Testing Companies Mine for Gold

Illustration: J.D. King

There’s gold in them there tests.

Thanks to the testing mandated by the federal No Child Left Behind (NCLB) legislation, private companies are mining the testing field with all the power their accountants, test-makers, and marketers can muster.

States are likely to spend $1.9 billion to $5.3 billion between 2002 and 2008 to implement NCLB-mandated tests, according to the non-partisan Government Accounting Office (GAO).

Those GAO figures cover just the direct costs of six years of developing, scoring, and reporting the tests—which is performed under contract with private companies. Add in indirect costs, such as the amount of classroom teacher time devoted to coordinating and giving the tests and, increasingly, preparing students with ongoing “practice” tests, and testing experts say the figure could be 8 to 15 times higher.

The amount of education money devoted to standardized tests is only part of the problem. Invariably, the private testing companies that control standardized testing operate behind closed doors with little to no public accountability. They function as subsections of multinational conglomerates that view the U.S. testing industry as just one tentacle of publishing and entertainment empires that span the globe.

“There’s very little oversight of the testing industry,” notes Walt Haney, an education professor at Boston College and a senior researcher at its National Board on Educational Testing and Public Policy (NBETPP). “In fact, there is more public oversight of the pet industry and the food we feed our dogs than there is for the quality of tests we make our kids take.”

Where’s the Outcry?

There has been little public outcry over the fact that private, multinational companies operating beyond public oversight are determining which students, schools, and districts in the United States are deemed “failures” and which are deemed “successes.” Given the secrecy that shrouds testing company operations, information is negligible. What the public doesn’t know, the public doesn’t complain about.

Critics of standardized testing also point to a third problem beyond the amount of money and the secrecy. That’s the problem of missed opportunity. There’s little doubt that the Bush administration’s obsession with standardized tests as the sole determinant of school success has undermined reforms that focus on teaching children to think and to do more than fill in circles on test forms.

“The amount of money spent on standardized testing is not the real problem,” notes Monty Neill, executive director of the Boston-based group FairTest. “The real problem is how it distorts teaching and learning.”

The Testing Explosion

NCLB, introduced two days after George W. Bush took office and passed a year later, instituted an unprecedented level of federal mandates for testing public school students. The mandates built on bipartisan support for a corporate-influenced agenda of increased standardized testing. But NCLB carried that agenda to new levels, both with the number of tests and the harsh sanctions for those schools not meeting predetermined levels of test progress.

NCLB requires annual testing of students in third through eighth grades in mathematics and reading or language arts, and testing once in high school. Beginning in 2007-08, states will also be required to give tests in science at least once in elementary, middle, and high school. All told, there will be 17 NCLB tests each year for school districts. This translates into unfathomable amounts of school time devoted to standardized testing and teaching to those tests. It also creates untold business opportunities for the companies that produce the tests. (If you add in district- and state-mandated tests on top of NCLB requirements, and the growing number of “practice” tests given to students so they will do well on the “real” tests, the number of tests schools must administer skyrockets.)

Shrouded in Secrecy

Ironically, although Bush has used the rhetoric of accountability to justify NCLB, the finances of the testing companies are almost impossible to uncover, the tests themselves are generally not made public, and mistakes in the tests often come to light only when angry parents, students, or school administrators threaten to sue over mistakes in scoring. (See sidebar.)

While the public knows little of the testing companies, lobbyists have ensured that legislators are well aware of those corporate interests. Following Bush’s first election and his unveiling of NCLB, testing company representatives descended on Congress to push for the type of standardized testing that Bush had made so popular in Texas.

“I’ve been lobbying on education issues since 1982, but the test publishers have been active at a level I’ve never seen before,” Bruce Hunter of the American Association of School Administrators said at the time. “At every hearing, every discussion, the big test publishers are always present with at least one lobbyist, sometimes more.”

