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Published in Print: February 25, 2004, as State Budgets Put Fear Into Text Publishers

State Budgets Put Fear Into Text Publishers

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Textbook publishers are closely watching state budget decisions amid predictions that the slow fiscal recovery in much of the country and the current lull in textbook-adoption cycles could spell short-term economic disaster for the industry.

"This, it appears, will be the worst year in the last 15 in terms of industry- revenue performance and growth," Peter A. Appert, a respected industry analyst with the investment firm Goldman Sachs, told publishing executives at an annual meeting here this month.

See Also...

See the accompanying chart, "Textbook Sales."

Recent budget proposals in several states would put textbook money on the chopping block. That follows practices over the past few years of districts around the country making do with older books to help balance strapped budgets.

"There's a general feeling that [textbooks] are not like a teacher's salary," said Kathy Mickey, the managing editor for education at Simba Information, which publishes Educational Marketer, a trade newsletter. "School districts have really been pinched, so if they can make do with the textbooks they have for another year or two, they will," she said in an interview.

But publishers and educators are lobbying hard to maintain the funding, citing the role of up-to-date instructional materials in preparing students to meet state standards and do well on tests.

Textbooks 'Negotiable'?

"When [textbook money] is put in the mix with other things that tend to get higher priority, like the boiler that breaks down in the middle of the winter, it becomes negotiable," said Stephen D. Driesler, the executive director of the Washington-based school division of the Association of American Publishers, which hosted the meeting here. "Students need both a good teacher and quality instructional materials aligned to state standards."

Many officials agree and are fighting to protect or restore textbook funding. In Kentucky, for example, Gov. Ernie Fletcher, a Republican who took office in December, has proposed restoring nearly $22 million in state funding for textbooks for fiscal 2005 that he omitted in his initial budget request.

The cuts for this year have posed a particular problem because schools were scheduled to buy textbooks for mathematics, a subject the state has homed in on as a result of declining achievement, according to Lisa Gross, a spokeswoman for the state education department.

"In math, we're not doing so well, so it doesn't help for districts not to have access to new materials," she said.

Alabama Gov. Bob Riley, another Republican, has also called for reviving some $80 million in textbook money after it was cut from the state's fiscal 2004 budget.

California Cutbacks

Updated textbooks are paramount in California, where officials argued in a recent school finance lawsuit that the state's regular selection of and investment in instructional materials offered evidence that it had provided equal educational opportunities to all students.

But this year, that funding may be unstable.

When freshman GOP Gov. Arnold Schwarzenegger lumped about half the estimated $363 million intended for instructional materials into general funding in his budget proposal last month, publishing executives shuddered at the potential losses in the country's largest textbook market.

Publishers bank on the regular selection of textbooks and other materials in "adoption" states—the 21 states, mostly in the South, that review and approve the books in each subject and allocate large sums to help districts buy them—for the bulk of their profits.

The consistent demand created by those states, Mr. Driesler said, allows companies to invest upfront in the costly process of developing, publishing, and marketing the materials. Efforts to customize texts to meet the needs of key states, including California, Texas, and Florida, often determine the types of materials available to other parts of the country.

But Gov. Schwarzenegger's proposal, designed to help offset a massive deficit, would allow districts to use some $175 million of the textbook money for other purposes.

The California proposal comes at a time when many in the industry are still reeling from the decision by Texas officials last April to defer some $300 million slated for materials for social studies and other courses, after publishers had already endured the state's grueling textbook-review process. ("State Moves on Textbooks Could Extend Market Slump," Mar. 19, 2003.)

The state's long- anticipated investment in technology-based curriculum materials is also on standby.

State and local officials in Georgia, North Carolina, and a handful of other states have also considered postponing or canceling textbook purchases to balance budgets.

When states get behind in those adoption cycles, it is costly for publishers to provide updated materials. And, according to Mr. Driesler, states find it difficult to get back on track.

"Once you start getting behind, the subjects [for which you need to adopt new textbooks] start adding up, and the price tag becomes a bit hard to swallow," he said.

Prospects for 2005

As the economy continues to show signs of improvement, and with several core subject-area texts scheduled to be adopted in the principal states over the next few years, experts are hoping for a return to the boom years of the 1990s, when those factors were also aligned.

Mr. Appert lightened the somber mood here in Austin when he urged the publishing executives to persevere in anticipation of much higher profits beginning next year.

He said that "2005 is the mother of all adoption years, with as much as $950 million becoming available." California, for example, is scheduled to adopt history and social studies texts next year, and Texas schools are expecting money to buy newly adopted biology books.

"It will be the boom time, with 10 percent [profit growth]," Mr. Appert predicted, "although it could be dramatically higher."

Vol. 23, Issue 24, Pages 20,23

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