The Private Contractor Goldrush

In February, as negotiations stalled, both sides escalated: LAUSD by announcing 657 layoffs and UTLA by organizing rallies for tens of thousands of supporters across the city. It was at this tense juncture that the most dramatic event in the negotiations took place: the FBI raided the beachside homes of Superintendent Alberto Carvalho and his business associate Debra Kerr in an apparent search for evidence regarding their roles in a $6 million LAUSD contract awarded to the now-bankrupt EdTech AI company AllHere.

One month later, in an apparently unrelated investigation, Los Angeles District Attorney Nathan Hochman also arrested Grace Peng, a former project manager in the LAUSD IT Department, for embezzling $22 million in kickbacks from various technology contractors from 2018 to 2022.

Because LAUSD has touted its national leadership in bringing public education into the twenty-first century, it is worth considering what these investigations reveal about the broader drift of public education amid the AI boom.

Across California, and in countless school districts across the United States, superintendents and school boards are confronting budget deficits. Oakland Unified, with 34,000 students, is forecasting a $102 million deficit and announced 400 layoffs during its recent bargaining with the Oakland Education Association. Portland Public Schools, with 44,000 students, faces a $22 million shortfall. The Austin Independent School District in Texas, with 77,000 students, faces a $49 million deficit. Hartford Public Schools in Connecticut, with 17,000 students, is looking at a $70 million deficit.

LAUSD, with 390,000 students, is on track to spend $1.4 billion more than it will receive in revenue this year — posing a fiscal challenge that the district says would be exacerbated by higher payroll obligations, making the union’s demands unreasonable. At first glance, it’s a staggering number, and though LAUSD carries a $6.4 billion reserve after years of underbudgeting revenues, money from a savings account can only be spent once.

But the investigations into Carvalho cast this $1.4 billion deficit in a different light. Since Carvalho became superintendent in 2022, according to UTLA research, LAUSD has entered into commitments with technology vendors totaling at least $1.6 billion. That one-year deficit is less than the district’s new commitments for technology vendors, a growing market for private equity.

The names of these companies are now familiar: i-Ready and Instructure, McGraw-Hill and Pearson, Google, and Microsoft. From prepandemic estimates of $8 billion in 2014 and $12 billion in 2017, total education technology spending in the United States has exploded over the past six years. Since the pandemic, estimates have ranged from $37 billion to $87 billion and up.

In the 2024–25 school year, according to one study, the average school district purchased over 2,700 distinct EdTech products. The American Psychological Association warns that “AI is being used to automate decision-making” like “school admissions, medical diagnosis, and automated grading.”

In other words, school districts are spending billions on unproven technology products while pleading poverty at the bargaining table.

The growth of EdTech vendors in public education is only the latest iteration of a broader trend in seeing government spending as a market for contractors — rather than a means of meeting public need through public employment.

In the nation’s largest school districts, the share of total spending going toward employees’ salaries and benefits has been steadily declining. Before 2008, New York City’s Department of Education (DOE) spent over 70 percent of its total budget on “personal service” — that is, on directly employed people. During the 2025 fiscal year, New York City spent just 56 percent of the DOE’s budget on personal service.

In Los Angeles, the total of all LAUSD salaries for certificated (i.e., teachers) and classified (bus drivers, cafeteria workers, janitors) workers accounted for 63 percent of total expenditures during the 2007–8 school year. This year, it is 51 percent.

According to LAUSD’s Second Interim Financial Report, the district is on track to spend $1.56 billion for “Services and Other Operating Expenditures” — that is, contracting out — this school year, or $401 million over budget. This includes software and technology hardware but also a variety of services that districts increasingly contract to third parties, both nonprofits and businesses, rather than perform using union labor: tutoring, counseling, and the requirements of special education comprising three prominent examples.

This market expands to entire schools. Nationally, charter schools enroll nearly four million students, or around 7 percent of all public school enrollments. However, this total masks their concentration in particular areas of former union strength, including 28 percent of all enrollments in Los Angeles and 16 percent in New York City.

In places like Florida, access to state public education funding has extended to online schools. Florida enrolls 35,000 students in full-time online K-12 classes. At its most extreme, such as in Texas’s and Arizona’s recent voucher programs, private companies can collect per-student public funding and set themselves up as schools.

The picture that emerges is one in which public education functions less as a service to students and families — and a source of good jobs for the people who provide it — than as a market for an ever-expanding universe of private contractors.

The Political Economy of Public Education

California educators’ statewide struggle and UTLA’s conflict with the Carvalho leadership at LAUSD represent a challenge to a deeply entrenched political power structure. This is because the vendors behind the push to increase technology sales to schools are, in much of the country, the same lobbies that have been pushing for charter schools for the past two decades.

