State Superintendent of Public Instruction

January 8, 2015

Gary R. Herbert

Governor

Office of the Governor

Brad C. Smith

State Superintendent of Public Instruction

Utah State Office of Education

Jonathan C. Ball

Executive Director

Office of the Legislative Fiscal Analyst

Report by the Free Market Protection and Privatization BoardConcerning the Utah State Office of Education and a Complaint of Unfair Competition in Student Information Systems

The Free Market Protection and Privatization Board, pursuant to UCA 63I-4a-203, reviewed issues concerning agency competition with private enterprise, namely whether the Utah State Office of Education (USOE) unfairly competes with private vendors of student information systems. The board approved the attached report, including recommendations, at its January 8, 2015 meeting.

The board finds that in its development, marketing, and operation of its student information system now known as Aspire, USOE does appear to compete unfairly in the student information system market. The board further finds that privatization of Aspire is feasible.

The board recommends five actions to eliminate unfair competition and two steps toward the privatization of Aspire. See pages 3 and 4 for recommendations; see pages 10 and 15 for findings.

Sincerely,

Kimberley Jones

Chair, Free Market Protection and Privatization Board

Contents

Executive Summary3

Recommendations3

Background4

Petition5

Main Issues6

Issue #1: Is USOE Engaging in Unfair Competition with Private Enterprise?6

A Definition of Unfair Competition6

Authority for and History of Utah’s SIS6

Utah State Office of Education 6

Local Education Agencies7

Appropriations7

History and Use of Student Information Systems7

SIS Comparative Features/Functions8

Typical Functions and Features by Student Information System8

Aspire9

Other support services 9

Ownership rights9

LEA Student Information System Survey9

Findings Regarding Allegations of Unfair Competition10

Issue #2: Whether Privatization is to be Recommended for this Activity?11

Commercial Activities Inventory Surveys11

Comparative costs: Private SIS Costs12

Comparative Costs: USOE SIS Costs13

Information Technology Organization Chart13

Aspire 13

Servers14

Administration14

Summary of Costs 15

Findings Regarding Privatization15

Appendix17

Terminology17

Board Authority18

Commercial Activities Inventory Survey (Elements of Review)19

Relational Data Corporation response to draft report27

Utah State Office of Education response to draft report29

Report by the Free Market Protection and Privatization Board

Concerning the Utah State Office of Education and a Complaint of Unfair Competition

in Student Information Systems

Executive Summary

In accordance with UCA 63I-4a-203, the Free Market Protection and Privatization Board (the board) reviewed issues concerning agency competition with private enterprise, namely whether the Utah State Office of Education (USOE) unfairly competes with private vendors of student information systems.

The board recommends five actions to eliminate unfair competition and two steps toward the privatization of Aspire.

Recommendations

Recommendations to eliminate unfair competition:

That the legislature review the agency’s vendor selection and approval process with a view to eliminating conflict of interest;

That the agency fairly promote all SIS options approved in the state, not just Aspire;

Whereas the agency established an appropriate SIF agent in collaboration with other SIS vendors at state expense, the SIF agent should be made available to all potential SIS vendors seeking to compete in the market.

In the promotion of transparency and interest of local control by LEAs, that funding for USOE IT be reduced by most of Aspire’s non-allocated costs and those funds be shifted to all LEAs on a per student basis and that Aspire be funded by charge to its users, including a fair and reasonable assessment for licenses.

That consideration should be given to LEAs who have subscribed to an uncharged service and should be given funding consideration on a short term basis as needed.

Recommendations to privatize:

That careful consideration be given to reviewing the pros, cons, and costs of privatizing Aspire by sale, licensing, or some form of managed competition and that the legislature independently assess via audit, evaluation, or market study the viability and marketability of Aspire.

That the legislature independently assess and determine the minimum data and security needs to be maintained by the agency should all SIS systems be available only in the private sector.

Background

The Free Market Protection and Privatization Board Act (UCA 63I-4a) directs the board, at Section 203 to “consider whether to recommend privatization of an activity provided by an agency…in response to a complaint that an agency…is engaging in unfair competition with a private enterprise.” It also provides that the board may recommend “ways to eliminate any unfair competition with a private enterprise.”

In November 2013, Nathan Andelin, President of Relational Data Corporation (hereinafter RDC), petitioned the board to investigate its complaint that the Utah State Office of Education (USOE) is engaged in unfair competition with the private sector where it provides student information systems.

Prior to its petition, Relational Data Corporation was contracted by two charter schools (Legacy Preparatory Academy and Renaissance Academy) to build or install a student information system (SIS) capable of transmitting state-required data to USOE. RDC was having difficulties meeting requirements set by USOE which claims to have helped RDC over a long period to get its SIS (known as OnePoint) installed and operating. RDC claims that USOE made the process difficult by its requirements and rules. Nonetheless, at this time, RDC’s OnePointapplication is installed and is operating at Legacy Preparatory Academy.Renaissance Academy switched to the state’s SIS now known as Aspire.

