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The Michigan Compromise

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Last August, by voting to become the first state in the nation to abolish the use of local property taxes as the primary means of funding public education, the Michigan legislature gave Gov. John Engler a golden opportunity to radically overhaul its state's public school system. The media speculated that Michigan might offer the first statewide test of education vouchers, but such hopes for radical reform were dashed by the state constitution and less-than-enthusiastic legislators. The political hurdles were simply too high. What emerged from the legislative process, however, was a clever political compromise. In exchange for a dramatic shift from local property taxes to state sales and cigarette taxes as the funding source for education, Governor Engler got the most innovative charter-school program in the country.

The charter-school concept was pioneered in Minnesota in 1991. California picked it up in 1992, and the movement spread rapidly last year. Charter-school legislation has now passed in eight states and is pending in more than a dozen others. While the laws vary, all allow for the creation of new public schools that are more or less self-governing, freed from the bureaucratic oversight of traditional local school systems. The idea is to encourage innovation by freeing the charter schools from the uniformity imposed by top-down regulations and mandates. Teachers (or others) can start from scratch in organizing a charter school, overcoming inertia and the "this is the way it's always been done'' mentality. All elements of what makes for a good school are back on the table, including curriculum, personnel, scheduling, and financial administration.

Further, most charter-school legislation allows for differentiation among schools. Some schools may choose to concentrate on an at-risk population. Others may be subject-intensive. Among the charter schools that will open in Massachusetts in the fall of 1995 are a boarding school for homeless children, headed by a retired rear admiral, and a school for high school dropouts run by a community college. Charter-school laws are intended not simply to create "demonstration sites'' but to help foster marketplace dynamics within the public education system by increasing the supply side of the education-reform equation.

The process of chartering a school is complex and varies from state to state--from the types of charter applicants allowed, to the composition of the "authorizing,'' or charter-granting, bodies, to the degree of regulation imposed on the charter schools. Michigan's law is unique. Unlike most states, it allows for any individual or entity to organize a charter school (called "public school academies''), and allows applicants to seek a charter from any of four potential authorizing bodies: a local or intermediate (regional) school district, a community college, or one of the state's public universities. The authorizing agent--which is free to set its own criteria for evaluation--then assesses the proposal and grants or denies the charter.

In addition to allowing "multiple authorizers,'' the Michigan law--quite significantly--places no cap on the total number of charters that can be granted, nor on the duration of the charter. Moreover, the funding a charter school receives is based on the number of students it attracts. An allocation equal to $5,500, or the average per-pupil expenditure in the district within which the charter school is located (whichever is less), follows the student. (See related story, page 3.)

What remains to be seen is the extent to which charter schools will be deregulated. Much authority is left with the authorizing bodies in establishing chartering requirements. In the case of local school districts, collective-bargaining agreements must remain in force, which may hamstring the more innovative school designs from the get-go. Intermediate schooldistricts, community colleges, and state public universities are free from this requirement, but as charter school teachers are public employees, they are permitted to organize under Michigan law. The new schools are also subject to recent amendments in the state's school code that require "state-board-approved standards'' and "school-improvement plans.'' While any good school should have a plan for its operation and continuous improvement, this state requirement imposes process-oriented bureaucracy and paperwork. As far as the new state standards (and eventually assessments) go, God may bless the principle but the devil is in the details.

Governor Engler did favor some form of state-level funding to narrow the spending gap among districts, but what he gave up in exchange for solid charter-school legislation was not inconsequential. Now, broad-based state sales taxes virtually supplant local funding of schools and threaten the loss of local control. While this change in revenue source may solve--for a while--the disparity in spending among districts, the centralization of school funding may well enhance the already oppressive influence of the educational establishment.

The new funding scheme is a teachers' union's dream come true. In addition to a 6 percent increase in state funding next year, the sales-tax arrangement makes it easier for the education establishment to achieve future hikes in spending. Whereas previous battles for increased funding were fought on many fronts (at the state level and district by district), now lobbyists need only take their requests to the top of the mountain. Of course, a state-level struggle over precious tax dollars will likely prove to be a much bigger fight--with more and stronger opponents--than getting local school boards to cough up yearly pay increases, but the costs of battle are lower and the payoff larger.

