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Education
School Choice & Competition

Public education is a core function of state and local government. The state constitution, in the words of the N.C. Supreme Court, recognizes the right to a “sound, basic education” for every child in the state. But public education need not and should not be delivered by inflexible, bureaucratic government monopolies, as a diverse array of magnet, charter, and private schools are demonstrating across the country and, increasingly, in North Carolina. Parent choice and competition should be core elements in any school reform.

Why Choice And Competition Matter

No system for delivering goods and services functions well without providing a means for consumers to make their desires known and express their level of satisfaction. Even in health care, where government pays about half the bill for medical services, patients are usually afforded the right to choose their hospital or medical provider. Indeed, to the extent that funding systems such as HMOs attempt to restrict patient choice, the quality of care declines and public and political pressure builds to enforce a “Patients’ Bill of Rights.” But don’t parents, who are in the best position to assess their children's needs, deserve at least the same kind of protection?

Affluent families already exercise choice. They can move to neighborhoods where assigned schools are of good quality, or afford to pay twice for better education once for private school tuition and then again in taxes to fund schools they don’t use. Poorer families with school-aged children have few such options. Nor do they have as much choice as those with preschoolers or college students, who have long been able to use taxpayer funds to help defray the cost of private, even religious, instruction. If a preschooler can stay in a church-run day care center, or a student attend a theological seminary, and receive public funds for doing so, why can’t a poor, innercity child needing effective instruction or special attention attend a private school without financial penalty?

Educational Options In North Carolina

An increasing share of North Carolina’s students are exercising choice. Several school systems, including Mecklenburg and Wake, have established magnet schools or otherwise expanded parental choice within their districts. A 1996 law established a new category of public schools, called charters, that receive public operating funds and thrive only to the extent they attract students. In 2000-01, nearly 16,000 students were enrolled in charters. Among private schools, enrollment exceeded 91,000 by 2001, up 72 percent from its 1991 level, with home-schooled students rising from 4,100 to nearly 34,000. Finally, privately funded scholarship programs in Charlotte, the Triad, and the Triangle help more than 600 poor students afford private education. Overall, the proportion of North Carolina students attending schools of choice more than doubled during the past decade.

These programs and others like them across the country are showing early promise in boosting achievement and parental satisfaction and reducing the racial “performance gap.” While North Carolina’s charter schools still lag other public schools on state tests (66.4 percent at grade level for well-established charters compared to the statewide average of 72.5 percent), many perform better on national tests that more closely fit their unique programs — and enroll a disproportionately high number of poor students and those failing out of their previous school. More promising are private-school choice programs. An independent study of Charlotte’s Children’s Scholarship Fund found that low-income students receiving vouchers to attend private schools outperformed a control group of eligible but nonparticipating students by up to 8 percentile points on standardized tests. In one year, the performance gap for these overwhelmingly black students had been cut by one-fourth — an effect matching or exceeding that of any other school reform studied, including class-size reduction.

North Carolina could move forward with publicly funded scholarships for at-risk students without costing public schools. For example, the state could offer scholarships equal to the average cost of private education to the poorest 50 percent of students in North Carolina’s low-performing schools for less than $60 million a year. If a significant number of students took the scholarships, the state would save more in operating and capital costs in the public schools (up to $71 million at full participation) than the program would cost.

For more affluent families, however, taxpayer-funded scholarships would have a greater fiscal impact and might also create a risk of government entanglement with private and religious schools that value their independence. A better way to promote parental choice for these families is to make expenditures or savings for their children’s education tax-deductible. Just as investments in financial capital, such as IRA deposits, should be deductible in order to avoid the double-taxation of savings, so should family investments in the “human capital” of their children be deductible, since they yield future taxable income when the children enter the working world. Even a modest deduction of up to $3,500 per child would save families hundreds of dollars in state taxes and reduce the bias against private education investment that currently restricts parental choice.

Recommendations

1. North Carolina school districts should make greater use of open enrollment and magnet schools, using choice and competition as tools to improve academic performance and allow diverse learning communities to form. Forced busing for social engineering is poor public policy, but voluntary busing for educational excellence provides children with the opportunity to receive the sound, basic education to which they are entitled.
2. The legislatively imposed statewide cap of 100 charter schools should be lifted, allowing the number of charters to grow as long as parents, educators, and oversight agencies ensure accountability for results.
3. All North Carolina families should be allowed to set up educational savings accounts, with an annual taxdeductible deposit of $3,500 per child, from which they can withdraw funds tax-free for educational expenses such as textbooks, educational materials, or tuition incurred at any time from preschool through college.
4. Needy students in public schools where fewer than half of students test at grade level should be given $3,500 scholarships to attend a school of choice. Public school spending per pupil would be unaffected or increased.

To view higher quality graphs, download Agenda 2002 [560KB Acrobat].