abu yahya doesn't stand on his own. and you still see, i think, that zawahiri has a prominent role is still the most important second to osama bin laden. :

i think this whole notion of how he has been rolled out and how he has been presented unframed were in a camouflage jacket and same, i think initially on -- i thought that was fascinating in addition to the engineering which we have talked about before. i do want to get you to talk about the six easy steps but before questions i hope it can do that real quick. >> really quicker want to respond to things pop up when brian was talking, i thought his comments were awesome. so i think one of the biggest difference stations between the high command represented in buying al zawahiri and abu yahya al-libi is that he admits mistakes and when you said al-qaeda stands a ground and when they are honest in standing their ground and what you said

about -- it sounds like propaganda and with al zawahiri and said we have been accused of killing innocent muslims and if we did that they shouldn't have been there and god will sorted out. he's all over the place and when abu yahya al-libi comes out he says i screwed up and i said these two guys are in heaven and who my to presume that i know they are in heaven, the movement called me and i was wrong in your right, thanks for keeping me straight and i think for the global movement and that's where i move into my second point, is back to they love of one's abu yahya, they respected and revered al zawahiri. but it's there fundamental difference in how the global movement -- you're right, he totally serves as adviser capacity to al-qaeda senior leadership. i don't think he's calling the shots rang out and maybe it's better to call him the next bin laden then the next al zawahiri and maybe that's the role of those are two comments were.

but chris was talking about with something that abu yahya did that blew my mind. i couldn't believe this guy would have done the. is in the course of an interview in september, the 9/11 interview in 2007 and his interviewer says if the americans were going to defeat al-qaeda ideologically going to try to degrade our movements and wage a successful war of ideas, how they go about doing it? and abu yahya says they could do it, there are six easy steps they could use. he starts going through and into recess, brother, are you sure you want to reveal the strategy is to the united states? when he said the americans are already using these in an ad hoc sort of fashion. they bought a certain things in egypt and support things in this and that, but they haven't put it all together yet. i'm going to put it altogether and demonstrate that i am the

best counterterrorism analyst the west has ever had a domestic my stomach in their eye, they haven't come up with a strategy that's but mcorp to inoculate the global movement from these efforts by identifying them and agree to make sure they can't hurt us in the future because we are aware of them so from then forward he is always like there is another one. this is why i was saying he is the investigative reporter for al-qaeda. so the six steps -- and the fine back trackers is something anybody who used to be a big voice in the global jihadist movements then renounces al-qaeda hurts them. he says it hurts that really bad. at a college by barking dogs metric, however many of our yapping response to something is indicator of how vulnerable they feel. besides every cancellations or revisions of all these guys

responded and he said his third senate does. the second fabrication. anytime the west can make up lies he says or exaggerate that which al-qaeda has already done to make it look bad really hurts them. the best quote i can think of as a quote that's as when your adversary is busy shooting himself in the foot don't stop them. this is i think the mantra that al-qaeda understands is the case and thank god that they would say america stopped them from shooting themselves in what. unwilling based on an hour -- a number of things they would argue. supporting anyone who renounces or issues religious rulings against al-qaeda does some damage. i think the most prominent guy who has read them from the mainstream community would be zaraqwi, but i haven't seen many

had on the tax of a zaraqwi. i know he is popular. introducing new voices. insurgency is fundamentally predicated on eliminating distinctions between you and the host population you're trying to blend into and so al-qaeda understands the more distinctions and shades of gray introduced within is of the worse for al qaeda. salafism, they want to eliminate these and blend in and allow them to look like pious muslims. anytime when we issue this the ksm hotel where salmon and make him look terrible but the hair, this is useful for us and bad for al-qaeda in any time you can symbolically degraded leaders, one there was a pretty horrible photographs promoted and then promoting these distinctions. in my book i talk about this and it drives them through the roof. they don't want to deal with that. there is only one salafism and

is al-qaeda salafism they would argue so the private he renounced the use was a strategic blunder. it was out of ego and you try to be too cute and it's a great strategy that like he said we're kind of doing but haven't put the pieces together in a robust systematic approach so i think we should if we are not. >> thank you. that goes to underscore why it's so amazing that abu y al-libi whitworth is the terrorist nobody knows about, the leader nobody is talking about which is fascinating. he has laid out a whole plan for what you'd think someone would be doing it is doing. with that allies to turn over two questions and discussion. i would like to remind everyone if you could please introduce yourself and we put the microphone to come to you. but also to leave it to to a question, not a big block comments. and who would like to start? >> i think will take some groups

of questions so in the front. >> one. >> i just wanted to ask you to read and write if you elaborate a little bit on the implications of the generational change in al-qaeda. if three lookbacks abu yahya al-libi it as an example of generational change within the al-qaeda what that means for al-qaeda relationships with other groups. specifically with the taliban. if we look at to in the older generation ended then your generation of one of the implications will for the larger will levels of collaboration and cooperation between the two of them? secondarily if i might, what do you think have what abu yahya will do it if anything to respond to his brother's recantation with the group? sp wrightwood.

>> thank you. i am a japanese journalist. i have a question about the relationship between abu yahya and abu yahya al-libi, i'm talking about al zawahiri and his followers from egypt, are they doing good and where are they frustrated with a new potential leader? >> i have two questions before we -- i am not here to start any polemics, but according to some speculation particularly in the middle east may be there is no longer any historical leader in al-qaeda such as al zawahiri and

bin laden will. do you think you are trying to put human space on a global terror organization? were one to keep the public alert? >> good question. >> the second question, regardless of politics and the differences between the shia, sunni or the four sunni schools, how would you categorize muslims in general? i mean, how many groups of muslims in the u.s. or the west to help understand who are the muslims to not mix between muslims and radicals? one and four mr. fishman, you just said in an want that al qaeda leadership to get to their positions according to their skills there are smart, if they're smart and they will work

hard and if you compare it with a middle eastern and so called secular regime, they look like they are much better because those secular regimes used nepotism. thank you very much. >> thank you. gentleman. >> i am just going to pick and choose a few things. inwood generational shift i think totally. it i guess i don't have anything to say -- right is better at that and i am but as we have talked a lot about his residence on the forms, versus -- i think qualitatively different than how al zawahiri will or the old garden with resonates so i don't have anything proud to say. i agree it's a very important

point i didn't emphasize enough. on his brother, many people though realize this and it's shocking in appalling to me and i was going to bring this up and didn't have time. so the senior leadership of the vician islamic writing group has been detained or in prison for some time now in libya and there's been a recent effort to get these guys to come out in a minute -- renounce so they wrote a 400 page book, the senior for our five leaders did. one of the senior leaders is abu yahya al-libi older brother had been so think about this, you have a guy who is poised potentially to be that next bin laden out there trying to run al-qaeda and then you have is older brother who is renouncing everything that he never stood for when it comes to violent jihad. and this is not a story. it's a story that we are trying to -- we've been talking about for a while, but think about it, they're so many angles. the older brother wagging his

finger and it's not resonating. in large part this is because we don't understand his older brother is in prison and a historical relationship between al-qaeda and the libyans, we don't understand a lot of dimensions so until we build that foundation we can appreciate the gravity of the situation so thanks for reminding me about that. on the relationship between al zawahiri and abu yahya, maybe it was newsweek put out something that said there was tensions between libya -- to the libyans and the egyptians. >> late 2006, early 2017 newsweek story. >> than two months later the announced that is what led by a group is joining al-qaeda and so al-qaeda has a habit of one kumbaya of videos whenever they are under attack for somebody who accuses them of not getting on with somebody, they come out and hugged and play patty cake so this is what happened with that with this video. so whenever it is the public

places at the unified command. on a question about the human race, and i don't work for the u.s. government's. if that is an unintended consequence of me identifying him as such, one is not my goal. i think you're right to point out as brian has the global jihadist movement is incredibly complex and multi laird and so its easier to find an enemy who has a face and, in fact, al-qaeda realized this and build their entire pakistan rhetoric on one man, musharaff, so when he left al-qaeda had no arguments because the made heating pakistan equated with musharraf. so i don't think that's what i'm doing. i think you're right it could be construed as a reductionist argument. i hope that the quality of my scholarship would help people see the gray lady of sophistication and it was within this movement.

>> i just want to applaud, that's a good question about whether or not we put to him in a place on a movement that is composed of people with a wide variety of motivations and in all corners of the globe. i think one thing that's interesting about al-qaeda it's increasingly i think trying to be more ideologically homogenous. there for a long time and somebody may disagree with this, but a wonderful norwegian researchers talk about the split in al-qaeda between dr. marion's and strategists. the doctrine areas tended to be people like al zawahiri, evokes that wanted to pull everyone together and sort of classic strategy so the strategists have

broader coalitions even among close to didn't necessarily agree on every ideological particularly on religious points. that movement i think is failing in al-qaeda almost completely. and in part because of the influence of the zaraqwi but in part because indoctrination has become a really critical of the as the movement spreads out all over the place. you don't have the same kind of sort of a brotherhood in arms that is gained when people are standing shoulder to shoulder tried to kill soviets together. the and so you don't have as many personal relationships and so if you're going to build a movement that is cohesive id needs to have a more distinct ideology. zaraqwi call this, he said we will be strangers and this is from a decline in the iran, and it says that is what is a stranger, we stranger again but it ultimately will prevail.

what in what he was saying is that we are ideologically separate from the bulk of society, we know that we're actually doing the right thing because of the approbation that we received in the al-qaeda as a rule i think has started to pick up some of those ideas in the abu yahya does that as well. the one thing he didn't mention on abu yahya i want to talk about because it gets to the things that she asked about in terms of generational change is that abu yahya has been at the cutting into of the campaign to discredit the pakistan regime and i think that is fundamental to where al-qaeda is senior leadership is going today. we were most of you probably read proust kaufman's op-ed in the washington post yesterday and if you didn't you should have is good, the two things i think bruce didn't mention there are that al-qaeda right now is doubling down on trying to delegitimize and discredit the pakistan and a regime, one, and

secondly there are increasing their efforts to co-op with a public opinion surrounding the israeli-palestinian conflict and that's creating all sorts of problems for them but also opportunities. >> thank you. and some more questions? in the back please. >> [inaudible] is there no relation between all these groups? with this issue dirt -- started during the assassination of abdullah azzam. unwed as my friend mentioned, would abu yahya al-libi would, he was

born in 1963 and a this is confirmed when writing this was during the fighting in the green mountain all the support coming from the west and some arab countries supporting them to the top of the regime. it originally created to some arab regime. this was said in an interview in a magazine in 1996, issue 963, 964, 965. they created a monster and they turned and eat those that create them. as a matter of fact, -- >> would get to the question because there are many. >> the question is, who is

making this? was. >> thank-you. >> yes, please, you raise your hand. >> item in the interim for the middle eastern magazine. my question is for my sake of your presentation i think al-qaeda is actually becoming divided and that abu yahya is not the new bin laden but opponents to him in zaraqwi. you think this is a possibility blacks to you think this is a possibility? >> npr. is your turn in the development of a abu yahya al-libi as he goes in the relationship with al zawahiri are you bringing information about where bin laden's in all of this? in other words, he is being called the next bin laden. to you have any idea if he is on his way out or already gone or

where he sits in the whole calculation of what al-qaeda is doing? and as you try to the growth of abu yahya al-libi. >> thank you. would you like to start? >> the question of who made an bin laden's one. i will leave that to the smarter people who have written log books about that. who is making the next bin laden i think is a beautifully phrased rhetorical question that may be we can all debate act. hopefully i am not but i don't know. in terms of is he in opposition to bin laden in the al zawahiri? the changeable is hurts a little bit and so i think we have talked about to the issues related to its. i don't have anything planned on any of these questions so brian will have to come through and finally in terms of the

relationship between bin laden and abu yahya, i don't think bin laden has mentioned the abu yahya, has the? he did in one of his recent statements give a reading list and i don't think abu yahya -- was he? so he may have been on his recent reading list and then have to go back to the transcript to see that but in terms of -- i call him the next bin laden because it is cute, not because i have any -- i believe it's and i think symbolically he will take the place of the sr. anointed one, the grand poobah basically of al qaeda. but i don't necessarily mean that bin laden's going anywhere. i don't have any open sources with information about that relationship. >> i think the river back in the newsweek story years ago was that al zawahiri was jealous because he perceived relationship between abu yahya al-libi and bin laden he wasn't a part of which is at least

