The 2016 United States presidential election and subsequent appointment of Betsy DeVos as the secretary of education has brought considerable attention to the concept of school choice. Indeed, a Google Trends analysis of web searches of the term “school choice” illustrates that public interest reached its highest level at the onset of 2017, as shown in Graphic 1 below.
Graphic 1: Google Trends Worldwide Public Interest in “School Choice”
School choice programs allow families to opt out of their residentially assigned traditional public schools and enroll their children in different public schools of their own choosing. Charter schools are one of the most popular forms of public school choice in the United States. Charter schools are open and free to attend for all children within a state and may not discriminate when enrolling students. If oversubscribed, charters are typically required to use a random lottery to determine which students are granted admission — they may not give preferential admission to any student based on race or ability. Since the first public charter school law passed in Minnesota in 1991, enrollment in charters has grown to over 2.9 million students located in 44 states and the nation’s capital.
Michigan passed charter school legislation in 1993, making it one of the nation’s early adopters. Charter schools are independently governed, state-funded public schools of choice. According to the Michigan Department of Education, there were 376 Michigan charter schools operating during the 2016-17 school year.[*] Charter schools served more than 152,000 students, approximately 10 percent of public school students in Michigan. More than two-thirds of the state’s charters are authorized by one of eight different public universities, with the rest authorized by community colleges, local school districts or intermediate school districts.[†] Authorizers provide accountability and oversight through the terms of a performance contract with a charter school’s governing board.
Charter schools are located all across the state of Michigan, but tend to be concentrated in urban areas such as Detroit. As a result, the students served by these schools have a different demographic makeup on average than the typical traditional public school. In 2017, half of Michigan charter school students were African-American and 70 percent qualified as low-income. By contrast, only 14 percent of TPS students were African-American and only 43 percent were low-income.
The Center for Research on Education Outcomes at Stanford University finds that over 94 percent of Michigan charter schools perform on par with or better than TPS, measured by annual growth in math and reading test scores. Of course, there is significant variation in the effectiveness of public charter schools across geographic locations, student populations and individual educational institutions. An overall review of the literature by Julian Betts and Emily Tang finds that public charter schools only slightly outperform TPS on boosting student math achievement. The overall effects are not statistically different from zero for reading. Critics of charter schools often claim that this is evidence of their failure.
However, such claims do not consider the relative costs of educating children. Funding for Michigan charter schools depends on the same foundation allowance most traditional school districts receive, $7,631 per pupil in 2018. The foundation allowance represents the state’s minimum per-pupil funding guarantee, but does not include numerous other sources of local, state and federal revenue available to public schools. Michigan charter schools lack authority to collect local tax dollars to finance facilities and infrastructure projects and typically have to pay for these costs out of their general operating budgets. Other disparities between charters and district-run schools arise out of extra program-specific tax dollars received through state “categorical grants” or federal appropriations. Altogether, the average Michigan charter school takes in significantly fewer dollars per student than the average TPS.
A series of reports by Ball State University and the School Choice Demonstration Project at the University of Arkansas estimate these funding discrepancies and efficiency differences. Year after year, these reports find that charter school funding inequity persists at the state and city level, with charters receiving considerably less revenue than TPS on average. Moreover, the University of Arkansas team estimates the productivity of public schools and finds that charters deliver a greater return on investment than TPS in every state they examined.
We build on this existing literature by detailing the relative funding and productivity of public charter schools in the state of Michigan. First, we estimate the equity of public funding for children who choose to enroll in public charters versus TPS in 92 cities across Michigan. In addition, we estimate the cost effectiveness and taxpayer return on investment for educating students in public charters and TPS in a subset of 71 cities throughout the state.
 Author’s calculations based on data from Michigan’s “Educational Entity Master” database. This is a count of the number of distinct charter school buildings in use — some of these buildings may be managed by the same charter school board. This figure also includes virtual or online charter schools.
 In all, 44 different entities authorized at least one charter school contract, including 16 local school districts, 15 intermediate school districts, four community colleges and the state’s Education Achievement Authority "school turnaround" district. The EAA shut down at the end of the 2016-17 school year and all its schools were placed under the control of the reconstituted Detroit Public Schools Community District.