Magazine | October 18, 2010, Issue

Education: 2010: Beyond School Choice

Four ideas to boost productivity in a cost-conscious era

In the same month that Congress legislated a $10 billion bailout for America’s schools and Secretary of Education Arne Duncan lamented that school districts across the land had already cut “through . . . fat, through flesh, and into bone,” Los Angeles unveiled a new $578 million high school. Duncan must have found it awkward to see the new school announced even as he prepared $1.2 billion in emergency aid for California.

This is emblematic of a larger problem: Education leaders plead poverty even as they refuse to take a hard look at the way they do business. For more than half a century, we’ve spent more dollars on K–12 schooling each year than we did the year before. Between 1970 and 2005, we reduced the number of students per teacher by almost one-third — and real (inflation-adjusted) per-pupil spending more than doubled. In the run-up to the housing collapse, between 2004 and 2007, per-pupil expenditures grew by 17 percent — from $8,310 to $9,683. Schools kept spending dollars provided by inflated real-estate assessments right until the bubble burst.

Well, times have changed. And the worst is yet to come. Scott Pattison, executive director of the National Association of State Budget Officers, notes: “This is an awful time for states fiscally, but they’re even more worried about 2011, 2012, 2013, 2014.”

Conservatives haven’t yet mounted much of a response to all this. Laudably enough, they’ve touted school choice and called teachers’ unions to account, but they haven’t suggested much in the way of addressing out-of-control spending or reshaping how school systems operate. There’s a need for politically viable proposals that can help local, state, and national leaders shift the school-reform debate and address K–12 productivity. Here are four such ideas, each a complement to more familiar calls for choice-based reform.

Return on Investment Accountability. While every state now features an accountability system that reports on student achievement by school and district, there’s not a single state in which accountability metrics gauge cost-effectiveness or return on investment. States tell parents, voters, and policymakers a lot about student achievement, but next to nothing about which schools or districts are delivering more bang for the buck.

Spending data should be reported in tandem with school and district achievement data. Performance relative to dollars spent, appropriately adjusted for cost of living and student demographics, should be a standard part of accountability measures. At the state level, this is as simple as legislators’ requiring education agencies to make the requisite change. And in Washington, the pending reauthorization of the Elementary and Secondary Education Act is a chance to make federal aid conditional on states’ reporting cost-effectiveness in the same way they are currently required to report test scores.

Gold Star Teachers. For decades, the go-to school-improvement recipe has been to reduce class size. Any challenge to this idea encounters a buzzsaw of opposition from parents and teachers. That’s why national teacher-student ratios are down to 15 to 1 today. Yet the research that supports across-the-board class reduction is thin at best. International evidence shows no simple relationship between class size and student achievement. Some high-performing nations boast middle- or high-school class sizes of 40 to 50 students. Small classes are costly, and the need to keep adding teachers forces school systems to be less selective and training to be less focused.

Given that 55 percent of K–12 spending funds teacher salaries and benefits, it’s hard to cut costs and simultaneously preserve the quality of education unless you boost the productivity of good teachers — which requires increasing class size. But trying to sell that argument to parents or teachers is a dead end. A Gold Star program would offer a way around this problem, by giving talented teachers, should they so choose, the opportunity to teach more kids per class and to be rewarded for taking on a larger workload.

Teachers whose students post larger-than-average gains for at least two consecutive years would be eligible to opt in to the program. While systems that use student-test-score gains from one year to the next to calculate how much students actually progressed have real limitations, they provide a systematic way to identify teachers whose students are making gains. Participating teachers would teach up to 50 percent more students than normal — say, 36 students rather than 24 — and would be rewarded for their increased workload. A teacher’s ongoing participation would depend on his students’ continuing to make larger-than-average gains.

#page#While parents like small classes in general, they are also frustrated when their children can’t get seats in the class of a heralded teacher. A Gold Star program would lower these barriers by allowing access to the most effective teachers for more kids. Given the choice between a Gold Star teacher’s serving more children and the alternative, many or most parents would likely prefer the larger class. But it is essential that this be a parental choice and not an administrative fiat.

Teachers and taxpayers would also win big. On average, given current teacher salaries and benefits, increasing class size by one student saves something like $3,000; so allowing a talented teacher to instruct 36 rather than 24 saves $36,000. Awarding the teacher half that amount would yield an $18,000 bonus (a 35 percent bump for the median teacher); the state and district would split the other $18,000. Adopted statewide, with particular attention to the early grades and high-need populations, the program could shave school spending by 10 percent or more — while rewarding excellent educators.

Turnaround Bonds. Given the uncertain results and political land mines involved in contracting with private providers, school officials remain skeptical of turning low-performing schools over to them even when the district is flailing. To help mitigate these concerns, charter-school operators could post a bond against specified performance goals. Whereas the only consequence for a failed charter school today is its possible closure, turnaround bonds would force providers — just like firms bidding to build capital projects like highways or bridges — to put up a cash guarantee of satisfactory performance: They would have to meet the goals, or else forfeit the money. Turnaround bonds could help alleviate concerns about spending public monies on charters, incentivize high performance, and discourage charlatans who cannot run schools well and simply want to make a quick buck.

K–12 Spending Accounts. The power of price-sensitive consumers to squeeze costs remains untapped in K–12 schooling: Parents currently gain nothing from choosing a more cost-effective school. And the freedom to switch schools has great appeal for urban parents desperate to escape awful schools, but does little for the vast majority of suburban parents who like their schools on the whole but might wish to take advantage of a different program in a certain area of study, such as math or a foreign language. K–12 Spending Accounts (KSAs) would both foster cost-awareness and widen the applicability of school choice in a world of home schooling and online learning, by permitting families to redirect a portion of the dollars spent on their child to programs and services inside or outside their schools.

Take, as an example, foreign language: Providers such as Rosetta Stone and its various competitors might apply for KSA eligibility. Rosetta Stone offers instruction in 31 languages, including Mandarin and Arabic. Some parents might prefer enrollment in one of those languages to the usual French or Spanish, or might deem the alternative program superior to the instruction available in their local school. Sufficiently wealthy parents can already afford these kinds of services on the side. But for other families, such an option is currently off the table. It needn’t be.

The KSA model turns “school” choice into something broader, loosening the expectation that a single school must meet every need of every child. And it introduces price competition in a sector where it has long been absent by giving parents, for the first time, cause to comparison shop.

Comforted by perpetually rising budgets, educators have long disdained notions of “productivity.” But the altered fiscal landscape has changed that. Conservatives have the ideas that can help, and are in a position to complement “choice” with smart strategies that address incentives, cost structures, and market dynamics. These proposals are a start.

– Mr. Hess is director of education-policy studies at the American Enterprise Institute and author of the forthcoming book The Same Thing Over and Over: How School Reformers Get Stuck in Yesterday’s Ideas.

Frederick M. Hess is the director of education-policy studies at the American Enterprise Institute.

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