Accounting Like a State


The phrase “seeing like a state” describes the tendency for governments to try and solve problems with top-down government solutions.

When you see like a state, every problem is solvable with the right technocratic fix.

I’d like to introduce a new phase: “accounting like a state.”

When you account like a state, finances are viewed through the lens of government program solvency, not outcomes.

I think Peter Greene falls for this way of thinking in his piece “The Financial Fantasies of School Choice.”

Peter’s argument is as follows:

  1. Public education benefits from economies of scale; specifically, charter schools are highly inefficient and they end up reducing teacher salaries and pensions to make up for these inefficiencies.
  1. Public school districts have a high fixed costs, so when funds “follow” the student, districts often lose more in revenue than they can save in costs.
  1. Public accountability over taxpayer funds for education is best accomplished through elected school boards (where all citizens can vote for societal ends) rather than choice (where public school parents pursue their own individual ends).

Some commentary:

  1. Efficiency can only be determined with respect to productivity. Peter does not consider academic outcomes in his efficiency argument. At least in the case of urban charter schools, there is evidence that they are more efficient than traditional schools, in that they achieve better academic outcomes for less funds.
  1. With regard to teacher pay, Peter fails to mention that many teacher retirement systems currently risk insolvency. Peter claims choice systems take money away from teachers. I would argue that states have been making promises to teachers that these states may not be able to keep. Or to put in other way: charter schools must balance their books. Many state retirement systems, to date, have not. I’ll leave it up to you to decide which system is based on fantasy. One other note: in some states charter are forced into these retirement systems, which puts their own schools at risk of being fiscally damaged by a problem they did not create.
  1. I agree that school districts have fixed costs. So do many organizations in the world. The solution is not to ban competition. The solution is for the district to build a financial model that allows it to stay solvent even if it loses students. The district might also try to figure out how to deliver an educational experience that keeps families coming back year after year.
  1. Public accountability can be achieved through numerous ends. Voting is one method. So is allowing users of government delivered goods to have the option to use non-profit delivered goods. Peter suggests we put all our eggs in the voting basket and not consider other, compatible forms of democratic accountability. An elected school board that oversaw a system of non-profit operated schools could allow for both forms (voting, choice) of accountability to simultaneously exist.

In sum (and perhaps less generously), Peter’s fantasy is as follows:

  1. School districts are efficient because they use economies of scale to deliver a strong educational experience for students.
  1. States funded teacher pension systems are based on sober predictions of market returns.
  1. The high fixed cost of operating a school district is a good reason to prevent competition.
  1. Democratic accountability is incompatible with giving choice to the users of government services.

As Matt Dicarlo recently pointed out, education reform advocates sometimes do appear to be living in a fantasy world – in that they make academic performance predictions that they will inevitability not meet.

But in this case, I don’t think choice advocates are living in a fantasy world.

It is the anti-choice advocates that are succumbing to the flaws of accounting like a state.

3 thoughts on “Accounting Like a State

  1. John Cozzi

    Three further thoughts to Peter Green’s comments:
    1. There is no evidence in the financials of public school systems that there are benefits to scale, at least financially. In fact I think the opposite is true in that overhead growth has outpaced all other areas.
    2. I don’t think he has ever been to a school board meeting. The motivations of who joins and how they behave are no different than any other aspect of our governmental system (not surprising). It reflects human biases and influences that drive decisions that are not always aligned to societal ends.
    3. Properly done, the charter system should economically benefit a school district. If you allocate existing space and reimburse the charters at a lower per student rate, then the excess accrues to the rest of the district. The challenge is that they have converted a marginally variable cost in the rest of the world (labor) into a fixed cost.

    Setting aside any advocacy commentary around these points I think he misses the true economic sources of cost here.

  2. Stan Jester

    I would disagree with Mr. Greene by taking his points to their logical conclusion.

    Economies of Scale
    If economies of scale dictate we shouldn’t have all these charter schools along with all these governing bodies, then we should merge also merge existing traditional schools and governing bodies. Louisiana, according to the economies of scale, should therefore only have one school district and each city have only one school building.

    Cost Per Pupil
    Peter Greene says, “If Chris leaves my school, taking “his” $10K with him, my school’s expenses do not decrease.” Following that logic, if schools expenses don’t decrease when students leave, then they shouldn’t increase when enrollment increases.

    People are not disenfranchised when they can all choose. We don’t tell people what grocery store to go to.

    Zero Sum Game
    I agree, revenues are finite. Government entities have little motivation to spend money wisely and generally have no idea whether they are providing a service that the people want. Giving parents choices sends a signal to the administration about what is working and what is not. It forces them to address or close down failing schools.

    Without choices, we may as well tell the people what bread line to stand in … eh, Comrade?


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