate job ads recruiting for school nurses were one indication that a September 10 reopening date wasn’t ever going to happen… as were videos circulating in late August of Department of Education facilities managers walking around classrooms, holding toilet paper taped to a stick up to ceiling vents to test for the requisite air flow.

Students are now set to arrive beginning September 21. The extra days will hopefully allow for physical and other preparations to be completed, although I remain skeptical.

Another key element of the agreement with union leaders was a provision for random monthly COVID-19 testing of between 10% and 20% of students and staff at each school.

The big push to open New York City schools is rooted in progressive Mayor Bill de Blasio’s commitment to public education and supporting working families, although the chaos and uncertainty hasn’t been much help. Postponing the first day of school with only a week’s notice does working families no favors. Personally, I’m still hoping for the best (some in-person instruction) but planning for the worst (fully virtual school).

The success of the city’s reopening will have major implications for the local and national economies…

While schools aren’t day care centers and teachers aren’t babysitters, not being able to send children to school is impeding the economic recovery.

We’ve all heard the stories about women who had jobs but had to quit them to oversee remote learning at home. Having kids, especially young ones, makes it nearly impossible for both parents to work outside the home, or for single parents to leave for work. This is a drag not only on current income for these families, but it is taking people (mostly women) off established career trajectories – ones that they may find hard to climb back on when the pandemic is over.

According to a recent survey by the Partnership for New York City business group, almost 70% of employers ranked school reopening as one of the three most important factors influencing when they will reopen offices.

Even parents with the luxury of working from home know that something gets sacrificed while supervising remote learning – either jobs suffer from inconsistent focus, children get inadequate supervision, or parents lose out on proper rest. Most likely, some combination of “all of the above” happens.

Wealthy parents have gotten around these issues by hiring extra help in the home or forming learning “pods” led by privately paid instructors who oversee and supplement remote learning. But these are solutions out of reach for most families.

With an extremely low positivity rate on COVID-19 tests – recently as low as 0.6% – New York City has so far defied a dreaded second wave of the disease and is in a good position from a public health perspective to take on physical reopening. While experience shows that young people are far less likely to have severe negative effects from COVID-19 and small children aren’t good spreaders of the disease, ultimately the safety of a school district will be a derivative of the safety of the overall region.

The theoretical justification for opening New York City schools is solid… but so far, the execution on the centralized level has been poor. The decentralization of reopening plans has put enormous pressure on school principals and other administrators – most of whom are working tirelessly to open their doors. But the lack of coordination on issues pertaining to facilities management and procurement has been seen by many as a failure of local government.

Fear of the virus, frustration over execution and communication, and temporary relocations have driven 34% of New York City parents to opt for fully remote schooling this fall.

Right now, New York City is statistically one of the safest regions in the U.S., so it makes sense that the city is giving it a try. If New York City can get it right, this could be the template for many other districts that are currently figuring out a return to in-person instruction.

But if New York City fails, it would be a big setback not just locally but also for the reopening prospects in other large economic centers like Chicago and Los Angeles. Until schools are open, it will be hard for central business districts to fully recover.

New York’s decentralization of decision-making is common across the country…

An estimated 60% of K-12 public school students are starting the school year fully remote. Of the roughly 40% attending in person, about half will go to school every day and half will be on a hybrid model, where a mix of online and in-person schooling reduces class size and promotes social distancing.

And how we got to the current configuration has been far from scientific…

Just four states and two territories saw school closures that were centrally ordered, and only five states are mandating that schools open. An additional two states are requiring the closure of certain outbreak regions, and three states are mandating social distancing by requiring a hybrid model for families who opt for in-person attendance.

That leaves more than 70% of states pursuing a decentralized approach where school districts can independently decide if or when to open, and under what safety protocols. (This map compiled with data from Education Week summarizes the various approaches that states have taken.)

Most school districts are primarily funded through local taxes… and beyond mandated curriculums, calendar elements, and standardized testing, they’ve historically operated with much autonomy from state or federal governments. But most towns and cities don’t have a public health department, which is adding to the confusion and lack of consistent standards around reopening.

Even when decisions are made on the state level, they’re amazingly inconsistent. In Vermont, with the lowest positive test rates in the country at 0.4%, schools are mandated to stay closed. Iowa, with one of the worst rates in the country at 18.5%, is mandating that schools reopen.

Florida is giving New York City a run for its money on being the most contentious region for the school reopening debate…

In July, Florida Education Commissioner Richard Corcoran signed a reopening order requiring schools to physically open five days per week. Teachers sued in response, calling the order unconstitutional and won their case in a circuit court last week… but this Monday, the state won an appeals court victory upholding the reopening order.