In the open-shop US South, for example, vendors have long funded the nonprofit Foundation for Excellence in Education, founded by Jeb Bush in Florida, now known as ExcellinEd. ExcellinEd’s commercial donors include such K-12 vendors as Pearson, Microsoft, ETS, McGraw Hill, and NewsCorp. In addition to creating and maintaining networks between large vendors and public officials, ExcellinEd was founded to advance state-level legislation to fund religious schools, expand online schools, and force unions to represent free riders. Its philanthropic donors include the Bill and Melinda Gates Foundation, the Bradley Foundation, the DeVos Family Foundation, the Koch Foundation, and the Walton Family Foundation, among others.

Courting the people who control public spending is a common strategy. ExcellinEd sponsors a “Chiefs for Change” awards program for public school principals and administrators, flying educators to galas and junkets. The Eli and Edythe Broad Foundation, one of the largest national philanthropies funding the expansion of pro-privatization “education reform” programs, has long operated the Broad Superintendents Academy to train management-side leaders in public school systems across many states. The goal is to build a class of public school administrators who define their stewardship of public institutions through their partnership with, and future employment by, the private sector.

But more recently, a newer pillar of the national power structure has begun investing in the K-12 reform project. In 2023, Google announced a partnership with the venture-capital fund Global Silicon Valley (GSV) to back the Google GSV Education Innovation Fellowship. The 2025–26 fellows include state education leaders from Maryland and Colorado, as well as district leaders from Tempe, Dallas, Newark, Little Rock, New Haven, Fayetteville, Bismarck, and, of course, New York and Los Angeles.

At LAUSD, Google GSV fellow Robert Whitman serves as Education Transformation Officer. At New York’s public schools, Google GSV fellow Miatheresa Pate serves as Chief Academic Officer for all five boroughs. In other words, the companies selling AI to school districts are now helping choose the people who run them.

While the relationship of contractors such as Google and Pearson to the public procurement officers they sell to is not new, the push for AI in K-12 education has provided a clearer picture of the commercial interests at play. The venture capitalists funding EdTech start-ups and the public officials handing out contracts are not only in the same room but are often the same people. And, like Carvalho, they are increasingly being caught at the center of fraud scandals. The web of connections is dense enough to make your head spin — and bear with us, because tracing it is the only way to see how the system actually operates.

The managing partner of GSV Ventures, for example, is Deborah Quazzo, the Rahm Emanuel–appointed member of Chicago’s Board of Education at the center of the kickback scandal that saw former Chicago Public Schools (CPS) chief executive Barbara Byrd-Bennett sentenced to four and a half years in federal prison.

In 2021, four years after Byrd-Bennett’s trial, Quazzo was serving on the Forbes “30 under 30” selection committee that chose Joanna Smith-Griffin, the CEO of AllHere, for that year’s list of rising business stars. Smith-Griffin had raised $8 million from Rethink Capital in 2020, an investor that also placed Byrd-Bennett’s successor at CPS, Janice Jackson, on the AllHere board.

With millions of dollars riding on the company, Quazzo could certainly see the need for Smith-Griffin to gain legitimacy in the start-up world. (Smith-Griffin was later arrested on federal fraud charges for allegedly bilking AllHere investors out of nearly $10 million.)

In the “education reform” movement, the same names appear on both sides of every transaction — as vendors, as lobbyists, and as the public officials signing the checks. In addition to Quazzo and Jackson from Chicago Public Schools’ vendor network, Smith-Griffin recruited several officials from Florida. These included Kerr, a former vice president at Pearson, who worked as a lobbyist in Florida and bragged about being close with Miami-Dade Superintendent Carvalho; Robert Runcie, the former superintendent at Broward County Public Schools (and current CEO of ExcellinEd’s Chiefs for Change); and Daisy Gonzalez-Diego, Carvalho’s former chief of communications at Miami-Dade County Public Schools.

Note that two of these names, Carvalho and Kerr, appear in this year’s LAUSD scandal. In 2021, Carvalho went to Los Angeles, where he contracted with AllHere — the deal that is now reportedly at the center of the FBI investigation.

This network has operated in a similar manner from coast to coast. When Carvalho left for Los Angeles, Miami-Dade’s chief academic officer, Marie Izquierdo — an ExcellinEd Chief for Change — went to work as an executive at Curriculum Associates, the vendor behind i-Ready and one of Miami-Dade’s key tech vendors. The pattern repeated elsewhere: in New York, the DOE hired a Curriculum Associates vice president as a senior director, and the city’s spending on i-Ready more than doubled. LAUSD soon became a Curriculum Associates client too, rolling out i-Ready across the district after Carvalho’s arrival.

