Texas Public Policy National Center Foundation For Policy Analysis

Although the Texas Constitution requires the state to establish "an efficient system of public free schools," education is neither free nor efficient for most Texas families.

• In order to send their children to "good" rather than "bad" schools, hundreds of thousands of Texas families incur great financial burdens and endure considerable personal sacrifice.
• To acquire a good education for their children, often parents must buy an expensive home in a particular neighborhood, drive 50 miles or more to work each day in rush hour traffic or pay tuition at a private school.
• The children of poor, minority families who cannot afford to choose a different school district are all too often trapped in schools that function more as day care facilities than as institutions of learning.

• Academic studies from around the country consistently find that there is no relationship between the amount of money spent and the educational results attained.
• Nor is there any relationship between student achievement and other variables under the control of the state legislature: teacher salaries, teacher credentials and pupil-teacher ratios, for example.

• Currently, the Texas public schools spend about $4,600 per student - more than the tuition charged by most private schools.
• Non-teachers now outnumber teachers among public school employees, and in a majority of Texas counties the public schools are the largest single employer.
• At least 154 special interest groups actively lobby in Austin in a continuing political struggle over a $14 billion state and local education budget.
• The results have been disappointing: Texas ranks sixth from last among the states on SAT scores and ninth from last in the percent of students who stay in school.

• In Minnesota, Iowa, Nebraska, Ohio and Arkansas, parents now have the right to send their children to virtually any public school in the state.
• In more than a third of the towns in Vermont, state education dollars follow children to the schools their parents choose, including any public or private school inside or outside the state of Vermont.
• Educational choice in East Harlem has converted the public schools from among the worst in New York City into schools that now send 96 percent of their graduates to college.
• Under educational choice in Cambridge, Massachusetts, student SAT scores have risen 89 points in the last seven years.

• Control over money and resources must be transferred from the educational establishment to parents and children, forcing schools to respond to the needs of their customers rather than to the needs of bureaucratic institutions.
• Government must gradually withdraw from its role as producer of education and instead adopt the role of aiding consumers - helping parents and children make wise choices in the educational marketplace.
• Principals and teachers must be given autonomy and flexibility so they can compete for students and reap the rewards of successful competition.

• Parents of children who failed the most recent TEAMS tests, measuring minimum basic skills;
• Parents of children attending schools in which the majority of students failed the most recent TEAMS tests; and
• Parents of children in school districts in which a majority of students failed the most recent TEAMS tests.

• 47 percent of high school students could not "express 9/100 as a percent."
• 95 percent could not calculate the cost per kilowatt for an electrical bill that charged $9.09 for 606 kilowatts of electricity.
• 43 percent could not place World War I in the period of 1900-1950.
• 75 percent could not place Abraham Lincoln's presidency in the era 1840-1880.

• Eighth grade students in the United States placed next to last on a 1981 mathematics test administered in 12 advanced industrial democracies.3
• In a 1982 comparison of the best mathematics students in 11 nations, U.S. students came in last in algebra and calculus, scoring at the median level of all Japanese 17-year-olds.4
• A 1988 study found that American 13-year-olds placed last in science and mathematics among six countries: the United States, United Kingdom, Ireland, Spain, Canada and South Korea.5
• Nine times as many South Korean students (45 percent) as American students (5 percent) achieved a high performance level in mathematics.6

• Between 1963 and 1981, scores on the Scholastic Aptitude Test (SAT), best-known indicator of student achievement, fell 90 points (from 980 to 890).7
• Scores on the Iowa achievement tests, administered to students in grades 6, 8, 10 and 12, dropped about as much as the SAT scores during the late 1960s and 1970s.8
• Upon arrival in the first grade they were better prepared than earlier generations, but by the time they were graduated from high school in 1980, students scored 1.25 grade levels lower than high school graduates in 1967.9

• After registering a 16-point gain in the early 1980s, the average SAT score stayed at 906 for three years, then dropped to 904 in 1988 and to 903 in 1989 - 77 points lower than the average score in 1963.10
• The American College Testing program (ACT) composite score fell from 18.8 in 1988 to 18.6 in 1989 - the same score that was registered in 1975.11
• The proportion of 17-year-olds able to read at the more advanced level required in most professional and technical working environments has fallen steadily in five surveys, from 6.6 percent in 1971 to 4.8 percent in 1988.12
• School dropout rates are 25 percent for the nation as a whole - a stable proportion since the mid-1960s - and as high as 50 percent in some cities.13

• Because of the decline in educational achievement since 1967, the quality of our labor force is 2.9 percent lower than it would have been.
• As a result, our gross national product (GNP) is $87 billion lower today.