And of course, there are the personal connections between the Bush Administration and the testing industry. A January 2002 article in The Nation points out that the Bush administration has a particularly “cozy relationship” with the testing company run by McGraw-Hill. The heart of this relationship, the article notes, “lies the three-generation social mingling between the McGraw and Bush families. The McGraws are old Bush friends, dating back to the 1930s.”

In fact, on the first day he assumed his job at the White House, Bush invited Harold McGraw III into his office, according to The Nation .

The Testing Companies

Three companies have traditionally dominated the market for developing tests: Harcourt Educational Measurement, CTB McGraw-Hill, and Riverside Publishing. All are part of larger conglomerates, and their financial data generally are not reported separately from the controlling corporation.

A fourth, little-known company, Pearson Educational Measurement out of Iowa City, Iowa, has significantly increased its market share in recent years. According to the Dec. 1, 2004 Education Week , Pearson has for now overtaken Riverside as the third main testing company.

With the testing frenzy engendered by NCLB, the testing industry is going through a shake-up and newer companies are competing for state contracts. Some of the newer players: Measured Progress out of Dover, N.H., Data Recognition out of Minnesota, and Educational Testing Service based in Princeton, N.J.

“It’s a very competitive landscape right now, and I’d say it’s undergoing a fair amount of change,” Jeff Galt, president and CEO of Harcourt told Education Week .

According to the Education Week survey, CTB/McGraw Hill currently dominates the market, with contracts in 23 states. Harcourt Assessment has contracts in 18 states, Pearson in 13, and Riverside in 12. The survey does not indicate the dollar amounts of the contracts or the number of students tested.

As with any business, the testing companies are driven by the need to make profits, not to improve education. They will do what the market requiresthem to do—nothing more, nothing less.

“These companies are really only interested in making money, and under NCLB they will make more money, while essentially remaining unaccountable,” notes Neill of FairTest. “In other words, you keep the pain public and you privatize the profits.”

Following is a brief summary of the major companies.

Harcourt Assessment

Harcourt publishes the Stanford Achievement Test series such as the SAT-9 (not to be confused with the SAT college entrance test). In 2002, more than 15 million students took the SAT-9, according to a special on “Frontline,” the PBS program.

The company is based in San Antonio, Texas, and employs more than 1,200 people at its headquarters. Among its other products are clinical tests, such as the Wechsler “intelligence” tests. It is affiliated with the Harcourt book publishing companies, which range from Harcourt School, publishers of kindergarten materials; to Holt, Rinehart, and Winston, publishers of middle- and high-school materials; to Harcourt Trade Publishers, which publishes novels.

But that’s only the tip of the conglomerate iceberg. All of these endeavors are part of Reed Elsevier, a London-based publisher that has a variety of separate legal entities, subsidiaries, associates, and joint ventures. Reed Elsevier is also known for its legal products such as LexisNexis, medical and science publications, and more than 130 business-to-business publications, ranging from the entertainment industry magazine Variety to Luxury Home Builder to Soho Today .

In 2001, Reed Elsevier had $5.6 billion in sales, according to “Frontline.”


CTB/McGraw-Hill is best known for its TerraNova tests, especially its Terra-Nova CTBS tests for grades one to 12, and its California Achievement Tests (CAT). The company currently leads the testing industry in terms of number of state contracts, and says that it serves more than 15 million students in 8,500 school districts in all 50 states. (Some contracts are with districts, not with states.) Like Harcourt, the company is part of a larger conglomerate; its parent company is McGraw-Hill, based in New York. Among the general public, McGraw-Hill is better known for enterprises such as Business Week magazine and Standard & Poor’s, the financial and investment analysis company. It also owns four television stations. Overall, it has 280 offices in 40 countries.

For the nine months ending on September 30, McGraw-Hill had revenues of $3.84 billion with net profits of $566 million, according to Reuters.

If these numbers aren’t enough to make you realize that the testing business is big business, consider the pay for McGraw-Hill president and CEO, Harold McGraw: $3.14 million in 2003.