possible. i don't want to stand here and say it's necessarily true but it's possible in the sense that al zawahiri has always had a manipulative perception or attitudinalist gordon bin laden. one thing i would say is i think that's gonna the most important strategic maneuvers that the senior of leadership is doing right now which i mentioned the turn against the pakistan government and the real decision since 2007 to highlight that and prior to rise in also prior to rise palestine propaganda in the way they haven't done in the past. everybody is on the same page. though i think abu yahya has been at the cutting edge and the al zawahiri recently released a book that was a take out of the entire pakistan constitution which is interesting noting because he is right that is used to be that al-qaeda and why was you hate musharraf there for you hit pakistan for the mentally which was in line brinkley with

what the other pakistan militant group said with a said the fundamental basis of pakistan was it was founded on islamic basis but that the rulers and differentiated from that. al-qaeda is that the leading edge in saying that is false. and fundamentally what pakistan is is in in the dow state, not even apostate, there are going farther than that. fundamentally disreputable states that used to be attacked and not about changing leadership and i think that al zawahiri ended the abu yahya in bin laden on the same page on that. >> listed another group of questions please. >> ming >> foreign service institute. the question, can you talk more about ways that abu yahya is trying to enforce some sort of a

purity. you talked about dad's but without but lots of examples and i'm curious about that because it seems to be in line with a couple of things you said in the q and a both of you that endorsing that sort of parity is itself a potentially divisive? so how is he doing that, what's the response been perhaps i would assume given the disparities within the movement that it would create ruptures and fractures as much as you find them ideological basis and what do you know about any of them? thank you. >> is there a central -- who gets to patrol the decisions that will let any major figure as you describe blacks who controls access to the web sites? is there a central intelligence summer and that says it become okay, we need a second group of

people in case the tourist train gets killed or whatever? and if so, who are they? >> new york times. this is sort of related. it could you say something about the relationship between the al-qaeda central as it sometimes called and the various regional affiliates such as aqap, and whether there is any tension in local goals vs. this vague sort of global jihad? and also is there any significance into thing for al-qaeda in a fairly dramatic decline in the popularity of its tactics in most muslim countries including pakistan? >> would like to start? >> i will take a couple of this, i will defer to brian on some of them. in terms of how he enforces religious purity, when it is

mostly through expos a journalism and. he brings up the same ideological lines, just points a lot more aggressively at people enhance the out to dry up much more so than i think other al-qaeda guys had done. for instance he takes on a omar who had written a book against al-qaeda, a u.s. a saudi shake and he takes them point by point and so it's a lot of fun to read when abu yahya takes him to task. he doesn't pull punches and he doesn't systematically. so it's not that he's coming now up with anything of that new. i think the most fascinating and attempt to enforce his religious purity is when he's taking this on a concept where when dealing with this terminal logical issue, the use of a national is somewhat or a theism where resistance has been western concepts. what's interesting there was a

preston, instead of calling these guys jihadist, to call them a other arabic terms. abu yahya actually uses the terms we were promoting to call it al-qaeda against the united states. he calls us highway brigands and thugs and i think -- i don't know if there is a causal relationship there. so it is wordplay. orwell said without words you have nothing and i think abu yahya has really embraced that. in terms of who controls access to the media is a billing question and that's something we don't have knowledge john. ksm and his tribunal said that he was the extra zero media operations director on al sahab under al zawahiri so it seems to me that al zawahiri probably founded it, rancid and is the guy who sits at the head of the table in terms of identifying who, when, where to release, and

so we've seen not just with al zawahiri and one but number 3i guess, that was a very strategic rollout that went out a few months. fanatically you can see they push him on one front in the next video and then another and you saw the same thing we just found out who was killed. and there is a new guy no one is paying attention to who i think al-qaeda position to be one of their top three sheikh one, has been releasing and writing and some of the taliban magazines for years, started releasing audiotapes and just in december released his first radio tape and we know what he looks like and it made no news but al-qaeda doesn't -- the form of media, addressed in the media will and the timing of the media i think is all choreographed and i think it is al zawahiri that oversees

its. i think they have a media council and these are mostly people you've never heard of or never see. and with two scots? , if i knew the answer i would get a lot more quotes in your newspaper. from an open source perspective it is really hard. >> that is a really good question about who controls the media but it's important to recognize and one thing he said was that when abu yahya in particular was rolled out on the baking media which was not al sahab, he was doing it independently which was likely through networks. i would imagine three never saw that or more closely associated with the taliban that he knew from his previous stint with them so probably wasn't thrilled at first. ..

when they were gfp c. and it was thought that from islam, and lebanon were just one point before it was routed by the lebanese army started using it that suggested to me they were coming more closely aligned and networks with al qaeda central. that says something about the relationship between al qaeda central and the various affiliates. i think much of it has to do with the media.

in the d.c. public instruction of strategy. some other quite specific, bin laden released a statement called practical steps for the liberation of palestine in which he described a movement from iraq, not into the labonte or into syria or lebanon which is what i would expect it. but he said no, the way to get to palestine is via jordan. and that the same time, started reaching out more aggressively to abu mohammed which was zarqawi's mentor their and this ideological figure almost sitting about the jihad movement. though i think he is kind of in jordan. he was sort of a strange figure. he's in and out of prison. you know, he gets out of prison and sometimes says something nasty about zarqawi, put back into prison. he would come up out again. we get attacked quite a bit for this sort of thing. but i think you do see this public kind of messaging, but there's private messaging as

well and it's hard to know exactly how that occurs today. we do know something about that from the iraq time. because of the capture of the zawahiri document to zarqawi, which was sent for a variety of messengers. it seems that you may have been a hard copy from a thumb drive or something like that. but coming outcome that's more difficult. i think it's harder to get from pakistan to jam and then it was to get from pakistan to iraq. and so i would imagine that the internet plays an even more important role. one of the things that you saw there and this will become more difficult. it also gets to the generational question. was that people would identify themselves. in identifying himself to zarqawi so he would know that it was credible. he would say, i still remember that object you gave me in herat. he would refer to something the

something of a shared history together in order to sort of gain credibility. that kind of thing is going to be more difficult going into the future for al qaeda because he don't have the same sort of cohesive momentum that their western anti-soviet jihad or that. in fresh water during the 1990's. >> please, sir. >> thank you. i am allen with cml resources in the middle east institute. i question is for jarret. what are the vulnerabilities of abu yahya both internally within al qaeda and more importantly as we're here in washington as a strategized, the counterterrorism strategist?

>> viola from being great news here that you talked about who controls the media, but before somebody is rolled out ory the rules themselves out, using your terminology, there needs to be a strategic decision may come if it is plotted as jarret has said that it seems to be. so i guess i wanted to take it one step further and that is, who is making the strategic decision or what is the likely answer to that? what are the implications of his rise in the organization for how al qaeda operates and then further for how the u.s. needs to respond -- for the u.s. response general? >> one more question. yes, in the middle back.

>> hello, caitlin duke from time. you mentioned yemen. i am wondering if the u.s. contributing to reasoning on our own lackeys status with john brennan on cnn that he is the bad guy. does that boost his standing? thank you. >> thanks. >> okay, i'll try to go click here. so far daylilies, brilliant question. i'd like to write an article about this. i would have to think about in depth first. i think the most glaring vulnerability is that he is so himself as the living embodiment of ideological purity and consistency. and so, i think it only takes one misstep. the problem is that he is very quick to acknowledge when he takes, you know, the wrong steps.

so we started trying to preempt our ability to do that. i think any time anybody builds himself up on. he, that's the best way to attack them. brian, chris, you may have some different ideas. he's got to have a massive ego is on how much he just talks. he just filled the airwaves up with his voice. well, anyways. so the question is, who was making the strategic decisions about whether to roll out. i think it is an interplay. i think you've got the backroom guys who don't know about within al qaeda, these are names that -- al qaeda has kind of a think tank that no one's really focused on here don't encourage somebody out there'll as i can get to it first is this magazine vanguards at corzine is there research institute, they're think tank. and this is where most of the guys have been rolled out have been writing articles in this magazine for two years, three years sometimes prior to getting

pulled out of so they pressed the issue for the internal community. they testify are some things out. test fire a theme and then zawahiri will pitch it six months later. this is constant interplay beef with them, their advisors, top commanders and strategists, the global movement, the foreign spirit i think they religiously might be al qaeda foreign student at the straw poll indicator. this is why zawahiri didn't open q&a to respond to the questions and criticism he faced and that the forms because they do value the global movement opinion because that's their primary constituency. so in terms of how the mechanism works, and i wish i knew. they just unexposed outside of them. implications for his rise for al qaeda. i think he is done his damage. so, you know, the next question

is, what happens if he dies? so i think he's already raised the movement up the movement up to a level of ideological sophistication that otherwise would not have been without him. and i think it's prioritized the importance of terminological. he and all of these things that i've already talked about. it's now in everybody's radar. he's made his contribution. so the lobby last the more damage you can do. it was reported a few months ago that he had been killed. unfortunately, i'd mixed reactions when i heard that because that's a short book. but, you know, i do think is one of the most dangerous areas out there because of his mind. and in terms of a lackey, i think the fact is he is really bad. i think he actually was a religious adviser to al qaeda in the peninsula is seems to me. and so i think he was a fire breathing chic after he left the

u.s. and that is bad enough. i think he was doing bad stuff so i think targeting was probably necessary. >> chris can answer questions about yemen far better than i can. i will say one thing. i'll mention yesterday he mentions a new strategy which i agree with is death by a thousand cuts not dependent on necessarily a large-scale attack 9/11 style. i think that's accurate. he says are five pieces, one to create background noise, economic warfare to divide the anti-al qaeda alliance to actively exploit failed states into our western recruits. and these five are interesting because again it allows us to ask, you know, who can do those things well? and is perfect as nice really breathes leadership, then who else besides abu yahya is potentially a successor? i don't think jarret would say

that abu yahya has 100%. their other folks out there and i think we should ask these questions because one of the things that made bin laden the mountain was that he was effective. he got stuff done. the embassy bombing in 1998 and the american response to the cruise missiles raced bin laden's stature with inside afghanistan. and post mola omar to give them influence within the terrorist groups operating there. and so the answer to your question about is our attention being paid to a lucky raising a stature? yes, it is. we should be careful because there's lots of fun ways that we could go about trying to undermine somebody like him because he is lots of things that he is rich in the past that have been criticized. you know, he has been declared arrested for prostitution charges >> there's things we could be talking about with al-loki and

frankly from a communication standpoint, you know, would be great for us as a nation to be talking about to undermine the sky. we have a problem when somebody like this comes up we always seem to elevate. what we need to do is look at the simplest human beings because it is their humanness that is their weakness. and that's how we exploit them and that's how we get. they are not 10 feet tall, none of them. >> thank you very much. i think this has been a great session. and a sitting and listening to this, this really reminds me, especially all the names i don't recognize reminds me of the importance for why we need to study this stuff. and it's shocking to me that it, nine years into this protracted conflict, there is still not an organized format and organized funded way to study this. and i think it is shocking. if you look back during the cold weather as a a whole science of criminology and russian and

soviet studies in chinese and now wisdom and communism and it's amazing to me that there is not a more coherently organized and funded structured program to understand this conflict that we find ourselves in now. so please join me in thanking our speakers. i'm really looking forward to the book. thank you. hot mac [applause] [inaudible conversations] >> now i look at all schooled at strikes can save money and enhance student achievement in the face of declining local state and federal funding several authors of studies will present their findings and how schools can overcome current economic factors at this convert hosted by the american enterprise institute. half.

