Charter schools are one of a number of school reform strategies that aim to expand choices for families. Other school choice policies include open enrollment, magnet or alternative schools, private school vouchers, tax credits for households paying for private school, and homeschooling. Although the number of cities with open enrollment and magnet schools is growing, charter schools represent the most prevalent type of school choice strategy in the United States today.
Charter schools are independently governed and run public schools that are supported with public funds. In the 2011-12 school year, there were about 5,700 charter schools in 42 states serving over 2 million children. That represents a 186 percent increase in the number of charter schools and a 359 percent increase in the number of students attending charter schools since the 2000-01 school year.
Charter school students still represent a small proportion of all students in the US (4.2 percent), but the speed at which their numbers are growing and where these students are located raise important questions for students, families, neighborhoods, and cities.
Where are charter schools located?
Charter schools are more prevalent in cities than they are in suburban or rural areas; 55 percent are located in central cities (compared with 24 percent of traditional schools), 29 percent are located in suburbs and towns (compared with 42 percent of traditional schools), and 16 percent are located in rural areas (compared with 34 percent of traditional schools). Their reach is increasing, too—they represented 12 percent of all public schools in cities in 2011-12, up from 7.5 percent in 2005-06.
This pattern is also reflected in enrollment patterns. A greater proportion of students attend charter schools in cities (8 percent) than in the suburbs, towns, and rural areas. The map below illustrates where the concentration of students attending charter schools is greatest, highlighting distinct state patterns that largely reflect differences in charter legislation.
What does charter school growth mean for cities?
Right now, there is little empirical evidence about how charter schools will affect neighborhoods and cities. We don’t know how growing demand for charter schools affects neighborhood residents or institutions. We don’t know how families communicate or build trust with their neighbors in places where children attend many different schools. And we don’t know whether charter school choices in cities will change where families with children choose to live and stay.
What we do know is that although the proportion of public school students attending charter schools is currently still relatively small, their growth in cities will likely have important implications for cities and their neighborhoods.
Data-driven programs. The U.S. Department of Education has set a high bar for measuring and reporting program performance and it hasn’t gone unnoticed. The strict requirements even begged the question “Can they be this obsessed with data?” from one Washington Post education reporter. But ask those hard at work in communities like Northeast DC’s Kenilworth-Parkside neighborhood of the DC Promise Neighborhood Initiative (DCPNI), and they’ll tell you it’s not just the federal government or researchers that care about data.
DCPNI is one of 12 Promise Neighborhoods implementation grantees, the Obama Administration’s effort to build a continuum of cradle-to-college solutions for children and youth that put great schools at the center. Grantees are required to collect data on 15 specific performance indicators for the communities they serve, ranging from how many young children have a place to go when they are sick to how many parents talk to their high school students about the importance of college and career readiness.
Data-driven communities. Last month, DCPNI invited its partners, community members, and other stakeholders to get a first glimpse at the data behind their efforts. The data told the story both the strengths and needs of children and youth in their neighborhood—highlighting how they compare to other neighborhoods and what that means for their future and DCPNI’s role. DCPNI showed their community that though the data’s collection and reporting requirements are demanding, understanding and acting on it is the first step to charting a better path for their children and youth.
One required Promise Neighborhoods indicators is the rate of chronic absenteeism, defined as the number of students who are absent 10-percent or more of the days they are enrolled in school. Research shows chronic absenteeism is a key predictor of negative outcomes for children and youth, including poor academic achievement, school drop-out, poor physical and mental health, and even adulthood poverty.
DCPNI found that the rate of chronic absenteeism across all grades in its target schools during the 2012-2013 school year was 32.6%--three times the 10% national average. This data hit the message home to residents and stakeholders that decreasing chronic absenteeism is a key to improving outcomes for students in the Promise Neighborhood. DCPNI shared it goals to change this trajectory through programs such as attendance campaigns, inviting input and collaboration from the community and partners.
Data-driven results. "Data for the sake of data is useless,” DCPNI’s Director of Data and Evaluation, Isaac Castillo, told community members and partners. “We have to share the data and act on it to make the data meaningful.” DCPNI understands that being “obsessed with data” is not just about reporting statistics for government and researchers. The data belong to the community—and the community, government and researchers can work together to find data-driven solutions to get results for their children and youth.
