Choice and Federalism

8/3/2019 Choice and Federalism

1/93


2/93

Copyright 2012 by the Board o Trustees o the Leland Stanord Junior University

This publication is or educational and private, noncommercial use only. No part o this publication may

be reprinted, reproduced, or transmitted in electronic, digital, mechanical, photostatic, recording, or other

means without the written permission o the copyright holder. For permission to reprint, reproduce, or

transmit, contact Richard Sousa ([email protected]). Hoover Institution has no responsibility or the

persistence or accuracy o URLs or external or third-party internet websites reerred to in this publication

and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.

The preerred citation or this publication is Hoover Institution Koret Task Force on K12 Education,

Choice and Federalism: Defning the Federal Role in Education (February 2012),

www.choiceandederalism.org.


3/93

Choiceand Federalism

Defning the Federal Role in Education

Kret Task Frce K12 Educati

Hver Istituti, Stard Uiversity


4/93

t hv i gall akwlg

llwg a

a a l a m.

Kret Fudati

Lyde ad Harry Bradley Fudati

Edud ad Jeaik Littlefeld Fudati

Berard ad Catherie Schwartz Fudati

Tad ad Diae Taube Fudati


5/93

Ctets

Frewrd

Executive Suary

W a amall w aa

Fiscal ederalis

Chice

rmma

Backgrud

Recedatis r ederal acti based fscal ederalis

eal al

1. Kwledge creati ad disseiati the cditi educati ad

what wrks i educatig studets

2. Ercig civil rights laws whe state ad lcal actis i educati are

discriiatry

3. Prvidig facial supprt r the educati high-eed studets

4. Ehacig cpetiti ag educati prviders by deterrig educatiplies ad supprtig educati chice r parets ad studets

rg ma g eseA a ideA

Fal a gam lma fal alm

Recedatis r ederal acti t expad chice

cmm aa a am

Recedatis r ederal acti t expad cpetiti

ca l

c l, , a va l

ca a k

Chice ad iratia tale tw cities

What abut accutability?

Is schl cpetiti a ree-r-all?

What is the rle idividual states?Suary

Abut the Kret Task Frce K12 Educati

bk la m K tak F K12 ea

1

3

5

6

10

17

26

26

26

27

28

29

31

34

38

49

52

52

54

60

61

63

69

71

73

78

83


6/93

i Koret Task Force on K12 Education

In 1930, the ederal government paid or less than 0.5 percent o the

costs o public education in the United States; by 2000, the ederal

governments contribution had risen to more than 7 percent, with

virtually all the rest coming rom state and local government sources.

This is a nearly twentyold increase in government spending in

what had traditionally been a locally unded enterprise. Although

still a relatively minor nancial player in the provision o public

education, with the No Child Let Behind legislation and the much

earlier Elementary and Secondary Education Act, the eds now play

a much larger role both in K12 education policy and in monitoring

perormanceoten with ununded ederal mandates.

Sadly, the ederal governments increased role in education has led

to only small improvements in perormance by American students.

Under such circumstances, particularly in these trying economic

times, every dollar o ederal expenditures is coming under scrutiny,

and education costs and perormance should be part o that analysis.

The Hoover Institutions Koret Task Force on K12 Education decided

to take a look at the role the eds play. Throughout its analysis, the

task orce considered choice, transparency, and accountability

in the undercurrents o its research. With task orce member Russ

Whitehurst at the helm, the eleven-member group came up with a

series o recommendations or what the ederal governments role

might look like going orward:

1. Continue down the path o top-down accountability

2. Devolve power to states and districts, thereby returning to the

status quo o the past century

3. Rethink the undamentals and do something dierent

Frewrd


7/93

iiChoice and Federalism: Defning the Federal Role in Education

In this report, Choice and Federalism, the task orce recommends

moving away rom the top-down approach and ully embracing

policies (which may mean abandoning some old practices) that

promote parental choice o all hues. All eleven task orce members

engaged ully in this project, although one member (Eric Hanushek)

did not agree with all recommendations.

In addition to the task orce, a number o people assisted with this

project and are owed a debt o gratitude: Denise Elson, Jacqueline

Jones, Ellen Santiago, Richard Sousa, Terry Su, Tin Tin Wisniewski,

and Ann Wood.

To learn more about this project, go towww.choiceandederalism.org.

To learn more about the Hoover Institution, go to

www.hoover.org.

John Raisian

Tad and Dianne Taube Director

Hoover Institution


8/93

Executive Suary


9/93

1Choice and Federalism: Defning the Federal Role in Education

Washigt is at a crssrads on K12 education policy. It

has three options: 1. continue down the path o top-down account-

ability; 2. devolve power to states and districts, thereby returning to

the status quo o the midnineties; or 3. rethink the undamentals and

do something dierent by empowering parental choice. A choice is

imminent because o the need to reauthorize the Elementary and

Secondary Education Act (ESEA).

The top-down approach aspires to emulate the national standards,

accountability, curriculum, and teacher preparation policies dictated

by the centralized ministries o education in most developed nations.

The arguments or the top-down approach in the United States include

the consistency and coherence that can fow rom a centrally controlled

system, as well as the ability o the ederal government to counteract

some o the orces that support the status quo in education at state

and local levels. Thus in the top-down model the ederal government

becomes an agent o reorm and a provider o quality standards that

serve the nations interests better than the haphazard and oten sel-serving ministrations o teen thousand individual school districts

and ty states.

The top-down model experienced substantial growth during the

Clinton and Bush administrations. That growth has continued under


10/93

2 Koret Task Force on K12 Education

1 Most countries whose students achieve at higher levels than students in the United States have national

education ministries, but so also do most countries that perorm at lower levels than the United States.

the Obama administration but has shited rom legislatively crated

control (e.g., No Child Let Behind [NCLB]) to executive branch control

(e.g., Race to the Top and NCLB waivers). The shit toward greater

ederal control, although signicant in the context o US history, alls

ar short o the degree o central management exercised by most

oreign ministries o education. Because governmental authority over

schools is legally dispersed among ederal, state, and local entitiesin the United States and will remain so, even the most enthusiastic

proponents o the top-down approach understand that Washington

will never have the authority or control over education that is

exercised by the governments o New Zealand, Finland, Singapore,

and so on. Thus the putative advantages o the top-down approach

are unlikely to be ully realized in the United States because the

approach cannot be ully implemented. Consistent with that view, we

will subsequently present evidence suggesting that the substantially

heightened ederal role in education o the last ten-plus years has

had only modest impact in some areas o student achievement, ar

short o what had been hoped. It might be that urther centralization

would yield more benets, but it is doubtul that more ederal control

is politically possible and in any case its additional yield is uncertain. 1


11/93


The second pathdevolving recently accumulated ederal power to

the statesis much avored by those who represent the historical

structures or delivering K12 public education, dominated by local

school districts, as well as those who avor states rights in general.

This is maniest in reauthorization proposals or the ESEA that allow

each state to establish its own accountability system and that require

teeth only or the very lowest perorming schools. It is unclear to ushow releasing states and school districts rom ederal accountability

and granting them maximum fexibility is anything more than a return

to the status quo. It is the regrettable state o the status quo that

motivated increased ederal involvement in the rst place. With a

quarter o Americas youth not graduating with a regular high school

degree, with those students who remain in school perorming at

mediocre academic levels compared with students in many o the

nations with which we compete, and with the costs o our public

education system among the highest in the world, we believe that

something is needed other than a return to the happy days o school

governance in the last century.

