Parents and students in Missouri have essentially three choices: public education in their local district, attending a private school, or home schooling. Some of those students have additional choices in the form of magnet schools and the voluntary interdistrict transfer program, also known as busing. The recent loss of accreditation in the public school system in Saint Louis, because of chronic underperformance, presents the opportunity to expand these choice programs for the benefit of all students.

There are two separate—though intimately intertwined—problems that need to be addressed in fixing the Saint Louis public schools. First, how do we provide those students currently enrolled in the unaccredited district with an opportunity for a better education? Second, how do we improve the district so that it can regain and maintain its accreditation? While these problems differ in immediacy, the solution to the former may very well be part of the solution to the latter.

County schools, and even some private schools, generally spend less per pupil than the city district. According to Missouri’s Department of Elementary and Secondary Education, Saint Louis public schools spent an average of $11,402 per pupil in 2006. As a comparison, my district, Mehlville R-IX, spent an average of $7,144 per pupil in 2006, while the statewide average for district spending in Missouri was about $8,221 per pupil in 2006. As a rough estimate, if the city is required to pay tuition and transportation costs—say $1,000 per year, per student—it would still save money by essentially contracting out to the county district. Whatever money is left over after this transaction would presumably be sunk back into the city, thereby increasing the per-pupil funds available to students remaining in the district. This program, a kind of voucher program completely contained within the public school system, would couple well with the current busing program.

Most proposed voucher programs rely heavily on competition between public schools and some combination of charter, magnet, and private schools. The logic behind such arrangements is simple; a variety of administrative approaches will likely lead to a wide variety of teaching methods, special programs, and systems of evaluation. Once these choices are in place, natural market forces, driven by the choices of parents in seeking the optimal education for their children, will weed out the worst and reward the best. Choice advocates further assert that by allowing market forces to take control, the entire panoply of educational opportunities will increase in quality, so that even the worst schools (tacitly assumed to be bureaucratically administered public schools) will improve significantly.

The jury is still largely out on how much competition between schools improves those schools that lose students, or by what exact mechanism competition produces those changes. Perhaps, when faced with the prospect of losing students and the funds that come with them, public school bureaucrats will start working smarter and more efficiently. More likely is the notion that, when competition starts to drain students and resources, those losing schools adopt whatever successful policies led students to the competing school in the first place. This suggests that competition-induced experimentation and variation between schools leads to new, more successful approaches to educating targeted segments of the population. In either case, it seems that part of the failure of some public schools, particularly the Saint Louis public schools, lies in an inability to innovate and specialize to meet student needs.

Many of these barriers to innovation no doubt originate in the political red tape inherent in any public institution, but that does not necessarily mean that we should abandon the public education system. Rather, a policy encouraging this mild form of competition between the county districts and the city district will provide an informative example of just how competition might work within the context of a limited voucher program, and how such competition can breed innovation. Most importantly, it will enable a group of kids, for whom choice was an unaffordable luxury, an opportunity to decide for themselves which school best meets their educational needs. Every child deserves a chance to succeed. Choice can provide that chance.

Steve Bernstetter is an intern at the Show-Me Institute and a graduate student in public policy administration at the University of Missouri-St. Louis.

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Public education, particularly in Saint Louis, is in a state of distress. Ineffectual leadership, failed reform initiatives, and declining student performance are just some of the symptoms of a much larger disease that could seriously cripple the future of this country. Recent attempts at reform can be divided into two categories: reshuffling the administrative deck and throwing more money at the problem. Clearly, neither of these solutions has succeeded. It is time for a more fundamental change.

Recently, two state legislators from Saint Louis, Sen. Jeff Smith and Rep. T.D. El-Amin, offered some suggestions for such reform. They rest firmly on the notion that teachers must be treated more like private employees, with all the associated privileges and responsibilities. Their proposals include new pay structures for teachers, mandatory testing of teachers, tax credits to private citizens for donations to after-school enrichment programs, lengthening the school day and school year, and mandatory state-funded early childhood education.

