Academic journal article Economic Perspectives

Midwest Approaches to School Reform

Academic journal article Economic Perspectives

Midwest Approaches to School Reform

Article excerpt

Paul Courant, Edward Gramlich, and Susanna Loeb (University of Michigan)

School finance reform: The view from Wisconsin Andrew Reschovsky and Michael Wiseman (University of Wisconsin) Respondants:

Illinois--Theresa McGuire (University of Illinois) Indiana--Larry DaBoar (Purdue University) Iowa--Thomas Pogue (University of Iowa)

The South Carolina experience with incentives

On October 26 and 27, 1994, researchers and policymakers met at the Federal Reserve Bank of Chicago to exchange information and research about current attempts to reform education finance and delivery. School reforms and experiments are taking place across the U.S., and the Midwest currently lays claim to diverse reform efforts. On the finance side, the states of Michigan and Wisconsin have recently voted to diminish the local property tax as the primary source of school funding and to increase the state government's role in funding. As to delivery of school services, the city of Milwaukee has the nation's only system of cash vouchers from public coffers that can be used to pay tuition at local private schools. Charter schools, a public-private hybrid, have been authorized in both Michigan and Minnesota, while programs allowing students to choose public schools across local school district boundaries are now in effect in Minnesota, Iowa, and metropolitan Milwaukee. Minneapolis schools have contracted with an outside agency for provision of some school services. The Chicago public school system has chosen a reform approach of site-based management with local communities participating in school management and budgeting. The Chicago Fed's conference addressed these diverse efforts and evaluated each of them in an attempt to help the region's policymakers as they choose among these and other models.

In an opening presentation, Michael H. Moskow, President of the Federal Reserve Bank of Chicago, outlined a framework for the conference proceedings. He noted that one of the key determinants of our economy's rate of growth is the skills and training of our work force--what economists call human capital. He stated that the Midwest has been somewhat of an incubator for finance and delivery reform experiments. For example, Michigan has made a major overhaul of its system of school financing, as a result of which the state government has become responsible for providing nearly 80 percent of educational funding. However, fiscal strains can be seen in other school districts throughout the Midwest, both urban and rural. The state of Illinois continues to wrestle with school funding problems; the Chicago public schools in particular face an impending $300 million deficit in school year 1995-96.

Moskow then turned to the many experiments with choice among public and private schools. Such experiments introduce competition into the provision of schools services in the expectation that this will improve the quality and reduce the cost of education. However, Moskow cautioned that it is difficult to evaluate education vouchers and similar experiments in school choice. In order to measure whether such experiments improve learning and reduce costs, one must simulate a full-scale program for an extended period of time. The long-term benefits of choice such as opening of new private schools, improvement of existing public schools because of competition, and increased research and development spending cannot reasonably be expected to occur unless the program covers a sufficient number of students for a guaranteed, extended period of time.

In closing, Moskow posed some questions that he hoped the conference would address:

1. Insofar as education is a public good that benefits our society and economy, do school financing systems in the Midwest ensure a sufficient and stable level of funding for every child? What criteria should be used to determine what this level is?

2. State and local electorates hold the purse strings to school finance, and increasingly, voters are refusing to fund schools without further evidence that their money is being well spent. …

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