Nov. 3 (Bloomberg) -- From a storefront office beside a Long Island Rail Road station in Glen Head, New York, about 25 miles east of Manhattan, Rally! Education LLC markets its Test Rehearsal product to two dozen U.S. states.

Rally, founded in 2003, is one of as many as 1,800 U.S. test preparation and tutoring firms that are springing up to sell practice materials to help schools get ready for annual No Child Left Behind tests.

Test preparation is booming. Companies took in $1.7 billion in revenue last year. Profit margins on test prep materials are 20 percent or more, compared with margins as low as 3 percent on the year-end No Child exams.

``We've been profitable since day one,'' Rally Chief Executive Officer Howard Berrent says. He says the company has annual revenue of $5 million to $10 million.

Rally recommends that schools administer Test Rehearsal practice exams as many as four times a year at a cost of about $4 per student. Test Rehearsal works, the company says. According to a study that Rally publishes on its Web site, scores in 25 urban New Jersey schools that used Test Rehearsal rose an average of 17.76 percent.

What the study doesn't say is that Berrent, the co-author of the research, is the company's CEO. Nor does it mention that Toms River and other New Jersey districts use prep materials besides Test Rehearsal. Berrent says he tells customers who ask that he's both Rally chief executive and an author of the study.

`Less Vocabulary'

``This is the sort of research that tells us very little,'' says Richard Allington, a professor of education at the University of Tennessee and past president of the International Reading Association. Further, Allington, who's the author of more than 100 articles and books on reading and education, says constant testing may have a negative effect.

``Often, reading gets worse,'' he says. ``The passages they read aren't relevant to the core curriculum, so the kids learn less vocabulary.''

Berrent agrees there's no proof that Test Rehearsal alone pushed up scores in New Jersey. ``That's the issue with all research,'' says Berrent, who previously was CEO of Harcourt Interactive Technology, a Harcourt Education unit that developed online classroom tests.

Rick Stiggins, founder of the Portland, Oregon-based Assessment Training Institute, whose assets are now owned by Educational Testing Service, says sophisticated test preparation materials can be helpful. He cites tests called formative assessments, which give immediate feedback on whether students are grasping a new concept.

`False Prophets'

The trouble is, schools get no assurances that the test prep materials they're buying are any good, says James Popham, an emeritus professor of education at the University of California, Los Angeles, and the author of more than 25 books on education, which he sells along with teacher training videos.

``Teachers are turning to all sorts of false prophets,'' he says. ``They're being sold a bill of goods.''

In Wyoming, Harcourt Assessment is selling a series of prep tests called Learnia. The product, which costs the state $206,000, has two parts. The first is a group of tests that educators call benchmark assessments. These midyear exams are designed to tell teachers how much progress a student has made in math, reading, science and writing. The second is a group of what Harcourt calls formative assessments that provide instant feedback.

Worth a Damn?

Cheryl Schroeder, Wyoming's testing director, says Learnia is helping students master the subjects that No Child exams test. Wyoming has started science testing in advance of the 2007-08 federal requirement. ``It's how you know the children are making the gains they need to,'' Schroeder says.

Popham, who serves as a member of the Wyoming advisory committee on testing, says there's no proof that Learnia is helping students. He says the practice tests aren't tailored to Wyoming school standards. ``There's no evidence that they're worth a damn,'' he says.

Harcourt Assessment's new CEO, Michael Hansen, says Learnia exams are under development. ``We have not, in any situation, rolled out this product saying `This is a finished product; here's what it is,''' he says. ``They're pilots.''

Learnia exams will be customized to test what's being taught in each state, Harcourt spokesman Russell Schweiss says. He says the exams are of high quality.

Popham says one big hang-up in test preparation is that no one is distinguishing the good products, such as those that rely on formative assessment, from the bad ones.

``Test publishers are hawking anything they can,'' he says. ``It's absolutely a fraud.''

To contact the reporters for this story: David Evans in Los Angeles davidevans@bloomberg.net David Glovin in New York at dglovin@bloomberg.net

Last Updated: November 3, 2006 00:08 EST