In an important new paper, Eric Toder of the Tax Policy Center and Alan Viard of the American Enterprise Institute say that corporate tax reforms now being debated in Congress fall far short of solving the widespread problems with the levy. Rather than merely lowering rates and tinkering with tax rules for U.S.- based multi-national corporations, as President Obama and many members of Congress have proposed, Toder and Viard argue that the corporate system needs what they call “major surgery.”
In a paper funded by the Peter G. Peterson Foundation, they propose two alternatives: Either build a tax based on a broad international agreement on how to allocate corporate income among countries, or kill the corporate income tax entirely and replace it with a direct tax on shareholders. In such a system, capital gains would be taxed as they accrue rather than when they are realized upon the sale of shares.
Toder and Viard have both been around Washington a long time and neither has any illusions about the political and technical challenges of either change. But, they argue, the policy options currently on the table “fail to resolve the fundamental contradictions in the current corporate income tax.”
The corporate tax has many well-known shortcomings. Two of the biggest: It’s inability to respond to both the explosion of international commerce and the growing share of corporate income produced with intellectual property. Because the U.S. tax on multinational corporations is based on corporate residence and income source—economic concepts that increasingly lack clear meaning in the real world—it is relatively simple for firms to manipulate the law to reduce their tax liability.
They argue that current reform proposals could improve matters on the margin, but can’t resolve these basic contradictions. Neither would the extreme options of either taxing accrued income of U.S. multinationals on a world-wide basis or exempting foreign-source income from tax.
World-wide taxation might prevent U.S. multinationals from shifting reported income to low-tax countries, but it would also place them at a competitive disadvantage if other countries don’t impose similar rules on their multinationals. A pure territorial tax that exempts all foreign-source income would make U.S. multinationals more competitive, but would encourage them to shift investments and reported income overseas.
What to do? As Viard and Toder see it, there are two options. Neither is perfect but both address the problems a single country has in imposing unilateral tax rules on global entities.
The first would encourage the United States to seek an agreement with other countries on a uniform rule for allocating corporate income among jurisdictions. For instance, countries could apportion income by formula, or agree to tax income from intangibles (such as patents) based on the location of sales. The base erosion and profit shifting (BEPS) project at the OECD, undertaken at the request of the G-20, is exploring ways countries can cooperate to reduce tax avoidance by multinationals. But the OECD has not yet addressed the basic issue of how to allocate profits of multinationals.
Alternatively, the U.S. could scrap its corporate income tax entirely for publicly-traded companies. U.S. shareholders would be taxed directly at ordinary income tax rates on their dividends and accrued gains, with a deduction for accrued losses. The tax would be based only on the residence of the shareholder, not of the corporation or on where it earned its income. Owners of closely-held businesses would pay individual income tax on their firm’s profits, just as partnerships and S corporations are taxed today.
While this design is simple, it raises many technical issues: What about shares held by tax-exempt investors such as charitable organizations or qualified retirement plans? Today, they indirectly pay corporate income tax but in this new model they’d pay no tax at all on these shares. How do you allocated profits among multiple classes of stock? What happens to existing business tax preferences, which would disappear for publicly-traded corporations but could remain in place for other businesses? While Eric and Alan suggest some solutions, they acknowledge these are difficult issues.
Finally, there is the cost. TPC estimates that shifting to a shareholder tax would reduce federal revenues by $168 billion at 2015 income levels. How does Congress make up that lost revenue?
Viard and Toder have come up with some creative solutions to a knotty problem. At the very least, they’ve given tax wonks something to talk about. And, with luck, they may help convince lawmakers to break out of today’s non-productive corporate tax debate.
They are discussing their recommendations at a panel discussion this morning at AEI. You can link to the Webcast here.
During the American Society of Public Administration’s 75th anniversary gala this month, I was pleased, though not surprised, to hear other attendees refer to the Urban Institute’s Harry Hatry as “a living legend” for his pioneering work in the field of performance management.
