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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 government monopolies, as a diverse array of magnet, charter, and private schools are demonstrating across the country and here in North Carolina.

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. Middle-income and poor families have few such options. Nor do school-aged students have as much choice as do preschoolers or college students, who have long been able to use tax 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 religious university, 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 districts — including Mecklenburg, Wake, Forsyth, and Cumberland — have established magnet schools or choice-based enrollment policies. 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 2002-03, there were some 20,000 students enrolled in North Carolina charter schools. Among private schools, enrollment was about 92,000 in 2002-03, up 46 percent from 1993-94, with home-school enrollment skyrocketing from 7,000 to nearly 53,000. Overall, the proportion of state students attending non-district schools of choice doubled during the past decade — but remained low at 11 percent. Adding magnets and open enrollment schools run by districts, the percentage of students attending schools of choice had grown to about 26 percent by 2002-03.

Educational choice programs are showing early promise in boosting achievement and parental satisfaction and reducing the racial “performance gap.” The privately funded Children’s Scholarship Fund offers hundreds of Charlotte-area students from poor families the opportunity to attend private schools. An independent study found that CSF students outperformed a control group of eligible but nonparticipating students in the Charlotte- Mecklenburg Schools by up to 8 percentile points after just one year in the program. In other words, the performance gap for these mostly black students had been immediately cut by one-fourth — an effect matching or exceeding that of any other school reform studied, including class-size reduction or preschool intervention.

There is also promising early evidence of the educational benefits of public-school choice. A study published by the prestigious National Bureau of Economic Research found that competition from charter schools had improved student achievement in North Carolina’s district-run public schools. The gain was so large that, according to the researchers, reducing class size “would produce just one-third of the test score increase created by opening a neighboring charter school, a move that would not require any additional spending.”

North Carolina could move forward with publicly funded scholarships for at-risk students without imposing any additional cost on taxpayers. For example, it would cost a maximum of $85 million for the state to offer scholarships equal to the average cost of private education to the poorest 40 percent of students in all North Carolina schools where fewer than 60 percent are at grade level on state tests. If more than a handful of students took the scholarships, the state and local districts would save more in operating and capital costs (up to $141 million at full participation) than the program would cost.

For more affluent families, however, tax-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. A deduction of up to $4,500 per child would save families hundreds of dollars in state taxes annually and reduce the bias against private education investment that currently restricts parental choice.

Recommendations

1. 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 $4,500 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 60 percent test at grade level should get $4,500 scholarships to attend private schools. Public-school spending per pupil would likely be unaffected or increased.

To view higher quality graphs, download Agenda 2004 [560KB Acrobat].