How the Cutthroat Walmart Business Model Is Reshaping American Public Education

Walmart's recent decision to close 269 stores was a blip on the national media radar, but it was big news in small towns and suburban neighborhoods across America.

“Now we have to figure out how to do our shopping," a Walmart customer in Baldwin Hills, in Southern California lamented.

"Before Walmart’s arrival, Winnsboro had two grocery stores," a local reporter in that South Carolina town noted. Now that Walmart is gone, so is convenient access to groceries and other retail goods.

"It’s the traditional story of a big corporation driving local competition out of town,” an article in Texas Monthly stated, "and then leaving.”

A Walmart spokesperson told a reporter covering a store closure in a small Mississippi community that closing stores is "strictly a business decision… It made fiscal sense."

That rationale is nothing new. Stories about local communities being devastated by business decisions made in distant headquarters have become a staple of this era. Time and time again, the nation has witnessed whole towns being hollowed out when big companies uproot local manufacturing plants to move to cheaper labor markets in Mexico or China.

The cause of the trauma and grief is always the same: "strictly business.” "Fiscal sense."

But what if that story isn't just about businesses anymore? What if instead of a closed factory or shuttered store, the story is about a closed public school? What if the consequence of these types of "business decisions" isn't a grown man having to look for another job or an elderly woman having to figure out a new way to pick up her prescriptions, but a child having his or her education significantly disrupted or a whole community left without convenient access to schools?

That question is becoming increasingly urgent as more and more government officials turn to publicly funded but privately run charter schools to compete with and upend local public schools—an education option, it is worth noting, that the family behind the Walmart empire has played a huge role in promoting and funding nationwide.

The Walmart Way For Education

At the same time news of Walmart store closings spread through local media outlets, the Walton Family Foundation (WFF), the private foundation created with the retail giant’s wealth, announced that it would be “doubling down on its investments in school choice with a $1 billion plan to help expand the charter school sector and other choice initiatives over the next five years," according to a report in Education Week.

This immense treasure trove for expanding the number of charter schools in the country comes in addition to the millions the Waltons have already spent on charter schools. In fact, the foundation's "strategic plan," published in 2015, claims, "1 in 4 charters nationally have received WFF startup funds."

In her book The Death and Life of the Great American School System: How Testing and Choice Are Undermining Education, education historian Diane Ravitch explores whether there is any "commonality between the Walmart business philosophy and the Walton funding of school choice." She likens the competition that charters pose to public schools to the competition that Walmart stores present to locally owned stores, and suggests parallel consequences: just as Walmart forces stores that can’t match their prices to shut their doors, so charters — which bleed students, and their funding, from traditional schools — cause local schools to close down.

Is the analogy Ravitch poses fair and accurate? Or is this new model for school options being promoted by the Waltons and other self-ascribed education "reformers" something more nuanced? Is there any evidence that their plans for distributing “quality” education are more efficient than democratic governance?

The Waltons Go To School

As the Walmart retail chain became the world’s largest retailer, the Walton family became one of the world’s richest families, with a combined net worth of around $150 billion as of January 2016.

The Walton Family Foundation—the family’s main philanthropic endeavor—was established in 1987 by Walmart founder Sam Walton and his wife Helen. In Sam Walton's autobiography Made in America, he voices a concern for America's public school system and links education and national economic prosperity, particularly in the context of being able to "compete" with other nations.

Since its founding, WFF has given more than $1.3 billion to K-12 education, according to its own recent calculations, an amount that is surpassed only by the Bill and Melinda Gates Foundation. The foundation's most recent annual report shows well over 50 percent of its 2014 grantee investments went to education ($202.4 million out of $373 million).

Sam Walton’s concerns about America’s public education system were no doubt fed by the animosity toward public schools that spread during the 1980s and, in particular, the presidential administration of Ronal Reagan.

Reagan had campaigned in 1980 on abolishing the department of education, according to Valerie Strauss of the Washington Post, and declared in a speech in 1984, “America’s schools don’t need new spending programs; they need tougher standards, more homework, merit pay for teachers, discipline, and parents back in charge.”