W a amall w aa

Given a choice between the dismal records o control o public

schooling by local public school monopolies versus an evolved orm


12/93


o No Child Let Behind that retains teeth, we avor the latter.2 But

there is a third and better way, an approach ounded on two principles

that have served the nation exceedingly well or our entire history:

ederalism and choice. The ederal structure o our government oers

an opportunity to speciy the role o Washington strategically, to

leverage what it clearly can do best, while allocating to states and

locales what they are best suited to do. This may sound like amiliarterritory, but, or all the rhetoric about local control, states rights, and

the like in public education, the rhetoric has not treated ederalism

thoughtully. The Koret Task Force view o ederalism is disciplined by

the laws o economics and empirical experience on how ederalism

works besta perspective known as scal ederalism. Our second

organizing principle is choice. Much has been written and studied in

this areacharters, vouchers, within-district choice among traditional

public schools, and much morebut the idea o choice, so powerul

in our economy and other government enterprises including higher

education, has rarely been examined in the context o ederalism and

the appropriate roles o Washington and lower levels o government.

One great virtue o a competitive systema choice system oering

lots o alternativesis that, even i no schools actually respond to the

competition, the schools that are providing a higher quality education

2 We have previously put orward recommendations or improving NCLB: John E. Chubb, Learning rom

No Child Let Behind: How and Why the Nations Most Important but Controversial Education Law Should

Be Renewed, (2009). Stanord, CA: Education Next Books.


13/93


will still have an advantage, the bad schools will lose students and

money, and students will have options that prevent them rom being

trapped in schools that are not serving them. Our analysis provides

resh insight by integrating ederalism and choice as the driving

principles o change.

Fiscal ederalism

Fiscal ederalism argues that services are most eciently delivered

i provided closest to the taxpayers/consumers receiving them and

that competition among local governments or residents/taxpayers

will improve those services. We also know that education is a service

that can be undermined by excessive scale or at least by highly

bureaucratized top-down control. Local control means that programs

and people can be much more easily chosen and deployed based on

proessional judgment rather than on ormal rules set in Washington

or even state capitals. But local control in the sense o parental and

taxpayer infuence is undermined in the current system by special

interests that control school bureaucracies. The present arrangement

o school boards, ederal and state regulations, union contracts,

teacher licensing, and court orders is rozen in place and thus can resist

or distort almost any new initiative. Further, the ability o taxpaying

parents o school-aged children to vote with their eet (leave school

districts with which they are dissatised) is severely constrained or


14/93


low-income populations that are most likely to nd themselves served

by low-perorming schools. This lack o geographical mobility or large

segments o the population undermines the competitive pressure that

low-perorming schools and school districts would otherwise expect

to ace in the context o scal ederalism. Vibrant, open competition

among the providers o education services or students and the unds

that accompany them must go hand in glove with ederalism i ouralternative proposal is to work. The absence o choice is why the

ESEA state waiver actions taken by the Obama administration and

oered in ESEA reauthorization proposals are not consistent with

our proposal. Simply devolving education authority rom the ederal

government to the states through a waiver mechanism or legislation

puts us back under the governance model that motivated increased

ederal involvement in the rst place. I states and localities are not

disciplined by a strong top-down accountability regime, they must be

disciplined by something else or they will all back into old habits.

That something else in our proposal is choice, that is, the ability o

parents, armed with good inormation on school perormance, to

decide where they send their children to school.

Choice

For the vast majority o amilies with school-aged children, residen-

tial address determines the public school those children attend. The


15/93


school district assigns the child to a school, typically the one clos-

est to the amilys residence. This assignment policy has a strong

eect on parents who want the best schooling possible: a quarter

o parents o school-aged children report that they moved to their

current neighborhood or the school. Another 11 percent o amilies

choose to pay or their children to attend private schools. Charter

schools and homeschooling account together or another 6 percent.Fiteen percent o school-aged children attend parent-selected pub-

lic schools (i.e., schools to which the parents apply or their childs

enrollment). Thus more than 50 percent o parents o school-aged

children have engaged in some orm o school choice, albeit primar-

ily in the orm o residential choice and private school tuition: two

socially inequitable means o determining where a child attends

school. There is little doubt, based on the long waiting lists or popu-

lar public schools o choice, that many more parents wish to exercise

choice than are currently able to do so. That poor amilies are least

likely to be able to exercise choice means that the school districts

that serve those amilies are least subject to competitive pressure

and least likely to change. Extending school choice to every parent is

central to our plan and critical to the success o any eort to replace

top-down accountability with local control. Further, that choice must

be inormed. Parents need reliable inormation on perormance when

choosing a school. In our view assuring that parents have ready ac-


16/93


cess to reliable inormation on the perormance o schools is a eder-

al unction, one that in the rame o scal ederalism is unlikely to be

taken on, much less carried out well, by lower levels o government.

Student-based unding is critical to our package o recommendations.

Funding must ollow students and be weighted to compensate or the

extra costs associated with high- need students i schools are to com-

pete or students and i parents are to be able to have a real choice.

We recommend student-weighted distribution o ESEA, the Individu-

als with Disabilities Education Act (IDEA),3 and Head Start unds.

With respect to ESEA, we recognize that ederal unds alone may not

be enough o an incentive to change school admission preerences.

Thus we recommend that states that pursue a choice approach, using

student-based unding with ederal dollars, be required to similarly

distribute their own compensatory education unds. Because states

vary substantially in how they target and describe state-appropriated

unds intended to support local school districts, it would be wise or

Washington to set a proportional foor under such unding (e.g., no

less than 50 percent o the states appropriation or K12 education

3 It is well-documented that reimbursement systems or identifed disabilities tend to yield

overidentifcation o special education students. Most o this problem is clustered within categories o

mild disabilities that are difcult to diagnose reliably (e.g., learning disability, attention defcit). Coverage

o this issue is beyond the scope o the present document, but our proposal or student-based IDEA

unding is in the context o a unding system that covers only expensive and easily identifed disabilities

(e.g., autism, mental retardation).


17/93


18/93


The situation is dierent or interdistrict or private school choice.

There $4K o ederal/state unding attached to the student would

leave a gap in tuition. I parents had to pay the dierence it would

limit choice or the poorest amilies, but it would make tuition in

better schools aordable or large numbers o amilies or whom that

option is presently out o reach. The tuition gap could be eliminated

or reduced through tax-credit scholarship programs or personaltax credits and deductions. States could take the next step, as some

already have, and incentivize districts both to make their own student

unding portable and to accept out-o-district students.

RECommEnDATIonS

We lay out a detailed set o recommendations or ederal action in the

body o this report. The most important are highlighted here. Each o

these recommendations is envisioned in a ederal legislative context

in which states can either choose to pursue a choice-based reorm

strategy or stick with a top-down ederal role that is some variant o

the current system.

We recommend that the ESEA unding ormula be overhauled to

award grants to high-need students choosing to attend any accredited

and authorized school and that participating states be required to

allocate their own need-based unds similarly.


19/93


Consistent with our proposal or ESEA unding, we also recommend

that IDEA unding and Head Start unding be student-based (according

to the disability or IDEA and by poverty level or Head Start). IDEA

unding would be limited to those disabilities that are associated with

substantial extra educational expenses and readily recognized. We

urther recommend that the unding ormula take into account local

and state dierences in the cost o services.

We recommend that ESEAs testing and accountability provisions be

abolished or states that adopt the choice-based approach.

