THE TEXAS MIRACLE FRAUD AND WHY BILLIONAIRES DOUBLED DOWN: A McKinsey-Style Deep Analysis
Food for thought: THE REAL COST of ED REFORM
"They call it 'school choice,' but what they're really offering is the choice to convert public funds into private profits."
"Education reform has become a Trojan horse—wrapped in the language of innovation and equity, filled with venture capitalists eager to extract value from our children's futures."
"When hedge fund managers suddenly develop a passion for urban education, we should ask not what they're giving, but what they're taking."
On Standardized Testing:
"The testing regime didn't emerge from educators seeking better pedagogy—it emerged from corporations seeking steady revenue streams and data mining opportunities."
"Every 'accountability measure' is a new consulting contract, a new software license, a new training module to purchase. The tests aren't measuring learning; they're manufacturing dependence."
On Charter Schools:
"Charter schools promised innovation but delivered fragmentation—breaking apart unions, stripping away oversight, and handing public dollars to private boards accountable to no one but their investors."
"They don't want to fix public schools; they want to salvage the real estate and rebrand the enterprise."
On Technology & EdTech:
"Silicon Valley sees education as the ultimate captive market—a generation of mandatory users, paid for by taxpayers, with minimal regulation."
"The chromebook in every hand isn't liberation; it's platform lock-in starting in kindergarten."
On Language & Framing:
"Notice how 'students' became 'consumers,' 'learning' became 'outcomes,' and 'schools' became 'delivery systems.' The vocabulary of the marketplace has colonized the vocabulary of learning."
EXECUTIVE SUMMARY
You’re asking one of the most important questions in modern education policy: Why did politicians and billionaires continue funding education reforms modeled on the “Texas Miracle” AFTER it was exposed as fraud?
The Short Answer: A toxic combination of ideological commitment, sunk cost fallacy, corporate profit motives, political investment, and willful ignorance of evidence created a system where accountability itself became more important than actual learning.
PART 1: THE TEXAS MIRACLE FRAUD — What Actually Happened
Timeline of Deception (1990–2003)
1990–1994: The Setup
- Texas implements TAAS (Texas Assessment of Academic Skills) testing
- Rod Paige becomes Houston superintendent (1994–2001)
- High-stakes accountability: principals’ jobs depend on test scores and dropout rates
- Cash bonuses up to $5,000 for meeting targets
The “Miraculous” Claims:
- Houston dropout rate: 1.5% (officially reported)
- Test scores: Soaring across the board
- Achievement gaps: Narrowing dramatically
- “Sharpstown High School: ZERO dropouts in 2001–2002”
2000: The Myth Goes National
- George W. Bush campaigns as “Education President” citing Texas Miracle
- Rod Paige becomes U.S. Secretary of Education (2001)
- Houston becomes the national model for No Child Left Behind (NCLB)
2000–2003: The Exposure
- August 2000: Dr. Walt Haney (Boston College) publishes definitive research: “The Myth of the Texas Miracle in Education”
- Only 50% of minority students progressing from grade 9 to graduation
- 30% of Black and Hispanic students failing grade 9
- Real dropout rate: 25–50% (not 1.5%)
- Test score gains: largely illusory due to excluded students
2003: The Scandal Breaks
- Robert Kimball (assistant principal at Sharpstown High) blows the whistle
- CBS 60 Minutes investigation (January 2004): “The Texas Miracle”
- Texas state audit confirms: Nearly 3,000 students miscoded to hide dropouts
- Real Houston dropout rate: 40–50% per independent experts
How They Did It: A Masterclass in Educational Fraud
1. Creative Dropout Coding
- Students who dropped out coded as:
- “Transferred to another school”
- “Returned to home country”
- “Pursuing GED” (doesn’t count as dropout)
- 463 students left Sharpstown High → Reported as ZERO dropouts
2. Grade Retention Gaming
- Hold low-performing students in 9th grade for 2–3 years
- Students never reach 10th grade = never take the high-stakes test
- Artificially inflates 10th-grade test scores
- Example: 60% of 9th graders held back at some schools
3. Special Education Exclusions
- Students classified as “special ed” don’t count in accountability ratings
- Number of excluded students nearly doubled 1994–1998
- “Substantial portion” of TAAS gains due to these exclusions
4. Push-Outs Disguised as Pull-Outs
- Counselors told students they “couldn’t” advance without passing certain courses
- Students repeated same courses for years, then dropped out
- Never counted as dropouts
PART 2: THE EVIDENCE — Why We KNOW It Was Fraud
Dr. Walt Haney’s Definitive 2000 Study
Published: August 2000, Education Policy Analysis Archives
Method: Comprehensive analysis of Texas enrollment data, test scores, and external validation
Key Findings:
Dropout Rates:
- Official claim: 1.5% annual dropout rate
- Reality: “Slightly less than 70% of students actually graduated” = 30% dropout rate
- GED surge: Sharp increase in young people taking GED tests in mid-1990s to avoid TAAS
Missing Students:
- Only 50% of minority students progressing from grade 9 to graduation
- Nearly 30% of Black and Hispanic students “failing” grade 9 by late 1990s
- Cumulative grade retention: almost twice as high for Black and Hispanic students vs. White students
Test Score Illusions:
- 20% increase in TAAS passing rates (1994–1997)
- BUT: TASP (college readiness test) showed sharp decrease from 65.2% to 43.3% passing
- SAT scores: No improvement compared to national trends; SAT-Math deteriorated relative to national average
- NAEP results failed to confirm TAAS gains
Haney’s Conclusion:
“The Texas ‘miracle’ is more hat than cattle.”