>> the states across the country are struggling with the fiscal situation in terms of school system benefits. this has been an unfolding news story for more than 12 months and it's going to be a news story for unfortunately a while yet to come. if we take a look at this, we see that the rate of decline and revenue projections can actually start back in 2005, give or take from the swing of the last recession at the beginning of the last decade. and right now, no, please go back. and right now, what we're looking at is finally a situation where we are seeing zero real growth and more or less of the state and local level. but because about one third of school spending is property tax derived and because property assessments tend to lag about three years because of the nation estate tax is that

fortunately the collapse we have seen in residential real estate values and what continues to afford in the commercial real estate values hasn't yet played out in terms of state and local revenues. and in all likelihood it's not going to play out until about 2013 or even 2014. so when we take a look at what we see in terms of say the rockefeller institute's projections for state and local revenues is that what you see with the dotted line appeared as a projection with the stimulus fund, which we see have cushioned the decline and made it m certainly not change the bottom line, which is we are looking at steady decline going forward to 2013 and perhaps beyond. as the rockefeller institute has noted, fiscal crises are rarely solved in the first year.

they can take three or four years before finances recover, even if economic recovery comes sooner. so the concern here is some of our conversations about the role of stimulus, about states hoping that race to the top might help them plug some of these gaps seems to suggest that what we are looking at is the short term grunge. the reality is something unfortunately that is going to be with us longer than that. so if we take a look at this next slide, what we see is right now in 2009 states doing dramatic midcourse corrections and budgeting. now if you look back over the last couple of recession, the early 90's and pay you'll notice is that even after recession ended states actually had to make larger adjustments typically for the next year or two. well what that means is in all likelihood it appears the recession ended just at the end of 2009, it quarters three and

four at 2009. if history is any guide, states are actually want to have to make larger adjustments than they made in 2009. most likely in 2010 and 2011. that's after the stimulus has run out. so what we are looking at here again is a situation in which we are not unfortunately starting to emerge from the tunnel yet, but in which we are very much still underground. what we've seen that's far from districts starts to reflect how we think about this. districts first responded in 2008, 2009 i trying to squeeze everything they could out of the marginal accounts. if you look at the major cuts in 08 and 09 the three biggest categories of superintendents tried to trim or altering thermostats, eliminating trips and differing textbook or cure meant. well, unfortunately you can only

squeeze those accounts so far. they're just not that much money in them. so we've started to see in 2009 and ten is a shift in where the cuts are being made. were seen and been made much when personnel which is where the money is. we see them being made in class size, seeing them being made in terms of laying off personnel. seeing them in eliminating instructional improvement initiatives and again in the land procurement of textbooks. in other words, were starting to see the money cut for the larger dollar figures are. problem is that very few superintendents in my experience are particular priest about the way they're going about this. there's a lot of reference to meet cleavers and unfortunate decisions. and the question now is twofold for the day. one, are there smarter more strategic ways to make these kinds of cuts? and two, can we use in fact this

crisis as an opportunity to put schools and systems in a better position going forward. and it sounds strange to think that way and education, that it's really not. three, high-performing companies have just gone through pretty severe strings of layoffs themselves between november 2008 in november 2009. cisco, ibm and microsoft between them laid off nearly 20,000 people, which is not a substantial chunk of their workforces. but in thinking and talking about the implications, this quote from bill gates in october 2008 might be a useful motive for educators. we are in an economic downturn, but an innovation that turn. and the reality is the crisis that has been created also offers an opportunity for district and state leaders to take steps that might otherwise be prohibitive.

the less we forward, the thing to keep in mind is that this is not a crisis we just need to get through. we are in for a long haul. we're probably not going to see fiscal 2008 revenues. we're not going to be back at that level on a state basis probably for five or six years to about 2013 or 2014. and beyond that, looking forward, the fact is that we have emerged as jim guthrie is going to discuss a little bit or an area in which school funding has been a beneficiary for many political economic developments. and going for comedy aging of the population, the degree of physical stress on the u.s. government, competing obligations for higher education and health care mean that funding situation for schooling over the next decade or two could very well be much grimmer than it has been in the past few decades. and if that is the case, these are not just measures to get us through a rough patch.

these are measures to help us run ols that are going to excel in a new environment. with that, here's what the day is going to look like. the first deal is going to an offer an overview of school spending and a little bit of what we know today about where and how districts can find new savings. cannot do is going to ask with saudi leaders can do differently when it comes to questions like personnel and technology. panel three is going to look at some up close accounts of where change has happened in how they have gone about it. in panel four is going to focus on the barriers to change and what can be done about them. with vasco are going to go get the first in the underway. the first panel consists of three papers, all of which are available out in the lobby for those of you here and at www.aei.org event 100164 for those of you watching at your

computers at home. for the three presentations the first up will be jim guthrie, senior fellow at the george w. bush institute and professor of public policy and education at southern methodist university. previously, jim was patricia everhart professor of leadership and policy and director of the center for policy at peabody college at vanderbilt university. jim's paper is called in over oversaw spending. but second is marquerite roza. marquerite serves as an associate professor of reinventing education at the university of washington. marquerite's research focuses on education spending and productivity, a field is where nation'snowledge leaders.f the her paper is titled, now is a great time to consider the per unit cost of everything and education. speaking third is mike casserly who is executive

or a great city schools, the nation's primary coalition of large urban public school system since 1992. before taking that position, mike served as the organization director of legislation and research for 15 years. makes paper is titled managing for results in america's great city schools. we are privileged to have with us to terrific discussants today. up first will be kartik jayaram, a partner at mckinsey & co.'s chicago social sec or office. a critique focuses on economic development. since joining the firm in 2000 he has worked with a broad range of clients including social sec there i'm a public air, high-tech and industrial clients. and finally we have with us jose torres superintendent of school district said six. u-46 is illinois' second-largest school district with 53 schools serving tremendously diverse population of more than 40,000

students. dr. torres is also a 2005 bro to follow. with that, jim i will ask you to get us started. >> in the interest of time and because of the nature of the subject i'm going to forgo the usual early-morning efforts that kumar. and get right out there. my message is straightforward and i'm going to give it it just a moment. some of the things i have to say will not follow easily with some of the individuals in the audience. i know that from prior experience. so i just want to lay the groundwork by explaining that there is not a number i am using today which does not come from a united states federal government statistical agency. i didn't make up his numbers myself. and if you choose to, in some manner, challenge them then we will have to go back to the

budget or the at ces, etc. now here is my nieces. it's twofold. the united states education system roughly over the last 100 years has enjoyed a remarkable fiscal benefits. even when you control for inflation dollars per pupil have had an almost perpetual rise. when you look back 50 years ago and you look at today, you'll see that the per pupil amount of really about quadrupled even when you control for inflation. educators, myself included, have had a good compared to what is coming. we have had it good for a long time. at the first message. the second message is that there is emerging and almost

inevitable stream of conditions that render this past fiscal for two at pattern unlikely to continue, highly unlikely to continue. as i'll show in the last 50, 60, 70 years, where we have put our money isn't in people and education. we have hired many, many more teachers than would've been justified by a moment alone or by growth in gross domestic product. so approximately 16%, 65% of school expenditures are for the payment of professional educators. another 15% of what they do is paying the salaries of certificate in people of classified people. so about 80% of what schools spend is for people. and it is unlikely that any belt tightening, as rick suggests,

round by schedules or thermostats or elect drake meters. it just isn't going to do it. the money here is in people and that's where the change has to take ways almost assuredly. but the question is, how cannot be done in a manner which is not only fair but also as best we can render an assist more productive for the students? so here is a modest step backwards and then we'll go into the future. this slide shows expenditures per pupil back to 1920, almost to the present. and then it has another curve in which those expenditures per pupil are adjusted for inflation. one can see that even on a adjusted basis per pupil spending has had virtually never ended upward trend over the last 70, 80, 90 years. there are two interesting plateaus and mess. these are -- one plateau is right in the middle of the great

depression. for two years of school spending was stable throughout the nation. and then again in the middle of world war ii, school spending per pupil was stable throughout the nation. and then it resumed the rise that you can see here. now this just didn't -- these are national figures are virtually every kind of school district has enjoyed the same kind of growth over time. the department of education keeps statistics -- it disaggregatege cities with which mike casserly on my right is connected to the smallest school districts of the approximate 14,000 school districts in the united states, there's a high level of concentration in the big cities. the 25% of all students in the united states are in 1% of our

school districts. 50% of them are in 5% of our districts. the remaining 50% of students are spread or distributed across the remaining 95% of our districts. as you can see most of our school districts actually are quite small. and the big ones get her attention. but it doesn't matter what kind of district per pupil spending over the last 70 or 80 years has been going up in all of them. now here coming up is the point i want to make at the beginning and i'll emphasize. when you ask, for what has the school district spent the money? would've made public this? overwhelmingly, they have five people. they have bought the time of professionals and of class employees. so on my last and your last, the upward trending line is the number of teachers that we have hired over the past 50 years and it's now approaching 3 million.

in this graph on the right shows that poor people, the teacher pure people over the average of time. and we have had a start point some 50 years ago of about 27 pupils are teacher. today on average we are at about 14 and still have it down. some of you who saw this morning's front page of u.s.a. today, they have their usual informative graph and there was a poll across industries and individuals who thought that they were most understaffed. an included government and there and there was educators who believe that the endeavor in which they were engaged. they were the most shorthanded of all and they might he and i here to argue that today. it is just that it has gotten a lot less shorthanded over time.

now, in the paper i spend some time explaining why education has enjoyed this privileged position for so long. and there is a set of structural explanation and political explanation that one can read about. but the short-term answer here is that they are starting -- all of them are starting to evaporate. and likely we have this regrettable turnaround. we cannot expect this fiscal dividend in the future. so let me try to explain what's going to change this path. en route i will point out that education has held up very well relative to other sect errs on it comes to employment over the last 50 years. no other sector really has done as well when it comes to employment. we've increased personnel faster than the growth -- rate of

growth in gross domestic rot acts. we have actually taking care of education in this nation better than we've taken care of defense education spending and personnel increase faster than defense. but moving on into the future, in a sense the future is already here. i undertook an analysis where i divided per pupil spending into gross domestic product. now this is not education spending in the aggregate. this is per pupil spending. what i see is about in the mid-1990's, the percent that is allocated to reach people, each student schooling in the united states began to go down. now the overall amount of spending didn't turn down, though it but the amount we're allocating per pupil as a% of gross

domestic product has already started to trend down. and there's a set of conditions which i'll talk about, which i think will intensify this. in the paper, i explain the constitutional change, the constitutional provisions that are protected education for so long and state governments. but now there is a set of things on the horizon but i just don't think can continue this. the -- by way of quick summary here, the number of households in the united states with children is dropping dramatically. so if you just want to look at the politics of this i'm at the ability for schools to support themselves is going to change politically. but it's also the intense competition with building public or obligations. the infrastructure that we know

badly, our airports, rivers, our dams, our civic elegance, the infrastructure just calls for attention. the national debt is now 12.5 trillion mounting. when one adds up all the unfunded social security, medical care, prescription drugs and public employee pensions across the state, the estimate is that there is $100 trillion in unfunded liability about to break honest in the future. thes with us. let me emphasize where i began. the money we now spend isn't pupils and pardon me in peace personnel. it's hard to imagine we're going to save a lot of money by paying

attention to the 20% of the budget which goes for not people. so what do we need to do? in my judgment that we need some help taking certainly that will help you in the long when we've got to look at the way in which we pay our professional personnel in education. we've got to look at the way in which we distribute them. we've got to look for ways in which we can augment labor with capital. we've got to start looking for a means of technology can begin to supplement or augment what teachers do. and then if i had my way, i would try to change the mentality of all of us in education to something far more experimental where we could understand, like the medical profession, we continually must strive to find more effective ways to do our job and adopt a mindset of the fast failure. so my time is exhausted good and thank you very much. >> thank you, jim. that is a terrific start.

marquerite? >> good morning. so we know that the reality for many districts -- let me see if i can get this going here. okay, he is telling me to wait zoologists give you my preview then. [inaudible] the reality for many districts is that school districts are facing the budget cuts. we party heard about that. and so what you have are a whole lot of people showing up for work for a school district or advocacy groups or at school board meetings or in state offices or county offices, etc. etc. and being forced to spend a lot of money allowing a lot of time staring at dollar figures. and these may or may not be accounting or financial wizards, but they suddenly got to be spending a lot of time making decisions on where to make cuts. so what i've done in this

chapter is to suggest one tool that will help people wrap their heads around all these dollar figures and that is to break it down to the level of household finance come is something that we all know. and by that i mean per unit cost. so what i've done here is given six strategies for how converting cost into per unit cost can help district leaders do what they need to do now, which is to take a look at their spending and start to make cuts and think about priorities and so one. so the first one i wanted to talk about was the tool that rake in school budgets down into per unit terms can convey relative magnitude to someone just pulled three on the left there. i pulled three headlines time is readiness. new york was going to get a cut of 698 million. alabama, a hundred billion. sarasota county was going to make a cut up 40 million.

