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The Bottom Line Competition Is Good for Customers, but Would It Benefit Schools?

Originally published at Puget Sound Business Journal

While the benefits to consumers of free market competition are obvious in virtually every sector of the economy, one vital institution remains staunchly resistant to competition — K-12 public education. Here state and local governments, supported by an increasingly influential federal government, run a near monopoly. Though funded by their taxes, the vast majority of families have little choice but to send their students to the traditional public school.

High Cost, Poor Quality

The U.S. ranks 26th in the world in K-12 student achievement, getting lapped by China, which places first overall as well as in each major individual academic area — math, reading, and science.

Even despite our shorter academic year (180 days a year compared to China’s 221), chronic absenteeism and dropout rates among U.S. public school students are embarrassingly high. The trend was exacerbated in many states when political and union leaders kept school campuses closed upwards of 12-14 months — replacing the in-person experience with poor quality remote learning.

Those who proceed to college from America’s high schools often require remedial courses to make up for their deficient K-12 education — 33 percent of four-year public college students and 60 percent of community college students need up to 30 hours of additional coursework. Paying for this insufficiency is enormous — students rack up nearly $6 billion per year in additional federal financial aid debt to cover the cost of remedial instruction.

Despite all this, the U.S. outspends nearly every other country in the world on K-12 education —  35 percent more per student than the average developed country — spending which has tripled in constant dollars since the 1970s while achievement has stagnated. Yet government and education leaders remain fixated on the notion that our education system is underfunded.  Covid-19 has provided the cover story for the federal government to pump over $200 billion more into the already astronomical $800 billion annual industry, resulting in a per-student spending increase for nine months of education from $15,000 to nearly $19,000.

Competition Works

Experience has shown that students in schools and settings other than traditional public schools, whether public charter schools, private schools, or homeschool, consistently outperform their peers. Research has shown that the competition improves public schools also. 

Lawmakers, voters, and educational leaders should encourage, not deter, families from seeking alternative avenues of education and incentivize options through Education Savings Accounts.

Keri D. Ingraham

Consequently, demand for charter school enrollment (particularly with low-income and minority families) is off the charts. Enrollment has increased 600 percent from 2001-2017, and current waitlists total one million students. New York City alone has over 52,000 students waitlisted, Boston more than 25,000. Lotteries, rather than entrance exams, select the lucky students who attend.

The learning disparity between traditional public schools and charter schools is striking. Students in the 65 charter schools in New York City located in the same buildings as traditional public schools achieved proficiency on the New York State English Language Arts test at nearly five times the rate of traditional public school students. For mathematics, the rate was almost seven to one.

Private school students also outperform public school students even though spending per student averages $4,000 less. For example, ACT test scores for private school students average four points higher (36 possible points) than their public school counterparts. Their graduation and college matriculation rates are significantly higher as well. No wonder parents are willing to pay expensive private school tuition each year on top of the taxes they pay for the public schools.

The academic achievement of homeschool students is also superior to their public school peers. According to the National Home Education Research Institute, homeschool students typically score 15 to 30 percentile points higher on standardized academic tests. The performance disparity is even more pronounced for minority students — black homeschool students score 34 to 42 percentile points above their black public school peers.

Control & Money

Not all are enamored with school competition. Teacher unions and Democratic leaders view school choice as a threat. Supporting one another’s agendas, they actively work together to prevent parents from seeking alternatives that would free children from the failed public schools.

Their interdependency is rooted in the relationship between power and money. Losing students to education alternatives means fewer total students, equating to fewer teachers as union members, translating to less union funding of Democratic political campaigns. In the 2020 election alone, the National Education Association raised $23 million, with 99 percent donated to Democratic candidates, and the American Federation of Teachers added $10.7 million, with 98.6 percent allocated to Democratic candidates.

While demand for charter schools is at an all-time high, several state governments are working to limit the number or make it difficult for new charter schools to open. Some school districts go as far as to pour taxpayer money into empty school buildings rather than sell them to charter schools. For example, Chicago Public Schools held 40 schools vacant at the cost of over $2 million a year rather than sell the buildings for profit to charter schools.

In defending these practices, Democratic leaders and teacher unions argue that funds going to charter schools, private school vouchers, tax-credit scholarships, or directly to parents through education savings accounts (commonly referred to as ESAs) takes money away from traditional public schools. Several crucial facts are missing from this argument.

First, charter schools, though public schools themselves, generally receive significantly less government funding per student than traditional public schools. When a student enrolls in a charter school, the traditional public school they are assigned often still receives a portion of funding for that student despite not providing any educational services or incurring any costs.

Second, private school families and homeschool families are equal financial contributors to the funding of the U.S. public education system through their federal, state, and local taxes, despite receiving no tax breaks nor direct benefits.

Third, by opting not to enroll their children in public education, the taxpayer funding is divided among fewer students, resulting in higher funding per student.

The bottom line is that lawmakers, voters, and educational leaders should encourage, not deter, families from seeking alternative avenues of education — whether private schools, homeschool, and “microschools” (smaller group, innovative learning environments). Massive savings would occur by incentivizing these alternatives through ESAs covering approved educational services and materials (generally a fraction of the traditional per student public school funding). With roughly 4.5 million homeschool students, taxpayers save more than $65 billion annually. Additionally, 5.8 million students attend private school, saving taxpayers more than $87 billion annually.

Concluding Thoughts

The benefits of increasing free market competition in American K-12 education would be enormous: in short, dramatically improved quality and lower costs to taxpayers. Continuing in our current stagnant, outdated system is not an option — it will only be a matter of time before our economy trails behind the rest of the world as our K-12 education system does now.

Let’s break the monopoly and allow consumers to decide what’s best for them.

Are you concerned about educating the next generation?
The American Center for Transforming Education is a program of Discovery Institute, a non-profit organization fueled by its supporters. Will you help us advance the timely and vital work of transforming our K-12 education system so that it better serves students and their families?