Lack of Incentives Produces Poor Results and Exacerbates Problems

Because consumer choice is the engine for a market economy in all goods and services, school choice has become the most common incentive reform measure. The foundation of basic economic theory is the ability of individual consumers to choose one product over another, according to their own values and preferences. Parents naturally prefer for their children high-quality schools over poorly performing schools. Assigning children to schools based on where they live deprives parents of the freedom to apply their own values and priorities in selecting a school, and it also deprives schools of valuable marketplace feedback and incentives that drive continuous quality improvement.

As evidenced by market incentives in other industries, a government policy of respecting parents' right to choose the safest and best education for their children would ultimately improve all schools, whether government or private. In addition to improving the quality of education, greater competition would have the added effect of reducing costs.

The negative results of ignoring the role of incentives in the education market have been significant.

Centralized Bureaucracy

In 1940, the United States had over 117,000 school districts with an average of 217 students per district. By 1990, the government school system had consolidated schools into fewer than 15,000 regular school districts with an average of more than 2,600 students enrolled in each district. With an 87 percent reduction in the number of districts and a growth of 1,100 percent in student population within the districts between 1940 and 1990, the centralization of control in education continues to increase rather than decrease.61

Ballooning Costs

Unwilling to recognize the flaws of a centrally planned system, government education officials consistently assert that it is a lack of funding that has prevented schools from being effective. However, since 1970, inflation-adjusted per-pupil expenditures have increased more than 88 percent nationally, yet graduation rates have declined 4.6 percent since 1980. At the same time, scores on the SAT dropped by an average of nearly 23 points. 62

Education in the United States has become increasingly expensive to taxpayers. The Education Intelligence Agency, a California-based research institute, reported that during the 1994-95 school year, every man, woman, and child in the United States contributed $1,071 to the support of government schools—totaling more than $278,966,000,000 spent on government education.63 Some put the expenditures on education at a much higher rate. According to research by Lehman Brothers, a global investment bank, the U. S. annually spends $619 billion, or 10 percent of the nation's gross domestic product. That amount is more than the nation spends on defense and more than the entire gross domestic products of Spain, Brazil, or Canada.64

In 1985, a federal judge directed the Kansas City (Missouri) School District to devise a "money-is-no-object" educational plan to improve the education of black students and encourage desegregation. Local and state taxpayers were ordered to pay for it. The result: Kansas City spent more money per pupil, on a cost-of-living adjusted basis, than any other of the 280 largest school districts in the United States. The money bought 15 new schools, an Olympics-sized swimming pool with an underwater viewing room, television and animated studios, a 25-acre wildlife sanctuary, a zoo, a robotics lab, field trips to Mexico and Senegal, and higher teachers' salaries. The student-to-teacher ratio was the lowest of any major school district in the nation at 13 to 1. However, by the time the experiment ended in 1997, costs mounted to nearly $2 billion, test scores did not rise, and there was less student integration rather than more.65

Plummeting Student Achievement

The Third International Mathematics and Science Study (TIMSS) was administered to a half-million students from 41 countries in 1995. The results showed that the United States is the only country where children do worse the longer they stay in school. Of the 21 countries participating in the twelfth-grade tests of general knowledge of math and science, the United States ranked nineteenth and sixteenth, respectively.66 Critics of international tests like the TIMSS contend that American students suffer by comparison because other countries educate smaller proportions of their populations and test only "elite" students. But researchers have shown that, in all 21 countries, 90 percent or more of teenagers were enrolled in school, thereby making the test an "apples-to-apples" comparison between American students and their foreign counterparts.67

Expensive New Obligations

Taxes to support education increasingly go toward such things as security and to a growing percentage of students with special needs. In many cases, large sums of tax money are consumed by special education programs that were once reserved for children with physical handicaps. Today, education funds provide assistance to an increasing number of students with "learning disabilities." On average, nearly 120,000 students are diagnosed with learning disabilities each year. In 1989, students labeled learning disabled numbered 1.9 million; in 1996 the total had risen to 2.6 million. Learning-disabled children alone make up more than half of those classified as special education students. The financial significance of these increases is tremendous: Schools spend a total of $1 billion a year on psychologists who work full-time to diagnose students. In addition, whereas the average cost per student in regular government education is around $5,000 per year, the special education student's costs typically range around $10,000 to $25,000 per year, and sometimes go higher.68

Other expenses, which are not directly related to education, have also continued to rise. According to former Detroit Public Schools board member Alonzo Bates, the district spends around $10 million of its $1.45 billion budget on police and security forces. While he complains that this money should be spent in the classroom, he also recognizes that safety is one of the primary concerns of inner city parents. As a solution, Bates proposes more after-school programs. It is arguable that children would be safer by staying in school after hours, but Bates's solution would certainly require greater increases in public expenditures.69

Almost every indication signifies that spending on government education will continue to rise. In 1997, the number of government and private school students in the nation was around 52.2 million, breaking a 25-year-old record, and enrollment is expected to increase over 2.1 million to 54.3 million by 2007. In addition, over the next ten years high school enrollment is expected to increase by 13 percent. These increases will necessitate the building of additional schools to accommodate additional students. Studies have estimated that an additional 6,000 schools will be needed to meet the future expansion of student population. Building schools is an expensive undertaking: a new high school costs around $15.3 million to construct. The New York Times also cited a study cited which estimates that $112 billion is needed for repairs and maintenance to existing buildings. U. S. Department of Education Secretary Richard W. Riley believes that the increases in student population, maintenance, and construction needs "has the potential to become a national crisis."70

Unprepared Graduates

The failure of students to receive an adequate K-12 education also affects the workplace and college. Public Agenda, a nonprofit think tank, surveyed 250 employers, 250 college professors, 700 teachers, 700 parents, and 700 middle-school students for a 1998 report. A majority of both employers and professors believed that most students leave high school without the most basic of skills. For most skills, only a minority of surveyed professors and employers ranked students as being "fair" or better (see Table 1, below).71

Remedial Training

American job providers also pay a heavy price for an uneducated workforce. In 1996, companies spent approximately $55 billion on remedial education for employees who graduated from high school barely able to read or write English.72 The American Management Association determined that the share of companies forced to provide remedial training for its employees has soared from 4 percent in 1989 to 20 percent in 1998. The Bureau of Labor Statistics also found that 65 percent of employers increased spending on training in the three years from 1992 to 1995. 73

  • Motorola, Inc., spends an average of $1,350 per worker for a total of about $200 million each year to provide remedial training for its workforce. 74

  • MCI Communications Corp. spends nearly $750 million each year on training, with 10 percent of it going toward remedial education. 75

More Dropouts

In September 1992, the class of 1996 had 19,029 students in the Detroit Public Schools. By September 1995, the number had shrunk to 5,769—an attrition rate of nearly 70 percent, still high after factoring in moves and transfers.76

Violence in Schools

By 1998, more than 600 Michigan students were expelled for carrying weapons in school in the less than three years since the state's "zero-tolerance" policy toward weapons was adopted. This means that at least one student is ordered to leave a school every school day of the year.77

Nearly 4,000 secondary students in Michigan participated in the "1997 Youth Risk Behavior Survey." The survey, conducted by the National Centers for Disease Control and Prevention in Atlanta, revealed that

  • 1 in 5 students have carried guns or knives to school;

  • 1 in 10 have been threatened or injured on school property;

  • more than one-third of all students surveyed have been offered drugs on school property; and

  • more than one-third had property stolen or vandalized while at school.78

As the problems in government schools continue to mount and reforms based only on altering rules or resources continue to fail, citizen support for incentive-based reforms such as school choice is increasing.