• The quality of the labor force will be 5.5 percent lower in the year 2000 and 6.7 percent lower in the year 2010.
• The present value of the loss of output due to this deterioration in the quality of our workers between now and the year 2010 is $3.2 trillion.
• If pre-1965 educational trends had continued, and the decline not occurred, the nation would be 39 percent richer today in terms of the present value of future production.

• In 1977, Texas' college-bound seniors ranked 41st among the states with an average SAT score that was 232 points behind the highest-ranked state (South Dakota).16
• By 1989, Texas fell to 46th among the states with an average SAT score that was 207 points below the highest-ranked state (Iowa).17
• The average SAT score in Texas in 1989 (877) was lower than it was in 1985 (878).18
• On the ACT test, the composite score of Texas students was 17.5 in 1989, down from 17.6 in 1988 and well below the national norm of 18.6.19
• Texas has a high school dropout rate of 35 percent, the ninth worst dropout rate in the nation; the dropout rate is 26 percent for whites, 39 percent for blacks and 41 percent for Hispanics.20
• Texas ranks 47th among the states in the literacy of adults over age 20.21

In addition to national exams, Texas has its own achievement tests; the Texas Educational Assessment of Minimum Skills (TEAMS), given to students in grades 1, 3, 5, 7, 9 and 11. These tests measure minimum skills which the state has determined all students should master. Texas students must pass the eleventh grade TEAMS test in order to receive a high school diploma. The ninth grade test is probably the best indicator of school performance.22 This is the highest grade at which three separate tests are administered (reading writing and mathematics), and beyond the ninth grade the dropout rate soars. The ninth grade results indicate serious problems:23

• In 1989, almost four of every ten ninth grade students failed the TEAMS tests, measuring minimum basic skills.
• In large Texas city school districts, the results were even worse. The failure rate was 41 percent in Dallas, 44 percent in Austin, 48 percent in San Antonio, 50 percent in Fort Worth, 56 percent in Houston and 57 percent in El Paso.24

School Reform in the Nation. In the face of the widely documented decline in the quality of United States schooling, reformers in the 1980s used both carrot and stick. They poured billions of new tax dollars into a centralized system of exclusive monopolies and "cracked down" on the schools through central regulation, testing and evaluation systems.

• Between 1970 and 1988, spending per student rose 59 percent in constant dollars.26
• During the 1980s alone, real spending per student rose 25 percent.27
• Average teacher salaries rose from $15,970 (per nine months) in 1980 to $28,000 today.28
• The number of teachers increased from 1 per 25.8 students to 1 per 17.7 students between 1960 and 1987.29
• On the average, the United States now spends $5,200 per child each year - more than the cost of tuition at most private schools.30

• Between 1960 and 1984, the number of public school students grew by 10 percent and the number of teachers by 57 percent.31
• At the same time, the number of principals and supervisors grew by 79 percent and the number of "other staff" by 500 percent.32
• Because of the rapid hiring of non-teachers, the proportion of classroom teachers fell from 65 percent to 53 percent of all school employees, so that today only one out of every two public school employees is a teacher.33
• Teacher salaries now consume only 37 percent of school expenditures, down from more than 56 percent in 1960.34

The problem lies not in an industry starved for cash, resources, teachers or centrally-mandated "goals." The problem lies in the well-known inefficiencies inherent in public enterprise protected from competition - unresponsiveness, poor productivity, increasing rigidity, red tape, taxpayer subsidies, bureaucracy, and crippled initiative and innovation.

School Reform in Texas. Texas school reform in the 1980s had distinctive features, but its basic form and lack of results reflect the disappointing national experience. Businessman H. Ross Perot was the driving force behind school reform in Texas. In his address to the special session of the legislature, he equated education with an $8.3 billion business (approaching $14 billion annually today). He argued that all of the things needed to run a successful business were missing in the Texas public schools. "There are no management goals; there is no management philosophy; there is no management training ... there is no accountability. Now think about that in your business."36 As in many other states, school reform in Texas has meant spending increasing amounts of money and concentrating more authority and power in the hands of state government.

