Shaking Up Public Schools With Competition

What does evidence say about the effects of charter schools on improving outcomes for nonchoosers and their schools? by DAVID D. ARSEN AND YONGMEI NI

The proposition that competition will spur public schools to perform better is now familiar to most Americans and self-evident to many. It is a compelling idea.

In his acceptance speech before the Republican National Convention in August 2008, presidential nominee John McCain brought the delegates to their feet with this pronouncement:

“Education is the civil rights issue of this century. Equal access to public education has been gained. But what is the value of access to a failing school? We need to shake up failed school bureaucracies with competition. Empower parents with choice.”

It is but one measure of the charter movement’s success that both major parties have long supported an expansion of charter schools. 

Detroit Public Schools offers one extreme case of a school district shaken up by charter competition. More than a third of Detroit students attend charter schools. Under Michigan’s state-controlled school finance system, the loss of resident students to charter schools and suburban districts through interdistrict choice has produced an annual revenue loss for Detroit Public Schools of roughly half a billion dollars.


While public schools in Detroit confront many profound problems besides school-choice competition, this revenue loss contributed to a crippling and sustained financial deficit. In response, the governor appointed an emergency financial manager to run the district in 2009.


The Detroit district has closed 149, or more than half, of its school buildings since 2001. The city is an extraordinarily turbulent education setting, with students and staff moving from building to building. In March, the school district’s emergency financial manager solicited bids from private management companies to operate a third of the district’s remaining schools as charter schools starting this fall. When the district failed to receive enough promising charter proposals, it abruptly changed course.

David Arsen and Yongmei NiDavid Arsen and Yongmei Ni contributed research on the competitive effects of charter schools on traditional public schools in a 2010 Harvard Education Press title.

In June, Michigan Gov. Rick Snyder and Detroit’s new emergency schools manager, Roy Roberts, announced the formation of an administrative authority that would assume control of nearly a third of the district’s schools in fall 2012 and expand thereafter. Although the new authority was compared to Louisiana’s post-Katrina Recovery School District, operational details have yet to be defined and likely will differ substantially from those in New Orleans. But the new authority is certain to further shrink Detroit Public Schools.

Who Benefits?
While much attention has focused on student performance in charter schools, a distinct and important policy question relates to how increased competition from charter schools affects the effectiveness of traditional public schools. That is, how does charter competition impact the students who are not active choosers? Only recently has research on this question been possible in the United States, as choice options became sufficiently widespread to elicit competitive responses from traditional public schools.

Discussions of charter schools’ competitive effect have been dominated by two opposing arguments. Choice advocates maintain that if charter school policies offer parents expanded choices and tie funding to enrollment, then educators will have an incentive to compete and increase their efficiency by working harder and implementing education improvements.

Critics of school choice argue that a more competitive education system will not benefit all students but rather create winners and losers relative to the status quo, increasing academic, racial and ethnic stratification while further concentrating many of the most disadvantaged students in schools depleted of the personnel and resources needed for improvement.

Which view comes closer to reality? While the literature of rigorous quantitative studies is still taking shape, the initial results offer little evidence that charter schools significantly improve or worsen student outcomes in traditional public schools. The existing research indicates that charter schools’ competitive effects on student outcomes are quite mixed and generally small.

Nevertheless, there now are isolated local areas, such as Detroit, where charter school growth has contributed to substantial shrinkage of traditional public school districts and a transformation of who provides educational services.

Dictating Factors
The competitive effects of charter schools depend on an array of circumstances, including features of policy design, the local context in which the choice policy is implemented and the responses of families and schools.

Among the many relevant policy features is whether state funding is adequately adjusted for higher-cost students (special education or secondary versus elementary school). If not, charter schools have an incentive to disproportionately enroll the cheapest students to educate. Insofar as charter schools succeed in enrolling low-cost students and excluding high-cost students, they reduce their own average cost while increasing the average cost for traditional public schools that continue to educate high-cost students. Without additional revenues to match the higher costs, districts would be obliged to cut services.

Meanwhile, a given state’s charter school policy will create less-intense competitive pressure in local settings where population is rapidly growing rather than declining. In high-growth communities, public schools may even welcome the departure of students to charters because it alleviates enrollment pressures. As such, the traditional public schools experience no competitive pressures to change their practices.

Positive competitive effects also are more likely if families base their choices on schools’ academic quality, which researchers typically define as average student learning growth net of student background characteristics. Yet we know families choose schools for various reasons, including the student racial or socioeconomic composition. This could undercut incentives for public schools to respond in ways that will improve education quality. In addition, if active choosers are disproportionately high-achieving students, this will likely generate negative peer effects on the learning of students who remain behind.

Finally, the prospects for charter schools to spur improvement also clearly depend on the quality of school district leadership and the leaders’ relationships with district employees. If leadership is weak, not trusted and subject to frequent turnover, a school district will have limited capacity to respond to competitive pressures.

District Responses
Case study and interview research clearly point to the diversity of responses of traditional public schools to charter competition. In many cases, charter competition elicits little or no school district response at all.

