Longtime NextSteps readers know that your humble author has been holding forth on the Baptist and Bootlegger problem that helped throttle the growth of the charter school movement. The term “Baptists and Bootleggers” comes from economics and references prohibition, which Baptists supported out of religious conviction, and bootleggers supported to limit competition in their manufacture and sale of alcohol. In the context of charter schools, it describes how elements of the charter school movement, in this case large charter management organizations, or CMOs, partnered with the anti-charter usual suspects to limit competition through 900-page applications and charter laws hewing closely to sponsored “model” bills that mysteriously produced few charter schools. This, of course, was not the only problem to afflict the charter movement in recent years; see Robert Pondiscio’s recent account for example.
In 2024, I sounded the alarm that the private school choice movement was far from immune to this danger. Alas, Bootleggers’ tactics have indeed appeared in recent school choice legislation. For example, Iowa’s “ESA” law requires students who choose to spend their funds on private school to attend an accredited one. The new Texas legislation makes only accredited private schools eligible, and in a late amendment, a provision was added that requires private schools to have been operating for two years before becoming eligible to participate. Competition is apparently good for Texas public schools, but not terribly desirable for established private schools in Texas. Sigh. Stay on the lookout; accredited Texas private schools that have been operating for more than two years might just start selling some illicit liquid products at their bake sales…
There are other examples, but you get the point. Why does this matter? Well, if you stimulate demand for a product but restrict the supply of new entrants, you hang a sign on your back that says:
Luckily, this does not need to be the case, but the devil is in the details of bill design. Some make the mistake of assuming any choice program will automatically lead to cost inflation, but this is not the case if supply can rise to meet expanded demand. EdChoice has a new study out on the supply side of school choice, in which they examined the purchasing data from Arizona’s ESA program for years one and two of universal eligibility. Arizona’s ESA program had a very large increase in participation during these years. Without a corresponding increase in schools and vendors, cost inflation could get underway.
Fortunately, Arizona’s program saw a healthy increase in the supply of new schools to accompany expanded eligibility:
Not only did the number of participating schools increase from 510 to 661, but Arizona also saw broad increases in the types of schools accessed by families, including large increases in private religious schools, non-religious private schools, special education focused schools, co-ops and post-secondary schools. Baptist and bootlegger anti-competitive provisions would have prevented this flourishing, but fortunately, Arizona lawmakers wisely avoided it. When the Goldwater Institute examined private school tuition trends after the universal expansion, they found no evidence of a demand induced inflationary spiral.
Arizona vendors other than schools also increased their participation in the program, increasing competition.
Don’t look now, but dance and art studios, dojos and a whole lot more have entered the Arizona ESA chat:
Choice supporters with a vision beyond trying to fill a limited supply of empty seats and/or creating a tuition inflation spiral must create bills allowing supply to increase with demand.