for all of us, including me who stares at numbers all day long i don't have a sense of which ones of those are big numbers and which are small, unless you pull out the district's budget or the state's budget or the county's budget and start looking at it. so what it would have and it is convert that into per pupil terms and you can see in new york at the time they were talking about a 256-dollar per pupil cut over $1000 per pupil in alabama and close to $1000 in sarasota county. so what you get when you start pulling these numbers out is the sense of the real magnitude and millions when you're starting to look at exponents and 0 cents hard to take a sense of what that really means. i think this entire presentation is probably worth committing one number to memory and that is that the average district in this country spends about $10,000 per pupil. so when you start to look at numbers that are close to a thousand per pupil you configure their minds those are pretty big

cuts. we're talking about 10%. and it's not just to think about numbers across districts, but in the example in red, this is a district close to me in washington state for the district a few years ago was looking at a proposal to spend $4.3 million upgrading the football stadium so it would also have a stadium ready track facility. and there was $4.3 million with a 50 year lifespan. and if you do all of us over 50 years that's probably a good number. i don't know. it takes a lot more numbers to figure that out. some analysts ran some numbers and figured out that per track student per year for the 50 years, this is actually 2000-dollar investment. in a district at the time is only spending about $8000. this was actually a lot of money, a large share of the per pupil expenditure for track student and they scrapped it. in a similar big dollar figure

kind of thing if you live in new york you might have read about the new york city area's data system which got a lot of news because it was an 81 million-dollar price tag at a time when they were talking about budget cuts. and i think the newspapers and most of the commentary acknowledged this was a good data system, but do we really have the money right now to spend $81 million on that. here again broken down to the per unit cost over the conservative lifespan for the data system it's about $8 per pupil. see get a sense that maybe the $81 million isn't such a big number there. so going onto her neck strategy, breaking down big numbers does more than just convey the magnitude that it also helps districts look for out of whack spending. and if you have followed some of the research i have done, i've spent a lot of time going into schools and breaking down all of the expenditures to find her pupil cost of different courses

and different activities. so sometimes i find things like the average expenditure for a math and english classes about $400 her pupil, but the average expenditure for maybe ceramics is double that at 800 or 900. and here is one bit of data that i've shown a few times in different places. but i went to a district and broke up the per-pupil class of different sports. and this is just staffing costs, so that the cheerleading uniform starting at the cost here. so you can see it really varies. in this particular district, cheerleading topped the list in terms of the cost per cheerleader, much higher even than golf. so with this kind of analysis does for a district is it allows you to look for out-of-pocket spending. in this district, cheerleading -- i will get mail for this on how i hate

cheerleading, but surely without a black relative to some of the other athletic opportunities. in addition to the idea in finding may be the ceramics class is not to eliminate these things. so i want to put that on the record. i'm not on a mission to eliminate cheerleading, but i do think there are ways that we can sometimes go back to find an activity that is out of whack spending and operate at lower cost. in this particular district, they did exactly that. cheerleading was offered as a class admitted to an afterschool sport which is offered at much lower cost, changed the stipe and did a much fewer things and brought him a cost of cheerleading by freeing up money that could go to budget cuts or to other services. and that is the same kind of thing. if you find her your photography classes ridiculously expensive, you might want to think of there other ways to offer photography sophisticates can study photography but not during the budget. at the same kind of thing is happening here. this is another district in the

east, where the cost per advanced placement classes is really double what we're spending per pupil on regular classes inside high schoo and when you break down the cost and look at that you start to take her to pieces, you can see one of the day driving yours is a much lower class size in the av class sizes. if we have enough to take the ap classes it turns out in this district and in the state that there is a cap on ap class-size that doesn't apply to regular classes. now might be a good time to revisit that captains on a relative basis it's really driving up the cost of the ap classes. so in our next, next to hear, the idea is to use per unit terms to consider trade-offs. and i think this is maybe the most important tool for district leaders, especially if you're dealing with the public or

special interest groups or other kind of advocacy organizations. the idea is that we have to make cuts so we can do this or this. rather than propose a cut and then wait for everybody to lobby against it. so in one example, we pulled them out without using nationally representative for as and class-size and salary info one and found that a very unpopular 4500-dollar pay cut for teacher was the equivalent of adding two pupils per class, which was the equivalent of eliminating one sixth of an aid for teacher, which was the equivalent of eliminating 2.5 hours of prep time for teacher. cost in per teacher terms, not per student because we are thinking about teachers have potentially been

one of the key audiences for thinking about these. so i'm not suggesting any one particular pet care, but rather by putting them out on the table i think that districts might be able to be a little bit more thoughtful about which choice they're making. and in fact, we've seen some districts make these kinds of trade-offs. and in a lot of the smaller east coast districts we saw trade-offs this last year made between layoffs and pay cut. and we can model that out and we do so when the paper. but certain districts were saying, you know, rather than do the layoffs, teachers with the vendor a payback part of their salary. you can see very much how many teachers that date. same kind of thing can be done with sick days, benefit rates, and so on and so forth. the two cost these things out on a per teacher basis empowers the teachers to consider what the options are and what the effect would be on

the next option is to look at per unit terms and when you think about school budget. our tendency when we implement cut is to think that we're starting from a bubble budget, all the schools are funded fairly, so when we're going to implement a couple implement a patch that is one library and from every school or so on and so forth. but the reality in most districts is spreading across schools is not even. and if you look at this chart, these are some schools i pulled out and remained from a district where the schools receive about $5000 per regular education students in different funds on average. but as you can see there are a handful of schools, the monastery program and the kimball programs that are actually receiving in the district resources more than the district average and a few that are receiving quite a bit last.

so implementing cuts it may be the case that one place to start is that rather than assume they are funded on a global basis to pull those numbers on a per pupil basis and then consider putting your cuts and in ways that are bubbling down those schools that are spending more than the average. in the last one but i will discuss for today is how converting cost into per unit terms helps communicate with the public to something that not everybody less to do, but really help strings budgeting process. and the idea here is that if you can put these numbers in per unit terms in the same way a talk about what trade-offs and communicate them out of the public, you might be up to more traction with some of their forms. and i thought i would bring you one example. one of the research studiesxteno which seniority-based layoffs result in more layoffs than a

seniority neutral basis for layoffs. so here's how it works. when you go to lay off teachers, generally districts are with the most junior teachers and they get laid off first. while the most junior teachers have lower salaries than the average teacher. so they might be making 30,000 or $40,000 a teacher with a district average might be $55,000. so if you need to make save 5% cut in your salary expenditures, you'll have to lay off more than 5% of your teachers if you're going to do it on the basis of seniority because he won't be saving that much money. so we quantify the extent to which that was true. what we found was for say a 5% cut you would be laying off 75 teachers per thousand versus 50 teachers if you are doing some kind of seniority neutral policy. obviously, seniority basis are pretty bad deep in district

policy but what we did see his arizona pass in a new lobster that prohibited the use of seniority basis alone to eliminate teachers and in part as a way to save jobs. so as you can see the information was a way that could rally some support for that change. and on that note i think i'll stop there. there is a lot more in the chapter of her interested in seeing what else we've done. >> marquerite, say a word about the budget stability point. >> on that note, what were finding -- but jim talked about a lot is the growth in expenditures because we are using our budgets and converting them to purchased items. and then we manage our budgets in terms of those purchased items which don't expand and correct with our revenues. but if you manage your budgets on a dollar basis, and a per pupil dollar basis and you allocate funds to departments and schools on a dollar basis per unit, what you'll find is

that your application will expand and shrink with your revenues were directly. so is just the basic idea that it creates some stability in your spending so your not perpetually back at the table with your red ink. >> okay, thanks. what i think it's terrific about marquerite's paper as it offers a concrete constructive way for starting to think about working with the challenges. mike's piece does exactly the same thing. m-mike? >> great, thank you, rick. and thank you for the option to speak. my paper is entitled managing for results in america's great city schools. it's very similar in many ways to what marquerite described, but our paper lays out a new tool that allows the nation's big-city school districts to compare themselves on a large series of key performance indicators and save millions of dollars by improving their operations relative to their peers. it's a good way to start this

conference because this new tool is indicative of how serious the nation's urban schools are about improving their effectiveness and efficiency just by the bad economy. and it is entirely in keeping with a series of initiatives undertaken by the council of the great city schools over the last several years to improve our performance both academically and operationally. we have initiated the trial urban assessment of nape that will include 21 districts out of the 2011 testing. we have initiated this key performance indicators project that i will be describing this morning. we've initiated are beating the odds theories that lays out annual state test score data for all of the cities. we have also been conducting a series of research by how some school districts have faster academic process and others. we've done on the ground technical assistance on both instructional and operational and management systems in the big cities and we've

consistently supported national standards. in fact, soon the council in conjunction with the american federation of teachers will be announcing a set of cities that will be the first pilot type for the new common core. we've launched these and other initiatives to spur reform and improvement in our big-city schools and the results are paying dividends as our math proficiency and reading proficiency rate have improved substantially since 202003. our key performance indicators project -- i'm not sure where the slides are for this -- okay. our key performance indicators project is in keeping with our data-driven focus. it is designed to improve management and operational efficiencies and effectiveness, save money and we deploy more resources into the classroom. and it is meant to help us resist the political instinct that is so strong and public institutions of all types to cut spending across the board in the name of equity one more thoughtful choices could be made

if better data were available. this project began some five years ago in a meeting of our organization's chief operating officers and financial operators when the districts themselves were looking for tools by which they could measure their noninstructional performance, compare themselves to each other and to whether non-education sectors, identify effective management and operational practices and make better, more data-driven decisions about how to deploy their human and financial capital. there were no such tools in public education however at the time, except in a very limited number of niche organizations and nothing like what we were looking for in municipal government. so we have invented the tools ourselves. the process over the intervening years involve the development and testing of prototypes, brainstorming, which indicators that a value to the efficiency of the organization, research on indicators in the private sector, development of

performance measures for each indicator and designing of methodologies for defining quantifying and aggregating data on each indicator all of which were put through a rigorous six sigma process. work teams from the city school systems were named and data were collected in a way that would ensure comparability. at this point, we've developed and collected data on some 227 indicators in four major functional areas and sev -- 77 corresponding power indicators. the four functional areas include business services, which also include food services, maintenance and operations, procurement, safety and security and transportation to my finance and budgeting, human resource operations and information technology. the slide shows the subfunctions in the number of indicators for each. the power indicators represent areas that super tenets boards and other senior policymakers can use to gauge districtwide

process and examine the core health of the organization. the kpi is our performance indicators are measures that managers and technical staff use to assess work in their respective areas. the report to produce include descriptions of each indicator come away as important, how it is calculated, a median value and range from high to low and what might affect the individual scores. let's run through three simple examples so we can see what this looks like and hopefully you can see his potential and power and let's start with business services and transportation. transportation is obviously important because districts are responsible for getting kids to school on time. the way of indicators that measure the degree of on-time revival of buses per pupil cost of transportation and many other variables. parenthetically as we were doing this work we found a dozen ways the districts consider themselves to be on time, including being 30 minutes late. [laughter]

you can see from the side that the per pupil cost of transportation in a major city school districts runs from $358 per child to $5056 per child. each bar in the grass is a real city with real data on the 2008, 2009 school year. obviously this is quite a range and may be due to all kinds of factors. one cost driver involved the efficiency of a districts use of its bus fleet near the slide shows the% of buses that are in operation on any given day district by district. the results show that the values range from 94.1% to 69%. the median is about 85% of all buses in use on an average day. the potential for reduced cost in this case are fairly obvious. if a district at 100 passes and only 69% for an operation on any given day it might be able to sell 16 in order to align with the median number of the expected rate of a depreciation and save $320,000, enough to

hire five extra teachers. the average large city school district, by the way, could easily have some 500 buses and save $1.5 million in moving toward the median. without these indicators however, districts might never know that it's fleet were out of alignment. let's take a look at another functional area, finance. financial operations are obviously important because they gauge district handling of taxpayer monies. one important indicator involves general fund balance. this is important because it signals an organizations ability to to handle unforeseen contingencies and she foa has a balance between 5% and 15%. one can see that they range from a positive 35.5% to negative 10.6%. the median for urban school districts nationally but he% well inside the recommended levels. still there are cost implications for individual districts. one of the school districts have a fund balance of 9.1%.

at a reduced asylum to the median of a percentage of redirect some $6.8 million into the classroom. in the case where the other 35.5% by reducing it to the median and could save over $79 million. another power indicator that i don't have a plan for and follows the average cost of processing invoices. this is second most commonly used accounts payable indicator in the dirt. the data indicates the values range from about 65% per annum for us to about $1.70, an enormous spread. the median is $5.19. the cost-saving implications are substantial. a district with an average cost of employees per $18 could save $136,000 for every 10,000 invoices processed if they moved to the 5-dollar median. a district with them 250,000 kits, which is fairly typical in

our organization could easily process over 315,000 invoices per year, meaning a savings of over $4 million. one final example, so you don't overwhelm everyone with numbers. this is human resources. this function is obviously important because education is a people business as jim indicated that it relies on having appropriately trained talent who shows up. one power indicator in this area involves a number of lost instructional days due to teacher at 20 of them. one could see that absenteeism rates range from pretty close to zero to some 11.1%, the median is about 6%. there are cost implications of fellow student achievement implications here of course. on the financial side, a district with 10,000 fte teachers anatomies of 11.4% could save about $230,000 each year by lowering its way to the median.