Izquierdo has since moved to Stride, Inc., formerly known as K12, Inc. — one of ExcellinEd’s donors, which in 2020 was awarded a $15 million no-bid contract from Miami-Dade while she was still chief academic officer. In New York, former Chancellor Melissa Aviles-Ramos left public service and went to work for Houghton Mifflin Harcourt, a company the DOE has paid $45 million in the last two years. The examples of administrators trading on their public sector relationships for private sector jobs and vice versa, and doing favors to grease the hinge of the revolving door, go on and on.

The specifics are dizzying, but the pattern is straightforward: wherever this particular cohort of administrators go, the EdTech contracts follow. Billions of dollars that once paid the salaries of teachers, bus drivers, and counselors now flow to a revolving cast of start-ups and legacy vendors — all touting the promise of AI subscriptions and “on-demand” software products to transform public-education outcomes.

Despite research that has long shown educational outcomes are primarily correlated with the income and education of students’ parents, the search for a technological fix for learning is now actually taking money away from teachers. In Los Angeles, the question of whether to reverse that flow is what will be decided on the picket line.

EdTech Versus Labor

AllHere declared bankruptcy in the summer of 2024. The LAUSD contract was too little, too late for Rethink Capital’s investment to stay afloat.

But the EdTech bonanza has coincided with something else: a labor market in which public school districts increasingly can’t afford the human talent that families continue to insist their children deserve.

“Why now is the right time for the Edtech movement,” explains the Edtech Handbook, a resource recommended by the federal government. “Budget constraints: strapped districts, now more than ever, are looking for tools and systems to help them do more with less.” Bill Gates, the billionaire whose philanthropy has done more than any other to shape K-12 policy in the United States (during the Obama administration, the New York Times called him the “real Secretary of Education”), has made this vision of AI replacing human educators explicit:

When the time comes to write your essay, don’t worry about the dreaded blank page. Instead, your AI tutor asks you thought-starters to help brainstorm. You get feedback on your outline in seconds, with tips to improve the logic or areas where you need more research.

As you draft, the tutor evaluates your writing in real-time — almost impossible without this technology — and shows where you might clarify your ideas, provide more evidence, or address a counterargument. Before you submit, it gives detailed suggestions to refine your language and sharpen your points.

In May 2025, just weeks after the White House announced its first executive order to promote AI in public schools, the Boston Consulting Group estimated that implementing AI in the public sector could eliminate “up to 35 percent of budget costs.” First Lady Melania Trump lent her name to the idea, touting AI’s promise to help children “develop deeper critical thinking and independent reasoning abilities” while standing with a humanoid robot at a White House summit on AI in education.

In Los Angeles, Carvalho epitomizes the model of superintendent-as-CEO that the institutions of education management ubiquitously promote. With his pinstripe suits and gelled hair, he is supposed to show how education is a “market” in need of “innovation” through entrepreneurialism and deal-making. Along with Kerr, the former Pearson executive, the duo embodies both sides of the revolving door that has long dominated the top of the public education field among philanthropy giants such as Gates, Broad, and Hilton; the vendors such as McGraw Hill and Google; and the managements of the largest districts themselves.

According to the boosters in the K-12 EdTech market, the job of teaching the children of working people will increasingly become one of supervising computers where children use AI to answer standardized tests and spend their school days playing gamified “personalized learning” software. What teachers remain will be there to provide “emotional learning” for children whose primary educational experience is screen-mediated.

In parts of the country where teachers are not organized into unions, this reality is already taking shape. And not all unions are playing a helpful role: at the top of the AFT, the national affiliate for most teachers’ unions in the nation’s urban school districts, this is a vision on which to partner with employers and vendors. Last summer, President Weingarten announced that the union is hosting a National Academy for AI Instruction at the headquarters of the New York City local, UFT, in partnership with OpenAI and Microsoft.

But Los Angeles teachers are not as excited about this future as Melania Trump or Silicon Valley — nor as resigned to it as Weingarten. The CFT, to which many CTA locals including UTLA and United Educators San Francisco (UESF) are jointly affiliated, passed a resolution opposing Weingarten’s partnership with OpenAI. The initiative was led by UTLA and UESF.

While Weingarten maintains, as any union leader should, that such changes must be subject to collective bargaining, California’s largest locals have gone further. Through organizing majority-participation strikes and threatened strikes, they have won language limiting school district employers’ ability to unilaterally implement new AI technology in the classroom.

In Los Angeles, UTLA’s contract proposals would obligate LAUSD to spend its money on salaries for people. By limiting the district’s ability to enter into self-dealing contracts like the AllHere chatbot, the union is advancing a simple proposition: that public education should be defined by the people who provide it, not the companies that profit from it.