Friday, May 6, 2016

The Free Market Does Not Work for Education

The initial spark for this piece was going to be this story out of Philly, where parents are shocked, upset and frustrated to learn that the charter their children are attending is bailing on them at the end of this year. 

But at this stage of the game "Charter Closes Doors and Abandons Students" is completely unremarkable, like breathless coverage of the sun rising in the East. The Center for Media and Democracy has done huge work on this, producing a map of the 2,500 (that's two thousand, five hundred!) charter schools that closed by 2013. CMD has also ramped up pressure on the US Department of Education, which loves charters, pushes charters, throws money at charters-- but in its "transparent" reporting claims to have no idea how many charters have actually closed. (Meanwhile, CMD continues to dig out the truth about charter scamming like this amazing report about KIPP. Do you contribute to the CMD? Because you really ought to.)

Why do so many charters close? There's no mystery to it. Here's a quote from the Philly charter CEO:

Kenderton is facing significant financial challenges due to a number of factors, including the school's rising special education costs. As a result, Scholar Academies has concluded that, next school year, it is no longer able to manage the school in the best interest of kids.

Charters close because charter schools are businesses, and businesses close when it is not financially viable for them to stay open.

The free market will never work for a national education system. Never. Never ever.

A business operating in a free market will only stay in business as long as it is economically viable to do so. And it will never be economically viable to provide a service to every single customer in the country.

All business models, either explicitly or implicitly, include decisions about which customers will not be served, which customers will be rejected, because in that model, those customers will be detrimental to the economic viability of the business. McDonald's could decide to court people who like upscale filet mignons, but the kitchen equipment and training would cost a whole bunch of money that would not bring a corresponding increase in revenue, so they don't do it.

In a particularly apt example, FedEx and UPS do not deliver to the remoter rural areas. If you hire FedEx to deliver a package to your uncle at the end of Bogholler Road in Outer Ruralsville, what they will actually do is sub-contract the United States Post Office to finish the delivery for them.

Note what the CEO said above. Special ed students are too expensive for their business model. When we see across the nation that charters largely avoid students with severe special needs, or English language learners, this is not because the operators of those charters are evil racist SWSN haters. It's because it's harder to come up with a viable business model that includes those high-cost students. Likewise, you find fewer charters in rural and small town areas for the same reason you find fewer McDonald's in the desert-- the business model is commonly to set up shop where you have the largest customer pool to fish in.

Of course, you can game this system a little by creating government incentives. Uncle Sugar can say, "We'll give you a tax break or a subsidy if you will go serve this customer base that it ordinarily wouldn't make economic/business sense for you to serve." But now it's not a free market any more, is it?

Look. As always, I'm not arguing that business-people are inherently evil and dastardly and wrong. But the values and mission of a business in a free market are incompatible with the values and mission of public education.

The first question of the public education system has to be, "How can we get a great education for every single child in this country?" The first question for a business has to be, "What model can we use that will keep this business economically viable?' And the answer to that question will never, ever be, "By providing an education to every child in this country." There will always be students who live in the economic cracks, niche customers that no business wants because there will never be money in them. Some charter fans suggest, either explicitly or implicitly, that educating those students will be the job of public education. But that represents a dramatic and complete re-imagining of the purpose of public education, and to repurpose an entire public sector without a public discussion is irresponsible and undemocratic.

In the meantime, charter schools will continue to close when it makes business sense to do so, no matter what sorts of promises they made to the families of their students. Charter schools think like businesses, not like schools, because charter schools are businesses. We cannot be surprised when they act like businesses, and we cannot keep hiding from a discussion about the implications of turning that business mindset on a public good.


  1. Greene fundamentally misunderstands the issue. He acts like closing 2,500 charters is somehow wrong. It's not.

    There are 1,700 (that's one thousand seven hundred !) high schools in the country that are drop-out factories defined by Johns Hopkins where more than 40% of students drop out between freshman and senior year.

    Which is worse - a charter that closes because its costs are too high - or a district school which stays open and wastes tax payer dollars while more than 40% of students drop out or fail to graduate ?

