How services are funded affects their effectiveness and quality. Take meals. It makes a big difference whether the state directly funds the operation of restaurants or “merely” mandates the issuance of food stamps, or whether restaurants are funded by paying customers. Each of these models brings different incentives and feedback loops.
The first results in rations and UBS (for the younger readers: universal brown sauce, a legend of socialist school catering) in school canteens, the second in soup kitchens with lunch menus, and the third in normal restaurants and streetfoods.
It is equally true in education that the way it is funded affects how it works. In Slovakia, we are used to the fact that the state finances the operation of schools through the so-called wage and operational normative. Thus, we finance the infrastructure.
That is why, for example, during the pandemic, it did not even occur to anyone to ask whether parents should not get their money back, or at least pay less, when schools stopped providing a significant part of their services and, for example, did not have to heat fully in winter, as there was nobody to heat for. Other services funded directly by customers, such as catering, retail, transport, or hotels, were not so lucky.
One of the consequences of state funding of schools is thus the absence of a basic awareness that education is a service, pupils and parents are customers and providers should strive to meet their needs and demands. And when they don’t, schools should have the problem, not customers.
Ask any parent if they have any idea how much a year of their child’s education costs at school. Or, on purpose, try to guess for yourself. You’ll find out the correct answer at the end of this article.
The solution to this problem may not be to privatize all schools outright, abolish the Department of Education and have parents fund education directly. There is also a compromise, introduced as early as 1955 by economist Milton Friedman in the form of so-called education vouchers. Thanks to them, the state does not finance the infrastructure of schools (salaries and operations), but the educational needs of pupils. This change improves incentives and feedback loops in education – making parents and pupils informed customers and schools and teachers hard-working providers.
This reform was heavily debated in the US for the following decades, with early pilots being introduced and political battles fought. However, the results of advocacy have not impressed. Of the 50 million children in the U.S., less than one percent could attend the school of their choice and pay for it through a voucher.
Friedman ended this period of lobbying with an essay he wrote 50 years after the publication of his famous article. In it, he expressed his “recurring frustration” with the “steadfast and effective opposition of school unionists and operators to any change that would reduce their control over education.”
There have been a number of attempts to introduce across-the-board education vouchers in several states – from Washington to Colorado to Michigan. The attempts in California and Utah in particular made it into the political economy textbooks on the power of narrow interest groups, and they failed narrowly and thanks to a strong last-minute campaign by unions.
I write about these failures to emphasize the magnitude of the recent success in the state of Arizona. There, a ground-breaking law was passed last month introducing education vouchers for all children in the state. Parents who choose to take their child out of public school will receive a credit of $6,500 per child per year in a special education account. And they can use that credit to pay for private and parochial school tuition, as well as for expenses related to homeschooling, tutors, or online classes.
They can even fund the purchase of educational supplies or fees for so-called “micro-schools” this way. These are schools where a group of parents join forces, hire a tutor and the tutor teaches at someone’s home. These schools became popular during the pandemic.
However, they were generally a luxury service and only wealthier families in affluent neighborhoods and towns could afford to pay for them. Thanks to education accounts, more Arizona families will get that opportunity.
The article was originally published in Slovak in Postoj
