William Niskanen - chairman, Cato Institute; former acting chairman, President Reagan's Council of Economic Advisers; former director of economics, Ford Motor Company; former defense analyst, Pentagon, RAND Corporation and the Institute of Defense Analyses; founder, National Tax Limitation Committee; former professor, University of California at Berkeley.

 Education must not be the left's issue. The issues are too important. The performance of many public schools, especially in the inner city, is shockingly poor. Many colleges and universities are now dominated by a boomer-left faculty. These conditions have important negative effects on our broader economy, our politics and our culture. We conservatives have most of the best answers. To be effective, however, we must stop squabbling among ourselves. We must focus on issues broader than those that affect our own children. And we must be prepared to make new political coalitions to support these policies, one step at a time.

First, any economist is expected to bore his audience with some statistics, and I will not break that long, hallowed tradition. As of this fall, about 68,000,000 mostly young people are enrolled in American schools. About 89 percent of them in public schools. Total expenditures for education in the United States are now about 7.4 percent of GDP, plus, of course, the value of students' time.

These numbers convey the magnitude of the issue, but not what is at stake. They do not inform us of the major issues about American education. For that, we need to examine the relation between student performance and the cost of education. Other figures summarize this bleak story for those students who aspire to college, maybe your children.

The composite average SAT score peaked in the early sixties, then declined substantially until 1980. Scores have increased, but recovered only slightly since that time. Over the same period, the real (inflation-adjusted) total expenditures per student in average daily attendance increased about forty percent a decade, roughly doubling every twenty years, and that has been roughly the rate of growth ever since World War II. Roughly, 40 percent a decade in terms of real total expenditures per student in average daily attendance.

The decline of the SAT scores is also reflected in the early college record. As of 1995, 41 percent of freshmen in the public two-year colleges and 22 percent of freshmen in public four-year colleges were required to take one or more remedial courses. Apparently, a high school is not as adequate a preparation for college as it used to be.

The cross-country comparisons reinforce this perspective of poor performance and high cost. Let me read you a summary of this evidence by Chester Finn and Herbert Walbert:"The OECD data make it painfully clear that the U.S. schools are the least efficient in the industrial world. This country spends more per pupil than almost any other nation, yet its year to year gains in student achievement are among the smallest. U.S. schools add less value than the schools of other lands, and do so at greater cost. Thanks to the OECD, it is now possible to compare gains made by students between the ages of nine and fourteen, across many nations. It turns out that U.S. students gain the least in this whole sample. On the average, they make just 78 percent of the progress of students in fifteen other countries. Is this because Americans are cheap? Hardly. The OECD data shows U.S. school expenditures to be third highest of twenty-two countries, lagging only Switzerland and Austria. So, the U.S. is near the top in educational spending but close to the last in achievement gains. Most people would call this miserably low productivity, but that is a concept practically unknown in education policy circles. If U.S. education were a business, they would be in serious peril and probably headed for bankruptcy."

Less is known about how our public schools serve those who do not go to college, but the indirect evidence is even more disturbing. The number of high schools graduates relative to the population age seventeen declined from 76.7 percent in the school year ending in 1964. This is roughly the time in which the SAT scores peaked. Now down to 69.7 percent in the school year ending in 1997. About 50 percent of inner-city students now drop out of school. Another cross-country study observed that the job-related skills of those who are at the bottom of the U.S. wage distribution are substantially lower than those who are at the bottom of the wage distribution in Europe.

The dramatic change in family structure has clearly contributed to a number of problems, including poor school performance, employment problems and crime. From 1960 through 1994, for example, the percent of births to single mothers increased from 2.3 percent to 25.4 percent among whites. And among whites, that rate is now higher than the rate which motivated Pat Moynihan to write his disturbing story about the black family.

Among blacks, the births to single mothers have increased from 21.6 percent to now 70.4 percent.

Many job skills are learned on the job. But, the employment rate for young black males has declined from 52.4 percent in 1954 now to 23.7 percent in 1997. These demographic and employment trends have not yet been reversed, and they're likely to cast a shadow on the potential earnings of low-skilled workers for many years.

Now, how important is this decline in school performance to the U.S. economy? This should shock you. The moving average productivity growth rate (the rate of growth of output per worker hour) and the composite average SAT score, both declined sharply from the early 1960s to 1980, and have since recovered only slightly. And, even the year-to-year perturbations are really strongly correlated.

