An education savings account ensures that Anna Ragusa of North Carolina can continue to receive needed therapies during social distancing.
Public education has historically been a poorly managed, underperforming market. The pandemic is driving changes that could, over time, lead to market improvements that will benefit families, students, educators and the public.
In effective and efficient markets, consumers control their purchasing power, monopolies do not exist, the barriers to entry and exit are appropriate (i.e., not too high or too low), information needed to make good decisions is available to suppliers and customers, and the public good is well served.
None of these features exist in public education today. About 90 percent of public education services are controlled by a single supplier – government. This market domination constitutes a monopoly. Almost all purchasing power is controlled by government.
When families have no control over their public education dollars, new suppliers are discouraged from entering the market. That’s because most families cannot afford to pay both school district taxes and the cost of education services from non-government suppliers. This barrier to entry is why there has been so little supplier diversity and innovation in K-12 education over the last 170 years. Giving families control over their education dollars would unleash demand and create a market that would attract more suppliers.
While the availability of information in public education has gotten better over the last 25 years, families and schools still lack the quality and quantity of information they need to make good decisions. These market flaws are causing taxpayers to get a poor return on their investments in public education.
Some of these market deficiencies are starting to be addressed as families respond to the pandemic by asserting more control over their children’s education. Affluent families are using their own funds to create and access alternative schooling models, including micro-schools, homeschooling cooperatives and pandemic pods. And a few governors are using federal stimulus dollars to fund scholarships so low-income families may have these same opportunities.
If this trend continues and more families gain greater control over their public education dollars, the barriers to entry for new, more diverse suppliers will be lowered and the creativity and innovation we are starting to see will increase. Using Education Scholarship Accounts (ESAs) to give families more flexibility over how they spend their public education funds will also open the market to providers such as tutors, counselors and therapists.
In healthy markets, more desirable supply attracts more consumers, which then attracts even more desirable supply, which then attracts even more consumers. This type of virtuous market cycle is emerging in a few communities and could start to erode the government’s monopoly on supply and further the development of a healthy public education market.
The unbundling of education services will also accelerate the improvement of a better public education market. Government has historically used its monopoly to force parents to access all their education services from a single provider (e.g., the neighborhood public school). While the unbundling of these services has been occurring slowly over the last three decades as families increasingly use programs such as virtual schools and dual enrollment, the pandemic is encouraging suppliers to accelerate this unbundling.
Some private schools are offering childcare services for families who want to access a virtual instructional program but need out-of-home childcare. Some school districts are providing breakfast and lunch programs for low-income families who are homeschooling. And some community organizations are providing extracurricular activities, such as theatre and sports programs, that are no longer available at some neighborhood schools.
We have almost two centuries of data showing that a dysfunctional public education market is not capable of delivering systemwide excellence and equity. The work required to develop the infrastructure necessary to support an effective and efficient public education market is daunting. But this horrific pandemic has provided us an historic opportunity we should not let pass.
Step Up For Students President Doug Tuthill writes that Education Savings Accounts (ESAs) provide the best opportunity for turning public education into an effective and efficient market
Markets are like gravity. They are everywhere.
Markets are where supply meets demand. They are how we access the things we need and want, including food, clothing, housing, friends, media, health care, romantic partners, entertainment, and education. Even those needing kidney transplants are dependent on well-designed markets.
Public education also is a market -- unfortunately, a poorly functioning one, especially for low-income and minority children, and most teachers.
I’ve been working to improve public education for 42 years. My primary lesson learned is that a well-designed market is a necessary condition before improvements can be systemic, sustainable, effective, and efficient.
Effective and efficient markets invite people to challenge themselves, to take risks, to develop their strengths, to help others, and to contribute to the public good.
Effective markets share some common traits:
Public education has few of the characteristics of an effective market:
Over the last 30-plus years, the gradual expansion of education choice has begun to turn some sectors of public education into slightly more effective markets. Magnet schools, charter schools, dual-enrollment programs, virtual schools, and open-enrollment programs are providing public school students with more choices. Unfortunately, these choices are highly regulated and generally resistant to innovation. Tax credit scholarships and vouchers are giving more students access to private schools, which is enabling more educators to open new schools. But while private schools are less regulated, they are usually underfunded and incapable of investing in the staff, technology, and training necessary to create and sustain effective innovations.
Education Savings Accounts (ESAs) are the latest entry in the education choice space and provide the best opportunity for turning public education into an effective and efficient market. The nation’s largest ESA is Florida’s Gardiner Scholarship for students with unique abilities, which our nonprofit, Step Up For Students (SUFS), helps administer. Most Gardiner students are on the autism spectrum. The average Gardiner ESA is about $10,000. (Editor's Note: Step Up For Students publishes this blog.)
Once a child qualifies for the Gardiner ESA, state government transfers the appropriate funds to SUFS, which we then deposit into a family-specific bank account. Families may spend these funds on an array of state-authorized education products and services, including physical therapy, occupational therapy, tutoring, curriculum materials, education hardware and software, and schools. Gardiner families may purchase services from district, charter, virtual, home, and private schools.