The landmark report from Reagan’s presidency, “A Nation at Risk: The Imperative for Educational Reform,” published in 1983, set the tone for those years and the years following, warning of a “rising tide of mediocrity” in public education “that threatens our very future as a nation and a people.”

That report proved to be “a golden treasury of selected, spun, and distorted statistics,” noted the late education policy scholar, and Reagan critic Gerald Bracey, 25 years after the report’s publication. Nevertheless, it was hugely influential.

According to the Philanthropy Roundtable, Sam Walton’s second-eldest son, John, who would take control of the Walton Family Foundation after his father’s death in 1992, read “A Nation at Risk” the year it was published and “circulated it among family members,” prompting “a number of discussions” in the family about ways to improve education and influencing his father to announce, “I’d like to see an all-out revolution in education.”

At first, the Walton’s education philanthropy “followed the usual course of education giving,” the Philanthropy Roundtable quotes John Walton recollecting of those early years, doling out money to “programs you hope will address the problems.” But at some point during the 1990s, John Walton’s patience with this approach wore thin, as he found “the improvements [to be] transitory, lasting only as long as the heroes making them work are on the job.”

To create more immediate and lasting change, John Walton came to believe, his foundation’s approach to public education would have to change. The agent of change would be “school choice.”

The Friedman Effect

The whole idea of school choice, most policy experts believe, is credited to the extreme libertarian Friedman Foundation, founded in 1996 by the economist Milton Friedman and his wife Rose to advance his ideas for how to improve K–12 education systems.

"Our elementary and secondary educational system needs to be radically restructured," Friedman argued in 1995. “Such a reconstruction can be achieved only by privatizing a major segment of the educational system—i.e., by enabling a private, for-profit industry to develop … a wide variety of learning opportunities and offer effective competition to public schools."

It’s not hard to see why John Walton’s conception of how to improve American schools would be heavily influenced by Friedman’s preference for school choice; both individuals viewed the world through the lens of rational markets. And year after year, the Friedman Foundation has been a consistent recipient of grant money from WFF.

Central to Friedman’s ideology was that schools should be thought of as businesses, with students being, essentially, customers. “In order to have satisfactory performance, you have to have a customer who needs to be served,” Friedman explained in an interview with the conservative Heartland Magazine in 1998.

Where public education had gone wrong in America, according to Friedman, was that the students’ role as the customer in the system had been displaced by the “professionalization and unionization” of teachers. Teachers unions had made education a “monopoly,” Friedman believed, and he falsely correlated the National Education Association’s conversion to trade union status in 1965 to a drop in scores on the SAT. (The scores changed because more students were taking the test.)

As Friedman saw it, “the only solution” to fixing the nation’s education monopoly was “through a system of vouchers.” As long as public schools were essentially free, and private schools charged tuition, most parents would keep sending their kids to the local public school. But introducing a voucher that could be “redeemed” by parents at a private school would break that dynamic, and in turn, break up the public education monopoly.

Friedman’s theory is, of course, grounded in what the Walton family practiced in retail: provide customers with the products they want (in this case, a “good” education for their children), at lower prices, and eventually drive merchants that are unable to compete out of business. Enterprises that are able to endure this churn in the marketplace, the theory holds, will be strengthened by their abilities to hold their customers.

Friedman’s animosity toward teachers unions also meshed with the Walton’s anti-union business practices. As freelance writer T. A. Frank writes for Washington Monthly, Sam Walton was obsessed with lowering business costs, especially payroll, and he believed loyal employees were created by giving them a stake in the business—through profit-sharing, stock options, and other means—rather than by giving them higher wages.

After the founder’s death in 1992, his progeny eliminated many of the employee retention policies Sam Walton created, Frank recalls, but the vigilant opposition to unions remained. While Sam Walton countered the first pro-union outbreak in his stores in 1989 with a series of management seminars exhorting his managers to “care” about frontline employees, his children, in 2000, responded to union activity among the company’s meat cutters by shutting down operations, finding alternative contractors, and summarily firing the instigators of the union organizing.

