Topic: Education and Child Policy

Bee Naturals

A home schooler, 13-year-old Evan O’Dorney, is once again the winner of the Scripps National [sic] Spelling Bee. In fact, home schoolers took fully one third of the top 15 spots in the Bee, utterly out of proportion with their share (about 1/40th) of the U.S. student population. Another two spots were taken by private school students, and three were taken by Canadian public school students (hence the “sic,” above — we’ve yet to anschluss the Canucks so far as I can recall).

That left five spots for U.S. public school students — the same number taken by home schoolers whom they outnumber by 50 million or so kids. And it isn’t as though the homeschoolers are fabulously wealthy and able to hire special tutors. The winner’s father is a subway train operator and his mother oversees his education.

Homeschoolers excel in such competitions because they enjoy more educational freedom than any other category of learner. They can pursue their interests and competitive drives (spelling isn’t even O’Dorney’s favorite subject) without being constrained by the pace of a classroom targeted at the “average” student — a pace that must be, by definition, too fast or too slow for the majority.

Private school students — whose showing was also disproportionately good for their share of the population — also have more educational freedom than those in public schools because they and their parents have chosen their schools from a minimally regulated, though currently small, private sector.

Public school students have the least educational freedom because public schools are explicitly or implicitly constrained to offer a uniform education to their charges. Even when parents “choose” a public school by choosing the neighborhood in which they live, their educational “choices” are artificially homogenized.

Imagine what heights America could achieve if every family had the freedom to choose from among homeschooling, public schooling, independent schooling, or some combination of the three, without facing a financial penalty for doing so. It would be an easy thing to accomplish through a program of personal use and scholarship donation tax credits.

Reno 411

Mike Reno, a Michigan blogger and elected school board official, critiques my recent study of school district size and spending here. My 411 on his analysis:

His chief objection to the study is that I use per capita income as a proxy for a community’s level of demand for education. Mr. Reno “cannot agree that all wealthier communities have higher standards than less affluent communities.”

This is a non sequitur. The fact that income has been found to be strongly correlated with educational demand does not mean that all wealthier communities will have higher educational demand than all low income communities. It simply means that, on the whole, the correlation between the two is strong and positive. There are surely exceptions.

I use income per capita as my main proxy for a community’s demand for educational services because that has been the norm in econometric research on school district spending since such studies got going in the late 1950s. It is not, however, the only such proxy that I used. I also control for the share of the district’s population actually enrolled in public schools (which captures the extent to which community members and their relatives are personally affected by the system – and hence stand to gain from higher spending on it). In addition, I tested out a control variable which was an index of parental level of education, also commonly used as a proxy for educational demand (the more education you have, the higher your expectations for the education of your children).

As I explain in the paper, the coefficient for the public school enrollment per capita term is unexpectedly negative, and the parental level of education term was statistically insignificant and so dropped from the final model. Hence, after controlling for the other dozen or so variables in the model, no proxy for educational demand explains a substantial share of the variation in district spending, and one actually has a negative relationship to spending.

A second of Mr. Reno’s concerns is my observation that student achievement is not, on average, related to per-pupil spending, after controlling for other factors. He observes that spending can matter when the stars align and a public school district has efficient leadership. This is not an objection to the overall pattern. It simply illustrates that, on the whole, public school districts do not have efficient leadership. The lack of substantial correlation between public school spending and student achievement is a very well established research finding. In most cases, public schools are simply not efficient. As I explain in my paper, the evidence suggests a reason for that pattern: the current system provides incentives for public officials to spend as much as they can, and, on the whole, they apparently heed those incentives.

Mr. Reno’s final concern is that I do not deal with any systematic variation in the service mix offered by districts of varying size. Presumably, he is suggesting that larger districts are able to offer a wider range of services, and that this explains their somewhat higher spending. A key conclusion of my paper, however, is that size does not matter all that much in determining district spending. Realistically, breaking up large districts would reduce total spending by about 1 percent (that would be for a hypothetical savings of $200 million from district breakups, out of a budget of about $20 billion).

As I point out in the paper, what really determines district spending is the ease with which officials can raise per pupil revenues. The easier it is, the more they spend. Is it any wonder spending is out of control?

Of Tax Credits and Government Subsidies

Previously on Cato-at-Liberty, Michael Cannon (post 1, post 2) and Andrew Coulson (post 1, post 2) argued with Jason Furman (on health care) and Sara Mead (on education) about the nature of tax credits and tax breaks.

Furman and Mead claim that tax credits and breaks, because they represent forgone tax revenue, are little different than government subsidies (with a raft of implications). Cannon and Coulson (for various reasons) disagree.

The great “a-ha” moment of the discussion came when Mead pointed to Cato scholars’ criticism of ethanol tax credits as subsidies or “tax expenditures.” Even other Cato scholars agree that ‘tax credit’ equals ‘government subsidy,’ she says.

