Gary Sernovitz just wrote an interesting piece in the New Yorker on the New Orleans public school system.  He argues that the New Orleans public school system is designed around free market principles that are, at times, being poorly applied to the public sector. Gary draws lessons from his time serving on the board of a charter school that eventually lost its charter for financial reasons.

Before considering his arguments, I just want to give a thank you to Gary. He joined a charter school board and devoted a lot time trying to make public education better. It’s great to see people with his commitment and intelligence serving on charter boards. I hope more people follow his lead.

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Gary argues that the New Orleans public education system is designed around “the engines of the free market – autonomy, competition, and customer choice” but that these design principles are currently inadequate to meet the aims of public education in New Orleans.

Gary points to three main problems with the New Orleans system: rewards, incentives, and start-up capital.

Rewards

Gary argues that New Orleans’ schools demand crazy work hours but offer mediocre compensation. Unlike for-profit founders, there is no dream of a financial exit for charter founders or their teams.

I don’t disagree with these facts. If you want to get rich, starting a non-profit charter school in New Orleans is not the way to go.

But this is the problem with Gary’s premise: the New Orleans public school system was never designed to mimic all parts of the free market. The goal of working in a charter school is not to get rich; it’s to do good while earning enough to live a middle or upper middle class lifestyle.

The reward model provides a different set of rewards for different kinds of educators.

Many teachers teach in charter schools for 3-5 years, work long hours, and are rewarded with the meaning that comes with knowing you helped others. They then go onto other things.

A minority of teachers find that teaching is their lifelong calling. Their hours tend to go down overtime as their mastery of teaching goes up. The most skilled teachers in New Orleans can achieve in 50 hours a week what it takes a novice to achieve in 70 hours a week. Their rewards come from the joy of doing good work, building meaningful relationships with children, and earning a stable middle class income.

Another set of teachers move into administrative roles. They tend to spend another 5-10 years working in leadership positions. Their rewards come from the challenges of leadership, seeing impact at a larger scale, and earning an upper middle class income.

Yes, current model does rely on younger teachers, who work more hours, and leave the classroom more frequently than their traditional peers. But this model is delivering better results for children than the old talent model. And it has been doing so for over a decade, which leads me to believe that the talent model is sustainable.

That being said, I’m open to the idea the current model is not optimal. I can think of two potential improvements: raising taxes to increase educator salaries, or simply encouraging charters to be for-profits so there can actually be financially exits and equity based compensation. But New Orleans is a poor city in a poor state, so I’m skeptical that New Orleans will be able to raise salaries by large amounts. As for for-profit charters, while a reasonable idea in theory, their results to date have been underwhelming, so I’m not holding my breath here either.

Rather, I think New Orleans has organically evolved to the best talent model under very imperfect conditions.

Incentives 

Gary’s main criticism of the New Orleans public school system is that it does not fully fund the costs for students with special needs. In market terms, it gets the price wrong.

Gary sat on the board of Cypress Academy, which intentionally enrolled a lot of students with special needs. These students cost more money to serve well.

The New Orleans per-pupil revenue system is designed with this reality in mind: I believe New Orleans has the most weighted per-pupil system in the country. Schools receive up to 3x of the regular per-pupil to serves students with severe special needs.

Because of this model, numerous schools in the city are able to serve a lot of students with special needs. Many networks have even developed specialized programs for high needs students.

I’m open to the idea that the weights need to be further increased. But the Cypress financial model should have been built around the existing financial regulatory regime. It is well known to all charter operators in the city, and Cypress should not have opened if they did not have a viable financial model to serve the students they wanted to serve.

If Cypress thought the per-pupil funding system was wrong, it should have advocated for policy change before opening its doors. Instead, it opened with an unsustainable model. This was a mistake.

Start-up Capital 

Gary argues that there is not enough start-up money to help a new charter school get to scale.

I don’t think this is true.

When I worked at New Schools for New Orleans, we helped 10+ new charter school start-ups open schools, and none failed for financial reasons. Rather, all of them received enough funds (usually $500K to $1m in philanthropy) to cover their operations until they reached scale.

My understanding is that Cypress Academy received start-up grants in the range of other successful start-up charter schools in New Orleans, such as Bricolage Academy.

And, again, none of the financial realities should have been a surprise to the founders of Cypress. If they knew they were going to run a deficit over the first few years, they should not have opened unless they were fairly certain they could raise the necessary philanthropy to cover this gap.

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Dozens of new charter schools have opened successfully over the past decade. These schools operate sustainable talent models, serve students with special needs, and scaled with the support of philanthropy.

Cypress Academy failed for reasons that seem to be mostly predictable. The balance of the fault appears to be with the school, not with system.

Lastly, it’s worth emphasizing that the New Orleans public school system is not designed to be a free market. It’s a publicly funded system operated by non-profit organizations.

Yes, it has more market mechanisms than a traditional government operated system, but it’s so far from being a free market that most comparisons to free markets obscure more than they illuminate.