Journal of Education Finance

abstract:

District expenditures and efficiency can be influenced by the entry of charter schools. Loss of economies due to reduced enrollments and a rising share of high-cost students are some of the key mechanisms that could potentially increase the costs of providing education in district schools. The competitive pressure from charter schools could also lead to efficiency gains by reducing the per pupil amount districts spend to achieve a given level of outcome. Utilizing data for Utah’s school districts over the period of 2014–2018, I estimate unobserved effects models to assess the expenditure and efficiency effects of charter schools on traditional public schools. I find significant increases in per-pupil expenditures associated with charter-induced enrollment losses and rising percentages of high need students. I also find evidence of efficiency losses in school districts stemming from the initial charter entry, but most adverse externalities appear to recede over time. The research underscores the policy significance of understanding how fiscally-constrained schools respond to competition.