Rethinking Robin Hood

As voters go to the polls on August 9 to vote on a property tax reduction, it will be a good time to reflect on how we pay for the public schools and why we do it that way.

The theory behind the current "Robin Hood" approach is quite simple. Kids lucky enough to live in school districts with high property values get to attend better schools. The reason? High property values generate more revenue for the schools and more money means higher quality education. Or so the Texas Supreme Court reasoned. Wealth was taken as a given. The only question was: What's a fair way to distribute this wealth among the school districts?

But suppose the original theory was all wrong. Suppose that the quality of the schools determines property values, rather than the other way around. If memory serves, neither the court nor the legislature ever considered this possibility. Yet H. Martin Gibson, a Dallas attorney and anti-Robin-Hood, activist argued during the school finance debate that reverse causation was a reality.

Gibson noticed that, although most Highland Park homes fall inside the Highland Park School District (HPISD) in Dallas, a few actually fall in the Dallas Independent School District (DISD). Other things equal, homes on the HPISD side of the street were selling for 24 percent more than homes on the DISD side. That implied that many Highland Park homeowners were paying about $72,000 just for the right to send their children to Highland Park schools!

Now comes a new study that provides support for Gibson's back-of-the-envelope calculations. Kathy Hayes (Southern Methodist University) and Lori Taylor (Federal Reserve Bank of Dallas) have examined property values and school quality in north Dallas. Using all the latest and most sophisticated tools of statistical inference, the two economists were able to separate out the influences of race and economic background and actually measure the impact of different schools on student achievement. The result is an objective measure of school quality.

No one thinks parents are able to make the same exacting calculations Hayes and Taylor did. But parents do seem to be able to discern differences in educational quality and are willing to pay more for homes that allow their children to attend better schools. For example, homes in areas that allow children to attend the top 10 percent of elementary schools (based on the Hayes/Taylor ranking) sell for about $20,000 more than homes that would require children to attend the bottom 10 percent. Also, parents are only willing to pay for results, not effort. There is no relationship between the home prices and the amount of money the schools have to spend.

The two economists also looked at other factors that influence the price of homes. The socioeconomic status of neighbors turned out to be significant, a finding most ordinary mortals already know. Build low-income housing next door and the value of your house is going to fall. But here's a surprise. Neither racial nor socioeconomic characteristics of school kids affects home prices. Parents are willing to pay more for quality education. But they're not willing to pay more (or less) based on the background of their children's classmates.

The Hayes-Taylor study, published by the Federal Reserve Bank of Dallas, ought to be required reading for every legislator and judge in the state of Texas. Although the authors don't draw many public policy conclusions, three implications practically jump off the pages for alert readers.

First, our entire approach to educational finance in Texas is based on a fraudulent theory – one that is inconsistent with the facts. Couple the Hayes-Taylor findings with a raft of other studies showing that pouring more money into lousy schools doesn't improve their performance and there's nothing left of the intellectual foundations of Robin Hood.

Second, the efforts we are making to promote racial integration (many of which are the cause of deteriorating quality) are completely misplaced. Parents prefer good schools, whether they're integrated or not. So if we produce good schools, voluntary integration won't be a problem.

Finally, despite the Herculean lobbying effort by the teachers unions in Austin, we already have an extensive school choice system in every major urban area in Texas. Parents select schools by selecting homes. They pay disguised tuition in the form of higher housing prices. It's a system that creates many choices for parents who have money and very few choices for parents who don't.