The sharp decline in school performance cannot be a complete explanation of the declining productivity growth because it directly affects only new entrants to the labor force. Other conditions like the average net saving rate on the United States economy have also declined sharply during this same period. More likely, some other condition, such as the change in cultural attitudes, jointly affected school performance, the net saving rate and productivity growth.

The schools, however, are not innocent victims in the change in cultural attitudes. Because, the schools, and now television, are the primary channels other than the family by which cultural attitudes are transmitted to young people.

How did we get into this mess? The answer is simple. At the K-12 level, our governments have given the public schools a monopoly right to provide tax-financed education.

Under these conditions, we should expect that any reform of the public schools to serve the state.

Over the years since World War II, three major reforms of the public school system swept the whole country:

A massive consolidation of schools districts. There are now roughly a third of the number of school districts that existed at the end of the war.

A substantial centralization of school finance at the state level, pulling finance away from the property tax to be financed by state income and sales taxes.

A roughly 40 percent reduction in the average class size.

The first two of these reforms substantially shifted the control over the public schools away from local voters and parents to state politicians and the education bureaucracy. The third reform substantially increased the cost per student, with little apparent benefit.

A growing concern about the quality of the U.S.'s public schooling led to numerous official commissions, most notably summarized by the 1983 report, A Nation at Risk, which concluded: "The educational foundations of our society are presently being eroded by a rising tide of mediocrity that threatens our very future as a nation and as a people."

These commissions, in turn, promoted a laundry list of expensive new reforms in the public school system that increased the rate of growth of school spending per student for a half dozen years or so, again with little apparent benefit.

In parallel with these commissions, fortunately, a number of scholars completed careful studies of the comparative performance of students in public and private schools. The most important of these studies was by James Coleman and his colleagues.

All of the comparative studies find that the cost per student is substantially lower in Catholic schools than in public schools in the same area.

I recently had occasion to make this comparison in Washington, DC. The total cost per enrolled student in the District of Columbia school system is now $10,400, and the cost per student in average daily attendance must be close to $13,000. That is higher than the tuition at St. Albans and Sidwell Friends and other first-rate, top-rate schools in the Washington area, where the President and Vice President chose to send their own children.

At the same time, I financed a young black kid to go to a Catholic school in Washington. My share is roughly half his tuition, $1,100. The family puts up the rest. And that kid is getting enormously superior education compared to those in a school system that now spends $10,400 per enrolled student.

The most controversial of the Coleman findings is that the performance of students, particularly those from disadvantaged backgrounds, is substantially higher in Catholic high schools than their counterparts in inner city public high schools.

The most counter-intuitive of the Coleman findings is that Catholic schools are more integrated by race than is the characteristic public school that draws students only from the local area.

If you look at the national statistics, because about 89 percent of K-12 kids go to public schools, the public schools look like they are more representative of the general population than is the case for the private schools.

When you look at individual private schools, however, they tend to be more integrated by race than the public schools because the public schools are defined by the population in a particular area. So you're more likely to get exposure to kids of other races in a private school in the United States than in a public school.

The Coleman study provoked a furious response from the educational community, but it's primary conclusions have been confirmed by the broader body of now what is called "effective schools research," and have now become conventional wisdom. Now broadly accepted, for example, at both the Brookings Institution and the Kennedy School.

In the Washington think-tank community, my test of whether an issue is ripe is whether Brookings has finally been convinced about the matter. And Brookings, as well as now the Kennedy School, have become places for some of the leading scholarship about school choice now being performed. There should no longer be any doubt that a major change in the institutional structure of tax-financed education is necessary to improve student performance, especially in the inner cities.

Now, where do we go from here?

As usual, Milton and Rose Friedman got it right first, proposing a general system of tax-financed school vouchers in their marvelous book published nearly forty years ago.

Building on the more recent effective schools research, an influential 1990 book by two Brookings scholars also endorsed a general system of tax-financed vouchers in which, "schools will be legally autonomous, free to govern themselves as they want, specify their own goals and methods, design their own organizations, select their own governing bodies and make their own personnel decisions. Parents and students would be legally empowered to chose alternative schools aided by institutions designed to promote active involved, well informed decisions and fair treatment." One of the authors of this study, who went to work after that for Chris Whittle, is providing alternative schools systems, profit-seeking alternative schools systems, now around the country. The other is Terry Moe at Stanford University.