To opt out o ederally controlled standards and accountability, states

would be required to establish or oversee choice portals that provide

clear and relevant inormation to parents on school perormance,

including the perormance o students on standardized and normed

assessments that are aligned to the curriculum used by particular

schools. Such assessments could dier within and across states but

in all cases would allow a determination o changes in perormance

o students enrolled in a school against national or state norms (e.g.,

students entered third grade in the Lincoln Charter School at the 45th

percentile on math and ended third grade at the 52nd percentile).Assessment results would continue to be disaggregated by student

group. States, districts, and schools could, o course, choose to

implement common standards and assessments that are widely

deployed in other states, but they would not be orced to do so.


20/93


We recommend that states that pursue the choice approach

be required to establish unied student admission systems

that provide students and their parents with the opportunity to

compare schools and complete enrollment applications or any

accredited school that accepts students supported with state and

ederal student-based unding.

The ederal government would use its expertise in gathering and

providing inormation on school quality to devise requirements

whereby each state would inorm parents o essential indicators, one

o which would be achievement. In addition to providing relevant

inormation on school perormance on which to base choice, the

choice portals would coordinate parent and student choice o school

through processes that maximize the match between parental andstudent preerences and that ensure equity o access.

We recommend that states be required to establish a system or

authorizing charter schools that allows the charter school sector

to engage in orderly expansion to meet demand; provide unding

under the same ormula that applies to all other publicly supported

schools; and provide charter schools with access to capital undsthrough a mechanism equitable with district unding.

About 20 percent o the states do not provide or charter schools at

all; many o the rest impose caps on the number o charter schools,


21/93


place the authority to authorize and oversee them in the hands o

the traditional school districts with which they compete, shortchange

them on per-pupil unding, and require them to cover the costs o

acquiring school buildings out o their operating budgets. The other

orms o schooling we have recommended to expand parental choice

(interdistrict choice, open enrollment within traditional school

districts, private schools, and virtual schools) have an important roleto play, but all except virtual schools typically require that students

travel much arther to school than they would i they attended a

traditional public school. Thus even i these orms o schooling

were in good supply, which they are not, they would be unctionally

unavailable to many students whose parents would like an alternative

to the assigned school. A vibrant charter school sector that is ree o

regulatory barriers to growth is the best present answer to the short

supply o schools o choice or large numbers o students.

We recommend that the teacher quality requirements o ESEA be

abolished or states pursuing the choice approach.

Under our reorm proposal, schools will be operating in a highly

competitive environment in which school perormance is importantto success and in which teacher quality is a dominant actor in

achieving high perormance. In this scenario, the ederal government

should have no more role in setting the standards or the training,

employment, evaluation, compensation, and advancement o teachers


22/93


than it does or restaurant ches. This is a state responsibility, and

states should be able to devolve much o their responsibility or

teacher quality to individual schools and school districts in a system

that holds schools accountable or their perormance. In doing so,

many o the state barriers to trade in the orm o teacher certication

laws that heavily advantage people who have matriculated in schools

o education within state institutions o higher education would all.

We recommend that the Obama administrations signature educa-

tion initiatives, Race to the Top, School Improvement Grants, Invest-

ing in Innovation Fund, Eective Teachers and Leaders, the ESEA

waiver competition, and any other ederal programs that involve the

ederal regulation o the content and mode o delivery o education

or the organization and stang o schools be null and void or statespursuing choice-based reorm.

In our model o scal ederalism and choice, the ederal government

has our core responsibilities in education: redistributive cash trans-

ers, providing inormation on school perormance and what works,

enorcing civil rights, and enhancing competition among education

providers. None o the Obama administrations key education initia-tives serves these unctions and thus none would be appropriate

within our model.

The reasons our proposal should be attractive to states are our-

old: serving the needs o their citizens by expanding educational


23/93


choice and opportunity; creating conditions under which innova-

tion around productivity is incentivized, leading to lower overall

taxpayer costs or education; greater fexibility and reedom rom

ederal control at the state level in education policy and manage-

ment; and assured higher levels o per-student unding than would

be the case i appreciable portions o ederal unding had to be gar-

nered through competitions (e.g., Race to the Top).

We recommend that the choice approach be an option or states. We

envision a world in which some states stay under ederal accountabil-

ity control and some are able to opt out and embrace a more competi-

tive system in which the ederal role is very dierent.

We believe that top-down ederal accountability (i.e., some evolution

o NCLB) is necessary in the context o our current system o

dispersed authority but that it is not necessary (except or inormation

reporting) or a truly competitive system in which parents can choose

their schools, schools have incentives to perorm, and schools are

held accountable rom the bottom up.

We realize that the appeal o our proposal will vary across states,

and we believe that states should have the right to decide how to

proceed on such a undamental and important area o policy. A state

option would allow the states most interested in choice-based reorm

to pursue that option, whereas other states could stick with some


24/93


version o the evolving status quo. Comparisons o student progress

in states opting into choice-based reorm versus those remaining

with the current arrangements would allow Congress to evaluate the

reorm as implemented in pilot states and use that inormation in

deciding whether to expand the program.

The United States has a choice: continue down a path o increased

ederal control o education; return to a pattern o school governance

in which local public school monopolies decide how children are to

be educated and only the afuent have choice; or embrace a new

approach that is grounded in proven and time-honored principles,

asking the ederal government to only do what it does best, and

asking our local school districts to do what they have always beencounted on to doprovide educationbut as strong competitors or

students, not as protected monopolists.


25/93


Although the ederal government has been involved in K12 education

since the beginning o the republic,4 its role until recently has been

largely conned to providing nancial resources and inormation

to states and local education agencies. Federal undertakings

escalated substantially with the 1994 and 2001 reauthorizations o

the Elementary and Secondary Education Act (ESEA) and with the

American Recovery and Reinvestment Act o 2009 (ARRA). Under those

statutes, Washingtons unding was made contingent on compliance

with detailed requirements or how to deliver education, including

the qualications o teachers, standards or what students should

learn, the curriculum or reading, the nature and timing o studentassessments, public reporting requirements on school perormance,

and accountability or schools and districts ailing to meet ederal

targets or improvement.

The ESEA is now being considered or reauthorization, which has been

due since 2007. The concerns about the state o public education that

drove much o increased ederal involvement in the previous two

4 The Land Ordinance o 1785 set aside tracks o land or the support o public schools in each new state

admitted to the Union rom the Northwest Territories.

background


26/93


reauthorizations and the ARRA have not abated. Few issues are more

important or the nation than the education o its citizens, which may

be substantially aected by the ESEA reauthorization. This report

makes recommendations or ESEA reauthorization and other ederal

education programs based on resh considerations o how ederal

involvement can best contribute to growth in educational opportunity.

It aims to change the ederal course dramatically to contain costs

and raise student achievement. And although we ocus on ESEA

reauthorization because it is on the horizon as an action-orcing event,our redenition o the ederal K12 role goes well beyond the specic

connes o ESEA.

We identiy three general approaches to the ederal role in education

that could undergird reauthorization. One is to continue the catchall,

innitely expandable, increasingly costly, and ineective approach

that the ederal government has lately allen into, with the hope omore success down the line based on better policy prescriptions and

renements o law and implementation. The second is to devolve

ederal control to the states and local school districts, thereby

returning to the status quo o the mid-1990s. The third is to change

course dramatically to an approach that has coherent principles,

denable limits, containable costs, and the possibility o boosting

student achievement.

