Imagine you're a seventh-grader walking to social-studies class. In the hallway, you pass a row of lockers plastered with a giant ad for a supermarket. At lunch in the cafeteria, you sit at a table adorned with characters from an upcoming kids' movie. You ride home on a school bus emblazoned with an ad for a bank and hand your parents a permission slip, for a field trip, that includes an unrelated promo for a department store.
Children and their parentstwo of America's most valuable demographicsare used to seeing ads during cartoons, on cereal boxes and, more recently, on kid-size water bottles. But parents can always turn off the tube or buy less advertising-laden brands. They can't, however, do much about the ads their kids are exposed to on school grounds. And that's exactly what draws some advertisers. A Los Angelesbased firm at one point distributed marketing materials touting a "unique form of advertising" in elementary schools, one that "caters to a captive audience where the viewer can't 'change the channel' or 'turn the page.'"
Educators don't relish force-feeding brands to kids. But as budget shortfalls continue, a growing number of school boards and legislators are making more room for advertisers. For example, the public school district in St. Francis, Minn., recently agreed to cover 10% to 15% of its lockers with ads. Installation began Oct. 22. Superintendent Edward Saxton says that so far, he has encountered little push-back from parents. "Most of these parents have experienced four years of flat funding," he says. "They don't like to see programs getting cut."
There's a lot of appeal in that logicplant an ad, save an art classand School Media Inc., the Coon Rapids, Minn., start-up pushing the locker ads, is working on deals with nine other districts in Minnesota, Wisconsin and California. Meanwhile, New Jersey, having cut $812 million from its school budget this year, could soon join the handful of states that have green-lighted school-bus advertising, which earns districts up to $1,000 per bus.
Businesses can sense schools' increasing desperation. "We see a tremendous opportunity for corporate America to step up and help during this time of extreme crisis," says Mickey Freeman, CEO of Educational Funding Partners, a Denver start-up that brokers naming and signage deals for FORTUNE 1000 companies for everything from school auditoriums and gymnasiums to libraries, computer labs, cafeterias and any other space school boards deem appropriate.
This is not the first time schools have courted advertising controversy. Channel One News, an in-school TV network launched in 1990 and used in about 8,000 U.S. middle and high schools, has long been a target of criticism because its 12-minute broadcasts include ads. A study published in 2006 in Pediatrics found that on average, students remember more ads from the broadcasts than news stories. In 2009 another company, BusRadio, streamed musicas well as four minutes of ads per hourto more than a million school-bus riders a day in 24 states. The company ceased operations last fall shortly after the FCC raised questions about the age-appropriateness of its music.
Concerns about acceptable content help explain why not every school is handing the keys over to the admen. In September the San Diego Unified School District voted down a proposal to sell ad space on campus and on school websitesanother emerging revenue stream. Meanwhile, the Sweetwater Union High School District, just outside San Diego, recently rejected its first potential advertiser, a local for-profit college. The rationale, says school-board president Arlie Ricasa, centered on the low graduation and high loan-default rates at for-profit institutions. "It didn't make logical sense to me to promote a system where debt was going to be incurred by students," she says.
"It's a slippery slope," Susan Linn, director of the Campaign for a Commercial-Free Childhood, says of determining which ads are permissible in schools. "It's really better to draw the line at none, because schools are going to be constantly weighing the impact."
But in an era of tough budget cuts, advertising is easy money. And as resistance wanes, PTAs, administrators, politicians and business owners have started to wonder: Where else can schools slap an advertisement to help make ends meet? In Massachusetts, which cut state education aid by $115.6 million in its fiscal-2011 budget, the Peabody school district in September approved selling advertising on permission slips and other notices that go home to parents. In Hull, Mass., administrators are considering selling ad space on the roof of the high school, over which dozens of planes fly each day in their descent to Logan International Airport, about 10 miles (16 km) away. Students wouldn't even see the ads. How's that for an upside?
This article originally appeared in the November 8, 2010 issue of TIME.