The proposal would offer incentives for teachers to specialize in the most needed areas, particularly science, math, special education, and English as a Second Language.  It would also offer bonuses to teachers for student performance. By the same token, those teachers that do not meet performance standards would receive professional development training; those failing more than once would be fired. Setting benchmarks that reflect a teacher’s performance and are not tied solely to the performance of each individual student is the key to making this system of compensation work.  Such a rubric would reflect the unfortunate reality that some students simply don’t want to learn, and avoid blaming the teachers for those student’s failures. This will create a pay structure that acknowledges the reality faced by teachers in the public system; a structure that encourages innovation and emphasizes performance. 

The plan also calls for state-funded pre-kindergarten education for all children between the ages of three and five, as well as tax credits to private donors who fund after-school enrichment programs. Both of these ideas are good on the surface, but the devil is in the details. A robust pre-school market already exists, and any attempt to require such additional schooling should take advantage of that market. It would be highly inefficient to build separate infrastructure for a network of new, state-funded, state-administered preschools. Rather, a practical approach would be to give every child a voucher to attend the existing preschool of their parents’ choosing. This method would place responsibility for kids’ educations squarely on the shoulders of parents, getting them involved in the education process early and hopefully keeping them involved throughout. If necessary, minimum performance standards could insure that preschools are optimally preparing student to enter kindergarten in the public system.

Similarly, private donations bolstered with tax credits for after-school programs should be distributed to schools chosen by that private donor, and students interested in those programs should have the option of attending the schools offering them. Injecting this small amount of competition into the system will encourage schools to seek this unique brand of public-private funding, fostering diversity between and within schools and districts. This choice-created diversity will more efficiently meet individual student needs than the current system that requires every school to be all things to all students.

Changing the way teachers are compensated and giving individual students and parents greater choice, and therefore a greater stake, in their education will serve the goal of creating a more effective and efficient system.  The possibility of real failure or real success created by competition will embolden schools and districts to strive for real excellence, rather than simply maintaining the defective status quo.

Steve Bernstetter is an intern at the Show-Me Institute and a graduate student in Public Policy Administration at the University of Missouri-St. Louis.

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Most industries are open to all firms willing to make the necessary initial investments to enter the market. If I want to open a bar in my neighborhood, can clear the zoning restrictions, and have the necessary capital to rent a space, fill it with booze, and market it to my prospective customers, then that bar will open, with me as its proprietor. This open process creates an environment in which businesses compete for customers, encouraging the innovation that leads to higher quality and lower prices. Requiring a prospective bar owner to obtain a permission slip showing a need for another bar in their neighborhood would obviously be ridiculous. Unfortunately, this is exactly the requirement made by the state of any entrepreneur looking to offer health care services.

Presently, any firm wishing to create a new service or spend a certain amount of money on improving an existing service must apply for and receive a Certificate of Need from the state demonstrating a need for that particular service within the health care market. This procedure was introduced by the federal government in the 1970s to control the rising costs of healthcare by eliminating duplication of services. But costs continued to soar, and the federal legislation was repealed in the 1980s, though many states, Missouri among them, still maintain CON requirements. The process of fulfilling these requirements is both costly and time consuming, creating an unnatural barrier to entry that stifles innovation and inflates prices.

Proponents of maintaining current CON laws make two key arguments. First, they assert that CON laws keep prices down and assure both quality and availability of service. Evidence for these claims is spotty at best. Success with and without the program varies greatly from state to state, and it is extremely difficult to separate the differences in care created by CON laws from differences created by other variations in healthcare systems between states. Additional study is required before any solid conclusions can be drawn as to the affect of CON laws on price, quality, and availability. However, conventional economic wisdom holds that when multiple firms compete, quality rises and prices drop. There’s no reason to assume that the health care industry would be exempt from this effect.