• Between 1979-80 and 1987-88, the average teacher's salary rose from $14,132 to $25,655.37
• Spending per pupil rose 50 percent in real terms over the decade of the 1980s.38
• The pupil-teacher ratio has been reduced from more than 20 pupils per teacher in the mid-1970s to 17.3 pupils per teacher by 1988.39

H.B. 72 reforms implicitly reflected adherence to a particular philosophy - the belief that centralized, top-down mandates can improve the quality of results in a government-operated system of school districts insulated from competition. Many decisions about teacher pay and evaluation, daily operations, student activities, discipline and curriculum previously had been made at the district level. State reform shifted crucial decision-making powers to Austin.

• Micro-management from Austin operates through regulations and mandates, governing more than 1,000 school districts ranging in size from three students to 190,000.
• The Texas Education Code now has reached 2,631 pages, and the Texas Administrative Code on Education is 998 pages and counting.
• As a result of the growth of non-instructional bureaucracy, Texas teachers now are a minority of public school employees - 49 percent, compared to a national average of 53 percent.40

The central problem with Texas school reform has been the vision of "government on a business basis." While the producers of government schooling surely lacked a managerial bottom line, they also were blessed with compulsory attendance, no significant competition and exclusive reliance on billions of dollars of taxpayer money. This last feature guarantees that the public schools, no matter how ardent the desire, cannot operate on a "business basis." When something goes wrong or unfavorable publicity develops, the education bureaucracy has only one answer: more spending. Vaguely perceived political resistance to higher taxation is the only check on expansion.

At the end of the last century, the school reform movement made the same mistake, seeking to emulate the efficiency of industrial enterprise. School officials of the day regarded the corporate model of school governance as a way out of "political control" and the way to "organize on a modern and rational plan our great and costly system of public schools."44 School administration was to become a science based on the literature of business efficiency and operated by "professionals." The crucial error was the belief that public schools can copy the attributes of competitive firms while escaping the rigors of competition itself.

These reforms have cost taxpayers a lot of money but have not improved our educational system. Nor are any future reforms likely to improve it unless we swiftly dismiss some popular myths.

There is virtually no relationship between the amount of money we spend and the performance of students in public schools. This is the conclusion of a huge and growing body of research on public schools in every state over the past several decades. There are only 4 percentage points difference in the passing rate for ninth graders between students in school districts that spend less than $3,296 per student and in districts that spend more than $4,708. Some of the highest-spending school districts in Texas are at the bottom of the performance list, and some of the lowest-spending districts are at the top.

One reason why there is no relationship between spending and student achievement is the stunning inefficiency of Texas public schools. If a school district is selected randomly from the list of 1,057 Texas school districts, odds are that some other school district is achieving the same average score on the minimum basic skills exam but is spending only one-half to two-thirds as much money per student.45 This result is understandable among schools that score high on tests of minimum skills. We would expect these districts to devote more time and money to the achievement of other goals, such as preparation for college. The result is not understandable or excusable in school districts in which a majority of students are failing the tests of minimum skills. The state of Texas has said, in every way it can, that no goal has precedence over the achievement of minimum basic skills.

One apparent source of inefficiency in Texas public schools is the amount of money spent on non-classroom activities and administrative personnel. The leanest school district in Texas spends only $265 in administrative costs per student. At the other extreme, some small districts spend as much as $4,700 per student. Extracurricular spending varies from virtually zero in some small districts to as much as $600 per student in others. These amounts are for operating expenses and do not include facilities such as football stadiums and swimming pools. But there are vast differences among Texas school districts on capital expenditures as well.46

A new racism is creeping into the debate over public education. With increasing frequency, educators try to excuse their failures by pointing to the number of minority children in their districts. The excuse will not work. Last year, Petersburg school district (near Lubbock) outscored every other school district in the state with a 100 percent passing rate on the ninth grade TEAMS tests. Sixty-five percent of the students in Petersburg are Hispanic!

