Increasing Student Performance Through Competition

Examining the President's Management Agenda

I wanted to share information with you about how President Bush's "President's Management Agenda," (PMA) presents a conceptual framework and strategic opportunity to work for more competition in education and better outcomes for students.

The President's Management Agenda or PMA recognizes that a central challenge in government management is the limited signals agencies get about how programs are working and how customers are being served. Without a bottom-line and without competitive forces, program structures and approaches often stagnate, while success is not always visible or replicated, and problems grow. Worse, since budgets are not linked to performance in a positive way, too often poor performers get rewarded as budget increases follow failure. This is certainly true for the federal Department of Education. For example, Title I, the largest federal elementary education program with 30 years of failing history receives the largest funding increase in federal education history.

The 2003 Department of Education budget includes $11.4 billion for Title I grants to local education agencies, an increase of $1 billion or 9.7 percent, to give states and school districts additional resources to turn around low-performing schools, improve teacher quality, and ensure that no child is trapped in a failing school. Yet, the most recent results of the 2000 NAEP tests for fourth-grade reading paint a bleak picture for Title I: 63 percent of blacks, 58 percent of Hispanics, 47 percent of urban students, and 60 percent of poor children scored below "basic" in reading—which for all practical purposes means they cannot read.

Poor performers get rewarded as budget increases follow failure.

William Eggers, a senior fellow from the Manhattan Institute and former Director of Reason's Privatization Center wrote in The Wall Street Journal that:

"The goal of the President's Management Agenda is to link funding to actual performance for scores of federal programs. His catchphrase: "performance-based budgeting." His primary goal: get legislators and interest groups to focus less on how much each cherished federal program's funding has increased over last year's base level, and more on what said program has actually accomplished. The goal, says budget director Mitch Daniels, the architect of the new approach, "shouldn't be merely how much, but how well."

So how is the Department of Education moving to meet the challenge of the PMA and ask "How Well?" more often?

The real opportunities for the Department of Education to answer the "How Well?" question and link student achievement with actual budget allocations comes from the plank in the PMA known as "competitive sourcing."

Government should be market-based—we should not be afraid of competition, innovation, and choice. I will open government to the discipline of competition.

—George W. Bush

Education outcomes have certainly suffered from a lack of discipline from competition. Competitive sourcing embraces the idea that before fundamental change can occur in government, we have to get to a bottom-line and a competitive system. Competition is the management tool that leads to better outcomes.

The President's 2003 Budget proposal contains several "competitive sourcing" opportunities for education. The most important initiative in the president's proposed budget is a new tuition tax credit program. With tax credits valued at $3.5 billion over five years, this new program will offer families of students currently trapped in failing public schools a refundable tax credit to cover 50 percent of the cost of books, computers, transportation, supplies, and tuition at a family's school of choice (including home schools). This tax credit is an important supplement to the enforcement power of "The No Child left Behind Act," which uses the transparency and accountability that will be provided to parents when test results for all children in 3rd through 8th grade are reported across the nation. The transparency and negative stigma of low-test scores should encourage schools to increase performance over time. On the other hand, the tax credits give parents immediate relief from failing schools and give failing schools an added incentive to improve because of potential lost per-pupil funding.

Other "competitive sourcing" opportunities from Bush's 2003 budget proposal include:

  • $200 million for Charter Schools to stimulate continued growth in the number of charter schools nationwide, an important element of the administration's proposal to increase choice for students and parents—particularly those from economically disadvantaged backgrounds. The request would support approximately 1,800 new and existing charter schools.

  • $100 million for a new Credit Enhancement for Charter School Facilities program to assist charter schools in acquiring, leasing, and renovating school facilities through competitive grants to public and nonprofit entities for loan guarantees, insuring debt, and other activities that facilitate private lending.

  • $50 million for a new Choice Demonstration Fund to support research projects that develop, implement, and evaluate innovative approaches to providing parents with expanded school options, including both private- and public-school choice.

  • $25 million for Voluntary Public School Choice grants to encourage states and school districts to establish or expand public school choice programs by providing financial support for planning, tuition transfer payments, and efforts to increase the capacity of participating schools.

Competitive Sourcing holds the key for students who need better educational outcomes now while they are still in school.

The Department of Education has also identified 40 programs as potential candidates for the chopping block, creating a $2.1 billion "menu" from which to cut programs. Among those slated for elimination are: exchange with historic whaling partners ($5 million), underground railroad program ($2 million), alcohol abuse reduction ($25 million), vocational rehabilitation access to telenetwork fund ($20 million), women's educational equity ($3 million), parental assistance information centers ($40 million), rural education ($162.5 million), and the comprehensive regional assistance centers ($28 million).

The Department of Education has also developed a Management Improvement Team (MIT) that has identified 661 recommendations towards meeting the PMA. Most of these recommendations deal with management and budget issues within the department itself. For example, limiting purchase card use by reducing employee access to cards, and reduced spending limits—in some cases by more than 90 percent.

The recommendations do not often trickle down to actual Department of Education programs like Title I—where the most money is spent and where there is the least link between budget and performance. Money follows failure.

To truly meet the challenge of the President's Management Agenda the Department of Education will have to tie student outcomes to budget allocations to truly claim a performance-based budget. The fastest way to create institutional change and increase student performance is to move quickly to more competitive sourcing for Department of Education programs through tax credits and other competitive proposals.

We have a historic opportunity to use the language and framework of the President's Management Agenda to push for more competition in education and more choices for parents and students.

Some links for your review:

The Presidents Management Agenda

The Department of Education Management Improvement Team

The Department of Educations 2003 Budget proposal

I welcome any comments or questions about PMA and the opportunities it provides for future school-choice options.

Lisa Snell is director of education and child welfare at Reason Foundation. She formerly taught speech courses at California State University, Fullerton.

Lisa Snell is Director of Education





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