Financing Entrepreneurial Education: Part V

Decentralization does not guarantee success

By Patrick R. Gibbons
  • Wednesday, January 13, 2010

Competition, consumer choice and school autonomy have made many charter schools and some empowerment schools excellent alternatives to the stale, traditional public school. But with the wrong incentives, rules and regulations, even those more innovative models may yield a system as stagnant as what we commonly get in public education. Reform in name only is no reform at all.

Calling something "school empowerment" does not guarantee success, and there are already examples of such failure. The state of Hawaii, for example, recently addressed budget issues by eliminating 17 instruction days from its school calendar. Public school students in Hawaii will now receive 163 days of instruction, compared to the national average of 180. By contrast, some high-achieving charter and private schools have calendars specifying well over 200 school days.

Hawaii's poor decision may stem from the fact that the supposedly empowered schools in the state actually control less than half of spending. All public schools are under one statewide district central office, where most decision making still occurs. This means reduced incentives statewide to provide superior service at lower prices. Hawaii still appears focused on providing jobs for adults, rather than quality education for students.

Probably the biggest example of empowerment school failure is Seattle. Seattle's empowerment program was once a shining example of success, and was featured in William Ouchi's book, Making Schools Work. In 1995 the district hired retired Army Major General John Stanford to reform the ailing school district. With the help of investment banker Joseph Olchefske, the two developed Seattle's empowerment school model. By 2002 students in Seattle public schools had improved, scoring in the 59th percentile in reading and 65th percentile in math on the Iowa Test of Basic Skills. At the time, empowerment schools in Seattle controlled 79 percent of their budgets.

After a decade with empowerment schools, however, Seattle regressed, abandoning the empowerment program's weighted student formula for a jobs-driven formula. Called "weighted staffing standards," the latter was treated as an innovative and efficient solution. In reality, however, it greatly resembles the same old, centralized planning that makes many urban districts flounder. The switch from the weighted student formula to the staff-driven formula resulted not from a failure of the empowered schools but from conflicting state regulations and bad management.

The initial plan called for good schools to be rewarded with more dollars as they attracted new students, while bad schools were supposed to close if they lost attendance and accompanying student dollars. However, as school board member Michael DeBell later said, "We got in a spiral of low-performing schools. There were never any real consequences to not performing."

Perhaps under pressure from parents or the teacher union, the district ultimately guaranteed a baseline budget for each school. Not only did this prevent bad schools from closing, but it also ensured that small schools received more dollars per pupil than large schools — effectively creating a situation where large, successful schools were penalized and small, poorly performing schools were rewarded.

With no incentives rewarding success and punishing failure, it is understandable why poorly performing schools survived. In any business, including education, incentives matter. Bad incentives create "moral hazard" — a situation that encourages people to make bad decisions. Empowerment schools can only succeed if the incentives are structured to reward success and punish failure.

For empowerment schools to succeed in Nevada, we must ensure that they are truly empowered. Allowing state lawmakers or district officials to continue dictating how schools must allocate their budgets, what programs they must offer, or what staff they must hire, will sabotage schools' ability to innovate and perform for their students.

If we are serious about educational success, we'll ensure appropriate incentives for schools, teachers and principals. Open enrollment, with funds following students, would allow successful schools to attract more students and, thus, more revenue. This would strongly encourage underperforming schools to improve in order to retain students, and thus funding. There should also be real consequences for schools that fail. Principals should have the ability to remove teachers who do not perform, while district officials should have similar ability regarding principals. Consistently failing schools should be reorganized, top to bottom, or even closed.

Large merit bonuses — individual or school-wide — could also help incentivize staff to provide students the best possible education.

Incentives to reward success and punish failure drive businesses across the nation to provide the best service at the best price. There is no reason why this would not work in public education.

Incentives matter throughout life. Education is no exception.

Patrick R. Gibbons is an education policy analyst at the Nevada Policy Research Institute.

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