We are putting orward such a coherent approach. Although

taking into account political and historical realities, as well as

evidence on the present unctioning o various ederal education

programs, the oundation o our approach is a combination o scal

ederalism and choice, with choice exercised through inormation-

rich competitive markets. These models have long and separate

histories as ways o thinking about how government can most


27/93


eectively enhance the delivery o essential services. We combine

them to oer a new path orward.

Fiscal ederalism holds that the ederal system provides policy

makers the opportunity to allocate responsibilities among levels o

government in ways that promote eciency and equity. In essence,

policy makers should allocate decisions to the unit o government

closest to the consumers o the service, unless there are externalities

spilloversthat prevent the local unit rom making such decisions. In

most matters, schools should make better decisions than districts, just

as school districts should make better decisions about educational

services than states, and states better than the ederal government

because those services are consumed locally. There are, however, a

number o externalities in education. That is to say, education doesnt

just aect the student. For example, the increased education o

individuals spills over to the benet o those around them and therest o society. Because school districts vary so widely in the tax

base rom which revenues or schools can be generated, higher levels

o government are better positioned to address the unding issues

surrounding such externalities than are local school districts, much

less individual schools. Otherwise, either poorer districts will spend

less or education, with the possibility o lower school perormance,

or they will raise their tax rates to disproportionate levels, causing

mobile tax payers to fee. Both taxpayer fight5 and inerior education

outcomes are externalities in public education that states and the

ederal government are best positioned to address.

O course, unding levels are only one determinant o educational

outcomes, with adequate levels being necessary but ar rom

5 William A. Fischel, ed., The Tiebout Model at Fity: Essays in Public Economics in Honor o Wallace

Oates(Cambridge: The Lincoln Institute on Land Policy, 2006).


28/93


sucient to assure that the negative externalities associated with

the undereducation o individuals are minimized and the public

good associated with eective education is magnied. There is a

national interestincluding a powerul economic interestin a

well-educated population.

From the perspective o scal ederalism, the design challenge or

the ederal role in education in general and the reauthorization o the

ESEA in particular is to identiy the major negative externalities acing

local providers o educational services, determine which can be best

addressed by state government, and assign the remainder to Wash-

ington. We carry out that exercise in this report, and it yields a very

dierent picture o ederal involvement than is seen at present or that

will be seen in the uture i Washington continues down its present

path. For example, in our model, Title I o the ESEA, which concerns

education o the disadvantaged, becomes strictly a mechanism orcash transers to support the schooling o high-need students rather

than 181 pages o legislative prescriptions and thousands o pages o

associated regulations covering requirements or everything rom pa-

rental involvement to school libraries.

Fiscal ederalism takes us ar in rethinking the ederal role in

education, but it has a signicant limitation: it lacks a strongcompetitive mechanism. Within the management structures or

public schooling that have developed in the United States, the

precepts o scal ederalism lead to more decentralization but still

within a hierarchical arrangement o monopolistic responsibilities.

A redesign o ederal responsibilities or education under scal

ederalism would reassign many tasks that have recently shited to

Washington back to the states and local school districts (i.e., urther

down in the hierarchy). But the nal resting place in that hierarchy,

the local school district, would remain a monopolistic locus o


29/93


control, one that cannot be avoided by those who are geographically

immobile or unable to aord private schooling.

As bureaucratic monopolies, local school districts cannot be counted

on to use their unds in ways that are responsive to taxpayers or

consumers. Instead, they respond to the interests o whoever is

powerul at the local level, more oten than not organizations that

represent teachers employed by the school districts and thus having

the greatest infuence on the election o school board members.6

School boards, in turn, appoint and oversee the administrators who

run the schools. This system is likely to be much more responsive to

the needs and wishes o adults who are employed in schools than to

the needs and wishes o thosechildren, taxpayers, communities

served by those schools. Bad decisions get made routinely on behal

o those vested interests.

Charles Tiebouts 1956 article, A Pure Theory o Local Expenditures,7

and a substantial body o subsequent empirical research demonstrate

the strength o one alternative to the political process or determin-

ing the nature o local public services. People vote with their eet

(choosing rom among the many local jurisdictions in which to live

in most metropolitan areas) rather than involving themselves in the

political process to improve local services. Thus instead o selecting aresidence and then trying to elect a school board that will provide the

quality o schooling they desire or their children, parents will move

to the school district that they eel best provides what they want at a

price they are able and willing to pay. The prolieration o smaller sub-

6 Terry Moe, Special Interest: Teachers Unions and Americas Public Schools(Washington: The Brookings

Institution Press, 2011).

7 Charles M. Tiebout, A Pure Theory o Local Expenditures, Journal o Political Economy64, no. 5

(1956): 416424.


30/93


urban school districts surrounding most metropolitan areas allows

this sorting to occur readily.

This option is much more readily available to the afuent than the

poor, who remain concentrated in large cities. Those large cities,

unlike smaller suburban governments, cannot tailor their services so

that average taxpayers get back the services they want and pay or

in taxes because doing so would mean providing a dierent level o

services to afuent than to poor sections o the municipality. Thus

large cities redistribute taxes rom richer to poorer residents, causing

richer residents to fee. In essence, the larger and more diverse a citys

population, the less eciently it is able to match service provision

to taxpayer contributions and perceived needs.8 This buers urban

school districts rom dissatised parents because they can fee and

do so; those who remain are both immobile and politically weak in the

context o the control o public education.

One way to correct the strong tendency o local school bureaucracies

to cater more to adult than student interests is to regulate and

intervene rom abovethe course o action taken by Washington

during the last teen years. We argue that this has been only weakly

eective and has imposed a heavy regulatory burden on schools in

the orm o administrative costs and infexibility. We propose, instead,to create real competition among the providers o K12 education

services or students and the public unding that accompanies them.

Competition among a diverse set o education providers (public,

private, charter, virtual, local, and distant) is very dierent rom the

competition among local municipalities or residents and taxpayers

that is the competitive mechanism in scal ederalism. Competition

among education providers allows parents to obtain their childrens

8 Paul E. Peterson, City Limits(Chicago: University o Chicago Press, 1981).


31/93


education rom an education provider that could be around the corner.

They do not have to move to another school district.

Our position is that competition or students and the public unds

associated with them, i accompanied by providing parents with

reliable inormation on the schools perormance, will create a

marketplace or schooling that will evolve toward what parents want,

be more innovative, and become more productive. Creating an even

playing eld or schools will allow those that are responsive to the

needs o parents and students to prosper.

Evidence rom economics, much o it subsumed in the literature on

the theory o rms, as well as considerable research in education,9

indicates that schools respond to competitive pressure. For example,

West and Woessmann nd that perormance on international

examinations by teen--year-olds in twenty-nine developed countries

is positively associated with the share o the K12 education

marketplace that is held by private schools in those countries.10 Just

as a managers o or-prot entities have their desire or salary, perks,

security, power, and prestige disciplined by the extent to which the

rm that employs them competes successully or customers, so too

do managers o schools respond to circumstances in which there is

competition or students and their unding.

Federal policy makers could and should introduce more competitive

pressures into public schooling. It is not enough to ollow the

9 Examples o research fnding competitive eects include Tim R. Sass, Charter Schools and Student

Achievement in Florida, Education Finance and Policy1 (Winter 2006): 91122, and Caroline M.

Hoxby, School Choice and School Productivity (or Could School Choice Be a Tide That Lits All Boats)?

in The Economics o School Choice, ed. Caroline Hoxby, (Chicago: University o Chicago Press, 2003),

287302.

