A new study in Michigan finds that the proliferation of charter schools has undermined the fiscal viability of traditional public schools.

David Arsen, a professor at the College of Education at Michigan State University, discovered that school choice and especially charters were diverting resources from public school districts, leaving them in perilous condition.

“Which Districts Get Into Financial Trouble and Why: Michigan’s Story” asserts that “80 percent of the explained variation in district fiscal stress is due to changes in districts’ state funding, to enrollment changes including those associated with school choice policies, and to the enrollment of high-cost special education students.”

In other words, the fiscal failings of DPS that we just addressed had less to do with poor spending on the part of district — though we’re sure there was some of that — and more to do with statewide policies, such as those that promote competition, that put the traditional district at a disadvantage.

“Overwhelmingly, the biggest financial impact on school districts was the result of declining enrollment and revenue loss, especially where school choice and charters are most prevalent,” Arsen explained to education blogger Jennifer Berkshire (author of the website EduShyster) in a recent interview.

To read Jennifer Berkshire’s illuminating interview of David Arsen, open this link to her website.

Here is a portion of her interview:

David Arsen: The question we looked at was how much of this pattern of increasing financial distress among school districts in Michigan was due to things that local districts have control over as opposed to state-level policies that are out of the local districts’ control: teacher salaries, health benefits, class size, administrative spending. We also looked at an item that the conservative think tanks are big on: contracting out and privatization. We found that, overwhelmingly, the biggest financial impact on school districts was the result of declining enrollment and revenue loss, especially where school choice and charters are most prevalent. We looked at every school district in Michigan with at least 100 students and we followed them for nearly 20 years. The statistics are causal; we’re not just looking at correlation.

EduShyster: There’s a table in your paper which actually made me gasp aloud—which I’m pretty sure is a first. I’m talking, of course, about the chart where you show what happened to Michigan’s *central cities,* including Detroit, as charter schools really started to expand.

Arsen: We have districts getting into extreme fiscal distress because they’re losing revenue so fast. That table in our paper looked at the central cities statewide and their foundation revenue, which is both a function of per-pupil funding and enrollment. They had lost about 22% of their funding over a decade. If you put that in inflation adjusted terms, it means that they lost 46% of their revenue in a span ten years. With numbers like that, it doesn’t really matter if you can get the very best business managers—you can get a team of the very best business managers—and you’re going to have a hard time handling that kind of revenue loss. The emergency managers, incidentally, couldn’t do it. They had all the authority and they cut programs and salaries, but they couldn’t balance the budgets in Detroit and elsewhere, because it wasn’t about local decision making, it was about state policy. And when they made those cuts, more kids left and took their state funding with them.

EduShyster: As you followed the trajectory of these school districts, was there a *point of no return* that you could identify? A tipping point in lost enrollment and funding from which they just couldn’t recover?

Arsen: When we looked at the impact of charter schools we found that overall their effect on the finances of districts statewide was modest. Then we looked to see if there were nonlinear, or disproportionate, impacts in those districts where charters enrolled very high and sustained shares of resident students. And then the results got huge. We saw very significant and large impacts of charter penetration on district fund balances for different thresholds, whether there were 15, 20 or 25% of the students going to charter schools. That was really striking. At every one of those thresholds, the higher the charter penetration, the higher the adverse impact on district finances. They’re big jumps, and they’re all very significant statistically. What’s clear is that when the percentage gets up to the neighborhood of 20% or so, these are sizeable adverse impacts on district finances.