Since that time, a growing body of scholars and officials have endorsed some form of education voucher system. And small tax-financed education voucher systems are now underway in Milwaukee and Cleveland in the inner cities.

In Milwaukee, about fifteen hundred kids from low-income families get about $4,700 each to attend private, secular schools, a program initiated in 1991.

In Cleveland, about thirteen hundred children receive vouchers of up to $2,500 each to attend either secular or religious schools, a program initiated in 1996.

Their early experience led the legislatures in both Wisconsin and Ohio to approve an expansion of these programs, but the expansions have been delayed pending resolution of some constitutional challenges, initiated, of course, by the teachers unions.

Both of these programs have now been subject to careful testing. In Milwaukee, the average voucher student has reading scores five percentile points higher in the fourth year than public students with the same types of backgrounds, and math scores twelve percentile points higher, again with students with similar backgrounds.

A study of two schools in the Cleveland program found these average gains in the first year: five percentile points on readings tests and fifteen percentile points on math tests. Moreover, a recent study at Harvard of the broader experience with school competition, indicates, "Competition from private schools does not have a significant effect on public school spending per pupil."

One of the fears about the voucher plan is that it will erode support for spending for the public schools. This study says it does not have a significant effect on public school spending per student, and, if the private schools in an area receive sufficient resources to subsidize each student's tuition by a thousand dollars or more, then the achievement of public school students is higher, regardless of whether it is measured by test scores, ultimate educational outcomes or subsequent wages.

Competition works. Competition works in education as it does in almost all spheres of life.

An interesting, related development has been the rapid, recent growth of privately-financed school voucher programs for children of low-income families. As I said, I contribute to the Washington Scholarship Fund. The typical rules there are that the students have to be from families which are eligible for foodstamps, and the families have to be willing to put up up to half the tuition themselves. So it is a special group of kids who benefit from this. These are kids from low-income families, but from families in which the parents are sufficiently motivated to support the kid that they are willing to put up up to half the tuition themselves. And that means that, for $1,100, I can enable a young black kid in the District to go to a Catholic primary school.

At present, there are 36 such programs, with more than 12,000 students, and many times that number on the waiting list.

In June, two leading businessmen offered a challenge grant of $100 million, which was recently supplemented by local contributions of $72 million, that will make it possible to establish similar programs in thirty-eight cities and enable more than 35,000 additional children to attend private schools. This program has also recruited a stellar and diverse board of directors. The Wall Street Journal had a good editorial on this issue this past week. As yet, there's been no evaluation of these private voucher programs, other than the testimony of many, many, grateful parents.

Some of the barriers to tax-financed voucher programs may be reduced soon. In June, this summer, the Wisconsin Supreme Court approved the plan to expand the Milwaukee voucher program to include church-affiliated schools. But this decision has been appealed and may face a decision by the U.S. Supreme Court next year.

On that same June day, Congress approved a tax education savings account that parents could use for private school tuition. But this bill, of course, was vetoed by a President who had sent his own daughter to a fancy private school.

One might hope that the left had more consistent principles. Fifty years ago, the left, to its credit, led the movement to overthrow the Jim Crow laws that had told young black children that they could not enter their nearest public school. Now the left, to its shame, is telling young inner-city children that they cannot leave these monopoly public schools.

This position cannot stand. Our challenge is to assure that it does not stand.

One should not, however, underestimate the political barriers to broad approval of a tax-financed voucher system. On the one side, there are nearly three million public school teachers and their well-financed unions to which too many Democratic politicians are beholden.

The fate of the voter initiative in California for school choice, however, tells a more complex story that reflects badly on many of our friends. The money and muscle against the initiative, of course, were provided by the teachers unions. Too many of the votes against the initiative, however, were cast by suburban white Republicans who seemed satisfied by their mediocre public schools as long as they're safe, effectively segregated and deductible against their income taxes.

The primary lesson from this California initiative campaign is that an effective political coalition for tax-financed school vouchers must be across parties, across races and across jurisdictions.

For principled conservatives, in conclusion, this means that we must stop squabbling among ourselves, we must focus on conditions that are broader than those that affect our own children, and we must be prepared to make political alliances with many people with whom we may disagree on many other issues. Our children, our economy and our culture are at stake. Seize the day.

