Statistics That Defy Belief

Posted on by Dave Roland

Andrew Coulson of the Cato Institute had to publish a correction regarding his calculation of the per-pupil spending taking place in the District of Columbia’s public schools. He had previously stated that D.C. was spending $26,555 per student. Since then, the DCPS has admitted that their enrollment numbers were inflated by four thousand students — meaning that the actual amount of money the school district spent per student is between $27,400 and $28,900.

Keep in mind that students in D.C.’s public schools routinely rank dead last in academic achievement.  Also keep in mind (as Coulson noted) that students in the D.C. voucher program are being educated for no more than $7,500 each.  And, three years into the voucher program, the voucher students are reading two grade levels ahead of their peers back in the traditional public schools.

So, D.C. has two significant approaches to public education, one of which is horrifically expensive and demonstrably ineffective, and the other of which is dirt cheap and shows great promise. Which one do you think is getting shut down?

The Future of Charter Schools

Posted on by Sarah Brodsky

Andrew Coulson writes at Cato@Liberty about the regulation that invariably accompanies public education funding. He predicts that regulation will catch up with charter schools and halt their progress. He sums up his opinion thus:

If you want to know what charter schools will look like in a generation or so, just look at the public school status quo.

I agree that money brings state directives with it (which is why I’m surprised by this call for state funding of private schools on the Panama City Renaissance School blog) but I think charters will have a lasting effect on the U.S. education market. By the time new regulations are written, charters will have changed people’s expectations about what schools are like, and there won’t be any going back to the one-size-fits-all schoolhouse.

In districts where charter and traditional public schools compete, parents are becoming comfortable with the idea that they don’t have to send their kids to a school based on geography. They can choose a school based on academic specialty or other preferences. (And in cases where parents do want to send their children to the closest school, that school could turn out to be a charter.) Charter school parents also know that if the school disappoints them, they can go right back to the traditional district.

As choices flourish, I think we’ll see children learning from different kinds of schools in the same day. A child might attend a charter school, take an online course through a traditional district in the afternoon, and then head to a private tutoring center for homework help.

Unions may influence contracts at charter schools, but they won’t change the fact that parents choose charters, combine them with other options, and can also choose to leave — characteristics of charters that are just as important as the structure of their contracts. And online charter schools are so different from brick-and-mortar schools that traditional teachers union procedures won’t always be applicable to them. Unions won’t be able to turn online schools into traditional ones no matter how much they tinker with contracts, which is why they’d like to shut down the online schools in Oregon.

Metro Gets Federal Boost

Posted on by Caitlin Hartsell

The Federal Transit Administration is designating $7 million for Metro operations in St. Louis, so it can increase bus services that were cut because of the lack of funding.

This federal aid is only a temporary fix for the costly Metro system. Metro has a government-subsidized monopoly that is siphoning taxpayer money: In its 2008 annual report, the Metro system earned $63.5 million in revenue while expending $307 million — operating at a $243.4 million loss, about 4/5 of its cost.

Public transit provides a great service to cities and urban areas, and usually cannot be operated on a cost level. However, there are ways to make transit more cost-effective. Wendell Cox’s study of Denver transit shows a great example of a more efficient transit system that used private competition. By having private companies bid for subsidies from the government, the government saved significantly. (Denver saved over $100 million yearly after 10 years, about 40 percent of the initial cost.)

Instead of applying federal Band-Aids that do not fix the problem, we should apply the principles of competition. Federal aid and tax increases (like the upcoming vote in 2010) are only temporary solutions.

To read more about Show-Me Institute’s different takes on the Metro system, look at David Stokes’ testimony to Metro’s Board of Commissioners and these op–ed articles.

News From Oregon

Posted on by Sarah Brodsky

When you introduce choice and competition into the education market, people with a vested interest in traditional districts don’t take it lying down. (I’m not referring to teachers’ unions alone; almost anyone who can gain from waste and mismanagement, including local farmers, will fight against reforms tooth and nail.)

With that in mind, I’m following events in Oregon to see whether choice will survive there. Portland is ending its practice of 30 years that allowed families to choose public schools outside their neighborhoods. Students will still be able to attend magnet schools, of which there are 15 in total, counting both elementary and high schools. (Two new magnet schools are set to open under the district plan.)

I can’t tell how the changes will affect language immersion programs. These programs take place in regular district schools, but draw students from throughout Portland. It would be great if they could be converted to magnets. However, a few extra magnets won’t offset all the choices that will disappear when intradistrict enrollment ends.

The other education policy debate playing out in Oregon involves online charter schools. Both the Oregon House and Senate have approved a moratorium on online schools. The bills would require that no new online schools open this year, and that enrollment in the existing ones has to stay the same. The ostensible reason for this moratorium is to give regulators time to think about online schools, but how would a few more students signing up prevent regulators from doing that? And, given that most states have online schools (through charters, districts, or state departments of education) it doesn’t make sense to say that Oregonians are rushing into uncharted territory and must be stopped for their own good.

I look forward to finding out how Oregonians react to these attempts to restrict their educational options.

SMI in the Springfield News-Leader Today

Posted on by David Stokes

We have two pieces published in the Springfield News-Leader today. First, Dr. Joseph Haslag has an op-ed about why Springfield should transition its pension fund to a defined contribution plan instead of its current defined benefit plan. While most private entities have already moved to the former, most public entities still maintain the latter, and in Springfield it has resulted in an enormous funding gap.

Also, the News-Leader published a letter to the editor by Dave Roland, about property rights and eminent domain.

Both pieces have generated a good deal of commentary online — most worthwhile, some less so.