.. we have many, many more examples in these and other functions. again, some 227 indicators in all, all of which you can find at our web site at www.cts.org. it's a little hard to calculate the potential for total savings but we estimate that a district with auá@ rbrb)

look like they do and what they can do to improve sound. all of this is more than just interesting academic exercise for us to see if we can develop these indicators much less collect data on them from a large number of cities. the city school districts are now beginning to put this tool into use to improve efficiencies and save money. it obviously couldn't have, and a more important time. we are pleased in many ways by our ability to get this far in the process particularly since this work was done entirely pro bono with no financial support from any business, foundation or agency until recently with backing from the hewitt foundation. still we know to we've created something unique, cutting edge of an enormously powerful.

our next ups include fine-tuning our power indicators, extending the indicators into instructional operations, delineating more clearly between leading and lagging indicators, tracking trends on the indicators, developing with standards not just millions on the indicators, a benchmark our operations against other sectors, automating the data by the way we will roll this out live in march, conducting case studies on the operational practices underneath the indicators and configuring the data in such a way of death that we can work kmart asked what if policy and operation questions to see what the results might be. we also know that there are important policy and strategic questions that margarita and others are asking from the research. we are paying very careful attention to this and finally we are palace of the fact we've done this work ourselves. urban schools are not sitting around waiting for someone else

to reform us. we know that we are under enormous pressure to improve and we're doing everything we can to rise to the occasion have become a response to the pressure, operate more efficiently and teach your kids the high standards in these difficult economic times. the fact that we're doing so makes me very optimistic about the future despite the economic situation. thank you. >> thanks, mike. at least for me the data that my presence is terrific, the paper has a lot more of this and there's also a body of this on the web site which is probably available and in much more in-depth and in the full paper. kartik.

>> hello, my name is kartik jayaram, a partner at mckinsey, a consulting firm which does work and laura education. my thoughts today are actually going to be a reflection of what to encourage from the distinguished three speakers on my right and is based on the a very practical experience of having gone through what you just heard. starting with what jim described, my conversations with superintendents, and principles very much reflect when jim was talking about in terms of the pressures, they are facing today, and the pressure is there likely to face going forward. the thoughts that margaret and my career talking or also pretty interesting because they actually are very consistent with the practical tools that we are applying when we actually serve school districts today. four main points i will make. i think we have the slide up.

the mind passing me --? for maintenance -- points and. as jim pointed out, for most districts that we are talking to, the increasing pressure on finances on the revenue side and expenditure side will lead to significant financial cuts and pressures, the focus of this entire day, and we're seeing that in a real way. the second thing we will see in our work is there is probably no silver bullet. districts likely need a range of strategy is both on the instructional sign and the noninstructional side to really make a difference and address the financial pressures. the third thing is that cost and service are not mutually exclusive. this is an interesting point because it's assumed when you have to go after cost cuts and savings service will suffer, education will suffer, the

noninstructional services actually get worse. given what we are seeing in school districts, this is not necessarily true and there are lots of things one can do two actually think of this as an opportunity as mentioned earlier. the last point i will say is most school districts to make to go after this are making decisions which are not fundamentally based on data. two actually do this while, two actually take a real look of the financial cost savings that are possible, we would recommend a looking at operational effectiveness in cost savings to be as much a part of the reform agenda as a terrific work in education that the distress are doing. i'll talk about these four points in a little more detail but those of the broad themes i wanted to cover reflecting on the papers. i had a chance to read the draft versions and i hope you have a chance to read the final vens well.

so if you look at the first one, where the forces impact school spending, on the left side and the revenues in on the right side expenditures. pretty much everything on the page looks red because pretty much everything is essentially an increasing pressure on -- pressure on a school's finances. the federal want looks a little bit better but probably temporary as we all recognize and it's likely to get worse over time which we have looked at finances of school districts and pretty close detail. at the micro level they reflect what jim pointed out at the macro level. on the expenditure side if you break them out into four broad the pockets of noninstructional operations, benefits, procured instructional goods and services and instructional staff and programs, every pressure who see on those four pockets is one of the increasing issues and

increasing costs in finances. interestingly, these pressures are now being faced by the school district's budget by the people associated with so vendors to school districts are as much facing pressures as the districts of this is not a problem that is contained within the building but likely to affect people beyond and also eventually comes back to the building as well. what with so not new but what you do about it? we think there are eight key levels. i will go through each of them in just a little bit. on a less side of the four broad areas that it's a school finance system looks like the construction of, staff,. benefits in noninstructional operations, they are interlinked. attacking one of them will affect some of the other so thinking have mystically is particularly important. as we have looked at this we think the two levels. first is what we call strategic

sourcing and. this is not simply a negotiating with the vendors and asking for an extra couple of percentage points off. this is a letter which the private sector has employed for years and, which we think is underutilized in the public sector particularly in education. it includes looking at in a very fact based way how the costs of the picture is services and goods in district purchases. the second mike alluded to transportation optimization. the third is lean operations and efficiency. when operations mike began included to with will what six sigma was started by toyota and we think it's just as applicable to services, ibm is one of the main organizations in the services of iran's, very much applicable in education. it is applicable and in the instructional sign and noninstructional. it affects both cost and

services in efficiencies as well. when the fourth benefit program. this is not about cutting benefits there are in many school districts and, multiple benefit programs offered which look exactly identical but have different cost pressures to the district. there are also cases where simply marketing the benefits have very different results in terms of the call structure and the benefits themselves appear in a central office effectiveness which is looking at the central office spends and a staff associated with it to. in addition use of facilities. in particular in urban school districts with a declining enrollments and other issues like charter schools, use of facilities with with what is significant savings opportunity an opportunity we find. and what its performance management, this is enabling

noir -- investment performance management required for any of the other levers to work. my deluded to having a system to keep performance indicators and that any school district to look sad, follows, works with, and targets in a systematic way. performance management has historically and education and looked at as an instructional devices. we think it's just as applicable forming noninstructional standpoint. the last thing is instructional program effectiveness and efficiency. there are lots of programs which even if you took the same cost level and the same funding levels and for a given program with an efficiency and effectiveness and significantly improved. this goes to the point he alluded to earlier that if you think of this as an opportunity, this entire budget crisis, it can actually lead to significant

improvements in the attractiveness of how we conduct operations within the school building. so those eight letters smith, what's had the opportunity at stake? what we found is that it's actually quite significant and quite huge and can have a significant impact on the budget deficits that many school districts are facing today. i think jim in his earlier talk completed out there on average if i remember correctly would signify a budget cuts between five and 10% or maybe higher. we are finding that as you look into categories of costa will in the school district's budget you can actually capture savings and significant levels, at those levels or higher. if you look at the fourth broad pockets i pointed out and read the numbers on their, the percentages are significant ranging to as much as 30% in

some cases in different categories. the interesting thing about this especially in the noninstructional side is that as i pointed out earlier this is not necessarily about cutting service levels in each of these categories. and transportation and maintenance and so on is possible to achieve this without actually diminishing the servicing of debt to our peoples and students see in the school district. i will take one example, it's interesting i picked transportation to build on with my point. the last sign of the page essentially started with benchmarks. the top left is one i will call internal benchmarking which is for a given noir vendor will what is the cost per mile will which has margaret diluted to

per unit toy to look at acosta is probably the best way to do an apples to apples comparison. even for -- this looks at a different vendors for providing the same type of a service cost given district and you see huge difference in terms of cost for a district. you look at the bottom left. and actually looking at not just an internal benchmarking within the school district, it actually looks at benchmarking outside. looks at benchmarking for example with the private sector. there's something called a clean sheet costs we have developed internally which essentially is if he were to provide a given service in the most cost-effective way one and provided to will the sinning in profit margin iowa and then look at what you are actually paying for it the costs and astronomical in terms of differences. amorite inside you'll see what happens and how to go after it and what we found is

benchmarking tells you where to look, tells you the scale of the opportunity an inbounds the problem. which you got since then is to say how do you go about in one of the analyses one has to do to go capture its. i will go through very quickly -- what. >> let's wrap up. >> in 30 seconds, very systematic way to look is a five step model which starts with where to look building a detailed faq identifying webber's. identifying what the savings and effectiveness strategy is and how you implement. we think this is a time to sit approach to capture savings and i will close by saying five core beliefs on how you might go about this which is identified savings were as much interco part of the agenda as instructional portion, second cost and service levels are not usually exclusive, number three, operational efficiency cannot be delegated and as much about

leadership and by the superintendents and principals as at the granular level, change has to be urgent, it's unlikely to happen to a long drawn-out programs and much better done quickly and fast and then educational and agencies need to identify the capacity to go after and will have to look at the mine said to capture in addition. thank you. >> thank you. and speaking of the importance of leadership in all of this commonwealth dr. torres. >> morning, please to be here and i will make my remarks briefly with with regard to help to primarily setting context of any city school superintendent travis and specific to each of the paper's fifth. in general i would say that as you read the papers were especially mike and margarets as a superintendent i found them and very useful. they include tools that might be helpful for internal management and external public indication

one and jim is right. i have the greatest reaction who want to his paper but not because i don't agree that teachers especially when educators in general have the sense of entitlement mentality but because i think in comparison with the defense budgets to education budgets $600 billion to 90 billion this year and comparing outcomes in terms of where the student population has changed radically were 70 percent white population '70s to 55% in 2001 and lower whew, if platts out, i'd actually be pretty good. especially as you compare the investment of defense and with the outcomes that the defense budget has had. if you look at casualty's. why so with that women tell you a little about school district

46 in illinois. when forming a penny saved help schools tighten their belts while serving students better is not just a conference to come to. it's not a theory. we're living this right now. we have $400 million operating budget and 41,000 students, 5,000 fte, about half of those are teachers. the other operators support people who like bus drivers someone and we are facing and $50 million deficit next year. we have for unions and the teacher union contract is up in august before school starts, wouldn't you know, and the administrators receive no salary increases last year, nonunion employes received no salaries increases while their colleagues anyone in the union we had to fulfill our contractual obligations with. we also to create contacts six

years ago the district had a 40 million deficit which was really because of a over expenditures not because of the revenue problem so at all times when during this major crisis we're trying to say we didn't create this ourselves, we are part of a larger will threats happening in society. one also just to create contacts with our district had a history of strikes and would. as i can and i've been there a. have been as i talk to community members in centel about the problems they said the deficit and stripes in by the second month and hearing the same issues i said when was the last strike and they looked at me and said 1991 so it's been a generation my kids never experienced but that one was a significant one and that there were 20 days one of strikes someone. and then the last i am in

context sending is no child left behind was the target of 100 percent of students making the target will guarantee that all schools will quote to be failing so in the context of trying to create support 14 efficiencies as well as revenues you have an enterprise by the changing standards of that are defined by the federal government and widely publicized already a failing enterprise. so if i were -- on notice i will not have a power point -- we kept our point in our district. [laughter] eleven but that's an interesting thing so where do i quds? i would have entitled something like complexity, revealed or uncovered. one of the -- i will talk about four issues and one is contract obligations. i've already contacted obligated to certain language within contracts in these contracts

higher cumulative documents. they don't restart every year with a black page but there is a history behind contracts one that our purpose fall when the people of which and some of the administrators not obviously the superintendent wants to buy the very nature come and go, but definitely the board has commitment. this is a negotiated contract so for example one of the languages that was put in our contract recently when the last contract was that in class in grades kindergarten through sixth grade in a class reaches 30 students i'm obligated to put a pair indicator in the classroom. with so as i began to think about where do i cuts i might increase class size but have to cost in the lie to that of every one that hits over 30i have to

walk back to in the cost of a peer educators. how many more students would have to put in there to make expenditures worthwhile? and how many of you would teaching kindergarten class of 50 students five year-old son and so forth? we could go grade by grade level and say what is a threshold of a class size we have to look at? the second example from contracts are stipends. he would think that i have a $6 million or the stipends that are extracurricular and i were to look at creating my core values and i would say my core value is teaching and learning, where does sports and to that picture? where does the chess club and all those kinds of things enter? and believe me, when this year we made some major cuts and cuts when we called the team, a freshman team and second string teams, i had a board room full

of people to advocate for those particular students even though i was not cutting staff. i was still outside protecting the court. and finally we have usually been a day to march 15th or have to produce reductions in force notices. so if we have had not noticed people who they will not be returning back they come back and they stay for a year because we cannot think duet to win by the march 15th. that creates other issues for example love my have a state grant that i hired people and the state in illinois is $12 billion deficit will tell me that an there are not planning to pay an the grants but hired the people who. state requirements and contract negotiations force me to keep a second complicating factor is time. margaret mentioned how much

