Portfolio Management At LAUSD: Private Security, Promotional Hats, Outsourced Instruction, No-Bid HighTech Contracts

In mid-May, 2020 the LAUSD board reviewed the Deputy Superintendent’s weekly lists of purchases and contracts for March 16-May 8, 2020, part of “the $540m in expenditures for Covid19” approved through the LA County Office of Education (LACOE).

That $314m is detailed below, authorized under the emergency conditions declared two months earlier at the board’s special meeting of March 10, 2020. This is also when last the board met in regular session prior to 5/19/20; three days later the District shuttered ordinary operations on March 13, 2020.

Under this “Emergency Resolution” the Superintendent may “…enter into necessary contracts to respond to emergency conditions.” That is, these expenditures are subject to neither venerable bidding protocols that control waste, fraud and abuse, nor oversight by the school board, which sets District policy. LACOE now approves these expenditures but according to what directives?

The Superintendent who now controls purse, policy and process, was appointed with a tenuous mandate, by a school board elected under an avalanche of ideological school-privatization money. That board unethically extending the tenure of its slim majority just long enough to appoint this Superintendent by failing to censure its swing board member charged with felonious campaign fraud. What priorities does the former investment banker Superintendent Austin Beutner’s emergency spending reveal?

Figure 1 shows the relative distribution of the two broad categories of LAUSD’s pandemic functioning:  (i) Instructional (blue series) and (ii) Nutritional (yellow series) support.

Since the pandemic closed its doors, LAUSD has served well over 25 million meals from its curbsides. This food bank of nearly inconceivable magnitude, receives three dollars to feed its families for every dollar spent on children’s instruction. And it’s a good thing, that. Superintendent Beutner deserves commendation quite apart from ideology for putting its Kids – more than 80% of whom live in poverty – First in this way.

Table 1 parses these categories of expenditures revealing that LAUSD’s 63 Grad n Go sites, that all operate in parallel for just three hours every weekday morning, consume enormously costly monitoring and guard services during the dormant, remaining 153 hours of the week. The cost for this security, outsourced to Alltech Industries (Table 2), is $202.6m, nearly 2/3 of the entirety spent by LAUSD on the Covid crisis so far.

Covid-expenditures-by-type-sorted

Table 1:  LAUSD Covid19 expenditures within Instructional and Nutritional Support operations by type of spending.

Apparently while operations are limited across the District, the infrastructure supporting these operations require attention staffed or not. It is curious that even while some families are disenfranchised by their distribution center’s invariant hours, staggering operating times could staff operations for far more hours weekly, potentially simultaneously diminishing some costs of security and expanding the operation’s reach.

Another surprising fallout of the accounting is how much of the food expense is unitemized. Just 2% of all food expenditures is itemized; the rest is from “various vendors” for unknown food items. It is impossible to know whether legitimate or unreasonable crisis billing is in effect.

100,000 N95 masks were purchased at a cost of $8.54 each even while an identical quantity of N95 masks was emptied from District stores and donated to local hospitals, several of which are private, for-profit enterprises. Such generosity may reflect gloriously on the District and its Superintendent, but this functionally shifts tax dollars from underfunded public school districts to the private sector. For reference N95 masks purchased at retail during 2019’s fire season were approximately $1.25 each.

There is further gratuitous glory in the warm glow of solidarity from branded baseball caps distributed by the Superintendent at the start of the District’s Grab n Go operations. These evidently were never the remnant of some philanthropic largesse; we taxpayers purchased 10,000 caps at $3.92 apiece. This is behavior from the playbook of private schools where “retail” promotional items are passed around in breathtaking quantity. Advertisement is the purview of a competitive marketplace, PR is not the M.O. of the Commons. That money could and should purchase books, nurses, teachers, safer schools.

Just gaze on the combined costs of PPE and sanitation equipment:  ~$5m. These are sorely needed scholastic dollars. Diverting these funds from instructional support is part of the tragedy of this pandemic, but we need not exacerbate the pain improvidently.

In the overshadowed “Instructional support” category, 89% of the $78m expenditures (see Figure 2) went to implementing the prodigal “ipads-for-all” program of fellow-Broad selected Superintendent, John Deasy. See an excellent timeline of this unfortunate saga here.

Apple maintains a small cloud of registered lobbyists with LAUSD, alongside Microsoft, HP, IBM, DXC, Xerox and a variety of other technology and educational content entities including Pearson, McGraw-Hill, Houghton-Mifflin, and more (still, the flock of California Charter School Association lobbyists outnumbers the combined weight of the rest). 

Table 2 organizes these expenditures by vendor, showing that of $61m spent for computer {hardware, software and licenses}, 62% went toward an unknown and redundantly specified (ipads are “tablets”) set of Apple products and accessories. Most of this went straight to Apple, a company implicated in cost and bidding scandals a mere half-dozen years prior. Apple’s contract predominance is striking, reiterated in today’s era of excepted bidding by this second Superintendent, likewise explicitly elevated by and linked to the patently political privateer, Eli Broad.

Covid-expenditures-by-vendor

Table 2:  Instructional and Nutritional expenditures by vendor.

Yet Apple product accessories were not exclusively purchased from the multinational. LAUSD also employs middlemen to mediate technology purchases. Arey Jones is a San Diego company (many of the Superintendent’s aides identify with the southerliest bit of SoCal where Eli Broad installed Austin Beutner as newspaper editor for a time) that furnished chromebooks, laptops, “windows devices” and ipad protectors at rates likewise hard to adjudicate without specific invoices or technical specs. But given the implication that Amazon was charitably “helping” LAUSD with deliveries while LAUSD “leveraged” “Amazon Business to find, distribute and deliver educational devices … including noise-reducing headphones”, It is a little troubling to observe so little evidence of the tremendous bulk purchasing power an entity as immense as LAUSD should command.

Instead the LACOE accounting details that, implied beneficence regarding those 133.6K headphones aside, LAUSD purchased the head gear at full retail through Amazon for nearly $15 apiece. Some families of high school students received warning of the impending gift; it was mysterious gratuity for others. Social media posts every combination of confused provisioning:  receiving unneeded and unwanted headphones, not receiving necessary headphones, serious concern with privacy issues (e.g., whereabouts freely divulged despite restraining orders) and unauthorized data sharing.

Though dwarfed by hardware purchases, another massive, $6.7m expenditure is for summer school. But it is not LAUSD’s accredited, UTLA teachers who will be providing the credit recovery coursework. It is a private, for-profit, online company whose leadership team is dominated not by educators but instead by business and marketing gurus.

This, then, is the emergent implementation of what is known in education reform circles as the “portfolio model” of school management. Patterned off the investment banker’s portfolio of stocks winnowing “winners” from “losers”, this glimpse into the Superintendent’s spending patterns in the present, belie claims about the Superintendent’s plans for the future, claimed to be “… not pursuing this approach”. In fact right here is the portfolio model writ large, outsourcing the business of teaching to private companies, conveniently evading regulations and workers and their unions.

Even an emergency cleaning of the centralized HQ was offloaded to a private company despite no dearth of janitors in the system. The very business of consulting in this high tech transition itself is outsourced to a former Superintendent’s advisor now doing business through a private LLC instead.

This is the very model of a modern portfolio-like system. The mavens of management have cast this die and it remains only for us to recognize it. As well as to mitigate its influence and ensure that our public schools operate as a public service by and for stakeholders, not as a trough for the business interests encircling it.