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Charter schools have been handicapped by receiving substantially less funding than traditional public schools and by having to comply with regulations far in excess of what was originally conceived, particularly with respect to collective bargaining with teachers’ and other unions. When states and districts allow more than a small percentage of schools, say, 3 percent, to become charters, they generally have a beneficial effect on the offerings and achievement of nearby traditional schools.

The majority of rigorous studies show that charter students, on average, achieve at higher academic levels, and, more important, they learn at faster rates than traditional school students. The positive effect that charter schools have on nearby public schools is to be expected, because competition tends to bring out the best in enterprises across entire economies. The presence of charter schools compels underachieving public schools to do a better job or risk losing students and funding to the new entrants. Traditional public schools may also be induced to emulate practices that have proven successful in the charter sector.

Data on charter schools, of course, are not a true test of the idea that completely free markets in education would even more substantially and consistently increase academic achievement and parental satisfaction levels and achieve economic efficiencies that public schools cannot. Enrollment in charter schools is too small in many states and spotty in others; charter schools are still subject to heavy government regulation, and funding for charter schools lags behind that for public schools. As enrollment in charter schools grows, moreover, public school funding often goes unreduced as the public schools lose students, which means public schools are insulated from the consequences of their failure (and become even less efficient since they serve fewer students with the same amount of funding).

Still, the success of charter schools, even with these handicaps, has to be viewed as favorable to a free-market hypothesis. In the absence of domestic examples of large-scale voucher programs or true free markets in education, charter schools provide valuable and credible evidence that even small amounts of competition and choice in education have favorable results for students. Such results may arise in two ways: choice schools may simply raise achievement of their own students, and they may provide a competitive “tide that lifts all boats.” As in other markets, both kinds of causation probably occur.

3. Education Voucher Effects

Education vouchers are grants to parents to cover some or all of the cost of private school tuition. These programs can be either publicly or privately funded. When funded by the state, they are simply called “vouchers” (or, occasionally, “public vouchers”). When funded by private businesses, foundations, or philanthropists, they are usually referred to as “scholarships,” but sometimes the term “private vouchers” is also used.

This chapter reviews the effects of voucher programs on academic achievement for both voucher-receiving private school students and students who remain in public schools. The effects on subgroups are noted separately for African-American children and for children with learning disabilities in those cases in which they are known to differ from the aggregate effect. This chapter also assesses the impact of vouchers on school segregation and parental satisfaction. Since K-12 public voucher programs are new and small in scope in the United States, research on large-scale programs in other countries is also reviewed.

Education Vouchers in the United States

Education voucher programs vary by the number and type of students allowed to participate, the size of the voucher, and the regulations imposed on participating schools. Voucher programs can be open to all children (as in Sweden, Chile, and the Netherlands), or limited to children from low-income families (as in Cleveland, Milwaukee, and the District of Columbia),