management is spending on budget issues and frankly of the 18 months i've been in the district, 15 months i have been with great attention to budget issues. so here is what is happening as a superintendent my cabinet is spending a lot of time on looking at the figures at the lines, thinking about the trade-offs, and then we get to announce them and can't announce too early because we have a poor media board who roomful of people because they don't see the entire picture so we have to announce a particular time. the people who are greatest affected by this don't have time to think through what we went through in months and months of deliberation. and so that's an issue. another issue is targeted touch horses across the board cut someone. in what we went after increasing service and reducing cost for example in illinois in my district certified nurses and

for able to reduce the number of certified nurses who come hire registered nurses so increase services and elementary schools by three hours of mayors services and had enough certified nurses. when it and we saved $500,000. he would think we would get accolades for that. the certified nurses were not real happy about losing their position so every quds one has a constituency will that we would love to be inclusive but happens who wants to be included in determination about which body you're going to lose one and so in a group of and a table of the question always is who are you going to hawaii remember the whole there are seven people in the boats -- two is going to be thrown off the island off the boat? two more things -- one is difficult choices that we face. recently we had made some budget

cuts in the previous plans and the fall came along the decision was whether to stop early childhood transportation or stop extracurricular transportations. so we value early tauzin and prevention, however, we are not mandated and frankly those folks are not going to come to the board as strongly as the extracurricular folks are so these are difficult choices. we have issues around to we comply with mandates, the state has a lot of mandates that cost us in finding. they will not find us and we have a civil disobedience. finally i would say that in terms of negotiations the contracts. usually the teachers who are on the negotiating teams are the senior teachers who might be retiring within two or three years and so when you talk about giving up a pay increase from a 3 percent pay increase next year or example, they're looking at

lifetime earnings, looking at the previous history with the deficit. they've spent 35 years in this organization and so they feel that they cannot give up in terms of their pension for the rest of their life so i just wanted two any sense creates the issue of complexity, reveal it a little more. i think the papers to help but the assumption is that where we lack is knowledge or tools, we do lacks some of the tools. what we needed is a very comprehensive approach is sort of the political astuteness to bring people who are not going to like what you want and the same side of the table. >> thanks voir. his point about particularly the complexity and some of the political and practical challenge us this is something we will return to at the end of the day. marty west is going to talk explicitly about these seven issues.

let me ask a couple questions and i will open it up for conversation with the audience. first of all, the jim he raised the question about a comparison made. you want to say why it may be useful to think about the military spending chairs as a metric or what are the limitations of doing so? >> the only reason i used to in the paper there is a comparison with defense expenditures over time and are also comparisons with other sectors of the economy, manufacturing, finance, transport, communication etc. in the only reason i brought those up is not that i would prefer we always be at war and that we always be spending more on defense than schooling, that's not my preference at all, but just to show that when education comes up against what i think is this curve pending set of conditions over the next 10 were 20 or 30 years, that education is not alone in this.

virtually every other segment of society, virtually every other segment of the economy has been facing the same things for logger. it's been going on longer. and i'm glad we've had the privilege position that's characterized as for the last 70, 80, 90 years but i fear is over and that's my only point of comparison. >> mike, you mentioned one thing. which i'm curious about. sounded like you haven't received a lot of interest in this particular initiative which strikes me as puzzling and haven't been interest at the federal government or among foundations and supporting this work. ay a couple words about why that might be or offer context on it? >> beats me. i don't know. there is enormous interest amongst the school districts themselves because it provides

an enormously powerful tool. we went five years developing this project and until the fuel that foundation stepped up with reasons support we did all of the work pro bono with teams of people from the individual school districts and programmers from microsoft who did the work pro bono. and transact communications in seattle did it pro bono. we approach lots of foundations in the u.s. department of education in corporations and the like to see about their interest in this, and we were repeatedly told terrific work, thank you very much for doing it, but we don't believe we are going to be supporting it. now, i hope that as the power of

these tools become more obvious, that more investment in them will come to play. but, we had to make a decision about whether not we are going to proceed with the development of these tools, something that we really needed or we were going to wait until we got the money to do it and we decided it was more important to proceed on inventing the tools, and not wait for others to come around to what we felt was the obvious. >> with that let's go ahead and open it up. we will have a couple of microphones coming around. to request an asking questions. first, please be kind enough to identify yourself by name and affiliation for those who may not know you. second, please ask a question. if we, if we run into that favorite deasy hobbit making a floor speech, with no question in sight after about 15 or 20

seconds i will give somebody else a chance. yes, sir. >> i made very sternly-- in the workforce in career development consultant. my question to mike and the other to the whole panel, to mike, as one who is developed passports for community college in state i really admire the nitty-gritty work you are doing. these measures are very viable as long as you don't bury people into many of them. to questions for you. to what extent do district to accounting differently? in terms of how they account for different kinds of expenditures and is that a problem in getting comparability? and related to that is to what extent have you been able to automated data collection so that the disparate data collection from disparate data sources is integrated into a common database with a common language and moving in the

direction of being real time, the feeding these systems can be very expensive. the other question for the rod panel archille stop? >> m. mike. >> i will be real quick. on the comparability think, part of what why it took us five years to actually get this done because comparability is a huge problem. it helped that we ran all of the process deray very rigorous process. that helped enormously. i also helps that what we did here was that we ask for the underlying data or the data on the underlying variables and did not ask the district to calculate the key performance indicators themselves. we did all the calculations with variable pfeiffer standardized ahead of time, so it helped our ability to get comparable data. on automation, this last data collection that i just told you about we had three rounds of

this so far, this last round of data collection was entirely automated. everybody submitted all of their worksheets on line, and when we go live with this process in march, districts will be able to tap into this manipulate their variables, see what it would take to improve their relative standing next to other districts and also develop dashboard's automatically that tells them where they are leading, where they are lagging, and assess where their district as a whole is moving on these key performance indicators. >> marguerite you do this work in a number particularly smaller districts. what kinds of challenges does this pose for you? >> accessing the data for sure is difficult and part because oftentimes what we are doing is getting information to look for all liars, and i would say that

the bulk of the information applies in the salary files, and if you think about it that way it is not that complex so to get the salary file sunstar to coat them and look through them, than that is where i say most of the information is. it is not going to be information on transportation and some of those but with over 80% of the money being spent on salaries of some sort in the district that is where i think the information is. >> is this something districts themselves are already doing or something they can easily do or what is the status? >> i think it is something districts could easily to. it is not what they typically do so if a district typically has a school budget or a district budget that he may book through, often school board did members look through them and they are often in binders and maybe 300 pages long. not that data. what we are talking about our salary files and a calculator where you can break things up.

a different kind of way of looking to reformation but something that you can do separately from flipping through those other pages. >> okay, next question. yes sir. >> jim snyder. my question is primarily directed to mark. to what extent you think your arguments are regional, that many members of school boards for example who don't have the capacity to do this? i know, i have seen many sophisticated businesses to get on school boards. i think they'll have the capacity to understand the types of comparative analysis you are doing but invariably i observed they don't do this type of analysis when they are on the school board. i was once on the school board. i got lots of comparative data analysis from other school districts. i can't say it had much impact on the decision-making so the question is, are you talking

about something that isn't being done and that is what is interesting or are you thinking this is an innovative type of argument? what is the nature? >> i think that is an important point because i don't mean to diminish the people on school boards by any stretch and i'm not saying any of these announcements i've done is difficult. smn janju could turn it over to the seventh grade math class and they probably figured out so it is not the need extensive training and expensive tools to do that but you are right, there is not the time or the focus or the energy to get that done because a lot of time school board members certainly are doing other jobs as a voluntary activity. i would say i have worked with a group of superintendents in a network in the pacific northwest that came to meetings every three months and shared information and brought salary files, where a lot of the data you see today came from.

so sometimes they would send me some information that i would take a look and say you might want to live here and sometimes they would pull out information themselves. in some cases it was the superintendent and in some cases it was the cfo and in some cases it was then equal the -- inquisitive meth minded person passed with doing that so i think it is right he does not the school members to have that level of time in concentration to get it done or is it necessarily their job, but i have seen that what starts to happen in districts it takes off and it gets done a lot and often it is the superintendent to get excited about it then then makes it happen in some way, shape or form. >> just two eddin one additional thought. i think may be for the reasons that the gym cited, we in public education haven't always had to think in this direction in part because of the revenue stream has been on an upward trajectory

on such a consistent basis that we haven't had to think so much about deficiencies in the way that we are now. this field that marguerite and us and karen halim i'll send the others are kind of pioneering here is being done in response to those pressures in order to present some more thoughtful tools for how it is we can improve our efficiencies, save money and not hurt the underlying services for kids. but, it is a recent and evolving field, that is for sure. >> for a moment i don't want to beat up on school board members either. but, i think the principle problem here our audience marguerite in mike isn't really school board members. the aid of 9,000 superintendents in the united states, there are a lot of districts that sure superintendents hen that is why

they are not 13,000, superintendents are almost never trained to think in a manner that the two of you have just exhibitive. that is in an unusual superintendent to his head that preparation and have that mindset. >> next question. >> thank you. i am with the-- industry association. most of the discussion seems to be focusing around marginal changes around existing practices. can you talk to the issues about some fundamental redesign of our school and instructional processes, the role of technology as part of that. an example might be looking more toward seedtime to fundamentally look at a zero based, baseline budgeting approach to redesign whether schools look like. >> markon actually i'm going to speak to that briefly but the next analysts focused on exactly the question you just put

forward so jim. >> to that briefly. >> mark, i think you have hit the nail on the head. if you would look back in time and see what one farmer does in the united states today, we feed our nation with fewer people directly engaged in agriculture then we educate our nation. agriculturalist become remarkably productive over the last 20, 3040 years. similarly, virtually everyone in this room remembers when check set to go to a federal reserve clearinghouse and it took three or four days. we couldn't begin to handle the financial system in the nation today without the automation. endless example for those of you who are really old like i am there used to be telephone operators and their the ones who placed your call. with the volume of telephone communication today that would be impossible. everyone would have to be a

telephone operator to make it work. this system of our schools has just got to begin to look for ways to augment laborer. i'm not saying replace it but it has got to supplement labor with some kind of automation, and around me, what i see is in reading. reading is an unnatural act for human beings. it is not like walking, it is not talking. reading requires a whole different neural network for humans to engage in get it is crucial for all of us. about 1% of children can learn to read on their own. most of this need instruction and we take that instruction at different paces and there are remarkable computer-assisted instructional programs now that this is students who were slow in reading, and gives them the attention that the classroom teacher cannot afford to give for johnny he was particularly slow. that is the kind of place where automation computers can really promote productivity for us.

>> that is terrific. jose let me ask you briefly, it sounded like before you were clearly a superintendent has both the inclination and some of the training to apply the kinds of tools we are hearing about but it sounds like you are suggesting in terms of thinking about transformative change, that there are obstacles even in the way of leaders who might be interested in pursuing those options. >> that is absolutely correct. we hear of people saying building the airplane will the plane is flying. how do we create a new structure, when children come and they are coming for the first time to this enterprise and the people who have the experiences in education all have their best way to do it. so, the issue is that everyone thinks that there an expert in running a school district, and people's had their own personal

experiences, and so, so that gets to the complexity of the enterprise. so, i would love to be able to create brand new school district out of scratch, and we are not able to do those things, and even, let's take class size. so, this is a large class size here so may be a classroom in a high school, we could go to the i have heard people say let's do 150 kids and in the classes and pay teachers 100,000, 150,000 for those people willing to teach those large class sizes. our schools have 30 kids come at the square footage for a school is 30 students so to create the transformation it is a major investment, and we haven't figured out the political will nor the process is to actually create new schools in this country yet. >> okay, jim.

>> jim glassman from the george w. bush institute. thanks for an excellent panel. i have just heard mr. torres but i thought you said that spending on education was $90 billion compared to 600 billion for defense which think the defense number is correct, but did you say 90 billion? >> i thought i had read somewhere. >> i think the figure is actually 500, or higher. 600 billion. >> from the federal government budget. >> that is a different story. >> that is a different story. for public schools, elementary-- >> that is right. just to make sure everybody is on the same page, the federal government provides an atypical year roughly 89% of k-12 expenditures. we spend roughly 600 billion nationally. currently, because of arra the

federal share is up substantially this current year. >> it is going to be about 50%. >> which is about 90 billion. >> unprecedented. >> okay, next question. yes, sir. >> i am sam. i am simply a parent. i want to speak from a parent's viewpoint. i see a lot of analysis here. it is all in business systems pretty much on running school systems, certainly very important. what i would like to see and maybe it is coming up, is the analysis based on the product, which a student achievement. so come if we look that student achievement and what goals produce better students are better product if you will, and then back that up, to what best practices will equal that student repost achievement.

is that coming up, or where is that in the analysis? >> mike? >> i am glad to ask the question. we actually have a very detailed kind of long-term study that has been going on the results of which will be out this spring that takes a look exactly at that question. and come compares major urban school districts across the country that have got an outsized gains on the national assessment of educational process and prepare their instructional programs and systems with school districts in major cities that have it, and then back that up with very detailed analysis of their instructional operating systems, finances, staffing patterns and the like, so there is more work coming up and more and more people are kind of thinking in these directions, so i suspect the research is going to get better sooner rather than later. >> how do you attends to approach these sets of issues?

