Response to:  "School choice is too timid and inflexible to give educators real freedom or

give parents real choice.  Worse than that, the extension of government funding to private schools would eventually compromise their independence, expanding rather than limiting the state's existing education monopoly."

 

 

SCHOOL CHOICE: AGENT OF CHANGE

 

 

By John Merrifield[1]

October, 2000

 

 

            'School choice' is an agent of change, but not necessarily enough, or the right kind. The changes that result from the expansion of parental choice depend on the ability and incentive to relentlessly pursue improvement and diversify the schooling options through specialization.  The accessibility of those options is also a key issue.  There are huge differences between the proposals that bear the 'school choice' label.  There are four general possibilities.  1.) Public school choice means access to public schools other than the assigned neighborhood school; perhaps a charter school.  2.) Private school choice means continued government funding of public schools, plus government assistance for some private school users; usually much less per student than the funding of public schools, and usually limited to poor families or victims of the worst public schools.  3.) Milton Friedman proposed complete voucherization of public K-12 funding.  Since the voucher payment mechanism is okay, but not necessary - choice-based direct payment or tax credits are okay too - I'll call that 100% child-based funding.  4.) Market education means no government-run schools.  Public funding might support schooling of poor children.

 

PUBLIC SCHOOL CHOICE

            Since the current practice of assigning children to schools through attendance zones precludes specialization, open enrollment among government-run schools would slightly increase educators' ability to respond to the existing weak incentives to specialize.  School principals' inability to adjust prices, reap profits, reproduce successful practices in other locations, or use controversial materials or methods will greatly limit specialization and innovation.  Parents' choices won't change much.[2]  Open enrollment will not create any additional incentive to pursue improvement.

            However, even modest specialization by public schools will place the private sector in even greater financial jeopardy.  Charter and magnet schools recruit many children that would otherwise attend private schools.  The increased financial strain sometimes forces independent schools to come under the government regulatory umbrella as charter schools.[3]  Even in the states with 'strong' charter laws, charter schools are still subject to significant regulation.[4]  The resulting decline in the size of the private sector may offset the modest improvements in the public schools.

 

PRIVATE SCHOOL CHOICE

            Private school choice typically allows a small number of poor families, or children enrolled in the worst schools, to use public funds to pay private school tuition.  Permanent programs involving a very large share of the K-12 population that permit parents to supplement a voucher with their own money ('add-on') could prompt significant improvement and diversification of parents' choices.  Unfortunately, the existing publicly funded programs (Milwaukee, Cleveland, Florida, Vermont, and Maine) lack at least two of those three characteristics.  Even though those programs are too limited to significantly change the school system, they are widely touted as important experiments.  But studying the effect of moving children among existing schools is nearly pointless in a nation that desperately needs system transformation.  Calling restriction-laden programs 'experiments' threatens to make parental choice politically irrelevant.

            Increased access to existing private schools for a few families entails some risks.  States derive their authority to regulate private schools from compulsory attendance laws, but new restrictions could accompany the rise in public funding.  There appears to be little risk that burdensome rules will follow government funds allocated by parents,[5] but restriction-laden programs maximize that risk, and minimize the potential gain.  A little-changed public system remains as a huge constituency for increased regulation.  And for that risk, we'd only help a small share of public school users.  Because private school choice supports choosers at a much lower level than public school users, it does little to help private schools expand or improve, or even eliminate the severe financial duress typical of so many private schools.[6]

Programs like Houston's 'Private School Plan' are a worst case scenario.  Houston students can use public funds to pay tuition only if they are failing in a low-performing school, or to reduce overcrowding.  To receive public funds, private schools must accept the district payment of $3575 as full payment, "meet state accreditation standards, abide by state laws governing public schools [emphasis added], and accept all students, regardless of conduct and academic performance;"[7] basically become a public school.  Financial duress will force many private schools to trade their independence for survival.  Parental choice as a modest add-on to the current system can eliminate choices in the private sector without changing the choices in the public schools.