Minority children are not the cause of the failure of the public schools; they are the most tragic victims of that failure. More than 70 percent of black and Hispanic first graders pass the TEAMS tests. At this point, children have spent six years with parents and only a few months with teachers. Yet the longer these children stay in school the worse they do, relative to our expectations and to the performance of white children. By the time they reach the ninth grade, more than half of the minority students in Texas are failing.

Do home life and socioeconomic background affect student performance in school? Of course they do. But they do not explain the failure of the public schools. The question is whether the problem with low-income students lies with the students or with the schools, and the evidence suggests the latter. The longer students from low-income families remain in school, the worse they do relative to our minimal expectations.

One way to appreciate how much difference schools make is to look at what happens in the early grades. In Petersburg, for example, 48 percent of the first graders fail the TEAMS tests. By the time these students reach the third grade, however, 87 percent are passing. Compare this with the experience of San Elizario (near El Paso), which ranked last in the state on the ninth grade tests. About 67 percent of first graders pass the TEAMS tests in San Elizario, yet at the third grade level only 12 percent are passing.

Another school that makes a positive difference is Wesley Elementary School in Houston. Students there may be black, disadvantaged and poor, but they can learn. Thaddeus Lott, 16-year principal at Wesley, is proving it. "I just do what works," he says.47 A 1989 national test shows Wesley's first graders reading at nearly a third grade level, and fifth graders doing eighth grade math. Two former Wesley students in the seventh grade were selected to take the SAT early as part of Duke's Talent Identification Program because their achievement scores were in the top 3 percent nationally. Lott's philosophy is high expectations, regimented drills, phonetic reading, recruitment of like-minded teachers, heavy homework and grading - and teacher accountability for results coupled with teacher autonomy in methods.

For most of this decade, our representatives in Austin have spent enormous time and energy searching for a lever they can pull to turn bad and mediocre schools into good ones. Suggestions have run the gamut done in some other state long before now. Mounting evidence from around the country confirms that no variable under the control of the legislators can solve the problems of the public schools:48

• Of 65 studies that examined whether increasing pupil expenditures improved student performance, three-fourths found no improvement, and about 5 percent found that expenditures reduced performance.
• Of 74 studies that examined whether better school facilities improved education, 84 percent found no improvement, and almost 7 percent found a negative impact.
• Of 152 studies that examined whether lower student-teacher ratios affected performance, 82 percent found no impact, and over 8 percent found a negative impact.
• Of 140 studies that examined whether more experienced teachers made a difference, 64 percent found no difference, and 7 percent found lower student achievement.

The Brookings researchers expressed the impact of these variables in terms of the number of months of additional classroom instruction that would enable students in the bottom 25 percent to achieve at the same levels as students in the top 25 percent. For example, other things equal, student aptitude is worth 18 months of classroom instruction. Continuing with this method of measurement, family background makes a 12-month difference, peer influence a five-month difference and school autonomy a 13-month difference.49 These results are shown in Table V. In general, schools have little control over the aptitudes or family backgrounds of their students, or peer group pressure. However, school systems have a great deal of control over the amount of autonomy given to schools.

The Brookings researchers found that successful schools have distinctive organizations. They are characterized by clear and ambitious goals; strong, teacher-oriented leadership; an orderly environment; teacher participation in decisions; and collegial relationships among leaders and staff. Private schools were found to be superior to public schools and were "free from excessive central controls by administrators, boards and unions. The main reason appears to be market competition. In a process much the reverse of the one in government schools, where political pressure leads to an increase in central control, competitive pressures lead to an increase in autonomy in private schools."50 Public schools can also be successful. But Brookings researchers found that in order for a public school to achieve autonomy, the school generally must be: (1) located outside a large city in a suburban school district, (2) currently performing well, (3) actively monitored by parents and (4) independent of a large administrative system.

The results from Brookings and many other studies strongly suggest that most of the things that really matter in public education are outside the control of legislators, and most of the things done in Austin have probably made the situation worse. Public schools in Texas are anything but autonomous. Texas teachers endure more harassment from the educational bureaucracy than ever before. Many teachers spend more time filling out forms and complying with red tape than preparing for class.

What is the solution? Fortunately, there is a growing national concensus, backed by an impressive body of research. Principals and teachers must be given more autonomy (freedom from interference by politicians and bureaucrats), and parents must have choice in where they send their children to school.