Fully inculcated with Friedman’s philosophies, and motivated by the myth of school failure spread by the Reagan administration, the Waltons were ready for their education revolution to begin.

A Preference For School Vouchers

John Walton launched the foundation’s battle for school choice by throwing both money and influence into a succession of voucher referendums throughout the 1990s and beyond — only to see the cause defeated at the ballot box time after time, as numerous studies have chronicled. The public, it would seem, was nowhere near as keen on the idea of vouchers as the Waltons and their ilk.

Then in 1998, came the Walton family's earliest ventures into direct funding of school choice, according to Education Week, when John Walton joined with New York City financier Theodore J. Forstmann to pledge $100 million "to launch a national privately financed voucher program that would offer scholarships to as many as 50,000 poor students."

A voucher of $1,000 would be given to each qualifying family to cover most of the cost of attending a Catholic private school, which, at the time, typically cost $1,500 in tuition annually. The idea was a scaling up of an effort the previous year by both Walton and Forstmann to give $6 million to the Washington Scholarship Fund, an organization that offered scholarships to students who wanted to transfer from public schools to private Catholic schools in the nation's capital. Neither Walton nor Forstmann appear to be followers of the Catholic faith.

In a rare interview for Bloomberg Business Week in 2000, John Walton explained his preference for school vouchers over traditional giving to public education institutions.

"I've also invested in public schools," he explained, and the interviewer makes note of "investments in New American Schools, scholarships, teacher and principal training, and other programs that work inside traditional public schools."

But then Walton adds, "I will say that we have had a much more difficult time evaluating the benefits of those investments than we have our [private voucher] investments, where the benefits are so clear and convincing.

At some point amidst repeated defeats at the ballot box and his frustrations with direct funding vouchers, John Walton decided “choice” needed another option.

The Waltons Choose Charters

That other option was charter schools.

“The Walton foundation itself was one of the early organizations to transition from vouchers to charters," explains Jeffrey R. Henig in an interview for Education Week. Henig is a political science and education professor at Teachers College, Columbia University and a co-editor of the book The New Education Philanthropy.

In a phone interview with AlterNet, Henig explained that the succession of ballot box losses, as well as numerous opinion polls conducted by conservative groups, influenced John Walton and other voucher advocates to conclude charter schools were the "more politically feasible" option, in Henig’s words.

Henig believes many conservatives view charter schools as a way to "soften the ground" for potentially more private options, though he isn’t entirely sure “the Waltons view charters as a Trojan Horse for eventually providing vouchers universally."

Nevertheless, he has little doubt the current intention of the foundation is to "rapidly expand the number of charter schools to create a constituency of parents and others who will have a direct stake in the continued funding and expansion of these schools.”

"The Walton Family Foundation has been the strongest and most consistent force in the nation advancing charter schools," as Ravitch notes. And that has remained true, even after John Walton’s untimely death in a plane crash, in June of 2005.

A Controversial Charter Legacy

Since John Walton’s death, a number of other family members have taken up his passion for promoting school choice, particularly in the form of charter schools.

According to a pro-union website, another member of the Walton family, Carrie Walton Penner, sits on the board of the foundation connected to the prominent KIPP charter school chain—on which the Walton Family Foundation has lavished many millions in donations—and is also a member of the California Charter Schools Association. Carrie’s husband, Greg Penner, “is a director of the Charter Growth Fund, a ‘non-profit venture capital fund’ investing in charter schools.” And Annie Walton Proietti, the daughter of Sam Walton’s youngest son Jim, works for a KIPP school in Denver.

Certainly there are beneficiaries beyond charter schools of WFF education money, most notably Teach for America, which has raked in tens of millions of dollars over the years. But year in and year out, top recipients of the Walton Foundation’s largesse are charter schools themselves and the many national, state, and local organizations and political groups that serve and promote school choice and the charter industry. Even TFA is closely associated with charter schools, with a third of the program's recruits working in those schools.