10 Martin R. West and Ludger Woessmann, Every Catholic in a Catholic School: Historical Resistance

to State Schooling, Contemporary School Competition, and Student Achievement Across Countries,

Economic Journal120, no. 546 (2010): F229F255.


32/93


prescriptions o scal ederalism and move decision making back to

states and local school districts. That was the status quo beore the

recent accretion o power in Washington, and it did not work well in

terms o educational progress. A new ederal policy should embrace

the concept o scal ederalism but insist that decentralization be

accompanied by new and powerul mechanisms to enhance choice

and competition.

Choice and the competitive pressures on schools it creates can

have a number o outcomes, including more advertising by schools,

which can be positive in that it provides parents and other interested

parties with better inormation on important eatures o schooling;

more equality and social justice by giving everyone rights, options,

and powers currently in possession primarily o the well to do and

infuential; and greater eciency/productivity rom our education

system. Eciency/productivity is particularly important, what withrevenues scarce and the current arrangements not producing enough

knowledge and skills or the nations long-term sel-interest.

We have developed our proposal in three steps. First, we identiy

the education responsibilities that should be centralized in Wash-

ington in light o the precepts o scal ederalism. These respon-

sibilities fow rom the existence o signicant externalities at thelevel o local provision o education services. Second, we provide

recommendations or ederal action to increase the quality and

usability o the inormation available to parents on which to base

school choice and to support schools in their eorts to be more

productive. Finally, we propose ederal actions to increase sub-

stantially the competition or students among education pro-

viders. These three components are inextricably linked in our


33/93


model: scal ederalism will ail, as it has historically, unless it is

combined with vigorous competition among education providers.

In turn, vigorous competition combined with scal ederalism will

produce more disruption than educational progress unless consum-

ers o K12 education services can make choices inormed by valid

and useul data on the perormance o education providers and unless

education providers have a knowledge base rom which to improve

their practice. We propose a package o reorms that will only work asa package. Our goals are improved education outcomes, more equal

education opportunity, and the undamental reorm o the current

wasteul and ineectual ederal role in education.


34/93


eal al

In the context o scal ederalism and the task o sorting out

responsibilities among ederal, state, and local levels, we nd our

unctions essential to the ederal role:

1. Knowledge creation and dissemination on the condition o

education and what works in educating students

The benets o inormation on school perormance and evidence on

what works in education are primarily a public good. That is, i one

person has inormation on school perormance and evidence o whatworks, that does not lessen the amount o inormation and evidence

another person can have. I someone produces inormation and

evidence, that person can give it to another person without losing

that evidence. In such situations, a serious ree-rider problem exists:

because it is impossible to prevent a class o consumers who have not

paid or the inormation and evidence rom consuming it, ar too little

evidence will be produced i it is not supported by an organization

with all the nations interests at heart. The ree-rider problem is one

reason that state and local authorities cannot be entrusted with

recommendationsor ederal actionbased on scalederalism


35/93


the task o knowledge production. Furthermore, evidence does not

merely need to be produced; it needs to be based on high-quality

data. But gathering and auditing data are almost pure public services.

That is why even when inormation on school perormance is treated

as a private good to support more inormed consumer choice (e.g.,

college search sites that require a ee or access), the inormation

that customers pay to access is derived overwhelming rom ederal

sources. In short, it is easy to justiy ederal support or research, data

gathering, and dissemination.

Although ederal budgetary support or knowledge production in

education has increased in the last decade, it remains a pittance

when compared with levels o investment in research, evaluation,

and statistics in other areas o the economy. For example, more

than 40 percent o the discretionary budget o the US Department o

Health and Human Services is invested in knowledge production anddissemination through the National Institutes o Health, the Centers

or Disease Control, the Food and Drug Administration, and many

other operational components. In the US Department o Education,

the corresponding investment is less than 1 percent. With such meager

levels o investment, the nation should not expect breakthroughs in

areas that are ripe or research and development such as instructional

technology. In education research and development, no less than in

health or transportation or communication or energy, the public gets

what it pays or.

2. Enorcing civil rights laws when state and local actions in

education are discriminatory

I a school or educational policy unjustly discriminates, it does so to

produce benets or some people at the expense o others oppor-


36/93


tunities to develop their human capital. Unjust discrimination (i.e.,

denying a student an educational experience or which the student

is qualied based on the students race, gender, disability, or other

protected status) is the direct creation o an externality that will be

costly to society. Logically, the ederal government has an interest

in curbing the creation o such externalities, especially i the conse-

quences spread through all o society, not just the local area. Owing

to mobility and societywide redistribution, we all suer i a school

unjustly discriminates. Those discriminated-against students ail toget educated; need cash transers as adults; and might take up crime

or engage in other antisocial behaviors. Thus, the ederal government,

not merely the state or local governments, should attempt to curb dis-

crimination. The protected classes are those whom society observes

to be routine targets o unjust discrimination; urther, the arguments

against discrimination and or equal protection under the law do not

stand exclusively on an economic rationale. The nations commitment

to justice, airness, and equality is rmly grounded in moral philoso-

phy and history.

3. Providing fnancial support or the education o high-need

students

A high-need student, regardless o the source o the need (disability,

lack o English prociency, poverty) is expensive to educate. Such a

student thereore generates a negative externality on the students

who attend the same school or school district: resources are moved

toward the high-need student and away rom the other students.

Other students, i they are able to do so, will thereore avoid being

in school with high-need students. The burden that the high-need

student produces will thus be disproportionately borne by those

who are unable to avoid it. For instance, poor immobile students bear


37/93


11 Caroline Hoxby, The Potential o Markets in Primary and Secondary Education, Clarendon Lecture 1,

lecture, Oxord University, Oxord, UK, February 7, 2011.

much o the burden o the externalities created by their ellow high-

need poor students. The ederal government can counteract these

inequities through cash transers: there is little need or other direct

ederal action. I the ederal government attaches a ee supplement

to each child who generates such an externality, it can address the

problem. The diculty is guring out the right ee supplements.11

States as well as the ederal government have played and will continue

to play a role in nancially osetting the externalities generated by

the uneven geographical distribution o high-need students and the

tax base to support their education. Although it could be argued that

scal ederalism could assign this redistributive unction to state

governments rather than centralizing it in Washington, the problem is

that there are signicant externalities at the state level (e.g., Mississippi

has a larger proportion o economically disadvantaged, high-need

students than Minnesota). It is to the nations advantage and thus aederal responsibility under the percepts o scal ederalism to even

out the disparities among states in their scal ability to educate high-

need students. It is not just economics that undergirds this ederal

role; it is a moral philosophy that values justice, equality, opportunity,

and airness.

4. Enhancing competition among education providers by

deterring education monopolies and supporting education

choice or parents and students

We have argued that scal ederalism has not and will not work

well to improve education outcomes and equity i it relies solely

on residential mobility as the competitive mechanism that drives


38/93


school districts to improve education services. Such a system

consigns the poor and immobile to inerior schools and leaves the

control o schools in the hands o those who benet most rom the

status quo. The ederal government has a long and constitutionally

sanctioned role in promoting competition through the Commerce

Clause and plenty o carrots and sticks at its disposal through its

discretionary grant programs and regulatory authority to break down

the barriers to trade that local school districts and states impose

on the provision o education services. Whereas in postsecondaryeducation the ederal government supports school choice through a

system o grants and loans to students that are completely portable

and through accrediting bodies or higher education institutions that

are regional and national, at the K12 level its unding mechanisms

and recognition mechanisms support teen thousandplus legally

constructed district monopolies and ty legally constructed state

monopolies. By simply shiting its policies on K12 education to those

it has adopted or postsecondary education, the ederal government

could carry out a legitimate and critical role in a ederalist system (a

test that many o its current K12 programs ail), provide to parents

something every parent wants (the right and opportunity to choose

where their child is schooled), and create a powerul engine or

innovation and productivity in US education.

