How do Ohio's charter schools resemble modern Poland's economy? Travel with me across the Atlantic.
In 1990, I had the privilege of spending a year in a Polish town as a high school English teacher. This was the year Poland experienced economic "shock therapy." Almost overnight, its state-owned industrial goliaths-mining, steel factories, tractor factories, armament factories, etc.-withered and myriad small businesses began to flower. Cities evolved from gray and dreary centers to colorful, vibrant places populated by hundreds of little shops and kiosks that sold every consumer item imaginable. Most of these shops were little more than a husband and wife selling products they bought in Germany or Russia with money they had been keeping under their beds for years, awaiting the opportunity to spend it.
Revisiting Poland only five years later, however, I discovered a land with far fewer mom-and-pop shops. Many of them had been replaced by established brands of haberdasheries, restaurants, pharmacies, and such. English, French, and U.S. brand-name stores now lined the streets, along with McDonald's, Pizza Hut, and their ilk. The free market had found its way to Poland. By the time of my last visit in 2004, that nation's cities looked much like their counterparts in Western Europe. Poland's economy, at least its service and retail sectors, had matured.
In a decade and a half, I witnessed Poland's entry into modern capitalism, an economic renaissance that resembled the classic sequence taught in Econ 101: a start-up stage (defined by rapid growth of a product or industry), a growth stage (with shake-outs from competition and consolidation), and a mature stage (where the most efficient and viable are left standing).
In observing the charter-school scene evolve in Ohio, I can't help but see parallels. Since 1998, the number of charter schools operating in the Buckeye State multiplied twenty-fold (from 15 to almost 300), and the number of children served by them swelled from 2,245 to over 70,000. It's fair to say Ohio's charter start-up stage has been dramatic, especially considering that these schools are pretty much restricted to the state's eight major cities. Such growth is driven by legitimate parent dissatisfaction with traditional public schools in those communities, and many of Ohio's most vulnerable children have benefited from the charter option.
But the rapid-growth era for small charter schools is coming to a close. The fact that the legislature has capped new start-ups for all but high-performing school management companies ensures that far fewer schools will open in September. And the state's charter sponsors (which, in effect, "license" these schools to operate) are becoming fussier, both because they, too, are under the gun to demonstrate success and because they cannot afford to sponsor small schools that pay small fees for what is often much heavy lifting by sponsors.
Hence the next 12-18 months in Ohio are likely to see fewer new schools open, more faltering schools close, and a round of consolidations where more successful operators take over struggling "mom and pop" operations. If Ohio charter supporters seek long-term sustainability and quality for this important educational experiment, such consolidation should be welcomed. However, as in Poland's economic transformation, there will be some who feel betrayed by these changes, and this could trigger a backlash.
At the end of 2005, 63 percent of Ohio's charter schools served fewer than 200 children each. One school in five enrolled no more than fifty students. (See here). Though nobody can say what is the optimal size for a school, even aficionados of small schools say that effective elementary schools generally enroll 300-400 pupils and that 400-800 students is appropriate for a secondary school. From a financial perspective, Moody's Investors Service observed in July 2003 that effectively funding charter school facilities requires at least 300 to 500 students. Moody's termed this "an important threshold, because below this figure, the loss of even a few students can negatively impact debt service coverage." (See here.) This is a significant point in a state that presently offers charter schools no help with facilities and keeps their operating budgets some 30 percent lower per pupil than traditional district schools.
In short, small charter schools face huge challenges. Their budgets are relentlessly tight, and any increase in operating costs (e.g., health insurance) may erode their academic programs. Sure, there will be happy exceptions to this rule, especially where philanthropy augments the state's dollar, but in general there seems to be a minimum economy of scale for a charter school to succeed in Ohio over the long haul.
Ohio's charter movement is entering the classic Econ 101 shake-out stage, dictated partly by economics and partly by legislatively-imposed caps and school performance requirements. Some schools will surely close, others will merge, and some may gravitate into partnerships that encourage economies of scale across multiple schools. Such consolidations could result in fewer schools but possibly more students. We may see situations where two or three schools become one (as has happened with Catholic schools in recent years). Perhaps we'll also see the emergence of mini charter school "systems." Such partnerships and amalgams will help smaller schools gain economies of scale across essential services (e.g., financial management, food services, special education, and even facilities), while maintaining their academic independence. In the end, these changes are going to improve the quality of choices available to consumers. That's the nature of the economic life cycle. For Ohio's neediest families, it should mean steadily improving schools of choice for their children.
Such changes may also lead to a proliferation of national firms managing Ohio charter schools. Examples of such chains are the Michigan-based National Heritage Academies (which operates 51 schools serving 26,000 student in five states), New York City-based Edison Schools (which operates schools serving 330,000 students in 25 states), New York-based Mosaica (70 schools in eight states), and Ohio's own White Hat Management (51 schools in six states). But for-profit companies aren't the only story. Just as Poland saw an explosion of non-governmental organizations funded by outside philanthropists in the 1990s, the charter school scene is also witnessing an increase in non-profit school chains supported by national foundations. Examples include Lighthouse Academies, KIPP, and the Big Picture Company.
When multinational corporations moved into Poland, the quality of services improved across all sectors because of the competition they brought and because of their resources, expertise, and proven models. The same is likely to be true in Ohio as it relates to charter school management companies and their non-profit counterparts. Yet, as in Poland, when outsiders are seen as taking jobs and control from locals, uneasiness (and sometimes even a sense of betrayal) follows. The key to avoiding a political backlash in Ohio lies in delivering the goods-in this case a demonstrably better educational product. This alone will determine whether the charter school marketplace in tomorrow's Ohio is vibrant, popular, and expansive, or if-as with Poland's neighbors to the east (Russia and Belarus)-the introduction of outside competition triggers a hostile response, protectionism and, in time, the demise of market forces.