Microsoft Word - v19n29.doc Manuscript received: 1/6/2010 Revisions received: 3/15/2011 Accepted: 5/26/2011 education policy analysis archives A peer-reviewed, independent, open access, multilingual journal Arizona State University Volume 19 Number 29 October 20th, 2011 ISSN 1068-2341 School Choice Participation Rates: Which Districts are Pressured? Yongmei Ni University of Utah David Arsen Michigan State University Citation: Ni, Y., Arsen, D. (2011). School Choice Participation Rates: Which Districts are Pressured? Education Policy Analysis Archives, 19 (29) Retrieved [date], from http://epaa.asu.edu/ojs/article/view/777 Abstract: School choice policies are intended to provide students in poorly performing schools the option of transferring to a better school. The associated loss of funding to new competitors is expected, in turn, to benefit students who remain in their assigned schools by spurring improved performance among the educators in them. The prospects for such systemic improvement are greatest if in fact student transfers and the market signals they provide are determined by school effectiveness rather than the social and racial characteristics of a district’s students. To test this proposition, we employ a series of fixed effects regressions to analyze the relative influence of school effectiveness versus student demographic composition on participation rates in Michigan’s charter school and inter-district choice policies. Our results indicate that school effectiveness has no systematic influence on participation rates for either epaa aape E ducation P olicy A nalysis A rchives V ol. 19 N o. 29 2 choice policy, while the loss of students to choice options increases significantly in districts serving high concentrations of low-income students. Therefore, Michigan’s school choice policies create financial pressures not on schools that are performing most poorly but rather on those that face the most difficult educational challenges. Keywords: charter schools; school competition; school effectiveness; social and racial characteristics. Tasas de participación en la elección de escuela: ¿cuáles son los distritos presionados? Resumen: Las políticas de elección de escuela tienen por objetivo ofrecer a los alumnos de establecimientos de bajo rendimiento la opción de transferirse a una escuela mejor. A la vez, se espera que la pérdida de financiamiento asociada a favor de los nuevos competidores beneficie a los estudiantes que permanezcan en las escuelas asignadas, estimulando el mejor rendimiento de los educadores de dichas escuelas . Las probabilidades de que se dé esta mejora sistémica son mayores si de hecho las transferencias de estudiantes y las señales de mercado que surjan de éstas son determinadas por la eficacia escolar antes que por las características sociales y raciales del alumnado de un distrito. Para probar esta proposición, se emplean una serie de regresiones de efectos fijos para analizar la influencia relativa sobre las tasas de participación de la eficacia escolar frente a la composición demográfica de los estudiantes en la escuela pública de gestión autónoma (escuela charter) en el estado de Michigan y en las políticas de elección inter-distritales. Nuestros resultados muestran que la eficacia escolar no tiene una influencia sistemática sobre las tasas de participación de cada política de elección, mientras que la pérdida de estudiantes en favor de opciones de elección aumenta significativamente en distritos que atienden altas concentraciones de estudiantes de bajos ingresos. Por lo tanto, las políticas de elección escolar del estado de Michigan crean presiones financieras no en aquellas escuelas con rendimiento más pobre sino en aquellas que enfrentan desafíos educativos más complejos. Palabras clave: escuela charter; competencia escolar; eficacia escolar; características sociales y raciales. As taxas de participação na escolha da escola: Quais são os distritos sob pressão? Resumo: As políticas de escolha da escola são projetadas para fornecer aos alunos de escolas de baixo desempenho acadêmico a opção de transferência para uma escola melhor. Ao mesmo tempo, espera-se que a associada perda de financiamento para novos concorrentes beneficie os alunos que ficam nas escolas a eles destinadas, estimulando o melhor desempenho dos educadores dessas escolas. A probabilidade de que essas melhoras sejam dadas sistemicamente são melhores se de fato as transferências de estudantes e os sinais de mercado resultantes destas fossem determinados pela eficácia da escola e não pelas características sociais e raciais dos alunos em um bairro. Para testar esta proposição, foram utilizadas uma série de regressões de efeitos fixos para analisar a influência relativa sobre as taxas de participação de eficácia da escola em contraste com a composição demográfica dos alunos de escolas charter no estado de Michigan e as políticas de escolha interdistrital. Nossos resultados mostram que a eficácia da escola não tem qualquer influência sistemática sobre as taxas de participação de cada escolha política, enquanto a perda de alunos em favor de opções de escolha é significativamente maior nos distritos que servem altas concentrações de estudantes de baixa renda. Assim, as políticas de escolha