Yet this unquestioning commitment to charter schools seems grossly detached from the controversy that charters have become in the American education landscape.

The charter school sector has been rife with financial scandal. Local news reports of charter school malfeasance and corruption have become commonplace in states where these schools have proliferated, such as in Florida, Ohio, Pennsylvania, and Michigan.

A series of reports from the Center for Popular Democracy in 2014 and 2015 uncovered many hundreds of millions in “alleged and confirmed financial fraud, waste, abuse, and mismanagement” committed by charter schools around the country. Authors of the 2015 report called their discovery the “tip of the iceberg.”

The financial problems caused by charter schools stem from the particular blend of public and private players involved. As a recent policy brief from the National Education Policy Center explains, the very structure of the charter school business introduces new actors into public education who can skim money from the system without returning any benefit to students and taxpayers.

The brief's authors Bruce Baker and Gary Miron – university professors from Rutgers and Eastern Michigan, respectively – note that charters generally aren’t subject to the same disclosure laws that apply to state operated entities and public officials, especially when the governance bodies for these schools outsource management services to for-profit management firms, as is increasingly the case.

The very nature of charters, the authors state, results in a “substantial share of public expenditure intended for the delivery of direct educational services to children…being extracted inadvertently or intentionally for personal or business financial gain."

Furthering the financial controversy related to charters is the model of how these schools are financed.

As currently conceived, charter schools are funded based on the idea that “money should follow the child.” That is, when students transfer from a public school to a new charter, the per-pupil funding to educate that child transfers as well.

But research studies have shown that this financial model harms the education of public school students. As a public school loses a percentage of its students to charters, the school can’t simply cut fixed costs for things like transportation and physical plant proportionally. It also can’t cut the costs of grade-level teaching staff proportionally. That would increase class sizes and leave the remaining students underserved. So instead, the school cuts a program or support service – a reading specialist, a special education teacher, a librarian, an art or music teacher – to offset the loss of funding.

For these reasons, and others, the introduction of charter schools into communities now invariably sparks division and resentment from parents who stay committed to public schools.

Yet, none of the controversy surrounding charters seems to have altered the Walton Family Foundation's determination to expand the numbers of these schools on the American landscape.

Answering the Critics

WFF's apparently unwavering course for charter expansion has drawn prominent critics.

A recent report by Philamplify, an initiative of the National Committee for Responsive Philanthropy, looks closely at the Foundation's education reform efforts, especially in New Orleans post-Hurricane Katrina, and concludes that the "preformulated, specific approach" WFF employs, “fixated on very particular market reform vehicles: publicly funded charter schools and vouchers to attend private schools,” is in fact a hinderance to the “transformative potential of the foundation’s education program."

As an apparent response, WFF recently issued a paper titled, “Investing in Change: The Walton Family Foundation Charts a New Course,” wherein the Foundation admits that its devotion to "expanding community-wide school choice” may not be “sufficient to improve educational outcomes." But the paper’s author, Michelle Wisdom, reasons that that insufficiency stems from something other than WFF’s guiding philosophy.

Calling school choice a "theory of change," Wisdom asserts, "School choice works.” What's needed now, she argues, is “a favorable policy environment for choice to be truly effective."

Responding to Wisdom’s paper, Strauss writes on her Washington Post blog, "Choice isn’t enough? So what is?" Most likely, Strauss deduces, nothing short of a total “dismantling [of] traditional public school systems.”

The Formula

"We're at the early stage of the beginning of the end of public schools," former classroom teacher and prominent public school advocate Anthony Cody tells Alternet in a phone conversation. "You can already see this in big cities such as New Orleans, Detroit, and Chicago."

Cody is a harsh critic of education philanthropists. For years he engaged in a public debate with leaders of the Bill and Melinda Gates Foundation, which provided material for his book The Educator and the Oligarch: A Teacher Challenges the Gates Foundation. Cody is also cofounder, along with Ravitch and other education reform critics, of the Network for Public Education.

