Whether school privatization involves expansion of various kinds of vouchers or the proliferation of largely unregulated charter schools, the policy tends to be driven by its proponents’ ideology, not careful policy analysis. That is, promoters believe in an idea—They usually call it the expansion of parents’ choice rather than naming the privatization that is happening.—and they push that idea without describing, or worse without even examining, the side effects on individuals and institutions. Economists call these other implications externalities, and they may be positive or negative. In the area of education, because the expansion of the privatized education marketplace has implications, budgetary and otherwise, for the public school system that is expected to continue to serve the mass of children in any locality, the externalities are too often negative.

Members of the Texas House of Representatives recently defeated a bill for statewide education savings accounts, a far-right proposal from the American Legislative Exchange Council. (Education savings account vouchers are explained here in the Network for Public Education’s new toolkit, School Privatization Explained.) The Texas bill to establish education savings account vouchers had passed the state senate and been declared by the state’s lieutenant governor as “the civil rights issue of our time.” But then the Texas House began considering the negative externalities for schools in Texas’s hundreds of small towns and rural areas.

Reporters for the Austin American-Statesman describe what happened: “An effort to redirect state money to help students pay for private school tuition—a favorite cause of conservative education activists in Texas and nationally—seemed to have momentum at the beginning of this year’s legislative session… But after sailing through the Texas Senate, the effort has run aground in the House, thanks to pushback from rural Republicans and Democrats… The senate passed its large school choice bill this month—calling for the creation of so-called education savings accounts and tax credit scholarships…. Then, during a marathon debate of the House’s version of the state budget on April 6, legislators overwhelmingly approved an amendment that would bar any state money from supporting school choice programs the next two years, cementing the chamber’s stance on the issue.  All but one House Democrat, who was absent, voted for the amendment as well as Republicans, 40 of them representing districts with at least one rural school district.”

The distribution of state school funding was the primary negative externality discussed. The state’s school funding pie is too small said members of the Texas House of Representatives, and increasing the number of slices to include tax credits and education savings accounts would reduce the size of the piece for public schools. It was also pointed out that privatized schools are not held accountable for serving their students well.  And in rural areas, there are few private schools to which students could carry their tax-credit and education-savings-account vouchers: “A major argument against school choice from rural lawmakers is that there isn’t a market for private schools in rural areas.  Private schools are located within the boundaries of just six of the 459 school districts that the Texas Education Agency considers rural….”

Spending Blind, a study just released by Oakland’s In the Public Interest, traces a two-decades-long experiment in California with the rapid growth of charter schools: “Unfortunately, the central conclusion of this analysis is that funding for charter facilities is almost completely disconnected from educational policy objectives, and the results are, in turn, scattershot and haphazard… Far too much of these public funds are spent on schools built in neighborhoods that have no need for additional classroom space, and which offer no improvement over the quality of education already available in nearby public schools.”  The report explores the negative externalities of rapid expansion of charter schools.

The report’s author, Gordon Lafer, an economist from the Labor Education and Research Center at the University of Oregon, explains that in California, public school districts cannot spend tax dollars to build new schools unless they can prove there are enough students to justify a new school. But charter schools have been started up in all sorts of places that did not need new schools: “The most fundamental question to ask about any type of school construction is: how many schools are needed for the number of students we have?”  By contrast, proponents of school choice imagine a marketplace with an over-supply of schools so that parents have options from which to choose. Here is what Lafer finds in California: “As a result, nearly 450 charter schools have opened in places that already had enough classroom space for all students—and this overproduction of schools was made possible by generous public support, including $111 million in rent, lease, or mortgage payments picked up by taxpayers, $135 million in general obligation bonds, and $425 million in private investments subsidized with tax credits or tax exemptions.”

Lafer continues: “(T)he rationale for charter schools is not that they supply needed seats but that they provide a model of education that is new, different, and better than otherwise available. However, this presumption is not written in to any of the charter facility financing laws. As a result, hundreds of low quality charter schools are supported by taxpayers.”  Lafer finds that 75 percent of California’s charters have performed worse than their public school counterparts: “Again, the public has paid dearly for these disappointments…”

One negative externality has been an intensifying public school funding crisis as charters operators have located their schools in places where there are already plenty of public schools: “Such indiscriminate funding comes at a time when schools across the state face urgent needs that are going unmet due to budgetary shortfalls.  Parents, teachers, superintendents, and school board members alike point to model programs in danger of closure… overcrowded classrooms that make personal attention impossible; and insufficient funding for school counselors, social workers, special education, and English language learners.”

Finally, Lafer describes the most serious negative externality. The charters are a parasite devouring their host: “(T)he overbuilding of charter schools not only wastes tax dollars, but it also imposes significant costs—above and beyond the direct costs of charter facility financing—on traditional public schools and school districts, as well as on competing charter schools in the area.  Studies estimate that between 33%-55% of school budgets are dedicated to fixed costs such as buildings, student transportation, and central administration that cannot be reduced when enrollment declines due to a surplus of charter schools. Furthermore, many charter schools receive full funding for special education but enroll students with disproportionately mild needs, leaving the school district to serve the neediest children but without the resources to do so.  As such schools proliferate, they create a growing crisis for traditional public schools and students. Yet there is no place in charter facility funding policy for these impacts to be taken into account or mitigated.”

In Massachusetts last November, voters actually turned down expansion of charters after they were informed about the negative externalities. Moody’s, the bond rating agency, sent a warning letter to Boston, Springfield, Lawrence, and Fall River that their school district credit ratings could be lowered if charter schools were to be rapidly expanded, thereby undermining the school districts’ fiscal viability. And Boston’s mayor, Martin J. Walsh explained what he believed would be the fiscal realities for the public schools of Boston: “Question 2 does not just raise the cap. Over time, it would radically destabilize school governance in Massachusetts—not in any planned way, but by super-sizing an already broken funding system to a scale that would have a disastrous impact on students, their schools, and the cities and towns that fund them. This impact would hit Boston especially hard. Twenty-five percent of statewide charter school seats, and 36 percent of the seats added since 2011, are in Boston. Each year, the city sends charter schools a large and growing portion of state education aid to fund them. This funding system is unsustainable at current levels and would be catastrophic at the scale proposed by the ballot question… (O)ur charter school assessment is based on a raw per-student average that does not adequately account for differing student needs and the costs of meeting them. This system punishes Boston Public Schools for its commitments to inclusive classrooms and sheltered English immersion, as well as everything from vocational education to social and emotional learning. If those factors don’t tilt the playing field enough, there’s a kicker. Because our charter school assessment is based largely on the district’s spending, the more high needs students are concentrated in district schools—and the more we have to compensate for withheld reimbursements—the higher our charter payments grow. Currently, our charter school assessment is 5 percent of the city’s entire budget. Under the ballot proposal, it would grow to almost 20 percent in just over a decade. It’s not just unsustainable, it’s unconscionable.”

Next time you see a photo of Betsy DeVos visiting a school—on a regal visit, for example, with Melania Trump and the Queen of Jordan—imagine what would happen if a reporter were to ask her the policy question that she—the person who leads our national education department—ought to have been carefully considering.  What if the reporter were to ask: “Have you thought about the negative externalities of the program you are proposing—the impact, for example, on the public schools that serve most of our children?”