The Houston Plan also contains another common, but not widely recognized threat to private school diversity and quality.  The Milwaukee, Houston, and Florida programs require private schools to accept the public funds as full payment.  The ban on private money 'add-ons' acts like a price control.  The devastating effects of price controls are well documented.  The stories are standard fare in basic economics textbooks.  Consider the Houston number of $3575 per child.  The Faustian bargain with the Houston District limits existing and potential school operators to services that they can produce for less than $3575 per child.  Without the ban on add-ons, the private sector would offer parents a much larger and more diverse menu of schooling options.  Because many widely available services originate as pricey luxuries purchased by the wealthy, price controls stifle innovation.[8]

 

100% CHILD-BASED FUNDING

            The allocation of all public K-12 funding through parental choices would dramatically increase the incentive and ability to specialize and pursue improvement.  The comparison of risks and potential gains would differ significantly from private school choice.  When every school gets its public funds through parental choice, the regulatory risk is lower because public school officials will no longer try to attach debilitating conditions to the money.  And vouchers and tax credits reduce the probability of federal interventions.  "By diminishing the role of central state authorities, it [choice through vouchers or tax credits] would lessen federal capacity to intrude via such state agencies."[9]

The small remaining risk to the 10% of K-12 children currently in private schools pales in comparison with the certain consequences of failing to transform the current system.  The potential benefits - to the 90% in public schools or home schooled and to current private school users - are huge.  The people that oppose every parental choice plan that involves tax dollars "display a fundamental lack of proportion in assessing degrees of risk and immediate vs. remote dangers."[10]  Independence is not in much jeopardy, and many private schools are much more concerned about their survival[11] than minor threats to their independence.  Independence is useless without adequate funding.  Child-based funding would significantly increase the per pupil funds of the vast majority of private schools.

            100% child-based funding increases the importance of add-ons.  If parents cannot supplement public funds with their own money, there is a virtual price ceiling at the per pupil public funding level.  A voucher worth, say $4000, would reduce the private sector to two categories of schools: $4000 tuition private schools, and elite prep schools.  Schooling costing slightly more than $4000 would vanish.

 

MARKET EDUCATION

Complete privatization maximizes the ability and incentive to specialize and improve.  The K-12 menu would be extremely diverse, but access to the menu would be a contentious issue.  Without subsidies, poor families have little or no access to schooling.  Philanthropists will certainly provide some subsidies as they have done in the past,[12] and tax credits can enlarge that source.  If voters are not willing to leave the education of the poor to charity, the use of direct public subsidies would raise the risk of increased regulation of private schools back to the low level associated with 100% child-based funding. Also, recall that compulsory attendance laws can produce regulation without public subsidies for the poor.  However, the new regulations that could arise through compulsory attendance laws would surely pale in comparison to the public school regulations that complete privatization would eliminate.

 

CONCLUSION

            Public school choice and private school choice cannot effect much beneficial systemic change, but either could undermine the current fragile private sector, and the political feasibility of a 100% child-based funding system and a market education system.  The choice between 100% child-based funding and a market education system is largely a matter of faith and political judgement.  With either 100% child-based funding, or a market education system with public subsidies for the poor, will the government continue to attach only minimal conditions to subsidies like vouchers allocated by consumers?[13]  Would a market education system without public subsidies for the poor spawn adequate philanthropic funding to educate poor children?  It has in the past,[14] so perhaps the most critical question is whether the electorate will vote for something that outright eliminates the public school system and leaves poor children in the hands of charity.  I doubt it.  Since 100% child-based funding does neither, I believe it’s the best choice.

100% child-based funding could evolve into a market education system.  With current K-12 public funding levels (about $7000 per child) plus private add-ons, 100% child-based funding would produce an entrepreneurial explosion.  Significant excess capacity is a likely early effect.  The presence of significant excess capacity will make it difficult for anyone to push for increased funding.  Given the intense competition for public funds, I predict little change in public K-12 spending, which would mean a decline in the real (inflation-corrected) value of taxpayer support per child.[15]  Parents would assume a growing share of educational expenses; at some point, perhaps 100%.  If education charities once again arise to help the poor, a market education system will have been achieved.  I believe that if there is a politically feasible road to a market education system, that 100% child-based funding is part of that road.

