SMU Economist: Schools Need Business Mentality More than Money

A new report says Texas enjoyed a net gain of half a million “migrants” from other states between 2004 and 2008–making it the top destination among the states–and one surprising reason was the proficiency of its eighth grade students in math and reading. Texas ranked about 30th in that category but still outperformed California, which ranked in the bottom 10. And that, the report says, proves that spending more money for education doesn’t necessarily lead to better education outcomes.

Texas “spends substantially less per public-school pupil than California–but its eighth grade students have been doing better in reading and math,” write W. Michael Cox (pictured) and Richard Alm in the 2010 annual report of the William J. O’Neil Center for Global Markets and Freedom at SMU’s Cox School of Business. Michael Cox, who is the center’s director, said at a luncheon unveiling the report Tuesday that Texas can make its schools better with competition including “privatization,” just as competition has improved the cost and quality of cellphones over the years.

“Make schools a business,” counseled Cox, a free-market economist and former senior vice president of the Federal Reserve Bank of Dallas. “I’d pay teachers more if they’re good, fire them if they’re bad. Introduce variety into the curriculum. Vouchers. We’re spending $12,000 per student, times 23 in a classroom; that’s $276,000. Where’s all the money going? Fifty percent is going to bureaucrats. We need hostile takeovers [of bad schools]. We need the full gamut of competition in the schools. Why doesn’t it happen? Unions.”

Public-school education was one of six key “econometric” factors that Cox and Alm identified in the report as significant in Texas’ leadership in state-to-state migration. The other five factors were:

–Individual income tax rates (Texas is one of seven states without a personal income tax);

–Union membership (Texas, which ranks sixth among the states in private-sector union membership, is a right-to-work state where people come to get away from unions, Cox said);

–Government spending (Texas ranks 18th among the states in the growth of state and local outlays per capita, over a five-year period);

–Housing prices (Texas ranks sixth in affordability, based on a four-year average of median prices for single-family homes); and

–Climate (Texas ranks 11th in the “variability” of its monthly temperature).

“These six variables explain two-thirds of all U.S. migration these days,” said Cox, who spoke as part of the North Texas Commission’s Signature luncheon series at the Hilton Anatole.

He concluded that the key factors identified in the O’Neil report bode well for the state’s future. “If we get it right, Texas will gain 1.3 million [residents] just from migration in a decade,” Cox said. “But we can’t [impose] a state income tax or start welcoming unions.”







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