The problem is that the current system creates enormous burdens for parents. Although the Texas Constitution mandates "a free and efficient system of public schools," the opportunity for parents to send their children to a good school is neither free nor efficient. As a result, large numbers of parents are effectively denied the opportunity to exercise real choice.

Exercising Choice. In the major metropolitan areas of Texas, there usually is one large inner-city school surrounded by numerous suburban districts. Measured by the scores on TEAMS tests, the large districts do poorly. Only 62 percent of ninth grade students in the state passed all TEAMS tests, a disappointing and mediocre result. But in the large-city school districts, the results were even worse. As noted above, the passing rate was 59 percent in Dallas, 56 percent in Austin, 52 percent in San Antonio, 50 percent in Fort Worth, 44 percent in Houston and only 43 percent in El Paso.

Around our largest cities, there are a great many alternatives. In the Dallas area, for example, there are at least 26 other school districts from which to choose. Measured by TEAMS test results, some of these districts perform worse than Dallas ISD. Others perform much better. Most of our large metropolitan areas have at least one high school which is judged to be "good," competing in national scholastic tournaments and often sending graduates to the nation's most prestigious colleges and universities.

Aside from choosing to live near a school, there is another way in which parents and children can sometimes exercise choice. Lovejoy School District (near Dallas) is one of about 50 Texas school districts with no high school. Students in Lovejoy, therefore, can attend any high school in the metropolitan area, and both state and local education money follow the student to the school district of choice. Thus, parents can and sometimes do use Lovejoy as a base from which to choose. Suppose a Lovejoy family has one child who qualifies for a magnet school in Dallas ISD, and another who does not. The child who qualifies can attend the magnet school, while the second child attends a high school in some other district.

There are also options outside the public school system. Home schooling is one option. Private schools are another. Within the Dallas metropolitan area, for example, there are dozens of private schools. In most cases, private schools outperform their public school counterparts and, as Table VI shows, many do so at a lower cost.

The Prices We Charge For Exercising Choice. Although in principle parents in the Dallas area have 27 school districts and numerous private schools to choose from, there are enormous obstacles to exercising choice. Public education, as such, is free. Attending a "good" school, however, is anything but free. In order to send their children to "good" schools, many parents purchase homes which they cannot "afford." Others drive 50 miles or more to work each day in rush hour traffic. Others pay tuition at private schools, with great strain on the family budget. In Texas, a "good" education is rationed. But in the public sector it is rationed not by market prices but by indirect costs.

Viewed in this way, the market for education in Texas is very strange. Producers of most consumer products make it as easy as possible for consumers to buy their products. Ultimately, consumer preferences determine where sellers locate. In the market for education it is the other way around. Institutional constraints determine where the "sellers" locate, and indirect rationing costs determine which "buyers" get to obtain a particular "seller's" product.

Families Who Are Priced Out of the Market. In Texas, the student population of our large inner-city school districts is overwhelmingly minority. Dallas ISD students are 80 percent minority. Houston ISD students are 84 percent minority. This is neither accident nor the result of racial prejudice. Even without court-ordered busing, we could predict this result based on the schools alone. The performance of our large-city school districts, however measured, is depressingly mediocre to intolerably bad. Nearby are school districts where the performance is obviously superior. Other things equal, all families would choose superior schools over inferior ones. But since other things are not equal, the families who exercise choice are those who can afford the indirect rationing costs.

The flight from inner-city school districts is not "white" flight, it is "middle-income" flight. Most families with school-age children - white, black, Hispanic, Asian - flee if they can afford to do so. In the north Dallas district of Richardson, 20 percent of the students are black. These are the children of middle-income black families who, like white middle-income families, fled the inner-city schools. The families left behind are those who cannot afford to escape, who are effectively denied the opportunity to make choices. Their children are the victims of mediocrity in education.

In principle, every school district in Texas has a monopoly. But some districts have more monopoly power than others. In general, those districts where parents have the greatest flexibility in terms of the ability to move to neighboring districts are districts that perform best. By contrast, some of our worst school districts are districts where families who had an opportunity to leave have done so, and those who remain cannot escape.