 



[1] University of Texas at San Antonio Division of Economics and Finance and author of The School Choice Wars

  (Lanham, MD: Scarecrow Education Press, 2001).

 

[2] Examine the effects of public school choice in Minnesota (David Durenberger [US Senator, D-MN], “Education

  Choices and the Generational Compact: The Minnesota Experience.” Vital Speeches of the Day [February 1,

  1990]: 226-232), Cambridge, Massachusetts (E.R. Fiske, Smart Schools, Smart Kids: Why Do Some Schools Work?

  [New York,  NY:  Simon and Schuster, 1991]), and New Zealand (Edward B. Fiske and Helen F. Ladd, When

   Schools Compete: A Cautionary Tale [Washington, DC: Brookings Institution Press, 2000]).

 

[3] See the November, 1998 School Reform News (p 12).

 

[4] Sarah Tantillo, founder of the Charter School Resource Center, said "I have yet to meet a regulation that charters

  are free from (Leslie G. Pfaff, "The Right to Choose," New Jersey Monthly (September 15, 2000).  Harvard's

  Caroline Hoxby concluded that charters are like new school districts (“What Do America’s Traditional Forms of

   School Choice Teach Us About School Choice Reforms,” FRBNY Economic Policy Review 4 [March, 1998]: 47-

59).  Indeed, in New Jersey "the state has defined each charter school as a kind of district unto itself (New Jersey

Monthly, 9/15/00)."

 

[5] Joseph L. Bast and David Harmer, “Vouchers and Educational Freedom: A Debate.” Policy Analysis

   Monograph #269, The Cato Institute (1997):  p 6 and their endnote 15, and David Kirkpatrick, School Choice:

   The Idea that Will Not Die (Mesa, AZ Bluebird Publishing, 1997): 97.  The key point is that new regulation is

   minimized by allocating public K-12 funds only to parents.  As Bast and Harmer point out, regulation is minimal

   where government money goes to consumers, but significant when it goes directly to producers.  For that reason,

   universal, refundable tax credits are somewhat superior to vouchers.

 

[6] Quentin Quade, "Must Tax Dollars Kill School Independence?" Blum Center Website (www.marquette.edu/      blum/taxkill.html), and Quentin Quade, Financing Education (New Brunswick: Transaction Publishers, 1996): 2. 

 

[7] School Reform News, "Houston School District OKs Private School Plan," (June, 1998): 11.

 

[8] For a discussion of that issue, see Andrew Coulson, Market Education (New Brunswick, NJ: Transaction

   Publishers, 1999): p. 343.

 

[9] Quentin Quade, "Must Tax Dollars Kill School Independence?" Blum Center Website

   (www.marquette.edu/blum/taxkill.html, accessed 8/8/00).

 

[10] Quentin Quade, "Must Tax Dollars Kill School Independence?" Blum Center Website

   (www.marquette.edu/blum/taxkill.html, accessed 8/8/00).

 

[11] Quentin Quade, Strap on the Armor and Go:  Never Give In!" School Reform News (June, 1998): 20, 16.

 

[12] Andrew Coulson, Market Education (New Brunswick, NJ: Transaction Publishers, 1999).

 

[13] Joseph L. Bast and David Harmer, “Vouchers and Educational Freedom: A Debate.” Policy Analysis

   Monograph #269, The Cato Institute (1997):  p 6 and their endnote 15, and David Kirkpatrick, School Choice:

   The Idea that Will Not Die (Mesa, AZ Bluebird Publishing, 1997): 97, and Quentin Quade, "Must Tax Dollars Kill

   School Independence?" Blum Center Website (www.marquette.edu/blum/taxkill.html).

 

[14] Andrew Coulson, Market Education (New Brunswick, NJ: Transaction Publishers, 1999).

 

[15] John Merrifield. "The School Choice Choices," The Independent Review 5, #2 (Fall, 2000): 189-

    207.