Teaching Schools How to Spend

By Matthew Cooper

He made millions figuring out how to profit from other companies' excess goods, and now the CEO of Overstock.com has set his sights on making sure public schools spend their money wisely. Appalled by bloated administrative and bureaucratic expenses, Patrick Byrne is championing state initiatives that would require schools to spend 65% of their budgets on teachers' salaries and other classroom costs. The national average is 61.5%, and only four states--Maine, New York, Tennessee and Utah--top 65%.

Implementing a 65% rule nationwide, Byrne claims, could inject $14 billion into classrooms without raising taxes. He has channeled $250,000 into his group, First Class Education, which scored a victory this month when Louisiana passed a 65% bill (increasing budget share from 60.3%). Similar measures are on the ballot in Arizona (which spends 58.6%) and before the legislature in Minnesota (current average: 62.1%), where G.O.P. Governor Tim Pawlenty hailed the proposal as "a commonsense idea that will help ensure better accountability in our schools."

Byrne, a political independent, opposes the No Child Left Behind Act because of restrictions it imposes on school districts. Many school officials oppose his measures for the same reason. "Local boards should decide what best works for their districts," says Barbara Klaas, president-elect of the Minnesota School Boards Association. Critics are also worried that a 65% rule would divert money from such outside-the-classroom needs as school buses and school nurses. The mandate, says Klaas, "diverts attention from the real issue--is there adequate funding going to schools?" --With reporting by Marc Hequet

With reporting by Marc Hequet