Harry’s 1992 article, “The Case for Performance Monitoring,” cowritten with Joseph S. Wholey, was selected by the Public Administration Review’s editors as one of the 75 most influential articles the journal has published since its inception in 1940. It is a worthy choice; though often implemented behind the scenes with little fanfare, Harry’s ideas have done untold good for the state of our governance.
In the article, Hatry and Wholey make the case for measuring and monitoring public programs and provide numerous examples from across levels of government where the practice could improve how tax dollars are used. “[E]lected officials and citizens are entitled to regular reports on the performance of major public programs—not only program costs and the amount of work completed but also information on the quality of service delivery and on program outcomes,” they wrote.
It builds on the foundation laid last summer by Senators Bob Corker (R-TN) and Mark Warner (D-VA) and their 10 bipartisan co-sponsors, but it shows clear signs that its authors were listening carefully and benefited from last fall’s hearings, as well as from endless conversations with interested parties from across the political spectrum.
Like its predecessor, Johnson-Crapo would wind down Fannie Mae and Freddie Mac over five years and establish a system under which the government would—standing behind significant private capital—provide a paid-for-in-advance catastrophic guarantee backing standardized mortgage-backed securities (MBS), thus providing the predicate for continuation of the long-term fixed rate mortgage at reasonable interest rates. But Johnson-Crapo also takes some major steps forward.
For one, the bill explicitly states that one of the purposes of the new system is to “facilitate the broad availability of mortgage credit and secondary mortgage market financing through fluctuations in the business cycle for eligible single family and multifamily lending across all” regions, localities, institutions, property types (including properties serving renters), and eligible borrowers. It is essential that we recognize that the contextual, legal, and financial support provided by the government to the housing system is there to serve American homeowners and renters. Profitability of lenders, issuers, guarantors, and servicers is a means to that end (although it was good to see nonprofits’ role recognized also) and protection of taxpayers essential to its sustainability, but the goal is to serve the public who need shelter.
Second, multifamily housing comes out well in this draft. More than one-third of American households rent today, and there is every indication that number will increase, at least in the near term. And affordable rental housing is in short supply. Building on the work of many over the past several years, the bill includes a faster transition plan for multifamily than for single family, retention of effective risk-sharing mechanisms currently in use, affordability requirements, and special attention to under-50-unit properties.
To accomplish these goals, the bill would establish an Office of Consumer and Market Access within the Federal Mortgage Insurance Corporation (FMIC) and give it significant responsibilities. In addition, albeit after a significant wait, it establishes a 10 basis point (.001) user fee to fund a Market Access Fund to promote innovation and experimentation so a new housing finance system meets the fast-changing demographics of the American population. The fee would also provide funding for the previously-established National Housing Trust Fund and Capital Magnet Fund, which are focused on affordable rental housing. The fee is structured with an incentive system to reward those who serve the market better. And there are reporting requirements so the public also knows who is doing a good job and who is not.
Third, Johnson-Crapo sets up a stronger and more comprehensive regulatory system. While there will clearly be issues of coordination among existing regulators, state and federal, and the FMIC, the bill provides the FMIC with critically important powers over those who will participate in the new system.
There is still much work to be done—on this draft and through the entire legislative process. The capital provisions still are too lenient when securities issuers directly approach the government for a guarantee, and too strict for the well-diversified guarantors envisioned as the primary gateway to the guarantee—raising the real specter of another securities-led race to the bottom, this time with a government guarantee. The equal access provisions, while a definite improvement, still raise serious questions, including the timing of funding and whether the incentive plan can be effective. And there are undoubtedly other concerns buried in the bill’s 442 pages.
But we can thank Senators Johnson and Crapo, and all those who worked with them, for moving the ball in a way that actually enables us to see the goal.
These proposals are well intentioned. They arise out of concern over rising college prices and the struggles students and families face to pay for postsecondary education. Targeting community colleges is appealing because these institutions disproportionately enroll students from low-income backgrounds.
But who will really be helped by free community college tuition?
Most community college students would not be eligible for this assistance because it is restricted to recent high school graduates.
According to government data, in 2011-12, only 38 percent of first-year community college students in the United States were age 20 or younger. The other 62 percent were older and returning to school to gain education and labor market skills. They would not benefit from these new programs.