CBS 60 Minutes Investigation (2004)
Whistleblower: Robert Kimball, assistant principal
Documented:
- Systematic miscoding of dropouts across Houston district
- State audit confirmed fraud at multiple schools
- Dr. Jay Greene (Manhattan Institute, pro-accountability expert): “I find [1.5%] very hard to believe. It is almost certainly not true… A reasonable guess is that almost half of Houston’s students do not graduate.”
The Timing Problem
CRITICAL FACT: The fraud was exposed BEFORE Common Core was created:
- Haney’s research: August 2000
- Bush elected: November 2000
- No Child Left Behind signed: January 2002
- Common Core development begins: 2009
- Gates funding for Common Core: 2009–2014 ($200+ million)
The fraud was public knowledge for 9 years before Gates funded Common Core.
PART 3: WHY DID THEY CONTINUE? — The McKinsey Analysis
Factor 1: Ideological Capture — “Businessification” of Education
The Core Belief System:
- Education is like a corporation
- Schools need “accountability” like businesses have bottom lines
- Testing = data = measurement = improvement
- Market competition drives excellence
- Teachers/principals are like employees who need incentive structures
The Gates Foundation Worldview:
- Bill Gates built Microsoft on measurable outcomes and data-driven decisions
- Education should work the same way
- “What gets measured gets managed”
- Technocratic solution bias: Complex social problems can be solved with systems, metrics, and technology
Problem: Education is NOT widget manufacturing. But the ideology couldn’t accommodate that reality.
Factor 2: Sunk Cost Fallacy & Reputational Investment
Political Capital:
- George W. Bush’s entire political brand built on Texas Miracle
- Rod Paige’s credibility
- Republican “compassionate conservatism” narrative
- NCLB represented bipartisan consensus
Admitting fraud would mean:
- Bush’s signature achievement was built on lies
- NCLB based on false premises
- Entire accountability movement discredited
- Political humiliation
Gates Foundation:
- By 2009, already invested heavily in ed reform
- Small Schools Initiative: $2 billion failure (Gates admitted in 2009)
- Needed a “win” to justify philanthropic strategy
- $200+ million into Common Core (2009–2014)
The Psychology: “We can’t have been wrong THIS LONG. We just need to implement it better.”
Factor 3: The Accountability Industrial Complex
Follow the Money:
Testing Companies:
- Pearson
- McGraw-Hill
- Houghton Mifflin Harcourt
- NCS (developed TAAS for Texas)
Revenue Explosion:
- Pre-NCLB (2001): ~$500 million/year testing market
- Post-NCLB (2008): ~$2.5 billion/year
- Common Core era (2014): ~$5+ billion/year
Textbook/Curriculum Alignment:
- Every new standard = new textbooks for every grade, every subject
- Common Core: 45 states adopting same standards
- Massive profit opportunity
Consulting/Professional Development:
- Schools need training on new standards
- Consulting firms (including McKinsey itself) advise districts
- Endless PD workshops, coaching, etc.
Political Donations:
- Testing/publishing companies donate to politicians
- Politicians protect testing mandates
- Circular profit cycle
Factor 4: Regulatory Capture & Revolving Door
The Pattern:
- Business executives → Education policy roles
- Create policies favoring testing/accountability
- Leave government → Join ed-tech companies/foundations
- Profit from policies they created
Examples:
- Rod Paige: Houston superintendent → U.S. Education Secretary → Educational Consultant
- Joel Klein: NYC Schools Chancellor → News Corp Executive VP (Amplify Education)
- John White: Louisiana State Superintendent → worked for Teach For America → policy roles
- Chris Cerf: NJ Education Commissioner → worked for Pearson/ed-tech companies
Factor 5: The “Narrative Capture” Problem
Media Amplification:
- USA Today editorial (March 2000): “Texas narrows racial gap”—published AFTER Haney’s research
- Think tanks funded by Gates/Walton/Broad families produced “research” supporting reforms
- Journalists often cited these sources without scrutinizing funding
- Counter-evidence buried or dismissed
The Dominant Story:
- “Schools are failing”
- “Teachers unions blocking reform”
- “Accountability works—look at Texas!”
