Teachers Unions, Faulty Economics and School Choice

By Jeffrey Dorfman

JEFFREY DORFMAN Professor of Applied Economics University of Georgia


School choice is one of the most controversial and hard-fought public policy debates of the past few decades. Most liberals, who get significant funding from public school teachers unions, line up against any form of school choice, while many conservatives favor allowing some form of market to introduce competition amongst schools for education tax dollars.

The argument against school choice always seems to focus on how it would “defund” public schools by “draining” monies away. This argument, however, is based on faulty economics and should be discarded or strongly rebutted by school choice proponents.

School choice comes in a variety of flavors. Some public school districts let residents choose their preferred school within the district; this is the smallest amount of choice. Vouchers allow at least some students to attend a private school and pay part or all of the tuition using a voucher equal to some of the tax dollars that would have been spent on their public education; this is a medium amount of choice.

Finally, education savings accounts allow parents to redirect some share of tax money that would pay for their children’s public school education to private school tuition, tutors, educational enrichment programs, or saved for later educational uses. This is the most possible choice, as parents can even home school their kids and use the tax dollars received to pay for educational extras or save the money for (possibly expensive) private schools in the future.

Clearly, both vouchers and education savings accounts involve some tax dollars that were going or could go to public schools being sent to private schools or other educational uses. Voucher programs have generally been rather limited in scope, with numbers of students and dollars capped and the dollars sometimes from private sources or appropriated (as in Louisiana) in such a way as to ensure that public school funding does not decline.

Education savings accounts are quite new, and in the four states in which they operate are restricted to certain classes of students. So far, education savings accounts have mostly been employed for special needs students, although Arizona also allows them for foster children, children living on Native American reservations, children of active duty military personnel, and children attending failing public schools.

Nevada passed what would be the most widespread education savings account program with eligibility for any child who attends a public school for the 100 school days prior to applying. This raised the prospect of a lot of money being diverted from public schools to parental control, thereby unleashing fierce opposition from teacher unions and the liberal establishment. A lawsuit led to a ruling that the law was unconstitutional because public school funding cannot be used for any other purpose. However, the Nevada Supreme Court has now ruled the law is constitutional and the Legislature simply needs to appropriate the money for the program.

Nevada’s law was intended to take a fixed pool of education money and separate it into education savings accounts and funds that would still go to public schools. However, that does not mean that opponents of school choice are correct that it harms public schools by taking away their money. After all, what matters is whether the revenue reallocated to education savings accounts or vouchers is more or less than what the public schools save by not having to educate the child.

According to the National Educational Statistics Center, the 2012-13 national average for total education spending was $12,296 per pupil, of which $6,693 was designated as spent on instruction (the rest goes to support services, building maintenance, administration, transportation, food services, and capital expenditures).

From the point of view of a school system, we could simplify this by thinking about the instructional cost as the marginal cost of a student, while the rest are fixed costs which likely don’t change if the student numbers drop a little bit. (This is not quite right, but the assumption probably is favorable for the schools, so the truth is even more in favor of school choice than the following numbers suggest.)

The numbers would vary state-by-state, district-by-district, and even school-by-school, but in general if public school funding is reduced by the instructional cost component or less when a student leaves, the school should suffer no financial harm.

U.S. Census data shows Nevada spent $4,782 per pupil on instruction in 2012. The state’s education savings account envisions giving parents $5,100 per student which, given even a little inflation in school spending, means that Nevada would not be diverting more than the instructional cost of each pupil removed from public schools.

Thus, public schools in Nevada should find that the money that would remain in the schools will be sufficient to cover the costs of the remaining students. The school voucher program that Congress created in the District of Columbia, which lasted about one decade before being defunded under President Obama, also offered amounts less than the spending on instruction in the D.C. public schools.

Most school choice programs involve some reallocation of money from public schools to other forms of educational spending, such as private school tuition. This does not leave public schools worse off if the amount of funding they lose per student is less than the marginal cost of educating a student. The data imply existing school choice programs would actually leave public schools better off because their funding would be reduced by less than their expenses.

In simple terms, public schools would be left with fewer total dollars but more dollars per student. This implies opposition is not due to concerns over funding, but likely a simple case of trying to maximize public school enrollment so as to maximize unionized teaching jobs.

Opponents of school choice are not worried about children, either the ones who want to leave or the ones that would stay. They only care about the teachers’ job security. So remember, the debate about school choice isn’t about education quality, it is really about jobs and union dues.

Jeffrey Dorfman is a professor of economics at the University of Georgiaa Senior Fellow at the Georgia Public Policy Foundation and a regular contributor to Forbes.com and RealClearMarkets.com. This commentary was published in the November 13, 2016, edition of Forbes and is reprinted with permission.The Georgia Public Policy Foundation is an independent think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the view of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (December 2, 2016). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.