The Pedagogical-Socialists Fear Competition

It can be particularly challenging to carve out a pseudo-market based approach to K12 education when the framework must rest squarely upon an overtly socialist system. In Georgia we are bearing witness to such an attempt with the passage of the “Georgia Private School Tax Credit” (HB 1133) in 2008. This bill set up a system whereby private individuals and corporations can make limited charitable donations to a “Student Scholarship Organization” (a type of charitable entity authorized through the bill). These organizations in turn grant scholarships to K12 students (typically needs based) so that they can attend a private school of their choice. Private entities donating money to help needy children get a quality education, what could be wrong with that? Well a whole lot according to groups like the Southern Education Foundation. This group and others feel that this program is diverting funds from public schools to private schools. The SEF is currently assisting in a lawsuit aimed at having the entire law declared unconstitutional.

Their assertion is true, untrue, and entirely irrelevant. To explain requires a bit of background. I will attempt to not bore you to tears so I will move quickly and gloss over some details. Essentially a taxpayer with a $1000 tax bill to Georgia can choose to send that $1,000 to an SSO of their choice instead of to the state of Georgia as long as they have permission from the state. Each year the state allows people to do this until an aggregate cap ($58 million for 2014) is reached. The benefit to the taxpayer is that while it does not change their Georgia tax liability it may lower their Federal liability in some situations. Although the state does indeed receive $58 million less than they otherwise would have absent this program, there is nothing in the law that says the education budget must be debited an equal amount. The legislature is the ultimate arbiter of funding. So decreased tax revenue could put pressure on them to decrease funding, in which case their charge is true. Or, to avoid such political backlash, they may not cut funding at all, in which case the charge is untrue. The only thing one can say for certain is that decreased tax revenue means that programs on the margin will receive less funding or that taxes will be raised to make up the shortfall.

Of course to suggest that reduced funding is a bad thing is completely wrongheaded. This is precisely what it SHOULD be doing. In essence this program is a backdoor to incremental privatization of the socialistic state run school system. To the extent that this program incentivizes parents to pull their children from public schools and move them into private schools it then follows that those public schools should require proportionally less funding. If the public school has 100 students and costs $100 to run, then if 50 students leave it follows that that public school does not still need $100 to run. Even if we assumed all $58 million got carved from the 2014 education budget that would be only a 0.5% reduction.

The goal is that the SSO’s act as a private version of a state education budgeting agency. In other words, given that many different SSO’s have sprung into existence all competing with each other for donations, it follows that those that are the most efficient at maximizing the student to dollar ratio (more students educated for fewer dollars) will excel. Why? Do you prefer to give to an efficient or inefficient charity? So the public school proponents should welcome this change. It will mean that if 50 students leave they will take with them only $25 leaving $75 for the remaining 50 public school students. How can they get by with only $25? Because they’ll get $50 worth of value due to competition driven market efficiency.

Of course in a truly market based system it would not be necessary to have all sorts of complicated tax credits and state chartered charities. Until the pedagogical-socialists let go of their superstitious fear of freedom that compels them to believe the only possible way to educate children is through gun-enforced collectivist redistribution, we will be stuck with the timid attempts of the state to emulate market based solutions to problems created by the state.