RDC has submitted multiple petitions, commentaries, and considerable analysis of technical and other issues to the Free Market Protection and Privatization Board, the State Board of Education and the legislature’s Administrative Rules Committee. USOE has provided information as requested. RDC and USOE staff has met numerous times with the board and its staff.

Petition

A summary[1] of Mr. Andelin’scomplaint that USOE is engaging in unfair competition with private enterprise is as follows:

The Utah State Office of Education:

“[provides] data centers, computer hardware, networks, operating environments, hosted software, documentation, training, and related services to [local education agencies or LEAs] for free”;

promotes its student information system above other options;

“asserts exclusive intellectual property rights to [Aspire] as opposed to open-source licensing”;

“requires that LEA's restrict their choices to USOE ‘approved student information systems’, calling that authority “a conflict of interest”; and

implemented an approval process that is onerous, even unlawful, to a small business striving to enter the market.

Additionally, Mr. Andelin opposes USOE’s adoption of the Schools Interoperability Framework (SIF), calling it “an additional undue cost and programming burden for providers.” He has separately petitioned the State Board of Education and the legislature’s Administrative Rules Committee on those issues.

Mr. Andelin specifically petitioned[2] the Free Market Protection and Privatization Board to:

Investigate and assess USOE's sources and uses of funds which enable them to engage in these commercial activities, including the full cost of USOE's products and services in comparison to those offered by private enterprise.

Recommend to USOE, the Governor's Office, and the Utah Legislature that funding for these commercial activities be dropped, or allocated to other USOE endeavors which are more congruent with the proper role of government.

Provide special funding to LEA's which would like to contract with private enterprise for their student information systems, instead of using [Aspire].

Establish a level playing field by requiring USOE to support choice, and to recover the costs of USOE's commercial activities by charging LEA's that benefit from them.

Have USOE implement a privatization program that migrates their commercial activities to private companies which currently offer services in Utah and already have student information systems that are compatible with USOE's reporting interfaces, aggregate data warehouse, and other requirements.

Improve language in Utah Code Title 53A to clarify legislative intent to protect LEA's rights against undue control by USOE concerning their choices of educational technology, and protect private enterprise from unfair competition by USOE.

Main Issues

Notwithstanding the many issues raised, this board’s review and this report are limited to matters consistent with the duties assigned per UCA 63I-4a-203. Therefore, we are concerned with two main issues:

1)Whether USOE’s Information Technology Division is engaging in unfair competition with private enterprise, and if so, how to remedy it; and

2)Whether privatization is to be recommended for this activity.

Issue #1: Is USOE Engaging in Unfair Competition with Private Enterprise?

A Definition of Unfair Competition

Unfair competition exists when either the governmental agency or a private business gains a financial advantage as a result of statutory authority.

Authority for and History of Utah’s SIS

The next several paragraphs summarize the history and authority USOE has to develop and operate a student information system. USOE’s SIS has been authorized and appropriated by the Utah Legislature and school districts and charter schools may acquire a SIS.

Utah State Office of Education

Article X of the Utah State Constitution and Title 53A of the Utah Code provide the constitutional and statutory authority for public education in Utah. Under the guidance of the State Board of Education (SBOE) the Utah State Office of Education (USOE) administers and implements public education. The Utah Legislature has the power of appropriation.

Local Education Agencies

School districts and charter schools are described as local education agencies (LEAs). Each has independent authority prescribed by statute. Each has its own governing board. LEAs are funded by a variety of methods, most commonly through the Basic School Program through a Weighted Pupil Unit. School districts also receive property tax revenue.

Specific to the issues herein, UCA 53A-1-706 authorizes and protects LEAs’ rights to acquire educational technology through their purchasing programs.

Appropriations

Public education is a $3.83 billion responsibility in Utah. The USOE budget is $380 million, with nearly 95% of that figure passing through for various programs.USOE is responsible for state level administration and support services. USOE’s Information Technology Division, which operates and improves the state’s SIS, is funded on an ongoing basis.

Historyand Use of Student Information Systems

A student information system is a data collection system used to manage student data, such as student test and other assessment scores, and can be used to build student schedules, track student attendance, and manage many other student-related data needs in a school. The state requires certain data to be collected and reported. Among other uses, the data is used for allocating education funding and failure to report on time can result in financial consequences, such as withholding or delay of Minimum School Program funds for LEAs.

There are several SIS applications in use in Utah. The state’s application is known as Aspire (formerly SIS2000 and SIS2000+). Currently, four different private sector vendors have applications in use (Skyward, PowerSchool, Compass, and One Point). Some LEAs like Davis School District have developed and operate their own custom SIS applications.

There are 42 school districts and 106 charter schools in Utah. 21 school districts and 88 charter schools use Aspire in 2014-15.While Aspire accounts for 20% of students in school districts it serves about 71% of students in charter schools (24% combined). Skyward, which serves approximately 26% of all Utah students has no presence in Utah’s charter schools. PowerSchool serves about 16% of all students including 13% of charter school students. Compass accounts for 7% of charter school students. OnePoint serves approximately 2% of charter school students (or 0.2% of all students).