    Greene obviously intends to solicit sympathy by noting that charters enroll fewer "severe special needs, or English language learners". In NY at least, this is not true. "It said that children with disabilities stayed at charter schools at a slightly higher rate than they did at traditional public schools."

    What the market does best is allocate resources. Sure, some charters close. But in New York City alone, there are 163,000 students on wait lists. Nearly 30,000 students have moved from district schools to charters in Philadelphia ... and twice that number in Chicago. This certainly suggests demand for charters ... not distaste as the article suggests.

    But the important point is the dynamic. In most states, dollars follow the student. Schools which attract students grow. And those that do not attract students - whether charters or district schools - close (or should close). Consequently, the overall system improves.

    1. This is a fascinating dispatch from some alternate universe. There is no system in the US where the "free market" has rewarded quality charters and allowed them to grow. And if you really can't see the problem with charters closing (sometimes in mid-year) for the students and families they serve, you might try reading the article I linked. But mostly you simply prove my point-- people who fetishize the free market flip the notion of public education so that students and families are there to serve the market, rather than schools being there to serve the students and the community. If we're going to change the entire purpose of public education, that seems worthy of a conversation, and not an un-discussed hijacking by business interests.

    2. I must have missed something, Alan Backman, because I see no logic whatsoever in your comment.

    3. I really do not understand your comment and it appears you misunderstand mine.

      1. "There is no system in the US where the "free market" has rewarded quality charters and allowed them to grow."

      Ever hear of KIPP with 183 schools ? You may question the value of such "no excuses" schools. But they grow because there is demand for quality schools particularly among the poor and minority communities that KIPP generally serves.

      2. "people who fetishize the free market flip the notion of public education so that students and families are there to serve the market" - You really do miss the point of the free market. You act as if consumers (students) are there to "serve" the producer (school). That's not how it works. When you contract with a plumber, is he serving you or are you serving him by paying him money ? A market simply means that there is a nexus between the provider and consumer of a service. Each exchanges what the other considers fair value.

      By contrast, too many district schools do NOT serve the communities in which they reside. Moreover, they act as if they do not need to do so - since the students have no practical choice but to attend them.

    4. KIPP has not been rewarded for producing quality. They have a successful marketing department. And that's because

      2) Like Success Academy and many others, they use students as data-producers whose function is to crank out the test scores that help them market their product. That's how a free-market school works-- you're not selling to students, but to parents, and you sell with "results" which means any kid that's going to screw with your results has to be shoved out the door. A student with special needs or behavior concerns or English as their second language or just having trouble getting their act together (because they're children) is not someone who needs help and support-- that child is a threat to the bottom line and has got to go.

  2. Just to make a follow-up point (assuming you published the last one). Let's assume your premise is correct. Again, as in my prior post, I show data at least from NY that more special needs kids are retained in charters than in district schools.

    But let's say you are right. Let's say charters do tend to exclude special needs students.

    First of all, this may be a boon to district schools - not a burden. Greene neglects to mention that due to both Federal and State subsidies, schools get far more dollars for teaching special needs students than for ordinary students. An example of this is a district in Santa Barbara, CA which spends an astounding $84,000/student (wow !). See link.

    Second, even if charter schools excluded 100% of special needs students (which they don't), would this really be "wrong" if the charters simply did a better job of academically preparing students than do the districts (as the data show) ?

    Guess it comes down to the purpose of school. I subscribe to the idea that in our country which has a lot of inequality, the key objective is to get as many kids as possible to graduate and become either college-ready or job-ready. It may be more romantic to think of schools as some type of indoctrination into a diverse culture. But as long as more than 20% of poor students do not even graduate high school and fewer than 40% of all students are college ready (per the NAEP), such concerns are secondary.

    1. If your idea of how to fix schools is simply to dump all special needs and low-achieving students, we have no need of charters-- we can just change the laws that govern public ed. Where do you suggest we dump all those unworthy people? This is not so much an argument about the purpose of public education as a call for fascism. With this comment you really have established yourself as a completely non-serious commenter of public education.

