BUSINESSWEEK ONLINE : FEBRUARY 7, 2000 ISSUE
COVER STORY

Going to Bat for Vouchers
Wal-Mart heir John Walton leads a crusade for taxpayer-funded school reform

When it comes to education, billionaire John T. Walton is as iconoclastic as his famous father, Wal-Mart Stores Inc. (WMT) founder Sam Walton. In fact, Sam would have applauded John's philosophy for fixing America's public schools: Experiment with new ideas, and let consumers vote with their wallets.

While that's hardly revolutionary stuff in retailing these days, Walton's zealous pursuit of competition in education puts him at the center of a national debate on education reform. His deep-seated belief in taxpayer-funded vouchers--which allow parents to choose even private religious schools--has made him a leading foe of teachers' unions and civil liberties groups. But after spending millions of Walton family dollars on education reforms, including charter schools, scholarships, and teacher training, Walton says he is convinced that taxpayer-funded vouchers must be part of the reform mix. ''Most of the serious reform efforts, including charters, were not implemented until voucher legislation became a serious prospect'' in the 1990s, says Walton, who attended Bentonville (Ark.) public schools and whose son goes to a public school in Wyoming.

A college dropout who once worked as a cropduster and a boat builder, Walton, 53, seems an unlikely leader for this educational revolution. Shy and reserved, he normally shuns the spotlight. And although he holds a stake in Wal-Mart that's worth some $20 billion and sits on the company's board,

he has no operating position. Still, it's his name as much as his money that helps the voucher effort. ''Having someone like John Walton in this movement makes it easier for other business people to enter the fray,'' says Clint Bolick, litigation director of the Institute for Justice, a conservative group that promotes vouchers.

Certainly, Walton is putting his money where his mouth is. Last April, he ponied up $50 million to help Theodore J. Forstmann kick off the national Children's Scholarship Fund. Modeled on other private voucher efforts that Walton and Forstmann have backed, the fund drew 1.25 million applications from families around the country for 40,000 four-year scholarships that allow poor children to attend private elementary schools.

Critics call the private scholarships a stalking horse for publicly funded vouchers. And Walton concedes as much, insisting that private vouchers will never go far enough. Only with publicly funded ones will ''we secure the future of charter schools and all the other reforms,'' says Walton. At his urging in 1994, the Walton Family Foundation gave $2 million to expand CEO America, a group that supports private scholarship programs around the country and lobbies for public vouchers.

''MINOR OBSTACLE.'' Despite the ample funds, voucher supporters suffered a serious setback in December. A federal judge ruled that a voucher program in Cleveland, where most of the children signed up to attend religious schools, violated the Constitution's separation of church and state (table). They're allowed to continue, pending appeal, but both sides predict that the case will land before the U.S. Supreme Court for its first ruling on such plans. Meanwhile, the Wisconsin Supreme Court upheld a similar program, while state supreme courts in Maine and Vermont have ruled that voucher programs must exclude parochial schools. Walton says he is not disheartened by the Cleveland decision. ''There have been so many successes in the effort to empower parents across the country that the decision has to be seen as a pretty minor obstacle,'' he insists.

Detractors argue that Walton's voucher efforts, public and private, undermine the very public schools he claims to want to save by siphoning off resources and motivated parents. ''Vouchers don't provide effective, fair competition'' for public schools, says Elliot M. Mincberg, legal director of People for the American Way, a civil-liberties group in Washington, D.C. He argues that private schools can choose their students and keep out those who are toughest to educate. ''Schools are not like toothpaste. No toothpaste chooses its customers.''

BACKING OFF. While Walton doesn't agree with his critics, they have prompted him to back away from one investment. In 1997, Walton stepped down from the board of Tesseract Group Inc., a struggling for-profit, and sold his 3% stake at a $1 million loss after critics accused him of pushing vouchers to potentially funnel public money to his for-profit investments. He now says he won't be involved in such for-profit ventures so that others won't confuse his motives.

That stance could soon force Walton to leave his nonprofit School Futures Research Foundation, which operates 10 charter schools. The San Diego-based group, backed by nearly $10 million in Walton money since 1994, is planning at least 14 new charter schools by 2001. But to expand as quickly as it would like, School Futures may become a for-profit entity, able to tap the capital markets. At that point, Walton says he'll step out. Look out, voucher opponents. That could leave him more time for his other favorite reform.

By Wendy Zellner in San Diego

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