- “We need standards and testing to close achievement gaps”
Suppressed Story:
- Poverty is the primary driver of achievement gaps
- High-stakes testing narrows curriculum
- Teaching to the test ≠ learning
- Fraud in Houston and beyond
Factor 6: Philanthropic Arrogance — “I’m Smart, So I Know Education”
Bill Gates’ Track Record:
The Pattern:
- Identify problem with limited expertise
- Fund “solution” based on business logic
- Bulldoze implementation before research validates
- Discover it failed
- Move to next idea
- Repeat
Gates Foundation Ed Reforms:
Small Schools Initiative (2000–2009):
- Investment: $2 billion
- Theory: Small schools = better outcomes
- Result: Failed. Gates admitted failure in 2009
- Schools disrupted: Hundreds broken up, then recreated
Teacher Evaluation via Test Scores (2009–2015):
- Investment: $575 million
- Theory: Tie teacher pay/tenure to student test score gains (“value-added”)
- Result: Failed. Research showed unreliable, punished teachers of disadvantaged students
- RAND study (2018): No improvement in student achievement
Common Core (2009–2014):
- Investment: $200+ million
- Theory: Common standards + aligned tests = excellence
- Result: Massive backlash; many states dropped out; no evidence of improvement
Current Focus (2024):
- Math education
- AI in schools
- Pattern continues
The Arrogance:
“I made billions in tech, therefore I understand how to fix schools.”
The Reality: Education is a social/cultural/developmental enterprise, not a software problem.
PART 7: THE GATEKEEPERS — Who Enabled This?
Politicians (Both Parties)
Republicans:
- Bush family (Jeb & George W.)
- Belief in market-based solutions
- Anti-union ideology
- “School choice” movement
Democrats:
- Obama/Duncan continued NCLB-style reforms (“Race to the Top”)
- Accepted Gates funding for Common Core
- Arne Duncan (Obama’s Ed Secretary): former CEO of Chicago Public Schools, embraced accountability
- Fear of being labeled “soft on standards”
Bipartisan Consensus:
- Testing = accountability = improvement
- Teachers unions = problem
- Business principles = solution
Foundations (The “Big Three”)
Bill & Melinda Gates Foundation:
- Total ed spending (2000–2020): ~$5 billion
- Common Core: $200+ million
- Funded: policy groups, think tanks, media, advocacy organizations
Walton Family Foundation (Walmart heirs):
- Focus: Charter schools, school choice
- Ideology: Market competition improves schools
- Total ed spending: ~$1 billion+
Broad Foundation (Eli Broad, real estate/insurance billionaire):
- Focus: Training superintendents in business practices
- “Broad Superintendents Academy”: Placed graduates in major urban districts
- Promoted business-style accountability
Think Tanks & Policy Groups
Gates funded a sprawling network to advance Common Core:
Advocacy Groups:
- Alliance for Excellent Education
- National Council of La Raza
- National Urban League
- U.S. Chamber of Commerce
Research/Policy:
- Thomas B. Fordham Institute
- American Enterprise Institute
- Center for American Progress
- Education Trust
Teacher/Professional Groups:
- National Education Association (NEA) — $$ to support Common Core
- American Federation of Teachers (AFT) — $$ to support
The Strategy: Create appearance of “grassroots” and “research-based” support.