    2. Please tell me where I said that "special needs and low-achieving students" should be "dumped". Again, the data suggests (that at least in NY) charters actually retain more special needs students.

      But I am showing the fallacy in your argument by accepting your premise. Let's say charters do exclude special needs students. But let's also say that charters overall do a better job in increasing academic achievement (as measured by the dreaded standardized tests) than do district schools. I recognize that you would not concede the 2nd premise. But the data overwhelmingly show this to be the case (e.g. Mathematica).

      Let's remember that prior to the LRE (Least Restrictive) mandate as part of the EAHCA in 1975, Special Needs students were taught separately rather than in the integrated fashion they are today.

      Let me be clear. I do NOT advocate this. I simply suggest that even if you accept your assertion (that charters exclude special needs students and therefor cannot be compared to district schools), I am not sure how you would compare the academic benefit to non-special needs students in a charter environment to any claimed benefit from integration.

      Even today, we segregate students in college. How many special needs students are being educated at MIT, Harvard or even some of the top public schools like UC Berkeley ? Again, even if you accept your assertion (which I do not), those capable of learning appear to fare better in charter schools.

    3. "We" do not segregate students in college. They are largely self-segregated (or segregated by class and economic status), including the vast number that choose not to go at all.

      But we're at a dead end here if you think the data show charters do a better job with students with special needs. They do not.

    4. All children are "capable of learning". The question is what, how, how much, how fast, what conditions motivate them, and if there are obstacles like unaddressed medical conditions or emotional trauma. Not everyone wants or needs to go to college, but that doesn't make them less worthy human beings.

  3. Dear Mr. Greene and Commentators:

    I am hoping some one of the folks out there can help me with this blog. In it Mr. Greene reports on the CMD (Center for Media and Democracy) finding of the schools that received money and never opened, as reported in PR Watch.

    by Jonas Persson on September 22, 2015

    “Today, the Center for Media and Democracy is releasing a complete state-by-state list of the failed charter schools since 2000. Among other things, this data reveals that millions and millions of federal tax dollars went to “ghost” schools that never even opened to students. The exact amount is unknown because the U.S. Department of Education is not required to report its failures, where money went to groups to help them start new charters that never even opened.”

    Sooo...if some of my business savvy relatives and I opened a business with the stated goal of operating a charter, or charters, then we could apply and get money from the government, and if we did a very poor job of advertising for students and no one enrolled, we could just keep the remainder of the cash?

    Because that's what it sounds like is happening here. Can someone tell me why my idea wouldn't work? You could chide me for being naive, OK? I mean, even a response like, “Oh No, You Silly Person! You must sign a contract and keep very strict account of the money and must return any unused portion. The government watches everything you do like a hawk, because it's the people's tax money you are using!” That would help me a lot, because it really does sound like once you get the money, no one keeps you accountable. Info please?

    Now that I made the mistake of telling them about this, my relatives are calling me day and night, night and day! They are all for that quick buck!



  4. There are some contradictory things to what Mr. Backman says.

    (1) He admits that charters close because they don't make enough money. But if so many people are on waiting lists for charters (of courses, many of the people whose names are on lists are in a school but their names are on multiple lists and they're never taken off), then how do charters get in this financial trouble? One thing not mentioned is that district schools are underfunded and charter schools that are financially successful can't do it just on taxpayer money either; they usually get twice as much money from wealthy donors who have their own agenda as they do from taxpayers.

    (2) What he's saying about ELL and special needs students isn't real clear, but it sounds like he's saying special needs students in charters graduate at a higher percentage than special needs students in district schools; which says nothing at all about what percentage of special needs students make up charters to begin with.

    (3) He intimates district schools should be glad to have tons of ELL and special needs students because they get more money from the government for them. So? This isn't "extra" money, like it's a slush find (not for non-charters, anyway). This is money needed to provide the resources for the students.

    (4) I don't see how the market is good at allocating resources for schools. The market allocates money to profit-making ventures. What does this have to do with schools? Where schools need the money allocated to most is to wraparound-service community schools in poor neighborhoods. That has been shown to do more than anything else to help poor students overcome the obstacles that keep them from graduating. That's not a money-making proposition.

