Privatising education

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Privatising education

• James Tooley, PhD
• Professor of Education Policy
• University of Newcastle
• ? James Tooley 2001

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Three parts

• Why privatisation of education?
• Negative and positive reasons
• Two approaches
• Public-private partnerships
• Extending access to private education
• Implications for Lithuania

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Why privatisation?

• What do I mean by privatisation?
• Increasing role for private sector in educational
• provision
• funding and/or
• regulation

4
Why privatisation?

• Negative reasons
• failures of state education
• inequity of state provision
• Positive reasons
• Efficiency and cost-effectiveness
• Investment
• Innovation
• Self-help and community self-help
• Freedom/liberty

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Why privatisation? Efficiency and
cost-effectiveness

• World Bank studies show the proportional gain in
  achievement score if a randomly selected student,
  with the characteristics of an average public
  school student, attends a private rather than a
  public school, holding constant that students
  background

• Jimenez, Emmanuel, Lockheed, Marlaine E., and
  Paqueo, Vicente, (1991) The Relative Efficiency
  of Private and Public Schools in Developing
  Countries, World Bank Research Observer, Vol. 6,
  no. 2 (July), pp. 205-218
• Jimenez, Emmanuel,, Lockheed, Marlaine,
  Wattanawaha, Nongnuch, (1988) The Relative
  Efficency of Private and Public Schools the Case
  of Thailand, The World Bank Economic Review, Vol.
  2, no. 2, pp. 139-164).

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Why privatisation? Efficiency
Country Achievement indicator Relative advantage of private versus public school SD units (effect size)
Colombia Ave. math and verbal 1.13 0.55
Dominican Republic Mathematics 1.47 2.16
Philippines Mathematics English 1.00 1.18 -0.09 0.33
Tanzania Ave. math and verbal 1.16 0.97
Thailand Mathematics 2.63 1.69
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Why privatisation cost-effectiveness
Country Ratio of private to public cost For the same unit cost, how much more achievement in private schools? For the same amount of achievement, how much less cost in private schools?
Colombia 0.69 1.64 0.61
Dominican Republic 0.65 2.02 0.50
Philippines 0.83 1.20 0.83
Tanzania 0.69 1.68 0.59
Thailand 0.39 6.74 0.17
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Kingdon Cost per achievement (Rs)
G PA PUA
Cost/student 2008 1827 999
Predicted maths 11.38 10.09 12.80
Cost per maths point 176 181 78
Predicted reading 13.78 13.73 13.82
Cost per reading point 146 133 72
Predicted total 25.16 23.82 26.62
Cost per point 80 77 38
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Kingdons conclusion

• PUA schools are unambiguously and substantially
  more cost-effective and internally efficient than
  G and PA schools

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Why privatisation? Innovation and investment

• Education companies are emerging, with chains of
  schools and universities, which
• benefit from economies of scale can find
  finance from financial institutions can fund
  student loan programmes

• invest in research and development implications
  for financial efficiency and educational
  effectiveness
• Potential to solve the information problem
  through brand names Solve information asymmetry
  problem

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Why privatisation? Innovation and investment

• Entrepreneurs in developed and developing
  countries have created educational opportunities
  which are
• Profitable
• Financed entirely from student fee income
• Cater for mass markets, not just the elite

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Cases

• Objetivo/UNIP, Brazil, was founded in 1962 with
  20 students and is
• probably the largest chain of private schools in
  the world?
• Over 500,000 students in about 500 campuses
• Many franchised

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Educor, South Africa

• 1943 - founded as a cramming college
• 1952 - developed distance learning materials
• 1996 - IPO on the Johannesburg Stock Exchange
• Now 300,000 students on 127 campuses

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(No Transcript)
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NIIT, India

• 1979 computer training company
• Now has 1,000 franchised centres in India and has
  expanded into 25 countries worldwide
• Emphasis on RD and quality control
• Student loan scheme with Citibank

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NIIT RD

• The hole in the wall programme
• Challenges the notion of what a teacher is
• Is it commercially viable?

