Revitalizing Dayton Through School Choice
Introduction
Generally, families choose to live by quality schools. Recent decades have seen an exodus of hundreds of thousands of residents away from Ohio city centers. The poor quality of traditional public schools in these cities hinders attempts at revitalization.
Working and middle class families with kids are vital to neighborhood- and city-building since they tend to have higher incomes and are more stable, economically and socially. These are the families, however, that Ohio’s cities are losing. Attracting (and retaining) this important demographic will help integrate Ohio’s urban centers, economically and racially, resulting in higher average incomes and neighborhoods that are more vibrant. There are simply too few empty nesters, DINKs (Double Income, No Kids), and young single professionals to revitalize an entire major city.
This study proposes the creation of Education Empowerment Zones (EEZs) in Ohio’s major cities. EEZs are a combination of continued Community School (Ohio’s term for independent public, or “charter” schools) growth and an expanded education voucher available to all Ohioans. EEZs should encourage urban living and help stem the exodus of middle-class families to the suburbs.
The Role of Education in Urban Development
When people purchase a more expensive home in a suburb, they are not only purchasing a newer home. They are also purchasing the government services that go with that home. For many home shoppers, the number-one government service they care about is the quality of the local public schools. The problem for those interested in revitalizing Ohio cities by stemming the emigration of residents to outlying suburbs is that the public school systems improve dramatically the farther someone moves from downtown.
Research suggests that parental perceptions of school quality can have important effects on the decision of families and households to move to one area over another. The effects of school quality on location decisions can best be understood by imagining two identical homes—one with good schools and the other with bad schools. Assuming the two neighborhoods were identical in every other way, the home in the area with good schools would be worth more because more parents would want to live there, therefore bidding up prices.
How much is this association with good schools worth? Looking at a Cleveland neighborhood where some students attend both Cleveland and Shaker Heights schools, Economists William Bogart and Brian Cromwell estimated that having a house in the Shaker Heights school system was worth between $5,300 and $11,600 more than an identical home in the Cleveland school system.
The issue of school quality lies heaviest on parents because parents are most willing to pay more (in both housing price and taxes) for the assurance of quality schools for their children. Parents are the customers who will shop elsewhere if they cannot find what they desire in a school. Widespread revitalization of Ohio’s cities and neighborhoods will not occur without making good schools available to all city residents.
Choice and Quality Schools
Given the slow pace of traditional public school improvement, educational quality will have to increase through a “supply side” improvement, expanding the number of quality school alternatives within the cities. This can occur in at least three ways:
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Expanding educational opportunity in traditional public schools by capitalizing on existing magnet and neighborhood schools, or converting existing schools to Community Schools;
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Expanding nontraditional public education alternatives such as Community Schools through new school start-ups; and/or
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Expanding private school options for all city residents through vouchers.
A significant expansion of school choice would have a substantial impact on Ohio’s cities. While the full effects are not known, existing research and experience with educational choice suggest the following:
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Education quality should improve through increased competition for students;
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Overall spending on schools should fall as students opt for lower cost alternatives such as Community Schools and private schools;
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Neighborhoods should stabilize as middle-income families are attracted into the city, raising home values and providing stronger incentives for educational improvement.
Increasing choice in Ohio’s urban areas will increase the academic achievement of students switching out of the public schools. Private and Community Schools are smaller, more nurturing environments, and a significant body of research shows that students do better academically and socially in smaller schools. More importantly, economic theory and empirical results indicate that the expansion of non-traditional public school enrollment will have a “competitive effect”—students in the traditional public schools will do better on objective measures of student performance.
Using data from 607 Ohio school districts, one of the authors has found that school districts with high nonpublic school enrollment perform better than where nonpublic school enrollment is low. This research suggests that the percentage of students passing all sections of the fourth grade reading test in Dayton schools would increase by 4.6 percentage points if Community and private schools increased to 49.8 percent of the market in Dayton.