    Schools are not just job-training; They are also to enable students to become informed citizens of a democratic society, who know how to get along with other people (which is a skill necessary for jobs also). But this is not important to Mr. Backman; he's evidently just looking for compliant worker bees or the governing elite.

    Of course, we know from previous posts that Mr. Backman, whose daughter got a good education from a district magnet school, doesn't want to pay for that kind of school for other people because of the Evil Teachers Unions that are full of people called "teachers" who Hate Children, especially Poor Children, because these "teachers" insist on being paid a decent salary so they can support their families, and that's why poor children have lousy schools.

  5. Oh, and I forgot to add, so many more students are going to charter schools now in Chicago because they have no other choice, as their community schools have been taken away. But the district schools out-perform the charters.

  6. Peter Greene, do you distinguish between public charters and private (for profit) charters? Several of my kids taught at KIPP (and were worked to death), one teaches at Haas Hall -- two of them after teaching in public high schools. They give me grief for opposing "public charters".

    1. My understanding is that there isn't really any distinction between for-profit and non-profit charters; both are considered "public charters" and use taxpayer money. Most of the "non-profits" are still managed by a for-profit management company, and Success Academy, for example, is technically a non-profit, but the CEO Eva Moskowitz pays herself a half-million dollar salary and has gone to court to keep the state from auditing her books. Albert Shanker came up with the original idea of charter schools to be pilot schools of innovation or to serve a difficult-to-serve population -- for example, in my city there are two charter schools for autistic kids, which I think is a good thing -- but the idea has largely been taken over by for-profit companies that aren't innovative, but just want to generate a profit.

    2. There are no public charter schools. Charter schools are, pretty much without exception, privately owned and operated but financed with public dollars. When KIPP takes and keeps every student that shows up at its door, and when KIPP gives full transparent accounting of every dollar it spends, and when KIPP is controlled by an elected board of local citizens, then it will might more closely resemble a public school.

      The more common distinction is between for-profit and non-profit, and as Rebecca notes, many if not most of the non-profits are simply a shell game for hiding the for-profit companies involved.

    3. Like most things in K-12 education, who operates a charter school varies depending on geography. In Wisconsin, the majority of charter schools are operated by the local school board. In Kansas, all charter schools are operated by the local school board. In Massachusetts, Horace Mann charter schools must have the approval of the local school committee to form and their annual budget approved by the local school committee.

  7. Alan Backman,

    I read your comments about "drop out factories" and immediately understood that the premise of the term itself fundamentally misunderstands the nature of the situation.

    I live in Indianapolis and I followed your link to the information that I know best and looked at Indiana:

    I used to teach in a middle school that fed into Northwest High School. Northwest High School has a 29& retention rate - a fact that I do not doubt. Some kids move out (I would guess about 25% since a move of a few blocks to the north, south or west would move you into one of three other school districts and we used to get that at the middle school where I taught as well) but there are a lots and lots of kids that just drop out.

    But, if this neighborhood were to depend on a school operated like a business to educate its children it would have no school at all because almost every business pulled up stakes and moved out years ago. In many cases, they don't just pull out, they also tear the building down to the ground because they know that no one will buy it and it has become a liability that will have to be insured and maintained.

    There are no name brand restaurants in that immediate area. There used to be because I used to shop in the area all of the time when I was younger and the neighborhood was nicer because I lived very close to it and both my wife and I worked in it. But, now all of the name brand box stores and groceries are closed. Boutique shops are closed. The only thing open are liquor stores and a Speedway gas station with bulletproof glass partitions to keep the customers away from the employees. I moved away and didn't think twice about it because the neighborhood changed. It got rougher, more violent and businesses moved out. Now, when I drive through it I am shocked at the changes.

    The problem is not that the school is a dropout factory. The school did not cause this neighborhood to be this way. The problem is that if this neighborhood were a country we would be calling it a "failed state" like Sudan, Yemen or Haiti.

