School Competition

The lack of progress in educational reform at the K-12 level is a serious threat to the health of the economy and to the future prosperity of American children. School reforms thus far have focused on increasing funding to public schools. However, the increased spending has not improved quality, suggesting that more money is not the answer to school reform.

Instead, effective school reform must address the structure of public education. Public schools monopolize the market for affordable education and, therefore, are not held accountable for their performance. Consequently, they have little incentive to improve quality or control costs because even the worst public schools are protected by the system.

Schools can be effectively reformed through parental choice programs that empower parents rather than school bureaucracies. Parental choice embodies two principles. First, any system which provides more parents with more choices will be superior to one that assigns children to certain schools based on zoning rules. Second, competition ensures that customers receive the highest quality product at the lowest price. If parents are given the financial ability to remove their children from failing schools, these schools will be forced to improve their quality if they want to remain viable. Competition essentially takes away the guarantee that classrooms will remain full regardless of a school's performance or quality.

Competition in education is not a radical policy. The market for higher education is competitive, and this competition has helped make American colleges and universities among the best in the world. Private and religious schools at the K-12 level also compete for students as do pre-schools. Therefore, the lack of competition in public K-12 education is the exception.

Several proposals have been introduced in Congress that would allow parents more choices in K-12 education. One proposal with bipartisan support would allow parents to establish tax-free saving accounts to encourage them to save for their children's K-12 education. Such accounts already exist under current law for higher education. Parents who contribute to these accounts could use their savings to send their children to public, private, or religious schools. Alternatively, the savings could be used to pay for a home computer, tutor, educational therapy, college tuition, or other educational expenses.

Saving incentives can be utilized by all low- and middle-income families in all communities. Their widespread use can provide the competitive pressures needed to generate broad-based reform in the K-12 school system. In addition, low- and middle-income families can receive substantial benefits.

Promoting parental choice through saving incentives would not advance private and religious schools at the expense of public schools. It would simply make more options available to more parents and provide new opportunities for school children both inside and outside the public school system.