Tag Archives: Finance

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.