We recommend that the three o the our ederal unctions we identiy

as essentialknowledge creation, civil rights enorcement, and cash

transers to support the education o high-need studentscontinue

to receive strong support at the ederal level but not necessarily

through the orms by which these unctions are presently legislated

and administered. We recommend that the ourth unction, creating

competition and choice, proceed through a new mechanism: allowing

states to opt out o most o the present and anticipated ederal


39/93


initiatives in education in exchange or creating vibrant marketplaces

or an inormed choice o schools.

rg ma g eseA a ideA

The largest ederal K12 education programs administered by the

US Department o Education, Title I o the ESEA and the Individuals

with Disabilities Education Act (IDEA), are designed to disburse

unds to states and school districts or the education o high-needstudents. Rather than the complicated and intrusive ederal schemes

under which unds are presently disbursed under Title I o ESEA (or

economically disadvantaged students) and IDEA (or students with

disabilities), unds should be attached to individual students to be

transerred to the schools and educational services used by those

students. Individual schools would receive ederal unds based on

student counts, with a weighting ormula to adjust or actors such as

the increased burden o educating high concentrations o high-need

students and or regional dierences in the costs o services.12

There is nothing radical or untested about our proposal or weighted

student unding, sometimes called backpack unding because the

unds are attached to individual students who carry that resource

to whichever school they attend. A 2009 report identied ourteen

school districts that had implemented some orm o weighted student

unding.13 Many more are considering moving toward it, most recently

Philadelphia. In general, the experience with backpack unding is that

more unds go to the schools that serve needy students than under

traditional distribution schemes, which is exactly what is intended.

12 Paul Hill, Marguerite Roza, and James Harvey, Facing the Future: Financing Productive Schools

(Seattle: University o Washington, Center or Reinventing Public Education, 2008).

13 Lisa Snell, Weighted Student Formula Yearbook (Reason Foundation, 2009), http://reason.org/fles/

ws/yearbook.pd.


40/93


Some would argue that Title I o ESEA is a orm o weighted student

unding in that districts receive unding in proportion to the number o

students they serve rom economically disadvantaged backgrounds.14

From its beginning, however, Title I unding has been directed to

school districts rather than to individual schools. Although unding

is supposed to avor high-poverty districts and the highest poverty

schools within those districts, the unding ormula distorts that intent.

The most recent national evaluation o Title I ound that the lowest

poverty schools received 37 percent more per enrolled low-incomestudent than the highest poverty schools.15 Given the intent o the

law, that disparity should fow in the opposite direction. Twenty-

seven percent o Title I unds received by school districts do not

nd their way into instructional expenditures at all, being used or

administration, transportation, student services, and the like. I the

American people and Congress want the roughly $15 billion in unds

that are appropriated annually under Title I to get to the schools that

serve economically disadvantaged students, they need to attach the

unding to students rather than dispersing it to districts through

complex and politically motivated ormulas. The same is true o the

roughly $12 billion in IDEA unding. A school that enrolls a high-need

student should be able to count on a supplemental deposit o a known

amount to its operating budget.

As some o the authors o this report have demonstrated empirically,

beyond a threshold level it is how money is spent rather than per pu-

14 Backpack unding was the original principle underlying the spending approach that President

Lyndon Johnson used to pass ESEA in 1965. See Patrick McGuinn and Frederick Hess, Freedom

rom Ignorance: The Great Society and the Evolution o the Elementary and Secondary Education Act

o 1965, in Sidney M. Milkis and Jerome M. Mileur, eds., The Great Society and the High Tide o

Liberalism(Amherst: University o Massachusetts Press. 2005).

15 Stephanie Stullich, Elizabeth Eisner and Joseph McCrary, National Assessment o Title I Final Report,

Volume I: Implementation, U.S. Department o Education, Policy and Program Studies Service, Ofce o

Planning, Evaluation and Policy Development (October 2007). http://ies.ed.gov/ncee/pd/20084012_rev.pd.


41/93


pil expenditure itsel that is most directly related to student achieve-

ment.16 Huge dierences exist among school districts in how pro-

ductively they invest their unds. For example, the Wisconsin school

systems o Oshkosh and Eau Claire are about the same size, serve

similar student populations, and get largely similar results on state

examsbut Eau Claire spends over $1,000 more per student than Os-

hkosh.17 In a larger rame, the United States spends more per student

on its education system than almost any other developed country in

the world without world-leading results.18

Our proposals regarding how ederal unds should be dispensed to

support the education o high-need students are not an endorsement

o views on education nance that have ound their expression in so-

called adequacy legal actions. The theory o action o equity/adequacy

lawsuits is that the quality o education is proportional to the level

o expenditure and that, thus, poorer school districts should receivea court-mandated state supplement o unds to assure an adequate

education or their students. School resources, however, are not the

dominant actor in whether students beat the odds.

Increasing productivity in education is extremely important. Schemes

or providing compensatory unding or the education o high-need stu-

dents need to enhance the productivity o the institutions that servethose students. Simply handing out more money to school districts will

not raise student achievement substantially or students with special

needs. Our proposal creates the necessary link between compensa-

16 Eric Hanuskek, ed., Courting Failure: How School Finance Lawsuits Exploit Judges Good Intentions

and Harm our Children (Stanord: Hoover Institution Press, 2006).

17 Ulrich Boser, Return on Educational Investment: A District-by-District Evaluation o U.S. Educational

Productivity, Center or American Progress(January 2011). www.americanprogress.org/issues/2011/01/

pd/dwwroi.pd.

18 OECD, Education at a Glance 2011: OECD Indicators(OECD Publishing, 2011).


42/93


tory unding or high-need students and increasing the productivity o

the education providers who serve those students. It does so through

the competitive mechanisms detailed subsequently in this report.

Weighted unding o individual students is a critical design eature o

our model. It creates conditions under which ederal cash transers

or high-need students support choice and competition and thereby

increase the quality o schooling and the achievement o students.

Fal a gam lma falalm

Were the ederal government to restrict its role to serving the our

unctions we have identiedknowledge production, civil rights

protection, compensatory unding, and promoting choice and

competitionmany present programs would all by the wayside.

Head Start is not administered by the US Department o Education but

is nevertheless a prime example o a large ederal education program

that does not make sense in the context o scal ederalisma

preschool program designed and administered in Washington, DC, is

as ar removed rom the consumers o the services o a local preschool

program as it is possible to be. Further, Head Start has been driven by

an education philosophy that is increasingly distanced rom what isknown about the need o preschoolers or preacademic skills such

as letter naming, phonemic awareness, and vocabulary and rom

research ndings o the best approaches to inculcating those skills.19

Strong evidence suggests that whatever impact Head Start has on

the skills and dispositions o the young children it serves has been

19 Chester E. Finn Jr., Reroute the Preschool Juggernaut(Stanord: Hoover Institution Press, 2009),

www.hoover.org/publications/books/8138.


