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The Center for Public School Renewal

Note: Published in slightly different form as "Put Kids Ahead of Adults in School Choice" by The Detroit News, April 9, 2000.

Original Title:
School Choice: Show Me The Money
by Barry McGhan

School choice ideas are controversial, and thus prone to exaggeration and obfuscation. Sometimes, statements about benefits for kids are really about benefits for adults. Perhaps we can cut through some of this smoke.

For example, a common anti-choice remark is that private companies shouldn't make a profit on the backs of public school children.

Does that mean that school bus manufacturers, textbook publishers, and food suppliers should be non-profit organizations? How about the contractors that build and repair schools, or provide janitorial services to some districts? Where should the line be drawn between for-profit and not-for-profit goods and services for education?

Some people seem to believe that the closer you get to actual day-to-day classroom activities, the less appropriate the profit motive becomes. It's apparently ok for the district to spend bond money for capital investments--where, for example, the manufacturer of a new boiler makes a profit. But its not ok to take some of the per-pupil operational funds as profits. The feeling is that all the money that could be spent on kids, should be spent on them.

But wait a minute. When districts spend money on kids, doesn't that money go to the adults who are running schools and providing goods and services to them? Whether funds are spent for someone's public salary, or someone else's private business expenses and profits may not matter all that much. Let economists worry about the differences between wages and profits. What matters in the case of school expenditures is the bang we get for our tax buck.

Take, for example, a typical Michigan elementary school. The district will get about $6000 for each child in the school, and reserves some portion of that amount to spend elsewhere. An elementary school--cheaper to run than secondary schools--may see only about $3000 per pupil spent for instructional operations.

Suppose one of these new educational management companies takes over the school, spends $4000 per pupil on instruction, $1500 on overhead, and keeps the remaining $500 (8.3%) as profit. Even if nothing else changes, the kids come out ahead, enjoying a one-third increase in the money spent on them.

There's nothing wrong with making either a good salary or profit in public education. What's wrong is taking that salary or profit without returning a good value for it.

The basic argument over profits in public education is about who gets the money–the adults currently in control, in salaries, or the adults who would like to be in control, in profits and salaries. Some people also worry that private companies--because they are private--will be able to get away with cutting corners and not offering good value. Others say we're already getting poor value from the current not-for-profit approach to running schools.

On the other side of the coin, a pro-choice remark one often hears is that competition from management companies, charter schools, and voucher-supported private schools will force regular public schools to improve.

Unfortunately, this makes no more sense than the concern about making profits off public education. The problem is that the schools offered up as competition for public schools are optional–schools that families can choose not to use. Because they are optional, they are mostly free from crucial constraints that compulsory public schools have. In particular, optional schools have two big freedoms over public schools--the freedom to choose who will work there, and the freedom to choose who to work with.

Optional schools are not generally saddled with union contracts, long-standing personnel policies, and state employee regulations (such as those regarding retirement payments). This gives them the flexibility they need to put together a staff that meets their instructional and profit-making goals. More importantly, they can be more selective about who their students are. While some worry about optional schools using selective enrollment procedures, I'm more concerned with their disenrollment practices. It's easy for optional schools to eliminate the difficult or uncooperative student. Regular public schools are usually stuck with them.

The claim that competition from optional schools will cause public schools to improve is bogus. Optional schools--even the magnet and alternative schools currently run by public school districts--will always have an advantage over regular public schools. The only way to have fair competition would be to level the playing field by freeing all public schools from the constraints sketched out above. No one is talking about that kind of competition.

Here again we have an argument--couched in terms of benefits for children--that is really about what is good for competing groups of adults. If we can find a way to get past the adults' interests, we may finally be able to start talking about what really is good for kids.

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