The lowest-income recent high school graduates will not benefit from the new subsidies because their tuitions are generally covered by federal and state grant aid. Also, this program, unlike other aid programs, does not allow students to use the money for living expenses.
Tuition and fees for full-time students at community colleges nationwide average about $3,330. Oregon charges $4,440; Tennessee’s price is $3,760; and Mississippi’s is just $2,390.
Students who can’t afford to pay any part of their own educational expenses are already eligible for federal Pell Grants of $5,645 per year, and most states provide some funding for low-income students to supplement that federal funding. Some students receive smaller Pell Grants, but the students who are not Pell-eligible would reap the biggest benefit from the free tuition plans.
The dollars will flow to the more affluent students who enroll in community colleges—those for whom the relatively low tuition is generally not a significant barrier.
Could low-income students be hurt by this policy?
Will free tuition induce more students to begin their studies at community colleges instead of at four-year institutions? If the policy increases the enrollment of middle-income students, it could strain community college resources and enrollment capacity, and wind up harming lower-income students.
In addition, evidence suggests that students with similar family background and academic qualifications are more likely to earn a bachelor’s degree if they start at a four-year rather than a two-year college. If a bargain price for community college lures students away from four-year colleges as their starting point, the net result may be fewer bachelor’s degrees among students who have that goal.
Better ways to help low-income students
It’s great that states want to reduce the financial burden of college. The most obvious solution would be to prevent prices from rising so rapidly in the first place. Increasing state appropriations for higher education institutions is the simplest way to do this. But this approach is expensive and not targeted to the students who most need the help.
The proposed incentives in these programs spurring students to keep up their GPAs and enroll in enough classes to graduate in a timely matter are very important. And providing academic and other supports to students—as the Tennessee plan proposes—can make a very big difference. Pushing community college students to apply for the federal grant aid for which they are eligible can also have an impact.
State need-based grant programs are targeted at low-income students. States should provide the funds to the students who are struggling most financially. These are students from low-income families and adults who lack labor market skills.
Funding these efforts would be more constructive than making college tuition-free for those who can already afford it.
Click image to view C-SPAN2 clip from BPC Debt Ceiling Event
The federal government hit its statutory borrowing limit last Friday and is predicted to run out of “extraordinary spending measures” by February 27th, putting before Congress yet again the task of raising the debt ceiling.
Given the frequency and contentiousness of this issue, it’s natural to wonder: is there a better way? That was the question former CBO director and current Urban Institute Fellow Rudy Penner considered on February 3 in a Bipartisan Policy Center event in which Treasury Secretary Jacob Lew urged Congress to raise the ceiling.
Below is a lightly edited transcript of Penner’s comments, in which he articulates his preference for replacing the debt ceiling altogether.
I think that the debt limit is a crock, basically. There’s a paradox here, and that is they always say that to be effective in negotiations you’ve got to be willing to shoot the hostages. We’ve never been willing to do that in the 100 years that the debt limit has been in existence.
The real place to negotiate over spending and tax matters, including entitlements, is when you’re debating the budget resolution. That’s when we set our targets for spending and revenues.
Having a separate debt limit—I don’t think it has served much of a purpose. It certainly hasn’t brought about fundamental reforms in entitlements. One of the biggest things that happened around the debt limit was the Gramm-Rudman-Hollings [Balanced Budget Act of 1985] but that quickly became bipartisan, and once the debate got going, you hardly heard any mention of defaulting on the debt.
So in terms of what to do, obviously my first choice is to get rid of the debt limit law altogether.
My second choice was alluded to by Secretary Lew: he noted what Senator McConnell did in the past, and Representative Honda has a very similar approach in the House. The basic idea would be that you would give the president discretion to set the debt limit a year in advance; the Congress would be able to disapprove of what the president did, the president could veto that law, and then you would need a supermajority to overturn the veto.
My third choice would be to go back to the Gephardt Rule, which worked fairly reasonably in the past, and that is to tie the increase in the debt to the budget resolution that was passed.
There is a practical problem with that: if you do that very rigorously, you’ve got to confront the problem that we don’t forecast deficits very well. Indeed, we often make huge mistakes, so to make that rule work practically, I think you would need some flexibility. You’d need a margin of error there.