    There are larger things going on in this neighborhood than a "dropout factory" high school. The "dropout factory" high school is simply a symptom of a neighborhood where almost everything had dropped out. This is not the fault of businesses, either. They can't be expected stay open where you have to protect your employees with bulletproof glass and where money is scarce. I would expect that they would determine the same thing if a charter school every took over Northwest High School and they would close it and then this neighborhood wouldn't offer anything at all.

  8. The only thing I disagree with here is the constant need of those defending public education to say, "Now,I'm not saying all businessmen are evil...." Every discussion about Gates and the other "philanthropists" starts with "Even though they have the best intentions...." I'm sorry, but we have to take the gloves off. When the very wealthy seek, and succeed in, taking over a fundamental rung of our democracy for the purpose of profiting from children -- you know what? -- it's time to call that "evil." We don't owe anyone the benefits of the doubt because, as your original source document proves, this has nothing to do with the best interests of children and everything to do with the pursuit of ever more money at the expense of others. And that, my friend, is evil.

  9. Going once … Going twice … Gone!… to the highest bidder!

    Fess up! Who’s really surprised that schools are the next gold-mine for drooling hedge-funders and tech magnates? Big Banks, Big Pharma, and Big Oil … move on over. It’s Big Education’s turn.

    The lure of charter schools … with the ever-repeating money stream via taxes … was just too, too lucrative to ignore. And now the sharks are just fattening their odds and slimming their risks by ruining the long-standing public school system.

    These charters are ostensible saviors of the last resort for children stuck in failing, inner-city educational mills. But the inner cities are the starting blocks. They see education in an entirely new structure and with an outcome never before considered … profit.

    To cull some schools from the system … a few at a time for now … sets the pattern. Profiteers hard-sell the "success" story and entice others to sign on … and the money siphoned from public schools further cripples already crippled schools. It’s a classic business “build and destroy” mission.

    Combined screecher resources and skewered assessment results … think Common Core! … and more and more schools become ripe for take-over. Charter operators bully their way into new situations … which, in turn, allow others to come forward to reap profits from arming these new schools swimming in redirected taxpayer monies. Everyone is in on the action. … from software providers to textbook pushers. Even the tutoring industry gets a booster shot.

    So the spigots are open and the tax monies now drain into the pockets of entrepreneurs who are more about flash than about substance. Classroom performance is now superseded by the bottom line.

    Charter schools will come to dominate the scene. And in true entrepreneurial form, schools will become more and more like race cars … covered with product logos and insignias of all sorts.

    Expect sport scoreboards with product info flashing all game long. Campuses will be decorated by signage that speaks to the generosity of business X and Y. We might not get a Whopper High School, but that doesn’t mean we won’t get something called the MicroSoft Magnet School for Technology. You know … something extra sexy that would awe the ordinary taxpayer into a state of silly gratefulness.

    Sports’ uniforms will look like those patchy outfits race car drivers wear … with logos all over the place. Cafeteria foods will be franchised out … even transportation will be “Uberized” in some fashion because … well … if there’s money to be made, they’ll make it.

    Teachers will be properly orientated company men and women … and students will be the product. The goal is to spit and polish the product just well enough to get by quality control and then … then it’s off to the bank.

    Older teachers will run to retirement hills, and those too young to retire will simply quit because they will not have the intestines for what is unfolding.

    So, there you have it. Schools will have new ownership, but the same funding … your tax dollars. The faculties will have been rinsed free of old blood and new, conforming teacher-bots will read from the curriculum scripts exactly as they are written … and nod their heads like bobblehead dolls.

    Phony civic-minded entities that wish to maximize their exposure in order to maximize their advertising clout will pay for the privilege to be associated with the scam-school. And politicians will share in the looting of the public schools by getting loot from the looters. I’m sure you can follow that.

    Taxpaying parents will have zero control over their tax dollars, and their children will be short-changed not for a few years … but for as long as they might live.

    That’s the future. More and more control by fewer and fewer powerful people who control powerful mechanisms to become more powerful every day. Sounds like a tongue-twister, but it ain’t. It’s real. Real real.

    Going … Going …

    Denis Ian​