Surprisingly, up to this point, the argument has largely ignored the use of the credited money/forgone government revenue. I would argue the use of the credited money is fundamental to determining if the credit/tax break is a subsidy.

In the case of an education credit, it is true that government would lose revenue because of the credit. But government has also assumed the obligation to educate the nation’s children, and government would be released from that obligation in the case of the child whose schooling is funded by the credited money. Is the credit, thus, a subsidy?

Consider: If Joe owes his bank a $10 fee for its services and, instead of sending Joe a bill, the bank simply deducts that amount from his account, we wouldn’t describe Joe as subsidizing the bank (or the bank as subsidizing Joe). Likewise, if government has assumed the obligation to educate little Johnny, but instead Joe pays Johnny’s tuition and receives a government tax credit as a result, it seems incorrect to say that Joe has received a subsidy. Instead, just as with the bank and Joe, the education credit represents a net adjustment of Joe’s obligation to government and government’s obligation to little Johnny.

Now, there may be reasons why government should not make this adjustment, but those reasons would not include that the adjustment is a subsidy to Joe. The only subsidy in this system is government’s taking on the obligation to provide little Johnny with schooling — a subsidy that I assume Mead finds acceptable.

Parenthetical #1: I suppose there is one condition under which Joe’s education tax credit should be considered a subsidy: if government education expenditures aren’t about educating Johnny, but about providing jobs for unionized public school workers. Thus, Joe’s paying for Johnny’s tuition at a private school wouldn’t be fulfilling government’s intended obligation. But surely, no one thinks that government education policy is about benefiting unions and bureaucrats instead of educating kids, right?

Health care tax benefits (e.g., HSAs, tax deductions for medical expenses, the tax-free status of employer-provided medical coverage) are a murkier subject. There is no explicit government financial obligation to provide the entire nation with health care (though supporters of socialized medicine claim there should be such an obligation — and, I assume, they are intellectually consistent and support tax breaks and credits for the private provision of health care).

There are, however, legally established government obligations to provide health coverage to the poor (Medicaid, SCHIP, et al.), the elderly (Medicare, Medicaid, et al.) and to guarantee everyone access to care. It may be that the various medical tax credits and insurance tax breaks help government to fulfill those obligations at lower cost than other policies. If that is the case, then tax breaks and credits may be part of the optimal policy for fulfilling that obligation (and Furman would be arguing for a policy change detrimental to welfare).

Parenthetical #2: Full disclosure here — I’m of the camp that health care expenditures should be treated no differently, tax-wise, than other expenditures, and that government has no special a priori obligation to provide health care or health coverage.

Now, juxtapose the above two situations with ethanol tax credits and the other sorts of tax breaks that Cato scholars regularly decry. While there are legally established government obligations to provide schooling for children and health benefits to certain sub-groups of the population, there is (that I’m aware) no government obligation to provide American citizens with corn-based energy for transportation.

Parenthetical #3: I ignore the wacky claim that the U.S. government has an obligation to provide ”energy security” so the nation is protected from evil Canadian and Mexican oil sheiks.

This means that there is no government obligation that ethanol producers can fulfill privately, and thus receive a tax credit or tax break. The ethanol industry’s tax breaks and benefits are not simply “squaring accounts” in the manner as Joe, little Johnny, and the government. The ethanol tax benefits seem to be clear cases of government subsidy, and they should be criticized as such.

Where does this reasoning leave the discussion between Cannon and Coulson on the one hand, and Furman and Mead on the other? At the very least, it seems Coulson’s position is fully consistent with Cato’s general critique of subsidies. Further, given the premise that government has some special obligation to provide health care, Cannon’s position also seems consistent with Cato’s general critique of subsidies.

I am curious, though, whether the Left’s sudden concern over subsidies is consistent with positions they take on health care, education, and other policy areas….

A Bit of Education Accounting

The U.S. Census Bureau just released Public Education Finances, 2005, and news stories are focusing on a national per-pupil expenditure average of $8,701, as well as state highs of $14,119 in New York and $13,800 in New Jersey.

Unfortunately, some major items such as capital costs are left out of these expenditure figures, so they understate pretty significantly total amounts spent on public education. Thankfully, the census folks also offer per-pupil “finance amounts” (they’re on table 11 of the report for those playing along at home) that are much more inclusive than the constrained “current spending” figures (table 8 ) cited in the media.

Using these more comprehensive stats, we see that in the 2004-05 academic year public school systems nationwide had average per-pupil revenue of $10,159, and the top spenders shifted a bit. Washington, D.C., took the first place position with a per-pupil haul of $17,809, New Jersey came in second at $16,213, and New York dropped all the way to third place at $15,791.

Poor New York. How can they possibly expect to educate anyone on that kind of money?

New Study: School Districts Spend As Much as They Can

The Mackinac Center for Public Policy has just released a study I conducted for them on the relationship between school district size and spending. But a funny thing happened on the way to the findings – I discovered something vastly more intriguing than what I set out to investigate.