43/93


dissipated by the time those children are in the rst grade.20 To the

extent that preschool services or children rom low-income amilies

are subject to externalities that are best handled at the national level,

they can be addressed through the same type o cash transers we

have recommended or economically disadvantaged students under

Title I o ESEA and students with disabilities under IDEA. This is a

mechanism the ederal government already employs through its

program or subsidizing child care expenses or low-income parents

and through tax credits.

A second example o ederal action that alls outside the principles o

scal ederalism involves curriculum development. For more than ty

years, the National Science Foundation (NSF) has channeled millions

o dollars into developing curriculum, primarily in mathematics and

science but also in other subjects. These curricula have a mixed

record o success and oten provoke controversy. In the 1970s, Man:A Course o Studydrew sharp criticism rom opponents who claimed

the curricula contained material oensive to religious groups. In the

1990s, several NSF-unded mathematics programs came under re or

promoting one side in what were known as the math wars. Programs

such as Everyday Mathematics; Investigations in Number, Data, and

Space; Connected Mathematics Project; and Interactive Mathematics

Project received tens o millions o dollars in NSF moneyrst, in

initially developing textbooks and then through NSF projects that

oered nancial inducements to districts adopting the programs.

The ederal governments role in knowledge creation is to promote

sound, impartial evaluations o curricula and to und the research and

20 U.S. Department o Health and Human Services, Administration or Children and Families, Head Start

Impact Study. Final Report, (Washington: January 2010).


44/93


development o innovative instructional materials through impartial,

open, and rigorously reviewed competitions. It is not to promote the

development o one particular program or one particular curricular

philosophy. It is certainly not to incentivize states and school districts

to adopt its preerred curriculum.

Many other programs would have to be jettisoned (or radically over-

hauled), in addition to Head Start and NSF curriculum development,

under our concept o the ederal role, unless those programs were

recongured as small demonstration or research and development

programs (that is, as programs designed to generate knowledge o

what works). Lets take as an example a program that is near and

dear to the hearts o most education reormers, the Teacher Incen-

tive Fund and the Obama administrations proposed replacement,

the Teacher and Leader Innovation Fund. Those ederal programs have

as their goal changing compensation systems at the school districtlevel so that teachers and principals are evaluated meaningully and

rewarded or increases in student achievement. Laudable as that goal

may be, determining how teachers and principals are evaluated and

compensated by local schools is not an appropriate ederal responsi-

bility under the precepts o scal ederalism.

The compelling present need or ederal intervention in local teacherevaluation and compensation systems derives rom local school

districts being public service monopolies whose most politically

powerul constituents are their employees. But were real competition

or the provision o education services present at the local level,

the current system, in which there is little meaningul evaluation o

instructional sta and salary is determined almost entirely by seniority,

would be immediately disrupted. Education providers outside the

traditional school district would almost certainly introduce human


45/93


resource policies and procedures designed to be more eective and

ecient than those employed in traditional school districts, as we

have already seen in the charter school sector.

We use the example o the teacher incentive und with its laudable

goals and obvious present need to emphasize that thinking about

what the ederal government needs to do to create higher levels o

school and student perormance changes once the present system is

disrupted by strong and pervasive competitive pressure. We could

as easily have constructed the example around other popular re-

orms, such as school turnarounds, lengthening the school day and

year, and strengthening alternative routes into teaching. What may

seem an absolutely essential ederal intervention, given the current

hierarchical monopoly o public education, can be seen as unneces-

sary, given the presence o true competition at the local level. In our

ormulation, i the ederal unction isnt primarily about the provi-sion o inormation, protecting civil rights, compensatory unding,

or supporting choice and competition, it would go by the wayside.


46/93


As a condition o receiving ederal unds to support the education o

individual students, schools should be required to participate in an

open enrollment process conducted by a state-sanctioned authority.

Such a process would maximize the matches between school and

student preerences and assure that schools do not discriminate

against protected categories o students.

For the vast majority o amilies with school-aged children, residential

address determines the public school the amilys children can attend.

The school district assigns the child to a school, typically the one

closest to the amilys residence. This assignment policy strongly

aects those parents who want the best schooling possible or their

children: a quarter o parents o school-aged children report that

they moved to their current neighborhood so their children could

attend the neighborhood school. Another 11 percent o amilies chose

or their children to attend private schools. Charter schools and

homeschooling account together or another 6 percent o the school-

aged population. Fiteen percent o school-aged children attendparent-selected public schools (i.e., schools to which the parents

recommendationsor ederal actionto expand choice


47/93


apply or their childs enrollment).21 Thus more than 50 percent o

parents o school-aged children have engaged in some orm o school

choice, albeit primarily in the orm o residential choice and private

school tuition: two socially inequitable means o determining where a

child attends school. There is little doubt, based on the long waiting

lists or popular public schools o choice, that many more parents

wish to exercise choice than are currently able to do so.

Market-based competition cannot exist in public education unless

the consumers o public education can choose where to be schooled.

A system that requires that school choice be exercised primarily by

the purchase o a home in a particular neighborhood or through the

payment o tuition to a private school is inecient and seriously

disadvantages those amilies who are immobile because they are poor.

This produces the very externalities we previously described, that is,

schools lled with students whose parents did not have the resourcesto fee the residential area with which the school is linked.

Even when public school choice is made available to parents, as it has

been or the above-mentioned 15 percent, it is requently administered

in ways that blunt its potential to increase competition or to create

the best match between parental preerences or schools and schools

preerences or students. For example, the city o Denver has anopen-enrollment process in which parents can apply or their childs

admission to almost any public school in the city. Although the system

is currently in the midst o change, in the recent past each individual

school had its own set o operations to govern enrollment, a large

degree o individual control over admissions, and its own admissions

records. This creates strong inormation asymmetries that undermine

21 US Department o Education, National Center or Education Statistics, The Condition o Education

2006 (NCES 2006-071). (Washington: US Government Printing Ofce, 2006).


48/93


the ability o parents to obtain admission or their child in the school

they preer. Parents must rely on inormal networks or inormation

about the admission process at individual schools and may have

express preerences or schools that dier rom their true preerences

to game the system (e.g., applying to one school as rst choice

because it is thought to be easier to get into rather than applying to

the school the parents would preer).

Other open-enrollment systems begin with a deault district-assigned

school and require parents to protest that assignment to enter the

choice system. Other districts provide such a strong preerence

weight to amilies who live in the neighborhood o a school that the

appearance and reality o choice disagree.

Few district enrollment systems that are portrayed as providing

parental choice include charter schools in the choice ramework.

Thus parents are requently required to coordinate dierent admission

processes and decision timetables or traditional public schools

o choice and individual charter schools. The situation is urther

exacerbated i parents are juggling the possibility o private schools,

multiple charter schools, and regular public schools.

A well-worked-out solution to the challenge o matching applicants

and schools is best known in the United States as the medical school

residency match.22 Applicants or a medical school residency submit a

rank-ordered list o their preerred schools to a centralized matching

service. Similarly, residency programs submit a rank-ordered list o

their preerred applicants to the same service. Neither applicants nor

residency programs see each others list. The two parties lists are

22 Atila Abdulkadiroglu, Parag A. Pathak and Alvin E. Roth, Strategy-Prooness versus Efciency in

matching with Indierences: Redesigning the New York City High School Match, National Bureau o

Economic Research Working Paper No. 14864, 2009.


49/93


combined using a computer algorithm to create the optimal match

o residents to programs (i.e., one that minimizes the discrepancies

between program and student preerences).