da escola em Michigan não criam pressão financeira sobre as escolas com o pior desempenho, mas naquelas que enfrentam desafios educacionais mais complexos. Palavras-chave: escola charter; competição escolar; eficácia da escola; características sociais e raciais. School Choice Participation Rates 3 Introduction Discussions of how school choice will affect students who remain in their assigned public schools have been dominated by two opposing arguments. Choice advocates maintain that if choice policies offer parents expanded options and tie funding to enrollment, then educators in nearby traditional public schools will have an incentive to compete and increase their effectiveness and efficiency by working harder and implementing educational improvements (Chubb & Moe, 1990; Finn, Vanourek, & Manno, 2000; Nathan 1996).1 Critics, on the other hand, have argued that choice policies are unlikely to benefit all students, but rather create winners and losers relative to the status quo, increasing academic, racial, and social class stratification while further concentrating many of the most disadvantaged students in schools depleted of the personnel and resources needed for improvement (See Ladd, 2002 for a review). As charter schools and other choice policies proliferate it is clearly important to gain a better understanding of how they affect the performance of the public school system for better or worse, since, for the foreseeable future, the vast majority of students will remain in traditional public schools (TPSs). A body of rigorous quantitative studies of school choice policies’ competitive effects on TPS performance has begun to take shape in recent years. Thus far, the initial results do not provide much support for the prediction that choice and competition improve TPS outcomes (See e.g., Bettinger, 2005; Bifulco & Ladd, 2006a; Booker, Gilpatric, Gronberg, & Jansen, 2008; Ni, 2009; Sass, 2006; Zimmer & Buddin, 2009). These studies generally test for the existence of a causal relationship between changes in the degree of choice competition TPSs face and the performance of their students on standardized tests, holding constant student background characteristics. Recent surveys of this evidence conclude that the competitive effects are quite mixed and generally small (Arsen & Ni, 2008; Gill & Booker, 2008; Ni & Arsen, 2010; Rouse & Barrow, 2009). Some studies find positive competitive effects, while others find no effect, or negative effects. Another body of studies, which we discuss in greater detail below, has utilized student-level data to analyze the influence of student and school characteristics on the decisions of active choosers to opt out of their assigned schools (e.g., Bifulco, Ladd, & Ross, 2009). The main objective of these studies is to understand how the re-sorting of students through school choice policies affects racial and socioeconomic stratification in schools and the peer environments encountered by different students. This paper investigates a key and unresolved aspect of the systemic effects of choice competition by examining the characteristics of districts that experience the greatest competitive challenges under state-level school choice policies. Variations in the level of competitive pressure across districts are determined jointly by the responses to choice policies by actors on both the demand and supply sides of the education market. In assessing choice policies’ systemic effects, it is important to know whether the treatment (competition) is applied primarily where the prior public school performance is weakest. This issue has been submerged in recent studies of choice policies’ competitive effects, yet the prospects for these policies to enhance overall TPS effectiveness are diminished if choice participation is not greatest where preexisting school effectiveness is lowest. Insofar as choices are based on considerations other than school quality, choice policies can create 1 Formally, school effectiveness is defined as student achievement (or other desired outcome) controlling for the incoming achievement of students. School efficiency, also referred to as productivity, is defined as student achievement (or other desired outcome) per dollar spent, controlling for the incoming achievement of students. In this paper, we use the terms school effectiveness and school performance interchangeably. E ducation P olicy A nalysis A rchives V ol. 19 N o. 29 4 the wrong type of competition. Alternatively, if TPS administrators believe that student choices are being driven by factors beyond their control, they may not respond to new competitors. Our empirical work focuses on Michigan, which passed a charter school law in 1993 and established a statewide inter-district choice policy in 1996. Participation rates in both choice policies are high by comparison to other states, and many Michigan districts, especially those in urban areas, have experienced strong budgetary pressures associated with the loss of students to school choice competitors. Conceptual Background and Previous Studies The prediction that competition will induce improved public school performance turns on a set of anticipated behavioral responses by households and schools which have been modeled formally