>> it is interesting. barry similar to what mike said, we publish some stuff which actually is related but doesn't answer the question which is the achievement gap in tippen school districts around the country and how are different districts killing about closing that gap. the question i think you were asking is, are different districts, financial strategies have any meaningful impact on their achievement gaps strategies? that is really the question you were asking. and i don't think there is good research on that specific topic. what we are finding and i will give you a practitioner's do you which is not research based is that the districts that are doing very well on the operational side of the house, then to also be much more focused on the instructional side of the house as well so the best practices in the district that is doing one thing, it

tends to be transferable on the other side of the house as well is what we are finding. i want to point to the and the practices that correlate the financial practices to the economic performance. speak with that come into this question more broadly for what it is worth, my 2 cents is that because we don't have the kinds of granular analysis that we are seeing presented here today by mike and by marguerite and because of the consulting firms, mckinsey bct working with districts because they have that made this information public because the preparer terry data, in which they then share on a client bases is we actually, in a large scale don't have the kinds of analyses which let us say in any thoughtful fashion which of these behaviors are cost savings actually seem to drive achievement gains, so in some sense to incr question it is a great question but one of

the reasons we need the kind of thinking analysis we are seeing today is because we are not ready in a meaningful way, shocking is that maybe in 2010 to answer the questions u.s.. >> aye curry with that. a lot of the system so far are fairly proprietary in nature and you have to kind of hire the company in order to get access to the data or the methodology. i think one of the things we feel so good about and what we have been able to develop is the it is not proprietary at all. it is completely free and there was no external investment that went into it, so we are hoping that over time that people are going to have wider access to it and it will produce a broader effect. >> quickly. >> this will be my concluding remarks. as a look over this audience, in some ways rec, both 44 demint aei, i think we may have

mistargeted this conference. pie like everyone here, that is not the problem. leadership is going to count a lot here. who is it that is going to be able to take the ideas that we have heard here today, who can take these ideas and run with them, implement them and make them real? it is more likely to be superintendents than almost any other actors we can think about and that is where i think we ought to be giving consideration, to what kind of preparation, how can we bring these ideas to their attention productively? >> with that i would like to thank the palace corey terrific session. [applause] we are going to reconvene at five of for the next session focused on precisely the questions of how do we think more broadly and trends formatively about the cost structure?

[inaudible conversio ip. he will discuss his book on afterwards as part of the this is just under 40 minutes. >> host: you have been in that role since it was created in the early part of the last decade. so used to sing last decade.

she is here with us today to talk about the irs and some changes they suggest will start this morning about people who could prepare an income-tax is for you, the irs is commissioners announcing there will be new regulations that people must be trained and licensed and regulated. can you tell us more about what the thinking is? >> guest: this is an issue that my office identified in 2002 and recommended congress regulate what we called unenrolled preparers, people who were not attorneys, certified public accountants or enrolled agents who had to take a test to practice to demonstrate their competency and we identified there was a group of preparers out there and i have full disclosure, i used to be one of those prepare someone who was not an attorney or cpa, later became an attorney who had not necessarily any training whatsoever and i felt and the commissioner obviously agreed that we needed to tell america,

the united states taxpayers that when the wind to get their returns prepared that there were some minimum level of competency that people mats, and so the irs study this at the behest of the commissioner and they announced early this year, that they were going to start to regulate unenrolled return preparers as well as requiring those people who already had training to register with the irs. >> host: when will this take effect? >> guest: i think the thinking is sometime this year, preparers whether they are attorneys, accountants, unenrolled and bolt will have to register with the irs, get the number and over the next three years they will have to take an entry test, and then over time, do sort of continuing education so that they can stay on top of the changes in the tax laws which are always coming at this. >> host: is there any concern with confusion as people get into the high season of getting

their tax is done. we have heard about this and asking tax preparers, are you regulated, are you certification? >> guest: if people are asking their preparer that that is a very good thing, asking the question what kind of qualifications to have? that really is the whole point to make the taxpayer be able to be a better consumer, so that they have some kind of a insignia or some kind of indication that this person is taking those extra steps and ultimately if the taxpayer as the preparer and the preparer says not this year or next year, than that taxpayers should go somewhere else brinkley. host: we are going to talk to you about regulating tax preparers and we also will take other questions about the irs and their relationship with it, if you would like to pose those 202-- 202-73-0001 and independents (201)628-0205.

how many on a percentage basis to americans use prepares or use online services? >> guest: there are 50% of individual taxpayers to use paid prepares and then there's another 3% that go to some of the volunteer organizations that do term preparation and then there is 20 to 22% they use software, so you really do have about 80% get some kind of assistance with preparing their taxes, which is a pretty sad commentary on our tax system that that many people feel uncomfortable doing their own taxes. >> host: what kind of regulations to the makers of the software programs face? >> guest: it is a wide range of regulation and in my opinion probably not enough. there are, the report the commissioner issued noted that there are several major players in the market and they do a pretty good job of regulating

themselves, and then there are some minor ones. i think there are competition issues there if he were going to rely on the major ones to do their own regulation, but what we need to really be concerned about is the security aspects of it as well as the accuracy, and it is the taxpayer who is libelant the software company does not program things properly. the taxpayer could ask for penalties to be updated. we charge penalties for not getting the right answer but they still love to pay the tax. >> host: binghamton north carolina, joseph you are on the line please. hello joseph? you are on the air. >> caller: the question about the people who t own taxes, an accountant or lawyer or whatever, is this going to cost and the amount for these people? >> guest: any of bounds for these people? >> caller: yes, the tax

people, the people who do the taxes to-- they say they have to be registered? do they have to pay anything to be registered? >> guest: yes, they will have to pay a user fee and they will obviously have to pay for their own continuing education and when they take the entry test which is a onetime tennis, then they will have to pay sort of an administration fee. deese the telsat nothing completely worked out and will be worked out in the next couple of months but that is the general idea. the ideas that this would be self-sustaining. it would not require the government-- the fee itself that is charged on the prepares would cover the cost of running the program. >> host: do you anticipate then the cost of having a tax is done by these people will go up because they are now facing charges? >> guest: that is a very good question but the fee for the

enrolled agent is very small and we have had the estimates while this idea was bouncing around over the years of the fee-paying anywhere from $35 to $100 a year, so someone is doing a fair number of returns they can certainly spread that out so that it would be a dollar returners something like that. it shouldn't be very much. if someone is inflating their fees greatly, that might be something that tax consumers could certainly make their choices between prepares to see whether that is actually happening or not. >> host: washington d.c. next, james, independent line. >> caller: good morning. how does the irs regulate tax preparers who are not lawyers, who were not-- and to prepare taxes and just ask who is preparing to obtain their signature and their identity for the tax procures for the irs to regulate them.

how will they regulate from your recommendations? >> guest: that is a very good question in this is one of my concer w stands right now. there is a pattern, a model of doing tax preparation were the person at the taxpayer actually meets at the tax preparation shop, and may not be the person who signs the return and for those of you who don't know, anyone who prepares a return and is paid to prepare a return has to sign it so that we would be able to see that person's name on the return and whether they themselves are inaccurate and doing their returns, so the person that taxpayers actually meeting may not be actually the one who signs is that we can track and the irs is proposing right now not to regulate or track required non-signers to register and that causes me concern because i think many of the preparers are actually non-signers, there is meeting with the taxpayer.

they are the ones feeling in the information but someone who may have never met the taxpayer will be the one signing the return and that is do we will have in the system. i propose we include all of these repairs and the idea is that we have to ask taxpayers themselves to be the watchdog here. this can be actually, they can be part of our enforcement of this. if we need to do with public information campaign that says to taxpayers, you should not be going to anyone who has not registered before the irs in taken a test and got a continuing education and they will have a card. they will have something that we will be giving out that the taxpayer can say i want to see this and then if you see somebody who doesn't have it and they are putting themselves out as being competent to prepare returns you should go to someone else because that person has been demonstrated that they know enough to even pass a test about basic questions about return preparation so what we are

trying to empower the taxpayer to be able to make this more consumer choice. once we have got them in the system we can look it returns and see whether a particular preparer is having more errors in a particular area then other tax preparers are. and than that might mean we might need to go out and make a visit with pepper perrin sade do you realize you were making mistakes in this area? we want you to take additional education. if we see that preparer is doing something that is slightly shady, then the enforcement rent suppa and there would be penalties against the preparer, him or herself, for the negligence that they are showing or even the criminal activity that they are showing. >> host: last week and they don't have it here with me but some concern about this. it suggested the mom-and-pop shops who don't have the annual revenues would be hardest hit by this where is it would favor the great big companies to work taxpayers?

>> guest: this is where i come from, a former mom-and-pop shop. i did this for eight years before i became an attorney. if i'm not willing to go and get continuing education than i am really come i shouldn't be in business. if i'm not willing to get continue mastication increase my competency and provide a good product to the taxpayers from whom i am making my living then i really should close shop. that is precisely what we are trying to get that. what we want is for people to say yes i am looking forward to showing people that die and professional and that certification will say to the world you can be confident in my services. >> host: tilson, george, democrats line. >> caller: u.n. to my question earlier about the processing. i was going to say this is going to drive up costs to prepares and i wanted to know if it is still tax deductible--

>> guest: your income tax return is tax deductible if you itemize deductions and right now, as the law is set up, the income tax return would be a miscellaneous itemized deduction which is subject to 2% deduction for your adjusted gross income in theory few people are actually able to take that. know if you are self-employed and you had a portion of your return was for your sole proprietorship or you are in the business, the lori corporation in hiring someone to do a corporate returned and those are obviously deductible business expenses but for the individual it is a miscellaneous itemized deduction but because of the floor very few people get to take it. >> host: you brought with the report to congress which you are required to do and in it you alhat the irs says set up that the irs has a goal of answering, that is their goal,

71%. you were not very happy. >> guest: i don't think it is just me that is not going to be happy. 30%, the calls that don't get through won't be happy there. this is not something necessarily that is caused by the irs per se. we had a high level of service in 2007 and just so people, the listeners understand level of service i am talking about here means the percentage of calls for the taxpayer has set the want to talk to a live person, a like assistant and it is the percentage of calls that get through to that like the system. what we found was that last year, 69% of the calls from the taxpayers who said they wanted to talk to ally the system got through. in order to do that they had to wait on average nine minutes on hold. and two years before that we were at an 83% level of service. so what happened in those two years? it was the result of the lot of

things congress has passed, the economic stimulus things where we have the economic stimulus payments of 300, $600, the first-time homebuyer credit. just a lot more calls coming in. irs calls know where 95 million calls. last fiscal year. zoe, the volume of calls has gone up. the irs ascetical this year of 71.2% with a 12 minute wait time and that is the goal. last week, our rate was 68% and it was about a 13.5 minutes wait time, and i personally think that is way too long to ask any taxpayer in that they are going to be problems because of it because taxpayers won't get the right questions to-- answers to their questions and then they will have problems downstream. >> host: a few statistics from nina's office to share with you about the business of preparing

an tanker tax preparation. u.s. businesses spend 7.6 billion hours a year filing their common meeting their filing requirements. in 2006 the cost the taxpayers and businesses $193 billion to meet their filing requirements. the irs estimates there a 3.7 million words in our tax code and since 2001 there have been nearly 3500 changes to the tax cut. what does that all say to you? >> guest: that we need tax reform. we have recommended for years that congress really start the hard job of slugging through the code in simplifying it for the vast majority of taxpayers. and, instead what we are seeing is much more complexity being added in and it is not just the day to day compliance cost of this. there also is an erosion i think

were taxpayers as more things if put through the internal revenue code start believing that they are all these deals that other people are taking it bannack gip and they don't have the ability to take advantage of them so it goes to the fundamental fairness of the code. >> host: cedar rapids, iowa, republican line. marjorie. >> caller: can you hear me all right? the way you were describing this training, it was like being recertified as a teacher. in iowa we have debris certification program for teachers. so that they can keep up their teaching certificate and i just wondered, in the training of these tax preparers, is this a federal program or a state program or how does that work? >> host: marjorie, how you do your taxes? do you use a preparer? do you think this is a good

idea? >> caller: yeah, because then i don't have to study the whole thing because i have other things to do. >> guest: well, i think it is a program that will be administered by the internal revenue service for federal income tax preparation. there are some states that are already getting into or have been regulating return preparation for preparers and their state, and one of the things i think that we are going to have to do is work out coordination with the state so prepares are having conflicting rules to abide by both the federal rules and the stables and we will be working that out over the next few months. and i think the testing, the testing itself is going to be a one time thing. once you've taken the entry test will have a continuing education requirement where you have to take a certain number of hours or courses each year to keep up on the tax law and the testing will probably be administered. it will probably be administered

throughout the united states. by, we are not sure who. we will probably contract with somebody and then the continuing education we think different groups throughout the united states can come in and show us here is the course we are teaching. is that it could and of course? we will probably put of standards and we want you to cover this issue, this is to come of this issue and then you can go in your own community are on state and get the continuing education. the irs runs seminars run the country where prepares go to get their education so i think there will be a lot of different ways to meet those requirements. we need a lot of flexibility there. again the goal is to make sure taxpayers know the person they are going to do is preparing their turn, they are prepared to-- pate to prepare their return has a minimal number of competency zen has kept up on the loss of that is what we are trying to achieve.