For precisely the same reason that charter schools will move education reform forward, the centralized state-funding mechanism threatens to smother much-needed changes. The charter-school law shields new schools from some regulatory barriers to innovation, but this privileged position is a delicate one. With resources and regulatory authority now centralized at the state level, there will be constant pressures to tinker with the way all public schools operate statewide. The Michigan Education Association, one of the largest and richest unions in the country, spent $2 million in advertisements against the charter-school bill and its chief sponsor, Governor Engler. There is little question that the union and other establishment interests will closely scrutinize charter schools and will continue to push their usual input-oriented agenda: new curriculum mandates, pupil-teacher-ratio requirements, staff-development funding, laboratories, libraries, and the rest. The "opportunity to learn'' standards or strategies called for in the federal Goals 2000 act provide a preview of what's in store for the states. (The point at which it can be said that states have devoted sufficient resources to give every single child the "opportunity to learn'' will be debated in statehouses and courthouses for years to come.)

As significant as actual loss of local control as a result of government empowerment is the threat of even greater loss of perceived control. While sales taxes will provide a steadier funding stream at the state level than income taxes (due to the smoothing effect of people borrowing to maintain lifestyles even during down times), it might be considered a "stealth'' tax. Parents are not likely to look at the gas pump and think "the extra dime I just paid to fill up my tank is going to my daughter's education.'' (Admittedly, the 50-cent tax hike on a pack of cigarettes will not easily escape some radar screens.) Moreover, once taxpayers' money goes to the state capital, it loses whatever tie it once had to their kids, their neighbors' kids, or the local high school football team. While imperfect, property taxes as a school-funding mechanism at least have the benefit of reminding parents that they are actually paying for their children's education, which leads to a certain level of concern (though not nearly enough) over what they are paying for. With payments for education both indirect and automatic, this concern may well diminish as education becomes more of "the state's problem.''

The legislation passed in Michigan represents a struggle between two tendencies: one that devolves authority to the consumers of education and emphasizes competition as a means of school improvement, and one that is convinced we can spend our way to educational health. Will efforts to inject supply-side competition through charter schools prevail over the gravitational pull of state control of resources in delivering better-quality education to Michigan schoolchildren? Perhaps, but if and only if the essential element of any competitive marketplace exists: consumer information.

In order for the charter-school initiative to succeed in its mission to raise all boats, a critical mass of organizations will have to develop innovative school designs to attract students and, if they build them, students must come. There is a window of opportunity where a strong initial showing of both producer and consumer interest in the new schools will pre-empt efforts already under way to alter the ground rules of the program. The key to attracting students who vote with their feet (and their $5,500 of funding), is to provide a better school program than is currently being offered and--as important--clear indications of what makes the new arrangement superior.

The success of charter schools rests on their ability to differentiate themselves from existing schools and deliver on their promise of providing better education for their students. Unfortunately, there are few reliable bases on which parents can rely in choosing their children's schools. Sometimes real-estate agents point new house-buyers to areas in "the right district,'' but this measure is unreliable at best. Aggregate S.A.T. and state-administered test scores might add to the picture, but they are far from telling and are frequently difficult to obtain. Sometimes talking to neighbors and colleagues can help.

In order for charter schools to succeed, they need to win customers. While it is, of course, impossible for charter schools to "prove'' their effectiveness before they open their doors--this is possible only by assessments of student achievement over time--parents need to be assured that they are not rolling the dice when picking a school.

Charter schools need to develop more than "mission statements'' that are unveiled and then filed away. They need to proactively develop criteria for their own self-assessment. They need to invite parents through their doors to both observe and take part in their children's learning. The opportunity that charter schools have is fragile and limited. Establishment interests that would rather see things progress slowly, if at all, and take more resources (not fewer) will seek out missteps to be able to prove they were right all along. If charter schools expect to retain their autonomy, they will need to hold themselves to higher standards--standards that are well known and well publicized.

If school reformers seize the charter-school initiative, the "Michigan compromise'' may open the door for even greater competition among schools in the future. A political atmosphere that permits innovation, coupled with schools willing to invite scrutiny, and a constituency that becomes comfortable with the idea of choosing their schools rather than having them chosen for them, might put Michigan schools--like the state's major industry--on the road to recovery. If charter schools fail to counterbalance the possible effects of centralized funding, Michigan schoolchildren will pay the price for a sizable political mistake.

Michael P. Garber is deputy director of the Educational Excellence Network, based at the Hudson Institute in Indianapolis.

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