 

QUESTION: What do you see on the horizon that suggests the ability to break the power of the teachers unions over what goes on in public schools so that we can begin to have real school reform and parental choice in education?

MR. NISKANEN: I think we have to chip away at their support in all directions. It means we have to use the media. We have to work with the academic and scholarly community to support the kinds of studies that are quite important in the matter.

I endorse the kinds of public protest actions that some have organized.

My own judgment, and maybe my hope, is that school choice will be like those famous lotteries in Minnesota in the spring time in which they put an old car out on the ice in the lake and bet on when the car's going to go under.

It happens quickly when it happens.

My guess is that, ten years from now, this will be an old issue. I think that the prospects are for rapid change in this matter, but it does take pressure from all sides.

I don't have good advice about organizing public activities. That's not my business. But it does take pressure from all sides.

I'm a public school graduate. Forty-eight years ago now.

And I valued the dedication of the teachers that I had and, particularly, the fact that my mother was a teacher as well.

I have studied at and taught at the best universities in this country, but I would not be eligible in teach in most public schools because I have not taken those mind-numbing courses in educational psychology and I don't have a teaching certificate.

We've got to break the monopoly of tax-financed education, but we've also got to break the monopoly of the certification process. This means, I think, operating primarily at the state level on these matters.

I am a stronger believer in taking the Constitution seriously. The word education does not appear in the U.S. Constitution.

I think most of the effective political action has to be at the level of the state, where they have the authority for this role.

I encourage you to operate primarily through the states, in either your state legislatures or in initiative processes, to bring about this change. I am hopeful that it can then happen quickly.

 

QUESTION: When A Nation at Risk was published fifteen or twenty years ago, one of the key issues in the report was the quality of schools of education which were turning out public schools teachers.

The charge was made that the quality of students coming into schools of education was poor. They were becoming the dumping ground for kids who couldn't make it in other area areas, and generally low aptitude, as measured by SAT or high school grade point averages seemed to be the pattern.

Nothing seems to have changed. They still teach methodology almost to the exclusion of content.

In the recent experience in Massachusetts where they required performance testing for candidates for teacher certification, the results were so abysmally low that they had to lower the standards even to make half of them, less than half them, eligible under the standards. That's idiocy.

If the arena for providing public school education is so inadequate intellectually that the people who are graduates are borderline -- well, perhaps I'd better not be so graphic, they're really incompetent. Is there anything afoot at the national, the federal, or the state level, other than Massachusetts, to force some changes in the educational bureaucracy in the colleges and universities?

MR. NISKANEN: My understanding is that several states now have allowed teachers to start teaching without a certificate. Then they are graded on their teaching performance after several years rather than having to go through the teaching methodology courses in college.

These are selective experiments, and they're under pressure from the teachers unions. But I think that they're likely to be effective.

One of the things we should recognize is, in a tight labor market, unless we change the character of the school system, we will probably have to pay more for teachers. In general, teachers in private schools do not now have the salary of teachers in public schools, but you get better teachers at a lower salary because of the very different environment.

One of the key features of the private school environment is that a teacher has the right to expel, and the school has the right to expel. One child can disrupt any kind of learning for a class of twenty or thirty kids. Teachers have to have to the right to expel without endless paperwork, and the principal has to have the right to expel. By and large, that has been greatly restricted in the public schools.

If you create the right kind of school environment, I believe you can get better teachers than are typically recruited now without paying the salaries.

The average teacher salaries right now are about forty thousand dollars a year for what is about a nine-month or eight-to-nine-month year. But at that level, we're still having a significant number of open slots.

 

QUESTION: Sir, the question came up earlier as to how to break the power of the National Education Association. One of the solutions to that would be to require that teachers pay their dues directly to the National Association.

Currently, our local school board treasurer acts as the treasurer for the National Education Association in collecting the dues and mailing them to them. So, as a taxpayer, I'm paying to have union dues paid to a union in Washington, D.C.

I think if we were to alert our local school board members to the fact that they should not be a collection agency for a union, that that in itself would help to alert the teachers to what is happening as far as their union is concerned.

MR. NISKANEN: That's a marvelous suggestion and something that any of us can do at our local school board level. I think that's a fine suggestion.

This address was delivered to the Council for National Policy in Chicago, Illinois, in October, 1998.