by Hoxby (2003). In the first instance, students (and parents) are expected to select higher quality schools, defined as schools that more efficiently produce desired student outcomes. School personnel, in turn, have an incentive to improve their performance lest they lose students and resources to other schools. In practice, however, choice participation rates may be influenced by a host of considerations, and the primacy of TPS efficiency (or effectiveness) has yet to be established. In general, student transfers generated by a choice policy will be a function of the combined actions of participants on the demand and supply sides of the educational market subject to the rules embedded in the choice policies themselves and features of the local context in which they are implemented. Consider first the demand side of the education market. Choice participation rates will be a function of the nature and extent of parents’ dissatisfaction with their children’s assigned public schools. Any local education system reflects the history of past household choices. Some parents have changed their residence to gain access to more desirable TPSs. Others have chosen to send their children to private schools at their own expense, or to educate their children at home. Families make the best choices they can given their preferences, subject to their incomes and the prices of alternative options. Some households remain dissatisfied with their local district schools, and the average level of dissatisfaction in a district is likely to decline with average family income. While families have preferences regarding many school attributes (including school safety, proximity, extracurricular activities, and facility conditions), we focus on school academic effectiveness, on the one hand, and student socioeconomic or racial composition, on the other, because these factors have long been at the center of choice policy discussions (Carnoy, et al., 2005; Friedman, 1962; Levin, 2009). The relative importance of assigned school quality and demographic composition in families’ school choices remains unresolved. Previous research indicates that although parents commonly cite school quality as a primary reason for choosing a given charter school, their actual choices can be largely predicted by student racial and SES composition (Holme & Richards, 2009; Lacireno-Paquet & Brantley, 2008; Weiher & Tedin, 2002). Even when parents highly value school academic quality in selecting schools, they often lack good information about it. In such situations they may use more visible features, including student demographics as proxies for school quality (Fiske & Ladd, 2000; Schneider & Buckley, 2002). Previous studies offer suggestive insights regarding the influence of assigned school effectiveness as opposed to student racial or social class characteristics in family school choices. Several studies of parental choice have shown that student demographics matter. White students and students from higher-income families tend to use charter schools and inter-district choice to opt out of schools with high concentrations of disadvantaged students, while low-income students of color sometimes transfer from mostly White and more affluent districts to districts with greater School Choice Participation Rates 5 percentages of children from their own backgrounds (See e.g., Bifulco & Ladd, 2006b; Bifulco, Ladd, & Ross, 2009; Holme & Richards, 2009; Ni, forthcoming). Results from studies examining whether students are moving from lower to higher-performing schools are, however, mixed (e.g., Koedel, Betts, Rice, & Zau, 2009; Weiher & Tedin, 2002). Only a few studies have directly compared the combined effect of assigned school student composition and academic effectiveness on parental choices. Each of these studies point to the strong influence of assigned school demographic characteristics, but the influence of school quality is inconsistent or unclear. Booker, Zimmer, & Buddin (2005) observed charter school students in California and Texas who were in a regular public school the previous year. In Texas, charter school students came from regular public schools with below average achievement and with achievement levels below their peers in those schools. This result, however, might reflect a supply-side feature of the Texas charter school program, namely the strong preference given to authorizing charter schools for at-risk students. Their findings for California were more mixed. In addition, in regressions designed to explain a student’s decision to move to a charter school, the results for assigned school math and reading scores were inconsistent.2 Meanwhile, Bifulco, Ladd and Ross (2009) find that students’ decisions to opt out of their assigned schools are positively correlated to an index of attendance zone disadvantage, but since zone disadvantage embodies both social and academic features—defined as the percent of parents with no college and the percent of students with low achievement—the influence of assigned school academic outcomes alone is unclear. On balance, while past demand-side studies of the determinants of family school choices have documented patterns of student re-sorting under choice policies, such studies do not provide