The Effects of the Texas Supreme Court Ruling. In the case of Edgewood v. Kirby,51 the Texas Supreme Court ruled that our current system of educational finance is unconstitutional because it is inefficient. The court's use of the word "inefficient" was very different, however, from the way we are using the word in this report. Our focus has been on the inefficient and costly obstacles that are placed in the way of parents who want to obtain a good education for their children. The Texas Supreme Court never considered these obstacles. Instead the court focused exclusively on the "efficiency" with which educational bureaucracies can obtain money.

To continue with the example above, suppose we have a school district so bad that no one wants to move into it and everyone with children wants to move out. Since the only way people can exercise choice under the current system is by relocating, families who can afford to move out of the district do so. What remains are poor families and a low tax base. The normal, sensible questions to ask are: How did the school system get so bad in the first place? Is there a way to dismantle the bad schools and replace them with good schools? Is there a way to help families send their children to good schools without having to relocate? These are not the questions the Texas Supreme Court asked, however. Instead, the court mandated that Texas find ways of putting even more tax dollars into the educational bureaucracy that was doing such a miserable job in the first place.52

The court's decision in Edgewood v. Kirby is understandable only if we consider who argued the case before the court. By the time the case reached the Texas Supreme Court, 67 school districts and their lawyers had joined as plaintiffs. Another 49 school districts and their lawyers had joined as defendants. Edgewood v. Kirby pitted institution against institution, bureaucrat against bureaucrat, in what amounted to legal warfare over vast sums of money.

For all practical purposes, the interests of parents and children were ignored. That's unfortunate. There is no reason to believe that pouring more money into failing institutions will improve their performance. There are good reasons to believe that taking money away from successful institutions will hurt their performance.53 To make matters worse, many of the most successful school districts will be able to replenish lost funds only through large increases in property tax rates. This in turn will make it even more difficult for parents to escape bad school systems by moving. The "price" of a good education will now include an expensive home plus a much higher tax rate on that home.

Texas' system of choice in education was extremely inefficient before the Supreme Court made its ruling and the system will be even more inefficient once the ruling is complied with. New and more costly barriers will be placed in the way of many parents who want a better education for their children.

Education in Texas is big business. Each year we spend almost $14 billion. Not surprisingly, in the current system the decision-making process is surrounded by a sea of special interests.

• At least 154 special interest groups lobby in Austin on education issues.54
• Texas school districts employ 400,000 people, and the central education agency employs an additional 1,000.55
• The public schools are the largest single employer in 131 of Texas' 254 counties.56

• Commissioner of Education W.N. Kirby maintains that Texas' education system is "doing very well"and that taxpayers across the state are "getting more than their money's worth."57
• In 1988-89, the Texas Teacher Appraisal System found that 88 percent of all Texas teachers ranked in the two highest evaluation categories, "exceeding expectations"and "clearly outstanding."58

If the purpose of education is to benefit children rather than the employees of the school system, then the safest, surest place to vest power over resources is with the people who care most about the welfare of children - their parents.

Having Government Become a Buyer Rather Than a Producer of Education. Under the current system, politicians and bureaucrats in Austin endlessly argue, debate and struggle over something they know little about: how to produce a good education. This is unfair both to the politicians and to the voters. We do not elect politicians based on their ability to run a school. Nor should we.

The better strategy is to shift the debate over how to produce education into an arena where people have a strong financial stake in being right: the educational marketplace. As we have learned so well with other goods and services, there is no substitute for the market in determining what works and what doesn't, what is efficient and what is not. We should let educators get out of politics and concentrate on educating. Politicians should perform different tasks: helping parents to make informed choices and monitoring a system in which taxpayers' dollars buy success, not failure.

Giving Local Schools the Autonomy and Freedom to Compete. Under the current system, state government tells teachers what to teach and when to teach it. State government is involved in setting teacher salaries and dictating pupil-teacher ratios. The state even tells schools how long a teacher's lunch break should be. Overall, Texas teachers probably labor under more government regulations and mandates than teachers in any other state. These regulations and mandates interfere with the work of teachers and principals, stand in the way of essential changes and, in an unregulated market, would make it impossible for public schools to attract students.

In order to improve the quality of their product and to compete for students, public schools must be free and autonomous. One way to achieve this is to corporatize them; that is, turn them into nonprofit organizations similar to private schools, with boards of directors comprised of parents and community leaders. Free from the shackles and constraints of the political system, public schools could set goals, specialize in different educational products and function as independent competitors.