Paul Teske and colleagues in an analysis of five urban districts, “Can Charter Schools Change Traditional Public Schools,” which appeared in Charters, Vouchers & Public Education (Brookings Institution), conclude that the link between charter competition and public school response is “tenuous at best.” In a review of studies covering several districts in the same volume, “Responding to Competition: School Leaders and School Culture,” Frederick Hess, Robert Maranto and Scott Milliman note a common finding that the majority of school systems display no response to competition.

When school districts do respond, one way they do so is by changing school leadership, opening magnet schools and creating new programs consistent with parents’ preferences. Some districts may start add-on programs, such as all-day kindergarten, after-school child care and extracurricular activities. Several researchers have noted an increase in districts’ marketing initiatives to compete for students. Some observers also noted efforts by the leaders of traditional public schools to vilify charter competitors or otherwise obstruct their opening and operations.

Thus far, however, little evidence points to competition stimulating significant change or innovation in instructional practice.

On balance, while some of the reported responses of traditional public schools to charters can be viewed as enhancing school quality, many plainly cannot. Taken as a whole, however, such accounts cannot gauge competition’s overall impact on school quality.

Quantitative Evidence
A number of recent, rigorous studies have examined how charter school competition influences student test scores in traditional public schools. Conceptually, the causal effect of charter competition is the difference between a traditional public school’s performance when facing competition and the same school’s performance when facing no charter competition. Because this scenario is impossible to observe in the real world (a school cannot both face and not face charter competition at the same time), researchers use statistical procedures to approximate this test.

One approach compares student performance in schools that are similar in many respects except that some face charter competition and others do not. Another approach compares student performance in public schools before and after they face charter competition.

With either approach, researchers must control for two other considerations.

First, charter school location is nonrandom. Charters are likely to locate where families are the least satisfied with local public schools. So if researchers observe that higher levels of charter competition correlate with lower outcomes in other public schools, it would be difficult to isolate the direction of causation. It is possible that low public school quality induced more choice options — or alternatively, that charter competition lowered public school performance.

Second, as noted, students who choose to go to charter schools may differ systematically from those who remain in their assigned public schools in terms of their past performance, ability or parental motivation. If, for example, charter schools tend to attract lower-performing students, the average performance of remaining students in public schools would automatically increase, even without any positive competitive effect.

A variety of statistical techniques permit researchers to control for the nonrandomness of charter school location and charter-induced changes in student composition in traditional public schools. The most desirable ones use longitudinal student-level data.

So far, rigorous charter school competitive effect studies have been conducted in several states, including Arizona, California, Florida, Michigan, North Carolina, Ohio and Texas. We reviewed these studies in “The Competitive Effects of Charter Schools on Public School Districts,” which appeared in a 2010 book The Charter School Experiment (Harvard Education Press).

The results from these studies are quite mixed. About half report negative or no effect of competition on traditional public schools’ student performance. Half report small positive results. No consistent patterns in the results emerge when categorizing the studies by state or by research methodology.

Sizing Up Debate
The best available current research is conspicuously at odds with strong claims regarding the beneficial competitive effects of charter schools. Neither does it sustain sweeping claims of harmful effects on public school students.

Charter school growth may bring about other meaningful changes. But if the existing research has one thing to say, it is that competition from charter schools has little impact on student performance in traditional public schools.

Charter school competition is a blunt policy tool for generating improvements in public schools. Although it represents a compelling idea, it is also a long shot. Participants on both the demand and the supply sides of the market for schooling have many feasible responses (and nonresponses) to charter school policies, and only a subset of them will benefit nonchoosers who remain in traditional public schools.

Although competition can create financial pressure on school districts, it does not by itself create the capacity to improve teaching and learning. While the design and implementation of charter school policies can be undeniably improved, policymakers should remain wary about suggestions that large, systemic improvements in school districts’ student learning will result from major increases in the number of charter schools.

Charter Density
Ever since states began passing charter school laws in the early 1990s, charter schools in most areas have enrolled a relatively small percentage of local students. Until recently, charters could be viewed as a small, heterogeneous system of alternative schools that offer families expanded choices, possibly incubate education innovations and hopefully spur improvements in the larger, dominant traditional public school system. In a growing number of urban areas, however, the system of charter schools no longer is small in relation to the local district schools. What’s changed in these districts with high levels of charter penetration?

Detroit offers an interesting case in point. While increased competition has not produced broad-based improvement in student outcomes in either charter or district schools in Detroit, it has introduced many new providers of public education services. This is perhaps the most significant change. The new providers operate largely outside the traditional governance structure of elected school boards and without unionized employees. Many view these changes in a positive light.

Charter school growth in Detroit and in other cities has expanded the schooling choices available to families, but it also has contributed to a turbulent education setting. No one should underestimate how messy and traumatic this transition has been for students, families and educators.

It is too early to know the longer-term consequences for students, yet one thing is certain. The traditional system of public schools in Detroit and other cities will be much more limited in relation to an expanding system of charter and contract schools that operate under govern­ance and management arrangements that traditionally have been much more typical of the private sector.

David Arsen is a professor of educational administration at Michigan State University in East Lansing. E-mail: arsen@msu.edu. Yongmei Ni is an assistant professor of educational leadership and policy at the University of Utah in Salt Lake City.