>> host: marie on the democrats line. >> caller: i do h&r block for my taxes. i worked at walmart and i don't have a clue on how to do taxes. i have never tried turbo tax. somebody would have to help me with that. how do you prepare yourself? >> guest: how do i prepare my taxes? well, first i am a tax lawyer with a master's in taxation from law school, so i have that background in tax law but also as a said earlier i wasn't the business of preparing taxes so it is sort of in my blood since 1975. i prepare my son's taxes and every single year we talked about how i am going to show him how to do his and some of the

transition hasn't occurred yet, so i think that really speaks to just how complicated it is and in some, for many people it isn't necessarily complicated but they are afraid of that and i have many clients who could easily prepare their own taxes but they were afraid of making mistakes and they would rather go to a preparer in pale little extra so that they know it is right. what we are trying to do is make sure that the people who are doing that will actually be able to do it correctly. host: just under the law when someone uses a professional preparer who is kopel bullet there are mistakes? >> guest: there is a penalty on prepares for negligence or reckless disregard of the rules and regulations or even for aiding and abetting preparations silda preparer can be held responsible but the taxpayers on the puck for the actual tax and the interest that may accrue because you didn't pay that tax on time and the irs will

generally impose penalty for failing to pay the right amount of tax which the taxpayer then again say to the taxpayer i relied on the preparer who was professional and therefore please don't apply this penalty to me which the irs usually will abate the panel said that the taxpayer will still have to pay the tax in the interest. you can go back to a taxpayer and say you did something negligent in you should coverage, and that is between you and the taxpayer. >> host: virginia, eric independent line. >> caller: hey. first-time caller. >> host: glad to have you eric. >> caller: i have two little things. one, you can provide evidence against yourself in a court proceeding, and two, why is the tax code in existence for wage earners considering that is their only source of income at

all? i will take my answers off the air. >> guest: first of all the tax code is a constitutional. the courts have ruled on that over and over again. there was an amendment to the constitution to allow us to do an income tax by individual rather than working out a tax distributed by the state's four population. now, you know, whether, why does it go against individuals on income? the internal revenue code says all income from whatever source derived his income, and unless congress makes an exclusion in congress has not made an exclusion for wages. in fact congress has gone in the opposite direction. we didn't have withholding until world war ii and congress enacted the withholding mechanism which is the major way that most individuals have their taxes paid into the system from their paychecks, just taken out of their paychecks and paid by their employer. >> host: richmond va is next,

landed on the republican line. good morning. >> caller: i am in total agreement with the license preparer is specially in security bonds and the like and property and inheritance and all. you need a professional, but my opinion is, i am not very critical of them, but let's say you get a job and you have two children and you are married, head of household and the whole 9 yards, you go to work. december the 31st whatever, the internal revenue service has all the information they need and especially for a person-mag and send you the money because what they do is after three years if you don't file, they don't change it that you owe any money. they don't change it that you get any money back because they

know they are going to keep your money and i don't think that is fair. what i think they should do is the person who is filing a form is in a computer. they can check, recheck and doublecheck. if you make a mistake they already know it but i see absolutely no reason why-- justice temple 1040 without the other forms have to do that at all? >> you understand what i am saying? >> guest: yes i do certain that proposal has come up in many countries prepare returns for their citizens and send it out and say if you have any changes to put on it, or you are coming you have self employment income or you have capital gain income or loss, in the last few years that you fill-in additional part of the return but we know about your interest income, your dividend income and your wage income. and that we have a legislative

proposal this year about the fact that the irs doesn't get actually this data from the wage earners because the wage earner and comfort to social security. the w-2's goes to social security and social security census the information later and we don't get the bank information informing can use an telethought mesa we don't have that information until later after the filing season is over and one of our recommendations is that congress require the irs and treasury to study what it would take poorest to get the information that you were talking about, the w-2, the interest and dividend statements in the form that is very early so we could perhaps at least make the information accessible to taxpayers of a could go on line and you know create a return themselves, or the government could maybe to a return rick least we could check any returns coming into make sure we are catching their errors up front rather than

after we have sent out a refund to the taxpayer and now we are catching later on in the year, there's something come you got that you didn't report on your return and now you all not only the tax but penalties and interest. we will see whether that gets an attraction. it makes a lot of sense to me. it may mean we have to move the filing season that. most people are raring to go filing by january 15th this in as they get their w-2. we have a whole bunch of people that filed between january 15th and the first week of february. we won't have the information by dan tikrit returns for them are make the information available so we may have to look into pushing it back a little further and that requires some debate. what we are recommending is we start talking about that. >> host: the irs commissioner was our guest on newsmakers our half-hour interview program, and last sunday and he was asked about the 71% target rate for

answering citizens calls. here is what he had to say. >> i understand from this report is the irs. >> host: lucky meeker service goal only 71% of the people who call the irs will actually be able to get through to a real person. why such a low percentage? >> let me talk about service in general. first of all with every irs program whether it is a service or enforcement program i believe we can always give better. the report you are referencing talked about some declining service levels. this last two years as compared to years before. to put it in broad context i try to make sure we run. good service channels and when i say channels i mean phone service, web service, service over the internet, watkin service as well, the paper that goes back and forth between taxpayers and irs. are phone levels of service that decrease in the last couple of years. to give you a sense wide demand

is really exploded. on average we get about 65 million calls every year. two years ago when we send out economic stimulus checks to everyone we had 150 million calls. last year we had 100 million calls a week and though our levels of service were decreasing, we were answering in servicing more taxpayers than ever before. we went from 35 million calls to 40 million calls answered. plus could you have anything more you would like to say? >> guest: yeah i do actually. first of all commissioner showman, a report directly to him but i'm appointed by the secretary of the treasury and the time required by congress and the internal revenue code to be the voice of the taxpayer inside the irs and we acknowledge all of those challenges, but from a tax pair perspective, if the taxpayer is saying and i think many taxpayers are uncomfortable getting substantive tax

information from the internet, there are, for their accounts, for their legal issues, just for tax questions, for complicated things, what is happening, i've got a letter from the irs, what does this mean? they want to talk to a live human being and it is incumbent on the tax collector to answer the phone. a former commissioner, charles rossotti them in he suggested me for this position broke in a book that he published a really great quote watusi fail to recognize why anyone would not pick up the phone and talk to someone who is trying to pay them money. i think that that is really my point. it is not to beat up the irs. it is to highlight the fact that 71.2%, 30% of the taxpayers are not, or the calls are not getting through. they have to wait 12 minutes. i would make one other point. the same people who answer the calls that the irs on the main

lines are the same people who process correspondence so you get into a cycle. you make a call, first to write a letter to the irs, you send in some information. the irs does not acknowledge that letter. it just sits there so you call the irs but you back to wait 12 minutes to get through to find that with the virus got the piece of paper you senton so you don't get through so then you send a piece of paper again which again sit somewhere because we don't have enough human beings to process but the paper in the phonecalls and then you colligan. then it just goes downhill from there, so you get into this debt spiral, and then finally the taxpayer gives up. so, we can talk about the reasons for why this is happening and i agree that the volume of calls is gone up been part of my messages that the irs needs to be funded to the level that we can answer 85% of the calls within five minutes because we know from our surveys thatminu ts and after that they

start hanging up. >> host: next telephone call, fairfield ohio on the democrats line. >> caller: good morning. thank you for taking my call. my question i think this is going to be helpful but for an individual, do you have to go through training before filing or there will be a penalty if you go and file? that is the question i have. >> guest: if you are preparing your own return there is no need for you to go to the additional training unless you want to. there are a lot of good software packages out there that's as i said earlier the irs is looking at, what kinds of standage they need to set for the software packages to make sure they are as accurate as possible but that they walk you through the

questions and answers, so that you can have reasonable competency of gotten the right answer. if you are like me and you sit down with all the publications and things and try to prepare the return, you know you have to do some reading yourself but the irs actually has very excellent publications. they are not easy to navigate. i have recommended the irs-- create a template on the internet where you don't have to pay anybody. you can file directly with the ireton for each line you would be able to go to the instructions for that line and if there was a publication that was explaining what the issue was, then you could click on the link to the publication and you wouldn't have to pay anybody and it would do basic math and make sure you would add things up correctly and in that the irs now has something called fallable forms so if you are inclined to do that, you can actually phil those forms. the problem is, my understanding

is you cannot save their return to your own computer so somebody has got it somewhere and that makes me nervous and i've been advocating taxpayers be able to save the return to their computer for their own records. >> host: arcadia, florida, richard. good morning on the independent line. >> caller: good morning susan, good morning enough. i disagree with the tax code thoroughly and completely. first of all the constitution says taxes should be directed proportional. to be able to control the people -- there are 20 to 40,000 stages to the tax code. we can make a criminal out of just about anybody at any time if we want to. and i think that your understanding of the law, you are leaving something out. the supreme court ruled in 1924

that income did not include wages or salary. it was investment income and it did not give the legislature or the irs the authority to tax wages or salaries. now, congress, they have decided to ignore that ruling and so have the lower courts, and but my question to you is, secretary of the treasury, tim geithner refuse to pay his taxes for four years and got away with it. and that he didn't even fill out a 1040. would you please comment on that? >> guest: first let me comment on the constitutional arguments. i have to disagree with you. i have read those cases as a lawyer. i have read those cases and i've read them carefully and i guess i have to disagree with you and i think the majority, not the majority but all of the courts and opinions i have read actually up hold the internal

revenue code as it is today. that is not to say it can't be vastly improved and that we need tax reform desperately and i am the first person to say that. i cannot comment on a specific taxpayers case. i am bound as an internal revenue service employee to not speak about individual taxpayers take-- cases. it is a criminal offense and i would lose my job if i discussed individual taxpayer casus-- cases. anyone really, in my own organization we work about 270,000 cases a year for taxpayers who have problems, and i am not authorized to speak about them unless they have given me a specific written waiver in which i can speak about them and secretary geithner has not done so. >>host:little rock, arkansas, last question. charles. >> caller: nina come every

year they submit the same thing to prepares and come up with ten different answers to prove one thing. it is not for prepares. it is the code that is entirely wrong. when they start and they get rid of the irs, and they have a federal sales tax as a fair tax book, it asks and explains. them in from florida i believe was correct but instead of getting rid of the entire irs, does not mean your job to it is not going to be fair to anybody so we go to the fair tax and do what the prepared textbook says and it will work. lindh by the way, there is no tax man that i have ever talk to that will give you the same and will tell you exactly what he believes. >> host: charles, we have got

to go. we are out of time charles. thanks for your question. >> guest: well, as far as a sales tax, i not designated to speak about tax policy but what we did write about this year in the annual report to congress was we did a study of value-added taxes which is a sales tax which is part one of the fair tax, a version of a value-added tax and be looked at how it would be administered and how were these things that ministered around the world and for people who are saying there would be no irs, that is just a misconception. there is someone there, some entity collecting this tax and i am very much a pragmatist in one of the things we have learned and that been studying all the sales taxes including state sales taxes is that they are all sorts of exemptions in these taxes, so the complexity what i call the complexity creep happens very early in these taxes. they may start out very