Allowing Freedom of Entry Into the Market. Freedom of choice is intended to create an environment conducive to innovation, experiment and change. In many within-district choice plans, such an environment cannot be created because the district maintains tight control over each school, just as the U.S. Postal Service controls each of its separate branches. The ultimate goal of choice is to change the behavior of the suppliers of education, and that is unlikely to happen unless outside competitors can enter the market.

Traditional Private Schools. In response to the failure of the public schools, parents across the nation increasingly are turning to private schools. While the public schools are losing customers, private schools are attracting them.59

• Although public school enrollment declined 14.3 percent, private school enrollment increased 6.6 percent between 1972 and 1983.
• By 1986, 12.8 percent of all students were in private schools.

• Of 21,000 private schools in the U.S., only 1,000 are "elite" schools with high tuition; the other 95 percent usually cost less than the public schools and serve children from all walks of life.60
• Private schools are increasingly serving the needs of minority children; between 1972 and 1983, while the number of white children in private schools increased by only 0.3 percent, the number of Hispanic children increased by 54 percent and the number of black children by 59 percent.61

• Between 1976 and 1986, enrollment declined by 18 percent and the number of teachers fell by 8 percent in Chicago public schools.
• Over the same period, the number of Chicago public school administrators rose by 47 percent.
• The Archdiocese of Chicago serves almost a third as many students as the Chicago public school system and does so with 1 percent as many administrators.

• Among 10th and 12th graders, the public school dropout rate is 14 percent while the non-Catholic private school dropout rate is 12 percent.
• Among Catholic schools, the dropout rate is only 2.4 percent.
• Among Jewish and Protestant schools the dropout rate is 3.7 percent.

Another important feature of independent schools is that they often reach out to troubled youths who have become gang members and alcohol and drug abusers. In this way, they convert negative energy into a positive force that benefits the entire neighborhood. There are even instances of former gang members volunteering their time to convert old buildings into community schools.69

Storefront Schools. In response to the soaring public high school drop-out rate (more than 50 percent in some places), a phenomenon known as "storefront education" has emerged. These educational clinics, or tutoring centers, are run by nonprofit or for-profit teaching specialists who bill the state by the hour for the classroom time they spend with dropouts seeking a high school diploma:70

• Educational clinics in California and Washington have a success rate of about 66 percent and their cost per pupil is a small fraction of the cost at a regular high school.
• These clinics save government an estimated $1.11 in welfare and law enforcement costs for every $1.00 spent on tutoring.

• The private contractors succeeded in doubling the rates of student achievement at a cost that was only slightly higher than that of the public schools.
• The private contractors spent about 10 percent less on teacher salaries and considerably more on instructional equipment.
• In the case of audio-visual equipment, the private contractors spent between ten and 15 times more than the public schools.

• In 1981, business spent $80 billion on education, compared with $60 billion spent by colleges and universities.
• Corporate classrooms now contain as many as eight million employees - about the same as the total enrollment of colleges and universities.

Home Schooling. Home schooling helped produce such distinguished Americans as Thomas Edison, Franklin Delano Roosevelt, Douglas MacArthur and Justice Sandra Day O'Connor. Today, the trend is growing:75

• At least 500,000 children nationwide are being educated in the home.
• Surveys show that home school pupils score 30 percent above the national average on standardized tests.

• Of 246 towns in Vermont, 95 operate a tuition system.
• These towns account for 25 percent of Vermont's population.

• Fifty-seven percent attend other public schools in Vermont, and 7 percent attend public schools in other states.
• Thirty-six percent attend private schools in Vermont and in eight other states.

• Today, East Harlem ranks about 16th out of 32 districts in test scores, with 64 percent of its students reading at or above grade level.
• In 1973, only 7 percent of the students at Benjamin Franklin High School graduated. That same school - renamed the Manhattan Center for Science and Math - now sends 96 percent of its students to college.