Media Complicity
Gates funded media organizations:
- Education Week
- PBS NewsHour education coverage
- NPR education reporting
- The Atlantic
The Effect:
- Positive coverage of Gates initiatives
- Marginalization of critical voices
- “Balanced” coverage that favored Gates perspective
PART 8: THE DAMAGE — What High-Stakes Testing Actually Did
To Students:
Narrowed Curriculum:
- Schools eliminated art, music, PE, recess, social studies, science
- Focus on “tested subjects” (reading, math)
- “Teaching to the test” became norm
Increased Stress:
- Test anxiety in elementary students
- Higher rates of depression/anxiety
- Loss of joy in learning
Pushed Out Vulnerable Students:
- Grade retention increased
- Dropouts disguised
- Special ed placements increased
Achievement Gaps Persisted:
- Gaps narrowed on TAAS but NOT on independent measures (NAEP, SAT)
- Illusion of progress, not real progress
To Teachers:
Demoralization:
- Treated as “widgets” needing management
- Professional judgment devalued
- “Teach the script”
Exodus from Profession:
- Teacher attrition increased
- Experienced teachers left
- Shortages worsened
Loss of Autonomy:
- Scripted curricula
- Pacing guides tied to test dates
- No room for student interest/needs
To Schools:
Cheating Scandals:
- Atlanta (2011): 178 teachers/principals changed answers on tests
- Washington DC, Philadelphia, elsewhere: Similar scandals
- Predictable result when jobs depend on scores
Gaming the System:
- Strategic grade retention
- Special ed referrals
- “Counseling out” low performers
- The Houston model replicated nationwide
PART 9: WHY IT CONTINUED — The Ultimate Answer
The Convergence of Interests
1. Politicians needed “solutions”
- Easier to mandate testing than address poverty
- “Accountability” sounds tough and responsible
- Bipartisan cover
2. Corporations wanted profits
- Testing = guaranteed revenue stream
- Curriculum alignment = textbook sales
- Technology integration = hardware/software sales
3. Billionaires wanted legacy
- “Fix education” = heroic narrative
- Business principles applied to social good
- Tax benefits from philanthropy
4. Think tanks wanted relevance
- Foundation funding sustained operations
- Policy influence
- Legitimacy from association with “reform”
5. Media needed stories
- “Miracle” narratives sell
- Foundation funding supported coverage
- Access to powerful people
The Ideology Trumped Evidence
Core Belief: Markets, competition, measurement, and accountability improve everything.
Contradictory Evidence Dismissed Because:
- “Not implemented with fidelity”
- “Need more time”
- “Opponents are protecting status quo”
- “Teachers unions blocking progress”
The Unfalsifiable Hypothesis:
- If it works → vindication
- If it fails → implementation problem, not theory problem
PART 10: LESSONS & IMPLICATIONS
Why This Matters
1. Democracy & Expertise:
- Billionaire philanthropists unelected and unaccountable
- Can shape public policy without democratic legitimacy
- Expertise in one domain ≠ expertise in another
2. Evidence Doesn’t Matter When Ideology Wins:
- Haney’s research published in 2000
- CBS investigation in 2004
- Common Core funded starting 2009
- Evidence was ignored
3. The Cost of Failed Reforms:
- Billions of dollars wasted
- Millions of students’ education disrupted
- Teachers demoralized and driven out
- Trust in public education eroded
4. Power of Narrative:
- “Texas Miracle” story outlived the truth
- Media repetition created “common knowledge”
- Counter-evidence marginalized
The Pattern Continues
Current Gates Focus:
- Personalized learning / AI in education
- New math initiatives
- Same pattern: Limited expertise + huge funding + systemic implementation
Warning Signs:
- Minimal pilot testing
- Top-down rollout
- Business logic applied to social/developmental questions
- Ignoring teacher/researcher input
CONCLUSION: Why They Continued
The Simple Answer:
They continued because:
- Admitting failure = massive reputational/political cost
- Corporate profits depend on perpetuating the system
- Ideological commitment (“markets always work”)
- Sunk cost fallacy (“We’ve invested too much to turn back”)
- Regulatory capture (policymakers profiting from the system)
- Philanthropic arrogance (“I’m smart + rich = I know best”)
- Media complicity (foundation funding + access journalism)
The Uncomfortable Truth:
The system was never designed to improve education. It was designed to:
- Create appearance of action on “failing schools”
- Generate profits for corporations
- Provide political cover (“we did something!”)
- Satisfy billionaire savior complexes
- Avoid addressing root causes (poverty, segregation, inequality)
What Walt Haney Said in 2000:
“The gains on TAAS and the unbelievable decreases in dropouts during the 1990s are more illusory than real. The Texas ‘miracle’ is more hat than cattle.”
They knew. They continued anyway.
CITATIONS & SOURCES
- Haney, W. (2000). “The Myth of the Texas Miracle in Education.” Education Policy Analysis Archives, 8(41).
- CBS 60 Minutes. (2004, January 6). “The Texas Miracle.”
- Mother Jones. (2014, September 4). “Bill Gates Spent More Than $200 Million to Promote Common Core.”
- Ravitch, D. (2010). The Death and Life of the Great American School System.
- Schneider, M. (2015). Common Core Dilemma—Who Owns Our Schools?
Would you like me to explore:
- Specific mechanisms of the Gates funding network?
- Comparison to other ed-reform failures (e.g., charter school research)?
- Current state of Common Core and what replaced it?
- How to fight back against similar reforms today?
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