K-12 education cost U.S. taxpayers $536 billion during 2004-05.  This figure, 4.3 percent of gross domestic product, is roughly equivalent to the entire sum spent over the last five years on the Iraq war.  U.S. taxpayers pay more per public-school student than nearly all other economically advanced countries.  But while per-pupil spending continues to climb, student performance doesn’t. 

What’s needed here is a surge of common sense.  In other words, America needs to start spending smarter, not bigger, on education. 

The way to spend smarter is to increase the power of the market in education funding.  There are a number of innovative solutions to do just that.

First and foremost is parental choice in education.  As with any other service, competition and accountability are keys to cost-efficient improvement.  Studies consistently back up the commonsense wisdom that school choice improves educational quality.  For example, several studies have demonstrated that the Milwaukee voucher program, the longest-running in the nation, has substantial benefits for participants – and even for public school students who do not use vouchers.  Milwaukee students who receive vouchers achieve much higher high-school graduation rates than public-school students overall, according to a 2004 study by Jay Greene, one of the nation’s leading education policy researchers.  During 1997 to 2004, Milwaukee public school students increased their scores in 12 of the 15 categories on Wisconsin’s standardized tests, notes the American Legislative Exchange Council.  According to Hoover Institution researcher Caroline Hoxby, student performance improved faster at Milwaukee public elementary schools where vouchers were available to many students than at schools where they were available to only few.  For example, during 1999-2003, the public schools that faced the most competition from vouchers saw their students’ math scores sky-rocket by 7.1 percentile points. 

But educational choice can’t help families without the resources to back it up. 

Derrell Bradford of Educational Excellence for Everyone, based in New Jersey, proposes an innovative plan:  Dollars Follow the Child.  Mr. Bradford’s proposal differs somewhat from New Jersey Governor Jon Corzine’s, which essentially allocates educational dollars at the district level. 

Mr. Bradford’s plan, on the other hand, allocates funding at the student level.  In other words, when a family decides to send a child to a different public school, the appropriate funding arrives at the new school with him.  The amount varies according to the student’s needs, and the money can be spent flexibly, guided by results—not planned programs or activities.  Such an approach would “direct much-needed resources to low-income students … and, with adjustments, enhance reforms and drive better outcomes for low-income and minority children,” Mr. Bradford argued in testimony before the Education, Budget and Appropriations Committees of the New Jersey Assembly. 

Mr. Bradford also points out that a Dollars-Follow-the-Child approach could help reform teacher compensation.  He points to a study, “The Hidden Gap”, by the Education Trust, which found that perverse incentives in teacher compensation can distort per-pupil spending between schools within the same district.  Teachers’ union contracts give the longest-tenured teachers the highest salaries, but union rules also allow these teachers the most control in selecting the schools in which they teach, and they choose the least difficult schools.   This means that tax money supports teachers’ school choice at the expense of parents’ school choice. 

Directing educational dollars toward individual students would help ensure sufficient moneys to implement market-based reforms in teacher compensation.  Instead of a formulaic approach, based on tenure, teachers should be paid on the same basis that many tax-paying parents are paid.  In other words, higher salaries should go to those who perform the best and to those who are willing and able to teach challenging subjects or work with the students who need the most help. 

Implementing smart-spending reforms like these can help boost taxpayers’ return on their enormous investment in the education system.  Uncorking the power of the market in education gives families the double benefit of the freedom to choose the best education and the resources to provide it.