Proponents of current CON laws also argue that eliminating those laws would result in a “cherry-picking” effect, in which new specialty hospitals and services would systematically drain the most profitable patients away from the general service hospitals most likely to serve the poorly insured and indigent. They argue that this would render those hospitals incapable of administering those less profitable services. These proponents essentially argue that removing CON laws would foster unfair competition that would further marginalize those already unable to afford decent general health care. The data surrounding this issue is largely inconclusive. However, reforms could be structured to provide incentives for firms serving those customers, thus curbing any “cherry-picking” effect, should one actually emerge.

The cost of care for those who cannot afford it ultimately gets passed on to those who can, driving up the overall cost of health care for everyone. The ideal system provides a variety of options, in both price and quality, for all. Such a system is best achieved in a market where firms are free to specialize to meet consumer demand. Such a market depends on consumers with a variety of options making informed decisions. As such, CON law reforms should focus on increasing the transparency of the market while simultaneously fostering competitive growth within it. A balanced approach to competition, in which artificial barriers to entry, such as CON laws, are eliminated and the healthcare needs of all are well represented, offers the best chance for guaranteeing all Missourians access to affordable, quality health care.

Steve Bernstetter is an intern at the Show-Me Institute and a graduate student in Public Policy Administration at the University of Missouri-St. Louis.

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As time marches on, the pace of technological advancement marches along with it: the hand-written letter becomes an email, the horse and buggy becomes the automobile, and the pen and paper become the word processor. These advancements are mirrored in the media services industry by the ability to use iPods and cell phones to access programs once available solely through the home television set. Though the options for accessing media services outside the home have increased dramatically, the cable television market has remained largely stagnant. This stagnation results from current policies limiting competition amongst cable providers. Changing these policies will benefit consumers in the form of lower prices and better service.

Those desiring a wider variety of programming than that provided by traditional over-the-air broadcasting have only two options: satellite, and its several variants, or the local cable company. For technological reasons, cable typically provides the strongest, most consistent service, and this fact is reflected in its respective market share: over two thirds of those subscribing to television programming are cable customers. While that figure is large, it reflects meaningful competition from satellite providers, competition demonstrably leading to a better product being delivered to consumers by both cable and satellite providers alike. However, significant opportunities for progress remain. Currently, a company looking to enter the market must receive special permission, a franchise license, from every municipality it seeks to serve. This process hinders firms from entering the market, stifling competition and leading to higher prices and poorer service for consumers.

Proponents of the current system make two key arguments for maintaining the status quo. First, they argue that entry into the cable market is prohibitive due to the immense cost of infrastructure, and the legal entanglements of building that infrastructure. While this was a reasonable argument at the onset of the industry, technology has driven these costs down dramatically. Furthermore, many of the firms entering the market, such as incumbent telephone companies, already have the necessary infrastructure in place. Proponents also argue that if cable companies aren’t required to provide service to everyone, then some won’t have any service, particularly poor minorities. This argument is a red herring: Companies exist to make a profit; any consumer willing to pay the price of service will find a firm happy to provide it. Furthermore, the increased competition will drive prices down, making service both more affordable and available.

Careful economic analysis supports these notions. First, exclusive licensing agreements create monopolies. Monopolies set higher prices than a competitive market would yield. Second, when such monopolies are dissolved and competition enters the market, prices drop and quality increases. A 2004 study found that when satellite providers were allowed to compete with cable providers, cable prices dropped an average of $4 per month. With 67 million cable customers nationwide, that translates to a $3.22 billion annual savings for those who stuck with their cable service. Third, new technologies promise to change media the way the internal combustion engine changed transportation and the Internet changed communications. Eliminating the monopoly power of cable companies will foster these innovations by granting new firms opportunities to capture a piece of the economic pie.

While the current system may have made sense during the industry’s infancy, advances in technology have undermined the reasoning behind it, leading to higher prices and lower quality. It is time for the state of Missouri to reform its cable regulations and allow the competition necessary to drive innovation at the pace of technological growth, for the good of all consumers.

Steve Bernstetter is an intern at the Show-Me Institute and a graduate student in Public Policy Administration at the University of Missouri-St. Louis.

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