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Key questions

• Can the virtues of private education be
  replicated in the state sector?
• Can access to the virtues of private education be
  extended to those currently within the state
  sector?

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Hence two approaches to privatisation

• Public-private partnerships (PPP)
• Contracting out of (failing) state schools
• Charter schools
• Vouchers (state)

• Extending access to private education
• Private schools for the poor
• Private vouchers
• Tax credits and scholarships

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Contracting out

• Founded 1992
• First four schools in 1995
• Now more than 57,000 students in 108 schools

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Inclusive schools

• Largest group of students is African-American
• 65 of students on free-school meals

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Attracting investment

• Since taking over first schools, by 1998 raised
  120 million for RD and investing in schools
• On Nov 11 1999, launched on Nasdaq, raising
  122.4 million
• Share price steady

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Inputs and outputs

• Takes only 90 of state funding
• Invests 1 million in each school
• Pays teachers more
• Share options for all staff, from janitors to
  principals

• 84 of classes have statistically significant
  gains
• High parental satisfaction
• Waiting lists in all schools
• edisonschools.com

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Edison versus government schools - of school
budget
Government schools Edison Schools
Devolved to school 70 79
Administration 27 7
Depreciation 3 6
Profit N/a 8
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Vouchers

• Government coupons or checks
• Programmes in USA, Colombia, Chile, Sweden, etc.

• USA examples
• Vermont
• Maine
• Milwaukee
• Cleveland
• Florida

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The Voucher Tree
Limited fixed-value uniform fees
Unlimited supplementable uniform fees
Unlimited supplementable cost-fees
transport included
Unlimited supplementable cost-fees
transport included income-related restricted
Unlimited supplementable cost-fees
transport included income-related unrestricted
(Blaug 1984)
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Chile vouchers

• Vouchers usable at any private or municipal
  school
• Subsidised private schools are more efficient
  than the municipal schools employing fewer
  teachers per pupil and having lower unit costs.
• Achieve higher test results in mathematics and
  Spanish.

• Larrañaga, Oswaldo, (1997) Chile A Hybrid
  Approach, in Zuckerman, Elaine and de Kadt,
  Emanuel (eds) The Public-private Mix in Social
  Services Health care and education in Chile,
  Costa Rica and Venezuela, Washington DC
  Inter-American Development Bank.

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USA Vouchers

• Vermont (1869)
• Parents who live in districts without public
  schools are reimbursed for costs of sending
  children to private school.
• About 400 students per year

• Maine (1954)
• Parents who live in districts without public
  schools are reimbursed for costs of sending
  children to private school.
• About 5,300 students per year

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USA vouchers

• Milwaukee Parental Choice Program (1989)
• Government gives vouchers to select number of
  parents, to pay for tuition at private schools.

• 8,000 students (1999), given 5,000 to attend 91
  private schools
• No more than 15 of total children

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USA vouchers

• Cleveland Pilot Scholarship Program (1995)
• Government gives vouchers to select number of
  parents, to pay for tuition at private schools.

• 3,500 students (1999) given 2,250 to attend 59
  schools
• 5 of children in grades 3 to 8

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USA vouchers

• Florida A Plan (1999)
• Schools are graded A-F based on standardised test
  scores
• Students in schools graded F for two out of four
  years are given 4,000 vouchers to attend private
  schools
• A school accountability plan with teeth.

• 1999 134 families offered scholarships
• 2000 as many as 50 schools would qualify.
• Superintendent of one Tampa district said that
  all top administrators would take 5 pay cut if
  any school was given an F.
• State judge struck down law on March 14, 2000

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USA vouchers evidence

• Cleveland study (1999, Dr Kim Metcalf, Indiana
  University)
• Found small but statistically significant
  improvement in language and science achievement
  scores
• Programme serves the population intended

• Most children who enrol would not otherwise have
  attended a private school
• Scholarship parent satisfaction with childs
  school substantially higher

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USA vouchers

• Very small scale only about 25,000 students or
  less than 1 of total nationally

• Heavily constrained and politicised
• Implications for Lithuania?