Related enrollment programs or public schools must be more

complicated because o the requirement o equity in access to schools

or disadvantaged students and the need to consider geographical

proximity o students to schools. But school enrollment programs

can be based on the same underlying theory as is employed in the

residency match and can thus generate a more-or-less strategy proo

process (i.e., both parties interests are best served by expressing

their true preerences and the distance between preerences and

assignments can be minimized or the applicants and schools). Such

enrollment programs have been established in New York City and

Boston and have been in existence long enough or their theoretical

virtues to have been seen in action. The principal problem with thesemodel systems is the number o students who do not match (e.g.,

most recently 10 percent in New York City),23 which is disruptive and

anxiety producing or parents and or schools. A signicant portion o

such matching ailures, however, are due to easily correctable design

ailures, such as allowing parents to list only two or three schools

rather than requiring them to list ten or more. The systems can be

improved; the issue is not whether they are perect but whether they

provide better outcomes and more parental satisaction than the

systems they replace. They do.

We believe that unied open-enrollment systems that encompass as

many choices as possible rom the regular public, charter, private,

and virtual school universes are essential to the expansion o choice

23 Liz Robbins, Lost in the School Choice Maze, New York Times, May 6, 2011, www.nytimes.

com/2011/05/08/nyregion/in-applying-or-high-school-some-8th-graders-fnd-a-maze.html?_

r=2&re=education.


50/93


and competition in K12 education. These systems must be designed

with the same temporal parameters or applications and admission

decisions or all schools so that they cannot be gamed by either

schools or applying amilies.

Being able to see where parents want to send their children to school

(i.e., schools revealed popularity) is the inormational bedrock on

which both market-based and administratively managed competition

lies. In a true market-based economy or education services, schools

revealed popularity plays the same unction as long lines waiting to

get into a movie or a restaurant: the entity provides something that

many see as valuable. Publicly visible signs that a restaurant is popular

create more demand or that restaurant and the customer base

grows. In an administratively managed system such as a traditional

local school district, revealed popularity should (although today it

oten does not) provide a signal to guide decisions on budgeting orschool expansion and contraction and on the perormance o school

leadership. For example, principals o popular schools might be more

likely to get their contracts renewed or receive bonuses compared

with principals o unpopular schools.

For school popularity to have its intended infuence, it must be clearly

and widely revealed to the public. Thus just as the proportion oadmissions to applications (i.e., the selectivity rate) is available on

numerous websites or all institutions o US higher education, so too

must the revealed popularity o US K12 schools and programs be

easily accessible.

We stress that an open-admissions process or K12 schools must

build in procedures or assuring that students are not discriminatedagainst based on their membership in a protected class. There are

three ways to accomplish this goal. The rst is to use a lottery or


51/93


admission to oversubscribed schools. This is currently required in

ederal regulations or start-up charter schools i they are to qualiy

or ederal aid and has the advantage that schools cannot discriminate

in admissions based on student characteristics that are protected by

civil rights laws. The disadvantage is that schools cannot discriminate

in admissions based on student characteristics that are not protected,

meaning that it prevents the use o admission processes that support

specialized schools that are intended to serve the needs o students

with unique needs and abilities (e.g., a high school or the perormingarts that would admit students through auditions).

A second approach is to attach administrative processes to admissions,

commonly called controlled choice, that assure proportionality

between protected classes o students and the resulting student body.

Conservatively, this proportionality could be achieved with respect

to the applicant pool. Thus with race as the protected category, theadmissions algorithm would ensure that black students were oered

admission to a particular school in proportion to their membership

in the pool o applicants. More aggressively and in keeping with

the concept o proportional representation that has played out in a

number o legal actions, the algorithm could seek to achieve as close

a match as possible between the proportion o the protected class in

the catchment area o a school and the proportion o that class oered

admission. Thus i the proportion o students with disabilities with

geographical access to the school were 11 percent, then 11 percent

o a schools oers o admission would go to students so categorized.

The advantage o such enrollment schemes is that they achieve at

least gross equity o access and spread the oten greater costs o

educating protected classes o students evenly across education

providers. Disadvantages include the need to dene a catchment area,

which becomes increasingly archaic as more education is provided


52/93


online, and all the arguments and issues that have been raised

in an extensive literature and public policy debate on race-based

preerential admissions to postsecondary institutions.

A third approach, which we hinted at previously, is to attach a ee

supplement to students in protected classes with the result that they

are admitted to the schools their parents preer them to attend with

roughly the same probability as students in nonprotected categories

are admitted to the schools their parents preer them to attend.24 A

sophisticated matching algorithm could achieve this dynamically by

adjusting the ee supplement during a prematch period to achieve

parity o preerence by schools or students in protected and

nonprotected categories. Thus i the initial match between schools

and students based on a deault ee supplement resulted in a negative

impact on high-need students, the unding entity would have to

raise the supplement or such students, ater which participatingschools would again list their preerences or student admission. On

the other side o the equation, i the initial match based on a deault

ee supplement resulted in high-need students being preerred, the

unding entity could reduce the size o the supplement and conduct

another matching round. The advantage o this approach is that it

assigns a true market price to the externalities that oten accompany

the education o students in protected categories, with that price

being paid by all citizens through state and ederal tax revenues. The

disadvantages include that no such enrollment system presently exists

so there is no experience associated with it; that the costs o the ee

supplements cannot be known and budgeted or in advance (although

they could be well estimated ater some experience with the system);

and that schools that are indierent to the loss o the ee supplement

24 Hoxby, The Potential o Markets in Primary and Secondary Education. Clarendon Lecture 1.


53/93


could discriminatealthough the latter could be mitigated through

routine civil rights enorcement actions.

Clearly, there is much work to be done on the design and implemen-

tation o K12 enrollment systems that provide the maximal choice

to parents and valid inormation on school popularity. We note, how-

ever, the considerable progress that has already been made in imple-

menting strategy-ree enrollment processes in the public schools in

New York City and Boston. The challenges that must be addressed

are largely around equity o access and the inclusion o the universe

o available schools, including private schools. Were ederal unds

or high-need K12 students available to any accredited education

provider, as is the case in postsecondary education, private schools

would have a reason to participate in an open-enrollment system.

Designing an eective choice architecture is relatively simple

compared with many o the challenges acing K12 education in

the United States. And the dividend will be huge. The chicken-and-

egg problem or ESEA reauthorization (i.e., how can the ederal

government require choice when the necessary choice architecture

is present only in a ew jurisdictions) can easily be addressed by

providing states that adopt choice systems a release rom a variety

o other ederal regulations and by providing competitive unding toentities that design and manage such systems.

As a condition o the receipt o ederal unds to support the education

o individual students, schools be required to participate in data

collections to be used to report to the public on the perormance o

individual schools.

The ederal government should competitively und the designers

and implementers o school choice portals.


54/93


Just as people may be lined up to see a movie or eat at a restaurant or

what lm critics and nutrition experts might judge the wrong reasons,

so too can the revealed popularity o schools send a alse signal about

school quality. In the postsecondary arena, or example, that the

University o XYZ is more selective than the College o ABC sends a

uzzy signal, at best, as to whether XYZ provides a superior education.

The potential or choice and competition to improve the quality o

schooling depends on parents having good inormation on which to

base their choice o school.25

Suppose that, per standard economic theory, parents are prepared to

act rationally in their choice o

Choice and Federalism

Documents

Transcript of Choice and Federalism