Effects on Cities
Increased quality in schools has an important, positive general impact on cities as well. This is perhaps most evident in housing values. A study of 134 school districts in six Ohio metropolitan areas found that increased school quality significantly boosted housing values after factoring out the influence of characteristics such as race, crime rate, tax rate, house size, number and kinds of rooms, and the time of sale. If a school district’s performance were to increase by 10 percentage points relative to its neighbors, housing prices would rise by 2.2 percent, or approximately $1,720.
Duke economist Thomas Nechyba has also studied the impact of education finance on neighborhood income segregation. He found that a flourishing private school market decreases residential income segregation by giving families the ability to purchase lower-priced homes in poorer neighborhoods without sacrificing school quality.
Nechyba suggests that the best way to reduce residential income segregation is a voucher program aimed at residents of only the poorest district in an area. Introducing a $5,000 voucher into the poorest school district in an area would increase demand for housing in the poor district by so much that the ratio of average income between the richest area and poorest area would fall from 2.13 to 1.20, or by nearly 44 percent. If the introduction of a $4,949 voucher into Dayton had an effect of residential income segregation of the same magnitude estimated by Nechyba, incomes in Dayton would rise from $22,602 to approximately $28,957, an increase of over 28 percent.
As more middle-income residents are retained or move into the city because of the availability of a voucher to attend the school of their choice, the average income of a city resident should increase over time. This would have a positive impact on the income tax revenues collected by the city, although it is difficult to predict by how much. The assessed value of property will eventually increase due to increased demand. It is important for Ohio’s cities to have as high a residential property tax base as possible so that any future tax levies would be at the lowest rate possible. Lower tax rates will help Ohio’s cities compete in a global marketplace.
Expanding Choice in Ohio’s Six Largest Cities
Ohio’s six largest cities, with the exception of Columbus, have seen population declines in recent decades. Each of these cities has important areas of strength, including ethnically diverse neighborhoods, vibrant downtowns, multiple higher education providers, and numerous sport and cultural opportunities. History and state education policy has also led to a large number of potential education opportunities for their residents. The nontraditional public and private schools are a critical ingredient in attracting and retaining working-and-middle-class families.
The long-run impact of creating EEZs would be a dramatic increase in the number of students in private schools. Table 1 shows current private school enrollment in Ohio’s six largest cities and enrollment after expanded school choice under EEZs. Current private school enrollment in these six cities is just over 60,000. All of the current students are assumed to receive vouchers as are the 34,000 or so students from families estimated to move into these cities as a result of the public policy change. In total, private school enrollment will be over 94,000 after expanded school choice.
By phasing-in EEZs, the short-term transition costs can be more evenly spaced out over time. A six-year phase-in, with the maximum voucher amount increasing by $500 annually (from its current maximum of $2,250), dramatically reduces the first year cost by $200 million. First year costs decline from over $300 million to around $100 million.
The first-year cost of extending vouchers to current private school students is around $108 million. Full implementation would occur in year six when all current and new private school students would receive vouchers worth $5,250, for a total cost of $316 million. This is the maximum cost of expanding the voucher program to all major cities in Ohio.
Funding the Transition
On a per-pupil basis, private schools are considerably cheaper than public schools. The savings from moving public school students into the private schools, coupled with the additional benefits of encouraging two-parent families back to the city, will eventually outweigh the short-term cost of implementing EEZs.
A possible source of funding is a shifting of current state and federal education funding. The Buckeye Institute analyzed 92 programs in the current Ohio Department of Education budget to identify those that might be affected by EEZs or another comprehensive choice program. Nearly two dozen programs could be removed, downsized, or have their priorities shifted without an appreciable change in student outcomes. At a conservative estimate, this could create a total of nearly $380 million, more than enough to fully fund EEZs in Ohio’s six largest cities.
Conclusion
The major cities in Ohio face a serious obstacle to real urban reform: the continued suburban migration of middle-class families seeking quality schools for their children. Education Empowerment Zones work to eliminate this obstacle to fundamental urban revitalization. The benefits of EEZs include greater economic integration, stabilized neighborhoods, and increased student learning. On net, the effects generated by EEZs are likely to make Ohio’s major cities more attractive to all metropolitan residents, especially working-and-middle-class families.
Joshua C. Hall is the director of the Buckeye Institute Center for Education Excellence and a lecturer in economics at Capital University.