When trying to statistically isolate the effects of district size on per-pupil spending, you have to control for other factors that might affect expenditures. One thing that economists like to control for is the public’s demand for educational services. If local residents expect more (or less), then district officials may choose to spend more (or less) to meet their demands. This is the traditional “selfless public servant” view of bureaucratic behavior.

But there is an alternative theory of bureaucratic behavior, called “public choice.” Public choice theory says that everyone, including bureaucrats, voters, and elected public officials, is motivated significantly by self-interest. We try to do what is best for ourselves and our families. According to this view, public officials generally endeavor to spend as much as they can, because that is the route to professional growth in the public sector.

As a “Pepsi Challenge” of economic theory, I included control variables for both views of bureaucratic behavior in my model. The result? Public choice theory explains about 15 times as much of the variation in spending between districts as does the selfless public official theory. In other words, public school districts spend as much as they can, regardless of local public demand for their services.

That means the incentive structure of our state-run school monopolies is broken. It encourages profligacy. Is it any wonder that real public school per pupil spending has doubled in the past 30 odd years, without any commensurate improvement in the skills of high-school seniors?

State legislatures wanting to rein in spending thus have only one real hope: introduce new incentives for educators to maximize quality while controlling costs. How do you do that? Competition, parental choice, private ownership of schools, deregulation, and, as much as possible, direct parental funding of schools. The same market structure that has driven rising quality and efficiency in almost every other field for centuries. Throw in a good education tax credit policy and you’ve got universal access to a free education marketplace.

Let Parents Choose

One of the most frequent objections I hear to market education reforms is that poor and minimally educated parents won’t be able to choose wisely; that they would be bad education consumers.

There is overwhelming evidence that even the world’s poorest, least educated families make better educational choices for their own children than “expert” bureaucrats make on their behalf.

I once offered this evidence to a Democratic state legislator who shocked me with the racism of his response. He basically said that such successes in the slums of, among other places, Africa, were not relevant to the U.S. context. “Our poor blacks” he told me, are less well equiped to choose their children’s schools than Africa’s poor blacks. This particular state legislator is, by the way, African American.

To him and those who share his pernicious misconception, there is now yet more evidence that families of all races, at all income levels, at all education levels, can choose wisely for their children — even if they are American. A newly released study by Georgetown University scholars finds that families (overwhelmingly low-income and African-American) participating in D.C.’s school voucher program are making rational, informed choices and are becoming more astute consumers the longer they participate in the program.

What most opponents of market education fail to grasp is that the reason so many parents are so detached from their children’s education in the current monopoly school system is that the system itself has marginalized them. Most parents have virtually no direct say in any important aspect of their children’s public schooling. There is thus no point for them to become informed and active. When given a choice and a chance, they know what they want and they learn to be savvier consumers the more they exercise that choice.

The Washington Post vs. Milton Friedman

Actually, it’s the Post’s education columnist Jay Mathews vs. the Milton and Rose Friedman Foundation’s executive director, Robert Enlow, in a school choice debate being held at Edspresso.com. Robert gets the best of this exchange.

Jay is generally a reasonable guy, and so, naturally, supports school choice programs that allow families to easily choose the public or private school that best serves their kids. His two failings in this debate are: not grasping the transformative nature of a large scale market reform, and allowing his own sense of futility about the prospects for change to color the school choice movement’s real potential.

As do most journalists, Mathews confuses the existing niche of non-profit private schools, and existing tiny voucher programs, with the kind of vibrant, large-scale, significantly for-profit market that could arise under a well-designed statewide school choice program. I explained the difference in this blog post.

It’s also easy to sympathize with how tired Mathews sounds when talking about the futility of real reform in k-12 government schooling. He’s been writing this beat for a long time, and change has been miniscule thus far. But what Mathews seems not to have noticed is that the school choice movement has been steadily growing, and steadily introducing and passing more programs over the past twenty years. For every battle-hardened veteran of the movement that is beginning to tire, there are several sharp new researchers, analysts, and campaigners coming forward to carry on the standard. Not just in the United States, but everywhere from England to India.

Utah may be the first U.S. state to implement a universal school choice program, but even if its program is reversed, another will follow. It’s inevitable. The status quo system will continue to consume more and more money without showing improvement, as it has done for generations now, and eventually people in one of our fifty states will decide they’ve had enough. Once one state tastes educational freedom, and reaps its benefits, the others will fall like dominos to the exigencies of economic and demographic competition.

Perhaps not tomorrow, or next year, but probably within the next ten or twenty, chunks of government school district headquarters will be sold for their historical value on eBay – like relics of the Berlin Wall. And public education will finally be delivered through a market system that can live up to its ideals, rather than by the moribund monopoly we’ve been saddled with for the last century-and-a-half.