MOSERS Bonuses Revisited

Posted on by Josh Smith

Jim Winkelmann — who was mentioned recently on this blog for his pithy letter to the Post-Dispatch arguing against the Clayton smoking ban — has had another letter to the editor printed in that paper. This one addresses the contentious topic of bonuses for Missouri public pension managers.

I wrote about this topic before, contending that criticism of the bonuses didn’t make sense given that the fund was (at least on paper) not losing value as fast as the rest of the market. I am now reconsidering, given Winkelmann’s clever point that the MOSERS employees were the ones assigning value to the investments that they reported as having lost less value than the market.

Here is a relevant quotes from the letter:

The MOSERS website reports that its investment policy is to have 25% of the pension portfolio invested in “alternative investments” in the published annual report they are referred to as “limited partnerships”. Even though the balance sheet in the annual report uses the term “fair market value” assigned to these limited partnerships by definition there is no ready market for these investments. […]

With no market for these limited partnerships where do these fair market valuations come from?

I ran into Winkelmann at lunch yesterday, and he commented to me that the problem is similar to that of assigning “market value” to a house appreciating or depreciating … before it’s sold. The fact is that the true market value of a thing is never the amount that you expect to receive — instead, it is the amount that somebody will actually pay.

I don’t agree with the argument that the MOSERS employees’ bonuses were unearned just because the plan lost money. However, the more subtle yet very relevant point that the MOSERS valuation was totally subjective, and assigned by the very people who stood to gain by inflating the number, smacks of perverse incentives.

A Taxing Dilemma

Posted on by Josh Smith

Caitlin Hartsell’s recent blog entry discusses another recent news piece, this one in the Springfield News-Leader, about that lawyer who is suing small Missouri towns that he holds to be charging illegally high sales taxes. I already talked about this in terms of theory, so I thought I’d use this opportunity to discuss the issue a bit more practically.

Here’s what I think should happen:

Officials in the towns that are charging these contested additional sales taxes believe they are in the right, because they received a letter from the Missouri Department of Revenue telling them what they could charge. The law, in my thoroughly layman interpretation, is ambiguous. It would be wonderful if we had an unambiguous state law that would prevent the present conflict between small towns’ desire to tax sales above 1.5 percent and the threat of expensive judgments/settlements.

In the absence of that, I question whether sales tax rates above 1.5% is actually needed in these towns. Giving them the benefit of the doubt, they want tax revenues in order to provide needed services to their communities. Perhaps a better solution would be to reduce the number of taxing districts, so that the benefits of economies of scale can be realized. This possibility, which is one of the insightful prescriptions of David Stokes’ recent policy study of government in Missouri, could work as an alternative to higher sales tax rates.

At present, I am of two minds about the lawsuits. On one hand, lowering sales tax rates benefits consumers immensely. On the other, I worry about which avenues for funding these towns might undertake if the sales tax rug were suddenly pulled out from under them. I am not optimistic that cutting spending will be considered as an option.

Taking a Stab at “Tax Stacking”

Posted on by Caitlin Hartsell

A Farmington  lawyer, Tom Burcham, is suing southern Missouri towns that “tax stack” — a practice by which municipalities circumvent the state-mandated limit of an additional 1.5 percent in sales taxes by adding additional increases through referendum.

In the suits, Burcham and his clients seek damages and attorney fees, as well as for “illegal taxes” to be returned to the residents. He has won suits in Purdy and Iberia already, and has cases pending in six other cities.

While I admire the quest to lower taxes, I am unsure whether I agree with this particular method.

First, any money that Burcham wins in damages — which amounted to $20,000 plus attorney fees from Iberia, population 620 — comes from the town’s coffers. (He did donate to charity the money he has received so far, so one can’t accuse him of a get-rich-quick scheme, but, still, high damage awards aren’t easily accommodated by small town budgets.)

Although it would be a nice gesture, agitating for the return of the disputed tax collections to citizens is infeasible — according to a Missouri Municipal League lobbyist, at least, who estimated such rulings would bankrupt the towns. Burcham has not yet convinced a town to refund the taxpayers directly, but he is still trying.

Another factor is that these projects were voted on in referendum by the public, and mainly fund projects like improved roads and fire stations. If a particular town decides to increase sales taxes to pay for a public works project, should the state be able to cap that rate? This becomes more complicated when one considers that the towns in question were following a 1999 Department of Revenue interpretation of the existing statutes — an interpretation with which Burcham disagrees.

Is this a laudable crusade for lower taxes, or a strategy that ultimately harms the very people it intends to help? Any thoughts?

Prospects of Education Reform

Posted on by Abhi Sivasailam

Joe Knodell, opining in the Springfield News-Leader today, is hopeful about the progress of education reform in the state. Knodell, a former superintendent and current consultant for the Missouri Education Reform Roundtable Foundation, cites the recently passed Missouri Senate Bill 291 as a harbinger of future, serious discussion and action on education reform in Missouri.

S.B. 291 calls for the Joint Committee on Education to study open enrollment and how it would affect students. Were Missouri to adopt a system of open enrollment, families would no longer be confined to schools within their district boundaries and would be permitted to apply to the school districts of their choice. Knodell argues, and I agree, that students deserve schooling based not on arbitrary geographical lines but on where students would be best served. Open enrollment would introduce much-needed competition into the educational system, as schools and their districts fight to attract and retain students. When schools compete, students win.

S.B. 291 contains other stipulations, as well, ranging from support of charter schools to increased school transparency, as well as establishing virtual schools and a parents’ bill of rights — issues that the Show Me Institute has discussed since its inception. It’s heartening to see Missouri shift toward more and more measures that are rooted in competition and choice.

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