Making the Grade: Early Thoughts on Where the K-12 Sector Is Headed

Last week we shared data from a pulse survey of parents of PreK-12 students across the U.S. to better understand the current state of their children’s remote learning experience. We hope you found it valuable and we plan to check in with parents again shortly.

As we continue to track activity across the ecosystem, we are also exploring what the current situation might mean for K-12 education beyond Spring 2020. We have highlighted below a selected set of themes and hypotheses we are testing with an eye towards the shifts and implications for stakeholders in the 2020/21 academic year and beyond. Our conversations with industry leaders have been incredibly fruitful; let us know if you would like to find time in the coming weeks to share perspectives.

Finally, we are launching a K-12 teacher survey later this week to better understand their experiences, challenges, and needs nearly a month into the current nation-wide remote learning experiment. We will share findings with you next week.

Finally, thanks for the kind feedback on last week’s note during this busy time. We will continue to stay in touch weekly for the near-term. Let us know if there’s anything you need us tracking for you and your team.

Thank you for the continued engagement and kind feedback. Be safe and have a wonderful day.

Adam Newman, Founder and Managing Partner

Chris Curran, Founder and Managing Partner

Tanya Rosbash, Director

What we are watching to see where K-12 could be heading…

The K-12 ecosystem is doing the best it can to transition from a predominantly face-to-face delivery environment to one occurring exclusively at a distance. While it may be easy as market observers (and parents) to critique districts, leaders, and educators for not being better prepared, the reality is we are witnessing the challenge of change management at unprecedented scale. The more important measure of our K-12 ecosystem’s readiness will occur in August and September, as schools across the nation embark on a new academic year.

In the interim, our consulting and banking teams will be following – and actively evaluating – a host of issues that could influence the contours of the K-12 landscape well into this new decade. We have highlighted four below and will share our thoughts on others in the weeks ahead.

District Budgets Under Duress: The CARES Act, via the Education Stabilization Fund, will “immediately” deliver ~$14B to districts around the country. It is the first – but certainly not the last – federal stimulus funding that will flow to states, districts and schools to support K-12 education in the coming months. At the same time, with state and local budgets accounting for ~90% of LEA funding, state tax receipts and local property taxes – the two most significant contributors to district budgets – will be under considerable scrutiny. Currently, nearly every state with individual income taxes has shifted its filing and payment dates to July 15, 2020. The recession will considerably impact budgets for the 2021/22 school year, as will anticipated adjustments to local property values in many communities. Comparison to the post-2008 Great Recession are relevant in part, and we will be tracking and modeling budget forecasts and funding scenarios for the upcoming academic years.

Supplier Ecosystem Disruption: The current district sales season will be incredibly challenging for many companies, particularly those with new product launches or limited customer awareness and/or adoption to date. The “incumbent” effect will be particularly strong in many communities, as district leaders and decision-makers focus on addressing the pandemic, not new procurement processes. Digital supplemental solutions with effective consumer-oriented models connecting school and home could benefit disproportionately, accelerating the transition away from legacy print offerings and other school-centric offerings. Other “winners” and “losers” – both at a segment and a company level – will emerge, as buying priorities and confidence in suppliers shifts. Among the questions we are focused on now include: What segments will expand/decline, by how much, and over what time period? To what extent are suppliers’ success predicated on an existing installed base, a newly relevant value proposition, brand reputation or awareness, specifics of the solution and delivery model? Stay tuned for more.

Student Achievement (gap): All 50 states have received testing waivers from the U.S. Department of Education, and few districts have directly addressed what type of credit students will earn for their Spring 2020 academic. More importantly, the learning deficits resulting from or accelerated by current education modes will significantly impact many students. When married with the potential impact this near-term period will have on achievement gap issues exacerbated by remote learning models, the K-12 community will face an even-more challenging academic divide with which our teachers, principals, and schools must contend. Curriculum, assessment, and professional learning models are ones to watch closely in the near-term, while more transformative school and service models may also play out in the mid- and longer term.

Parents’ Agency on the Rise: Discretionary US family spend on educational products and services has long considerably lagged that of families in Asia, among other regions. However, given their children’s remote learning experiences, many parents are already digging deeper into their wallets, a trend that could persist well beyond the current pandemic response. An increased involvement of parents in directly funding their child’s education may expand the universe of qualified buyers and change the role and opportunity for consumer-based business models.

Key reads from the past week

U.S. Department of Education announces new flexibility in how states and districts may use federal funding

An early window into how district purchasing priorities are shifting

Detailing the equity and access challenges when moving online

Should we be closing schools to reduce COVID-19 transmission?

This year’s AP tests – at home and open book