Choice and Decentralization in Chicago. In 1989, the city of Chicago implemented the most radical restructuring of a large city school district that has occurred in this century. The Chicago plan involves much more than freedom of choice. Parents and community leaders actually run the schools. Each of Chicago's 540 schools is now under the direct control of local councils composed of the principal, parents, neighborhood represepals no longer have tenure, and they serve under contract from the governing council. Chicago already has a greater proportion of students in private schools (32 percent) than any other major city.78

Freedom of Choice in Other States. Legislatures in Minnesota, Iowa, Nebraska, Ohio and Arkansas have voted open enrollment at public schools throughout their states ("controlled" choice), removing the compulsory monopoly over students by the local school district.

Freedom of Choice in Other Cities. Cambridge, Massachusetts, launched a citywide choice plan in 1981, and its average combined SAT scores have increased 89 points in the past seven years. In Montclair, New Jersey, a commuter town of 40,000, students are scoring well above national averages after a decade of choice among public schools.

School Choice in Great Britain. Under Margaret Thatcher's education reform plan, parents can pick any government school they want, and the funds follow the children to the school of choice. Each school is operated autonomously, subject to a parent-elected governing board. England's Education Reform Act of 1988 specified that principals' and teachers' salaries depend on the enrollment a school attracts.

School Choice in Japan. In Japan, both public and private high schools compete for students and charge tuition. Government loans are available to help families pay tuition. There is no compulsory attendance beyond age 15, but 94 percent of 16-year-olds stay in school voluntarily, paying tuition fees. Although Japanese and American students score at about the same level in the first grade, the average 18-year-old in Japan does better in math than even a fraction of the top 1 percent of 18-year-old Americans.79 When Japanese students graduate from high school, they have completed the equivalent of at least two years of an American college curriculum.80

Texas could move toward expanding freedom of choice in education by broadly applying these precedents for change. We could begin by identifying those students, schools and geographical areas that constitute the public school system's worst failures. The strongest argument for change exists precisely where the traditional approaches have been least successful.

The Demand-Side Approach to Freedom of Choice. Beginning immediately, Texas should grant the right of freedom of choice to (1) parents of children who failed the most recent TEAMS tests of minimum basic skills, (2) parents of children attending schools in which the majority of students failed the most recent TEAMS tests, and (3) parents of children in school districts in which a majority of students failed the most recent TEAMS tests. These parents should have the right to seek immediate alternatives at other public schools and at private schools. The average amount of state and local money spent on children of similar age in the school district should follow the children to the new school of choice.

Texas also should initiate an immediate freedom of choice plan for all metropolitan areas. In these areas, alternatives to public schools are already in place and could expand quickly. In order to insure an orderly transition, freedom of choice options might apply to 10 percent of all students the first year, 20 percent the second, 50 percent the third and 100 percent the fourth year. Meanwhile, a freedom of choice plan should be developed for smaller communities and rural areas.

The Supply-Side Approach to Freedom of Choice. To compete successfully for students, public schools must be decentralized and given local autonomy. As shown in Chicago, East Harlem and Britain, one way to begin is to create local governing bodies composed of parents and community leaders. Texas also should set up a "bankrupt school program,"81 giving the state immediate authority to step in and restructure those school districts in which a majority of students failed the most recent TEAMS tests. At the same time, the state should initiate a four-year timetable for a freedom of choice plan in all major metropolitan areas. Elements of a possible phase-in plan are shown in Table VI. Plans should also be developed to use a similar approach in other areas around the state, including rural areas.

Instead, the new reform movement attempts to draw on the strengths of competitive markets, which have served us well in other areas of economic life. Power over resources is being shifted from large bureaucracies to individuals, as parents and children increasingly exercise choice in an educational market place. Decision-making is being decentralized, as schools are obtaining more autonomy - giving them the freedom and the flexibility to compete for students.

So far, Texas has not been part of this new reform movement. Education policy in the state continues to be shaped and molded by old ideas - ideas that have been discredited and repeatedly shown not to work. Our state is well behind most other states on measures of student achievement. We are seventh from last in our ability to keep students in school. We are third from last in the literacy of our adult population. Unfortunately, it appears that we also may be near the last in adopting genuine reform.

Because of the Texas Supreme Court ruling in Edgewood v. Kirby, our state is forced to make substantial and radical changes in the way we are financing the public schools. In the very process of meeting the mandate of the court, Texas has an opportunity to be a leader rather than a follower in the new school reform movement.

It is our hope that Texas decides to lead.