clear evidence on our central research question of whether choice participation rates are inversely related to district academic effectiveness. Yet even if such studies were more conclusive on this point, they overlook important supply-side considerations that contribute to inter-community variations in choice participation rates. Whatever families’ schooling demands, if they are to become effective, there must be a corresponding supply of schools. The actions of schools on the supply side of the education market will be shaped by a range of considerations beyond simply meeting consumer demand. Among them are the rules and regulations governing choice policy implementation. Charter school and inter-district choice policies are designed so differently they are likely to elicit very different supply side responses. The supply of charter schools, for example, will turn on provisions in state laws that stipulate which entities can grant charters (e.g., school districts versus state-level agencies) and whether the number of charters is limited. Moreover, state laws may restrict the establishment of charter schools to certain districts or provide incentives to influence charter location. In decisions about where to establish charter schools, charter authorizers and charter management organizations may take account of many considerations aside from the academic effectiveness of local traditional public schools (Gulosino & Lubienski, 2011; Gulosino & d’Entremont, 2011). And they may be strongly swayed by political pressure to open charter schools in some communities or avoid the establishment of new competitors in other local areas. Location decisions will also be influenced by practical considerations such as the availability of buildings, transportation access, or whether an area possesses sufficient population density to sustain a new school. Thus far, however, we have relatively little systematic information on the determinants of supply-side behavior in the education market. One exception is Glomm, Harris, & Lo’s (2005) study of Michigan charter school location. Utilizing district-level data, they find that the number of charter schools increases in districts with 2 In Texas, assigned school reading scores were significant, but not math; In California, math was significant but not reading. E ducation P olicy A nalysis A rchives V ol. 19 N o. 29 6 more diverse populations in terms of race and parental education, while the results for district effectiveness and efficiency are mixed. Although suggestive, the number of charter schools in a district is not a reliable measure of charter school participation rates. Moreover, Glomm, et al. do not account for the fact that many Michigan students attend charter schools that are located outside their district of residence. As we will note, more than one-third of Michigan’s charter schools draw the majority of their students from districts other than the district in which the charter school is located. In the case of inter-district choice, supply-side actions will also be shaped by a host of considerations aside from the relative effectiveness of different public schools. Districts’ supply of openings for nonresidents will depend on the rules in a state’s inter-district choice policy. How much funding do nonresident students bring with them to a district? What criteria may districts utilize in determining which nonresidents students they admit? Districts’ capacity to admit nonresident students, moreover, will be heavily influenced by the pace of their recent enrollment growth. Declining-enrollment districts are likely to have excess capacity, while rapidly growing districts are not. Districts may also anticipate how nonresident students are likely to change the racial or socioeconomic composition of its students. Community resistance to altering a local district’s established racial or social composition may create supply-side restrictions on openings for inter- district transfers. In short, despite strong predictions that school choice participation will be highest in districts where students’ assigned schools are least effective, the evidence thus far is not nearly as robust as one might expect. Past demand-side studies of family school choices are inconclusive regarding the influence of school effectiveness. And such studies fail to recognize a range of supply- side factors that could substantially influence inter-community variations in the school choice participation rates. In this paper, we analyze the determinants of inter-community variations in the proportion of district residents who participate in school choice policies. The issue is important, because it defines which districts experience the greatest financial pressure from choice policies. That financial pressure, in turn, is supposed to be the stimulus for improved district performance. We do not directly model family decision making or ask which students are leaving a given district and why. Rather we conduct a reduced-form, district-level analysis that implicitly embodies the decisions of actors on the demand and supply sides of the education market. We focus on the relative influence of district academic effectiveness and student composition on students’ participation rates in