The order forces schools to open but does not force parents to send their children to school in person. It allows schools to offer a virtual learning option but warns state funding would be withheld unless five-day-per-week instruction was offered to every student. Despite the prevalence of five-day offerings, more than 40% of Florida parents have opted for online-only instruction this fall.

Five of the 10 largest school districts in the country are in Florida, where positivity rates and hospitalizations have improved greatly since early August, but at 12.2%, still has the 10th-worst positivity rate in the country.

Miami-Dade, Broward, and Palm Beach counties were all given exemptions from the order because of their hot spot status and remain all online.

In Central Florida, where no exemptions were granted and Monday was the deadline for opening five-day instruction, nearly 450 students and staff are currently in quarantine after cases popped up in their schools. One middle school in Osceola County has been temporarily shuttered because of an outbreak among teachers.

Even the biggest proponents of in-person instruction acknowledge that cases – and perhaps some temporary closures – will be inevitable. How such mini-outbreaks are contained will be crucial to the successful continuation of in-person learning. With many districts opting for a wait-and-see fully remote learning approach, all eyes will be on New York City and Florida for their ability to pull this off.

In tomorrow’s Empire Financial Daily, I’ll conclude the back-to-school series with a look at how the changes at K-12 education are affecting some businesses… stay tuned.

In the mailbag, thoughts on college football and its business elements, and one reader scored at Lord & Taylor’s liquidation sale…

If you have children in K-12, are they learning virtually, hybrid, or fully in-person? Are you comfortable with in-person instruction in your region? I would love to hear from any teachers or school administrators on how they think things are going (can be anonymous). Share your thoughts in an e-mail to [email protected].

“Hi Berna, Great piece on colleges and athletics. For me, if there are no in-person classes due to risks, there should be absolutely no athletics. Those places are supposed to be schools where kids earn college degrees. If they can’t go to class, but athletics still take place, the ‘student athletes’ are not equivalent to the rest of the students. You can’t have it both ways. What UNC (and others) is doing is sad and disgraceful for a school with such a great reputation for academics.

“Should college players be compensated? Absolutely, but at the same time, I think it can be done in a way that promotes education. Most (if not all) of the money would go to men’s basketball and football players. Here’s my idea:

“1. A designated portion of revenue (TV, ads, merchandise, ticket sales) is set aside for players on a team.

“2. Compensation is determined based on playing time (minutes per game, percent of plays per game). Along with a minimum for any player that suits up for a game. There would need to be a limit on the number of players that can suit up for any single game.

“3. The money is divided into designated accounts for each player. If a player transfers, they forfeit their money to be split among the other players on the team.

“4. No player will be eligible to receive payment until they receive their degree. So if a player leaves for the NBA or NFL early, they forfeit their share of the money. For graduate transfers (mainly football), the player can only receive their compensation from one school, so they can take payment from one school and go to another without compensation or forfeit their compensation and take a risk to make more money at the second school.

“However, the elephant in the room is: is this opening Pandora’s box to tax scholarships as income?

“On the college side, higher education is declining as numerous studies have shown. I’m glad Google is looking to disrupt a broken industry. I bet they are tired of getting college graduates with lackluster abilities for critical thinking and problem solving. We will have to wait and see if any colleges are smart enough to realize what is at risk with Google Career Certificates.

“As a side note, I was a huge college football and NFL fan. The pandemic made me realize how much time I wasn’t using productively by watching TV. I’ve realized I don’t need sports, and they were no longer a short ‘escape’ from reality with all of the politics starting to get pulled in.” – Anthony S.

Berna comment: Anthony, these are interesting thoughts on how compensation could work. Thanks for writing in.

“College – the business of Football with a side-hustle of classes… Your analysis on the money at stake shows the true nature of things…” – Joe M.

Berna comment: Regarding getting back on the gridiron, one reader – Robert G. – sent in a link to an article that comprehensively sums up the #WeWantToPlay athlete’s perspective through an interview with Clemson University quarterback Trevor Lawrence. You can read it here.

“Berna, Thank you SO much for the tip regarding Lord & Taylor’s inventory. My wife and got LOTS of cute outfits for our 2-year old that we would never have gotten otherwise because of the huge discounts that were available. Just wanted to say ‘Thanks’.” – Jesse H.

Berna comment: You’re very welcome, Jesse… I’m glad the tip came in handy for you.


Berna Barshay
September 2, 2020

Whitney Tilson

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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

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