Cody sees Gates, another major funder of the charter school industry, and Walton as "operating with the same playbook;" although he acknowledges there are differences (notably around vouchers). What the two foundations share, Cody believes, is a devotion to operating schools according to "their belief in business systems.”

He argues that having charter schools compete with local public schools around student test scores will "corrupt education," as schools chase after ever higher scores at the expense of educating all children equitably. In Cody's mind, this will inevitably lead to expansions of charter schools, which have more leeway to game the system, and the closure of more public schools.

“There's no way to compromise with this formula," he contends, and "no end point at which applying the formula would stop because it impinges on human dignity."

Cody isn't the only critic who sees a fundamental problem with choice. When the late Rick Cohen of the Nonprofit Quarterly reflected on the Philamplify study of the Walton Foundation, he argued that “choice” makes education, ultimately, “a zero-sum [game], focused on the individual and the family and increasingly saying to hell with community… What’s lost is what the nation was trying to achieve in the first place with public education."

Choice For Who?

Is the Walmart Foundation really intent on dismantling public education through its expansions of charter schools?

Henig argues no, saying the debate of charters versus public schools is not what really what matters "at the parent level."

In his view, the debate about choice needs to shift from being about charter versus public schools to focusing on the role of democracy in school governance and how to "calibrate" democratic input in decision-making about schools.

That’s an important subject for sure, but when Henig says the debate about charters is not relevant at "the parent level," it's not clear what parents he is referring to. He’s clearly not talking about parents in Southside Chicago, where in 2013, families reeled from a rash of school closings coupled with charter school expansions.

As Sarah Karp reported for Catalyst Chicago, Walton had made Chicago its largest recipient of charter school grants, then gave the district additional financial support for a series of community meetings to "educate parents" about the school closures and obscure the role of charter schools. The WFF money paid for "robo-calls to tell parents about the meetings, mailings to parents and 'other engagement and communication platforms.'”

This churning of public school closings with charter school openings left some stretches of the community without any schools at all, according to an article by Trymaine Lee for MSNBC. Calling these neighborhoods “school deserts,” much like the food deserts many low-income communities know about all too well, Lee quotes community activist Jitu Brown: “This is not about school choice. If it was really about providing us with choices, we’d have the choice to improve our neighborhood schools.”

That the spread of school choice can actually leave some communities with fewer educational options is not a matter constrained to Chicago alone.

In cities such as New Orleans, which now has an all charter system, whole neighborhoods are bereft of schools, and it is now quite common for students to spend hours a day in transit as they trek from their homes to available schools across town. Conditions are similar in some areas of Houston, TX, where parents have coined the term "education desert" to describe "areas where a significant number or share of residents is far from schools."

"This crisis has reached critical mass," the Houston parents contend.

Choice Hurts America’s Heartland

Around the same time Walmart was closing stores in rural North Carolina, parents in an Appalachian community in that state gathered at a hearing to fight for their local public school to keep it from being closed down. "Many in the audience sobbed as students talked about losing what to them has been the center of their world as long as they can remember," a local newspaper reported.

The local reporter noted a "trifecta" of factors leading to the imminent closure. Two in the trifecta—declining student enrollment and state budget cuts—are factors school officials and communities across America have faced many times before. But the third factor was new: "charter school competition."

We’ll never know if this is an outcome John Walton considered when he committed his family’s billions to the expansion of charters and choice.

What we do know for sure, though, is that when he made his decision to pull back from direct investments in public schools, he did so because he did not see the kind of results he wanted to see.

But what if John Walton’s disappointment in public schools stems from the possibility that Americans, as a whole, want other kinds of “results” from their public schools? What if what they want, as Jitu Brown says of his own community, is the opportunity to “improve our neighborhood schools” instead of having them replaced by the charters preferred by the Waltons?

Meanwhile, as WFF contemplates how to best "soften the ground" for increased school choice, and policy makers ponder the growing impact of philanthropists in education, more communities may have to contend with the reality of schools, public or charter, coming and going based on forces not in their control. Completely lost in the discussion, though, is whether it's right for the American populace to have its access to education determined by the values and philosophy of a few rich people.