Families are using their ESA funds to customize their children’s education. Entrepreneurial educators are responding by creating a plethora of flexible, innovative education programs that Gardiner families are purchasing. On any given day, a Gardiner ESA student may, for example, receive instruction from a magnet school, an occupational therapist, a tutor, a virtual school, math manipulatives, and education software.
ESAs are beginning to introduce some healthy market features into Florida’s public education system. Because families have the public funds to purchase services directly from educators, the barriers to entry for new providers are lowering. Parents are purchasing afterschool and summer remediation and enrichment services directly from classroom teachers, charter and district schools are customizing programs for struggling readers using a new reading ESA for public school students, and parents are able to afford a variety of customized services from physical and occupational therapists.
A huge challenge -- and opportunity -- moving forward will be helping families access the information they need to make good purchasing decisions with their ESA funds. A market’s effectiveness and efficiency are, in part, dependent on the quality of the choices consumers make. If parents are consistently making good choices on behalf of their children, the providers will respond by creating increasingly better educational products and services. If parents are not making good choices, providers do not spend resources on innovation and continual improvement.
SUFS has raised several million dollars from foundations and individuals to build an online infrastructure to facilitate the implementation of ESAs. A key feature will be helping families access the information they need to make the best possible decisions for their children.
Because U.S. public education has never been a healthy market, the infrastructure necessary to support effective and efficient choices must be created from scratch. We’ve begun that process.
The American Enterprise Institute is out today with a paper on improving the school choice marketplace.
The basic idea is that for choice to truly drive improvements in the education system, market forces need a chance to work. For that to happen, parents need to be able to select schools based on quality, and new, better schools need to be able to meet their demand.
The "demand" side of the equation begins with making scholarships and vouchers available. It also depends on giving parents the ability to make informed choices, and removing other barriers. The author of the paper, Mike McShane, recently edited a volume on the "supply" of new schools, which hasn't always gotten the attention it deserves.
"Questions of whether or not vouchers or tax credits 'work' are becoming less important than understanding how they work and what can be done to make them work better," McShane writes.
It's worth checking out the report in full, but here are a few choice excerpts:
For the past two decades, hundreds of thousands of mostly disadvantaged students have enrolled in private school choice programs, usually seeing some improvement in their academic outcomes while saving taxpayers money.
But the programs have yet to create the kind of systemic transformation sought by proponents of market-based education reform. As Michael McShane writes in the opening chapter of New and Better Schools: the Supply Side of School Choice (which he edited): "Arguing that performing marginally better than struggling public schools is a victory is defining success down."
The volume, released late last year, and an earlier symposium at the American Enterprise Institute, reflect a growing sense among school choice proponents that simply giving students access to private schools that may previously have been out of reach won't, on its own, create the kind of quality and efficiency improvements they say the education system urgently needs.
For the forces of creative destruction to drive real improvements in education, the thinking goes, more high-quality schools need to open — the faster, the better. Creating an environment where new private schools can thrive will require new forms of school financing, new teacher education programs to train a new breed of entrepreneurial educators, and a new approach to school regulation.
Whether you agree with the framing analysis or not, the volume may offer a window into the parental choice debates of tomorrow. Contributors contemplate schools financed by investors who only get paid if they improve student outcomes, private school networks that draw lessons from the best public charter schools, and programs that give parents accounts they can use to shop not just among a range of different education providers to create a customized learning plan for their children.
Words such as voucher, privatization, profit and corporation are often used as weapons by individuals and groups who oppose parental empowerment and school choice. Using words as weapons is especially common during periods of significant social change - we all do it - but the practice undermines civic discourse and makes finding common ground more difficult.
“Market” is another term school choice opponents use to connote evil, but our way of life is largely based on markets, and public education is increasingly embracing market processes as customized teaching and learning become more common. Our challenge moving forward is regulating public education markets in ways that maximizes their effectiveness and efficiency.
People access products and services in one of two ways. Either their government assigns them, or they choose for themselves. In the United States, we have historically allowed citizens to choose, and this system of provider and consumer choice is a “market.”
In a goods and services market, providers decide which goods and services they want to sell, and consumers choose those they want to buy. Markets, when implemented properly, are preferable to assignment systems because they better utilize people’s knowledge, skills and motivation. Citizens are allowed to use their own experiences and judgments when making selling and purchasing decisions, and this citizen empowerment maximizes the universe of ideas from which improvement and innovation derive.
When governments assign products and services to their citizens, they rely on a small group of people to decide what to offer. This top-down approach is less open, transparent and effective than the decision-making that occurs in markets, and it discourages creativity. This is why most improvements in goods and services emerge from market systems rather than government assignment systems.
Markets allow providers to learn from consumers. When governments dictate to consumers what goods and services they may have, their citizens’ true wants and needs are not fully considered. The voice of the customer is silent. But when consumers are empowered to choose for themselves, providers learn from these choices and adjust accordingly. In markets, this necessity to meet customers’ needs drives innovation and continuous improvement. (more…)
