Taking on the Monopoly

Robert Alt

June 1, 1998

Last week, investors and the courts took major steps to break up one of the largest monopolies in the United States. The monopoly in question has over 90% market control, has stifled innovation, raised consumer prices, and decreased the quality of services provided. Confronted with last week’s court loss and increasing opposition from industry, advocates of the recalcitrant leviathan pledged to appeal the decision, and argued that if they only increased prices, they could increase quality, and eliminate the perceived need for competition. Who would dare make such a statement? It’s not Microsoft—it’s public education.

Convinced of the need for real competition, investment banker Ted Forstmann and Wal-Mart heir John Walton announced last week the creation of the Childrens Scholarship Fund (CSF), a $200 million program to help more than 50,000 underprivileged public school students nationwide attend private school. Their announcement came on the eve of a decision by the Wisconsin Supreme Court ruling Milwaukee’s taxpayer funded school voucher constitutional.

Both of these events share common elements: they offer new opportunity for parents and students, and new competition for public schools. In the case of CSF, parents otherwise forced to send their children to inferior public schools will now have the opportunity to give their children a quality private education. The Wisconsin Supreme Court decision, on the other hand, upholds the Milwaukee Voucher program, which allows parents to choose from numerous public and private options, including neighborhood public schools, other public schools in the district, magnet schools, charter schools, suburban public schools, trade schools, and private religious and non-religious schools. Thus, public schools will not just be competing against private schools, but against each other.

CSF is indicative of a larger trend toward school competition. A number of private scholarship programs are forming around the country, including the School Choice Scholarship Foundation in New York, which has awarded $11 million in the past 3 years, the Children’s Educational Opportunity Foundation of San Antonio, Texas, a $50 million scholarship fund designed to provide 14,000 students with private education over the next ten years, and the Washington Scholarship Fund in Washington, DC, which offers vouchers to 1,000 low-income students each year. All of these programs provide parents with a real educational choice, and will give failing public schools significant competition.

Similarly, the Wisconsin Supreme Court decision is indicative of a legal trend permitting greater choice and competition between religious and non-religious services. Recent United States Supreme Court decisions make clear that the government may provide benefits to individuals for use at religious or non-religious institutions of the individual’s choice without running afoul of the Constitution’s prohibition against religious establishment. The Wisconsin Supreme Court’s decision, upholding Milwaukee’s policy of allowing parents to choose to use tuition vouchers at public, non-religious private, or religious private schools, is consistent with this line of cases, and should be upheld if the Supreme Court opts to hear the inevitable appeal. Whether or not the U.S. Supreme Court takes the case, the Wisconsin decision bodes well for similar appeals pending in Ohio, Vermont, Maine, and Arizona, and for the increased competition these programs provide.

Despite these clear trends and public support for school choice, defenders of the status quo—particularly the teachers unions—argue that competition will be bad for public schools because it will divert resources from them. Mr. Forstmann offered such advocates a sink or swim reply, stating that "Competition makes you better… If you have a totally free marketplace in anything, and you don’t compete, you go broke. If you do compete, you prosper." While this may sound harsh, this is just the sort of medicine that public schools need. Operating without competition (it is unreasonable to believe that private schools that charge parents tuition in addition to the taxes already exacted to support public schools are in competition, if parents are thereby priced out of the market), public schools—particularly those in America’s inner-cities—have increased per pupil cost while producing students who cannot pass basic proficiency exams. If public schools are forced t
o compete on an even playing field with private schools that cost less and offer superior education, public education will improve, or parents will pull their children from the public schools. Either way, the students win.

Fearing the loss of dues that will result if teachers move to non-unionized private schools, teachers unions are prepared to defend the public school monopoly to the bitter end. Picking up the mantra of the Clinton administration—size matters—the teachers unions claim that the panacea for public school problems is reducing class size, and that this could be accomplished if only public schools had more money. There is only one problem with their argument: its not true. A recent study by Paul Ciotti of The Cato Institute illustrates this point. In his study, Ciotti examines the Kansas City Municipal School District, in which Judge Russell Clark implemented the first-ever judicial tax to improve public education and stave off white-flight. Over 18 years, Judge Clark spent $1.7 billion doing just what teachers unions claim schools need: he reduced class size to where the student-to-teacher ratio was the lowest of any major school district in the country, increased teacher salaries, and added extravagant amenities, but alas test scores did not rise.

In the end, fixing education requires more than pouring in money or reducing class size. As nice as "spending more for America’s children" sounds, the truth is that we’ve been spending more and getting less. By challenging the public school monopoly, programs like CSF and the Milwaukee public voucher program offer competition, and the opportunity for genuine educational reform.

Robert Alt is an Adjunct Fellow at the John M. Ashbrook Center for Public Affairs at Ashland University.