Michigan’s two mature choice policies—charter schools and inter-district choice. Michigan School Choice Context Passed in 1993, Michigan’s charter school law authorizes several agencies to grant charters, including local and intermediate school districts, community colleges, and state universities. Most charters in Michigan have been granted by the governing boards of state universities. Charter schools have no geographic boundaries; students are free to attend any charter school in the state on a space available basis. Random selection by lottery, with certain exceptions, must be used if the number of applicants exceeds available space. Charter schools can serve any grades but most in Michigan serve students only in the K-8 range. Originally, no limit was imposed on the number of charters that could be issued by any of the authorizing boards. However, in 1996, following a proliferation of charters issued by the board of Central Michigan University, the state legislature imposed a cap of 150 on the total number of schools that may be chartered by the state’s 15 public universities. Since there is no cap on the number of schools chartered by other organizations, however, the number of charter schools has School Choice Participation Rates 7 continued to grow. By 2005, the state hosted 226 charter schools that enrolled about 95,000 students (or 5.9 percent of the state’s public school population). In 1996, the Michigan legislature created an inter-district choice program, commonly known as the “schools of choice” program. Every district (school board) can decide each year whether to admit nonresident students and specify the number of available slots by school building and grade level. Districts can also specify whether or not students transferring in must reside within the county where the district is located. Districts cannot prohibit students who live within their boundaries from attending another district that admits them. Once admitted, nonresident students can continue attending a district’s schools until they graduate. Districts are not required under the law to provide transportation for out-of-district students; some districts provide transportation, others do not. By 2005, more than 400 out of 552 school districts accepted inter-district choice students. About 65,000 students (or 4.1 percent of the state’s public school population) participated in inter-district choice. Michigan’s finance system, established with the passage of Proposal A in 1994, has facilitated the development of the state’s school choice programs. Michigan’s districts and charter schools receive almost all their discretionary operational revenues in the form of per-pupil foundation grants. The amount of the grants is determined by the state and districts have essentially no authority to raise local taxes to generate additional school funding. Each charter school receives per- pupil funding approximately equal to the district in which it is located. For inter-district choice students, the revenue follows automatically to the districts where they enroll. Districts receive the lesser of the foundation allowance of the resident district or the enrolling district. Enrolling districts are prohibited from charging tuition in any form to make up any revenue differences. Proposal A creates relatively strong fiscal incentives for schools to compete for students. With the declining value of real per-pupil foundation grants in all Michigan public schools since 2002, the only way for schools to increase their revenue is to attract more students. Where Does School Choice Take Place? Table 1 shows the uneven growth of participation in Michigan’s two school choice programs across different types of communities.3 By 2007, more than 11% of the state’s public school students attended charter schools or district schools outside their district of residence through inter- district choice. In Michigan, school choice remains primarily an urban phenomenon. Central city and low-income suburban districts (generally adjacent to central cities) have experienced the sharpest enrollment losses due to choice competition. Some urban districts, including the state’s largest, Detroit, have lost roughly a third of their resident students to charter schools and inter-district choice combined. No one familiar with Michigan schools doubts that school administrators in Michigan’s urban districts are acutely aware of the financial impacts that the state’s school choice policies have had on their districts. By contrast, neither choice policy poses much threat to high- 3 We define a five-way classification of school district community types. Central city districts are those that the National Center for Education Statistics (NCES) classifies as serving large cities and mid-sized cities. Rural includes districts classified by NCES as outside a metropolitan statistical area (MSA) plus those within an MSA with population density less than 20 people per square mile. Suburban district are those classified by NCES as “serving an MSA but not primarily its central city” and having population density greater than 20 people per square mile. The suburban classification is disaggregated based on median home value (MHV) in the 2000 U.S. Census—Low-income suburb: $32,500