Like many companies, CTB/Mc-Graw-Hill realizes that developing and selling the tests is only the beginning of the testing goldmine. These tests also need to be scored and reported, and then districts have to figure out how to store and evaluate data over several years in order to prove they have made the “Adequate Yearly Progress” that NCLB requires. Hence, there is an explosion in scoring, reporting, and database services as well.

In June, CTB/McGraw-Hill acquired TurnLeaf Solutions, “a national provider of customized online reporting and data analysis.”

Pearson Educational Measurement

Pearson was previously seen as a niche player emphasizing data processing and scoring of tests. In 1968, for example, it began scoring test items for the National Assessment of Educational Progress (NAEP.)

With NCLB, Pearson has begun to develop a range of services that also includes test development. Pearson touts its ability to quickly turn around score reports as one of its advantages. According to Education Week , in Texas the company turns around results for some high-stakes tests in five to seven days.

Riverside Publishing

Riverside, based near Chicago in Itasca, Ill., is best known for its Iowa Test of Basic Skills (ITBS). Approximately four to five million students in eight states took the ITBS in 2001, according to “Frontline.”

Riverside also publishes a variety of reading assessments designed to meet the “Reading First” phonics-oriented mandates of NCLB, which will provide federal dollars only for specific reading programs. Among the materials being promoted by Riverside are the Gates MacGinitie Reading Tests and the Basic Early Assessment of Reading (BEAR, with a silly-looking bear as the trademarked product icon).

Riverside has one of the most-well-known corporate parents: Houghton Mifflin Company, which is owned by HM Publishing Corp., which is owned by a consortium of private investment firms comprised of Thomas H. Lee Partners, Bain Capital, and funds managed by the Blackstone Group. Company press releases say Houghton Mifflin has more than $1 billion in sales annually.

Houghton Mifflin is also venturing into the database field. In December 2003 it bought Edusoft, a San Francisco-based company that provides web- and computer-based tests—and databases to store test results. Among its marketing promises: Edusoft can help classroom teachers develop “mini tests” that will gauge how close students are to passing the state tests. Edusoft’s website says that more than 300 districts are currently using its services to comply with NCLB and that the Edusoft data warehouse currently stores more than 100 million student scores across more than 500,000 assessments.

Not to Be Forgotten . . .

Given the NCLB-driven explosion in standardized testing, smaller companies are also trying to increase their market share. One of the most successful has been the nonprofit Educational Testing Service, best known for the SAT college-entrance exam and its Advanced Placement program. In 2003, for example, ETS flexed its power and won a three-year, $175 million contract to oversee California’s testing.

There are also companies that hope to make their money on scoring the tests. The federal GAO report on state spending on NCLB assessments from 2002-08, for example, used $5.3 billion as a high-end figure for tests that included essay or open-ended questions. If only multiple-choice questions are used on a test, costs could fall to $1.9 billion.

The reason is not so much in the tests as in the scoring, administering, and reporting. The GAO report, for instance, notes that in Colorado, developing the tests accounts for only 11 percent of the expenditures for the state test, with the remaining 89 percent going for test administration, scoring and reporting.

Open-ended and essay questions—which require more analytical skills than multiple-choice questions and which are considered educationally more sophisticated and worthwhile—cost far more to score. In Massachusetts, which the GAO says uses more open-ended questions in its tests, the cost was about $7 to score each test in 2002. In Virginia and North Carolina, which used mostly multiple-choice tests, the cost was less than $1 per test.

Given the financial crisis facing most state education budgets, and the consistent complaints that NCLB does not provide enough federal money to cover test costs, it’s not outlandish to predict that financial pressures may force states to adopt dumbed-down multiple-choice tests emphasizing rote memorization and regurgitation of disconnected bits of information.

Which, of course, the testing companies will be happy to provide.

Barbara Miner (barbaraminer@ameritech.net) is a freelance writer and former managing editor of Rethinking Schools.

Winter 2004/2005