A work in progress: Michigan's potent combination of interdistrict choice and charter schooling is forcing traditional public schools to take notice. Whether they respond is often a different story - Forum

Education Next, Winter, 2001 by David Arsen, David N. Plank, Gary Sykes

Between the traffic reports and familiar pop songs, drive-time radio in Lansing, Michigan's capital city, has a new feature: slickly produced advertisements for the East Lansing Public Schools. With the number of children living in East Lansing declining, school administrators have become increasingly aggressive in their efforts to attract students and the state dollars that come with them. They have been joined by a host of other education providers--public school districts, for-profit management firms, charter schools, and private schools--trumpeting their virtues in an increasingly crowded and competitive market for schooling.

After five years, school choice is beginning to have visible effects in Michigan's education system. Parents can choose among a wide variety of charter schools, school districts besides their own, and private schools, and they are taking advantage of these choices. Some school districts are losing substantial shares of their enrollment; others are trying to bolster their funding streams by wooing students from other districts or private schools. Some charter schools are thriving; others are struggling due to mismanagement or a lack of interest. Schools and school districts increasingly recognize that their financial health-- and ultimately their survival--depends on their ability to attract and retain students, The proliferation of billboards and radio spots advertising the virtues of specific schools and school districts reflects a new sense of urgency.

How does the emerging market for schooling work in Michigan? We find little evidence of systemic improvement so far, Rather, we find that the interaction of local factors and statewide rules is producing a variable yet patterned set of effects in different parts of the state. In our view, the balance between positive and negative effects depends on the details of policy design. In essence, the rules matter. Harnessing market forces may be a useful strategy for improving public schools, if policymakers are careful to get the incentives right. Simply "unleashing" the market may do as much harm as good.

A Competitive Environment

Michigan's system of school finance has created a highly favorable setting for studying the reactions of schools and school districts to competition. Since 1994, virtually all operating revenue for Michigan school districts and charter schools has been distributed by the state on a per-pupil basis. The only option for those who seek to increase revenue is to attract more students, Competition for students in Michigan is a zero-sum game; one school's gain is another's loss.

In the meantime, the state has expanded the choices available to parents through both charter schooling and interdistrict choice plans. During the 2000--01 school year, 185 charter schools enrolled about 60,000 students in Michigan. Another 26,000 students enrolled in public schools outside their home district under the state's interdistrict choice program (see Figure 1).

Some important new players in the education system are education management organizations (EMO), such as National Heritage Academies and Edison Schools. Suchx entities now manage about 70 percent of Michigan's charter schools and some traditional public schools as well. They compete against one another not only in the "marketplace" for student enrollment, but also in the political arena, where chartering authorities decide which proposed schools will receive charters.

Roughly 5 percent of all students take advantage of school choice in Michigan, but the rate varies substantially from district to district. Detroit Public Schools has lost 10 percent of its resident students to charter schools and neighboring school districts, shaving $100 million off the district's annual operating budget. Some districts have lost more than a quarter of their students to charter schools and neighboring school districts. Others have benefited from choice, gaining students and funding. Not long ago, researchers considered the number of children participating in school choice programs to be too small for school districts to notice. This is no longer true in several regions of Michigan, where seasoned educators are acutely aware of the "market" signals generated by students' choosing (or leaving) their schools,

Traditional public schools are not the only schools feeling the strain of competition. Private and religious schools have seen their students switch to the public system through charter schools or interdistrict choice. In western Michigan, for example, the many charter schools managed by National Heritage Academies pose a real challenge for Christian schools. A growing number of parents view Heritage schools as an acceptable, and tuition-free, alternative to religious education. Private and religious schools in urban districts are also losing students to suburban public schools. Before the introduction of school choice policies, private schools were the only option for city residents dissatisfied with their local public schools. Now many of these parents are choosing to return to public schools