Testimony before the Senate Education Committee on Senate Bill 1506

March 29, 2007

by Robert D. McTeer

Testimony before the Senate Education Committee on Senate Bill 1506
Robert D. McTeer
Distinguished Fellow
National Center for Policy Analysis
March 29, 2007

Madam Chair, Senators, my name is Bob McTeer.  I'm representing the National Center for Policy Analysis, which is a nonpartisan, free-market think tank headquartered in Dallas.  Before coming to NCPA, I was Chancellor of the Texas A&M University System for two years, and before that I was President of the Federal Reserve Bank of Dallas for 14 years.

For the record, I attended public schools, both my sons attended public schools, and both my grandchildren attend public schools.  I believe in public schools, and I have the highest admiration for public school teachers. More school choice, in my opinion, will make public schools better-not harm them.

We did have some choice in where our sons attended school in Virginia and Maryland.  We moved to neighborhoods known to have excellent schools.  Homes were more expensive in those neighborhoods because of their schools, but we were fortunate enough to afford it-barely.  But I don't think choice should be limited to those who can afford it, and it shouldn't be based on real estate.

As an economist, I've witnessed the power of competition to improve quality everywhere I've seen it introduced.  I was a college student when we started importing high quality, low cost Honda's and Toyota's in large quantities.  Those who purchased them enjoyed those benefits immediately, but it wasn't long before the added competition began to improve our Fords and Chevrolets and our fathers' Oldsmobiles.

In the 1980s, I ran the Federal Reserve office that processed and cleared checks in the greater Washington, D.C. and Baltimore areas.  It was a large operation in part because we provided that service to banks free of charge.  Large correspondent banks couldn't compete effectively against our zero price-we had a monopoly. 

Then Congress opened up competition by requiring us to charge for our check and other services and recover our costs.  Overnight, our check volume fell by almost half.  Then we got serious about quality and service, and earned much of our lost volume back.  Competition and choice made us-the government provider-as efficient as the private sector.

As Chancellor of the A&M System, I became aware of how many of our high school graduates entered college unprepared for college level work and required remedial instruction-not so much at the flagships, but at most of our other universities.  Only later, when the Friedman Foundation study came out, did I realize how many of our students were dropping out before high school graduation.  Statewide, it was about a third.  In the inner cities, it was about half.

This is, of course, tragic for the dropouts. But it's also a major financial burden for the taxpayers of Texas-even those outside the areas covered by this pilot choice program.

We are in a new, global, information economy-an economy that requires education, knowledge and stills.  We are in an economy where the penalty for not having those attributes grows larger every day.  The Texas education system increasingly resembles that of an underdeveloped, third-world nation-elites at the top with the under-served below.

In this country, we have world-class universities, but second-class primary and secondary education in too many schools.  Why?  What is the source of the difference?  In higher education, we already have choice and competition.  In primary and secondary education, we have government monopoly.

It's not the teachers.  It's not the schools.  It's the system.  The system is broken, and more of the same-meaning more money-has not fixed it.

A limited school-choice pilot program is a necessary start to a better approach.  It may cost some money up front.  But any additional cost will be more than offset by higher state tax revenues and low medicade and prison costs.

And the cost of doing nothing is the highest cost of all.

Thank you.