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USA vouchers evidence

• Milwaukee Dr John Witte (official evaluator of
  program).
• The Market Approach to Education An analysis of
  Americas First Voucher Program (2000)

• Vouchers are a useful tool to aid low-income
  families

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Recap of first approach public-private
partnerships

• Contracting out
• Charter schools
• Vouchers

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Second approach Extending access to private
education

• Private schools for the poor (budget private
  schools)
• Private vouchers
• Tax credits and scholarships

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Private schools for the poor in India

• Dramatic growth of private schools for the poor
• School fees of about 20 per year
• Scholarships for poorest 15-20 of student
  places

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Why? Breakdown in public schools

• plain negligence cases of teachers keeping a
  school closed for months at a time a school
  where the headteacher was drunk, a headteacher
  who comes to school once a week
• this pattern is not confined to a minority of
  irresponsible teachers it has become a way of
  life in the profession.

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If India can

• Why cant we?

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Extending access to private schools

• Private vouchers
• Tax credits

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Private voucher scheme USA

• Childrens Scholarship Fund (CSF) in USA, 100
  million foundation, underwritten by Ted Forstmann
  and John Walton.
• Awarded 40,000 four-year partial scholarships to
  low income students to attend private schools

• CSF received 1,250,000 applications 30 times
  the number of scholarships available from low
  income families, all prepared to pay 1,000 per
  year.

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Private vouchers in the USA the Golden Rule

• J. Patrick Rooney, Chief Executive Officer of the
  Golden Rule Insurance Company
• Golden Rule model embodied four principles
• Vouchers would be for half of the private school
  tuition fee (thus ensuring parents became
  financial stakeholders in their childrens
  education).
• Only low-income families would be eligible (but
  low-income families who had already made the
  sacrifice and commitment necessary to get their
  children into private schools would not be
  penalised).
• Vouchers would be eligible for use at any
  private school of the parents choice
• Low-income families would be granted vouchers on
  a first-come, first-served basis  

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Tax credits

• Dollar for dollar reduction in taxes owed for use
  on schooling
• Includes school fees, textbooks, transport,
  extracurricular fees

• In USA, four states
• Arizona
• Iowa
• Minnesota
• Illinois

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Tax credits - USA

• Arizona allows taxpayers to contribute up to
  500 to a tuition organisation which gives
  scholarships for poor people to attend private
  schools

• In 1999, 30,000 people contributed nearly 14
  million to 31 clearinghouses, helping nearly
  7,000 low income students

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Tax credits - USA

• Iowa
• Tax credit of 250 on the first 1,000 of tuition
  expenses at private school.
• No income ceiling.

• Minnesota
• Families with incomes up to 33,500 can claim a
  maximum tax credit of 1,000 per student or
  2,000 per family.
• Refundable I.e., those families who dont pay
  taxes can still receive it.
• Tax deduction for school expenses from 1,625 to
  2,500 per year

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Tax Credits Cato proposal

• 500 nonrefundable education credit against the
  federal income tax.
• Estimate that states would save 14 billion on
  public education costs, and allow 2.3 million
  students escape failing public schools

• Two components
• Parental choice credit dollar for dollar
  reduction up to 500 per child
• Scholarship credit any taxpayer can receive
  reduction of up to 500 per taxpayer for
  scholarship clearing house

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Implications for Lithuania? private schools
Year Private Public and private private
1994 17 2516 0.68
1996 36 2570 1.40
1997 36 2597 1.39
1998 42 2620 1.60
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Implications for Lithuania? private school
students
Year Private Public and private private
1994 996 634096 0.16
1996 3097 613697 0.50
1997 3470 691570 0.50
1998 4342 721842 0.60
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Implications for Lithuania?

• Leading the way with a workable voucher scheme?
• Easing regulations for private alternatives ?

• Exploring contracting out to international
  companies?
• Other ideas?

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For further information

• www.katallaxia.org