The legislature initially funded SIS development at USOE in 1967 and USOE has continued its development of SIS since that time through a variety of different technological formats.In the 1990s, USOE and LEAs began working together to develop or acquire a statewide student information system.

Historically, USOE has favoreda single statewide approach. However, some school districts created their own SIS programs while others contracted with private sector developers. Task forces (in 1991 and again in 2008) recommended the continuation of local choice with the state setting reporting standards.

The 2008 task force also resulted in the requirement for Schools Interoperability Framework (SIF) compliance. USOE and two private sector SIS vendors (Pearson, which makes PowerSchool, and Skyward) participated together in the development of an SIF Agent to meet the standard.

Around 2007, USOE obtained federal funding to develop a system for transmitting data between school districts and USOE. That program is known as UTREx (Utah Transcript Record Exchange). Since then, USOE reporting requirements require LEAs to transmit data to UTREx.

A significant issue for USOE and LEAs is the protection and security of student data. USOE sets the standards and requires compliance with those standards.

SIS Comparative Features/Functions

The chart on the right shows the typical features and functions in student information systems offered by USOE and the four private sector applications mentioned previously.

Aspire

The Aspire application has two components: a FoxPro Client Interface accessed via remote desktop connection and Aspire software web portal accessed via web browser.

The FoxPro Client interface is used for school and calendar setup, scheduling, and student fees.

The Aspire Software Web Portal is used for assessment, attendance, behavior, contact/student access, control master, data quality, enrollment, food service, grade book, lockers, SEOP(Student Educational Occupational Plan), student summary, and UTREx data submission.

The Aspire team installs and configures database software, creates, develops, and produces student information software, manages security and integrity of student data, assists in state and federal reporting for all LEA funding, assists in state and federal reporting of all assessments, manages changes and requirements of state and federal reporting, assists LEAs in communicating student data information and academic progress to guardians/parents, assists in management of the success of educating Utah students, and continually improves and enhances student information system software.

At the request of its users, USOE continues to make improvements to the application. An Aspire (SIS) Future Project and Implementation Plan indicates that improvements and additional features are continually being rolled out. Items scheduled for 2014 included the addition of Faculty and Track Editors to Enrollment, Gradebook integration via SIF, a Student Locator Framework to replace Statewide Student Identifier (SSID), an Attendance Data Dashboard, and others. Other improvements and features to be implemented in 2015 or 2016 include Attendance integration, College and Career Readiness, a new Online Registration process, a Student Achievement Backpack, increased usability and access for Scheduling, and a Behavior Data Dashboard.

Other support services

USOE’s Information Technology (IT) teams provide a variety of support services, including hosting and maintenance services.

Ownership rights

USOE’s Official IT Policies and Procedures include a Software Use and Service Agreement which makes clear that USOE owns or licenses all application software it provides to LEAs.

LEA Student Information System Survey

RDC asserts that USOE unfairly competes against the private sector. Given that USOE is clearly competing in terms of features and functions and that there are currently four private sector vendors (including RDC) with applications in use in Utah, we wanted to understand what factors affect LEA choice in the SIS market.

In March 2014, we sent a questionnaire to 42 school districts and 90 charter schools in Utah based on a list supplied by the Utah State Office of Education. 32 school districts and 36 charter schools responded. We asked which SIS is used, why that SIS is used, what it costs, whether and why (not) the LEA has considered a different SIS, and if the LEA is paying a private vendor rather than getting Aspire at no cost from USOE, why?

The results were mixed. 16 school districts and 32 charter schools using the Aspire application responded, the remainder represented other products with the largest group (10 school districts and 2 charter schools) using PowerSchool.

Less than one-half of Aspire users have considered using other programs, with most of those obtaining quotes or bids. For many of the Aspire users, cost is clearly a factor in the decision to use USOE’s SIS. A second factor is the support they receive from the Aspire team at USOE.

When asked if Aspire were not free, 24 of 46 who answered that question indicated they would continue to use Aspire. Only nine indicated they would not. While reluctance to change to a new system is commonly mentioned, cost is again routinely named as a factor in the choice. And it is clear that for those LEAs using Aspire, how to fund the cost if not provided at no charge is a concern.

When asked if the state were to provide funding in the form of grants would the LEA consider acquiring a different system, 22 LEAs said yes, 26 LEAs said no, with 3 maybes and 1 not sure. When asked why, respondents clearly pointed to satisfaction with Aspire for those who would not change, and for those who would consider a change, again cost is a factor.

Non-Aspire users were asked for information on costs to the LEA. While there were many comments, the information was diverse. It is apparent that the monetary costs of installation are significant, a factor that is hard to quantify on the Aspire side as development costs are enmeshed in the USOE IT budget and no information as to installation costs is available without further study. In any event, USOE does not charge LEAs for installation of the Aspire application.