Building a Competitive Education Industry
A Weekly Column by Myron Lieberman

The following article by Dr. Lieberman was published in Canadian Issues, March/April 2001, pp. 22-23.

I begin with a few statements that are accepted. Constitutionally, education is not a major function of the federal government in the U.S. There is some federal funding for special purposes, such as education of the handicapped or low achieving students, and such funding amounts to about seven percent of government expenditures for K-12 education. In addition, education is affected by federal legislation that is not education specific, federal legislation prohibiting discrimination on the basis of race, creed, color, or sex, is perhaps the most important. Much as some would like to change the fact, K-12 education in the United States is a state function subject to a host of variations between the fifty states.

Except for Hawaii, the states have delegated the operation of education to local school boards, usually elected bodies with jurisdiction over education within a specified political jurisdiction; however, "local" encompasses both one room school districts and enormous urban districts with hundreds of thousands of students and budgets of several billion dollars. Setting aside a host of qualifications and caveats, the day to day management of public education is highly decentralized and there is no movement in sight to change this fact.

In contrast, most public school teachers in most states are members of one or both national unions, the National Education Association (NEA) or the American Federation of Teachers (AFT). Thus, we can say that although management is highly decentralized, teacher organizations are national in scope, operations, and orientation.

The upshot is that tilde teacher unions enjoy enormous strategic advantages, as they always do when a single union bargains collectively with a multitude of small employers. For many years, the leading example was in transportation; the International Brotherhood of Teamsters (IBT) was a national union that was much more powerful than any one of the thousands of trucking companies that employed members of the IBT. The IBT was able to crush any one trucking company that tried to go it alone against the IBT. This situation changed only when highway transportation was deregulated, and over the road transportation became a competitive industry in which employers were much better prepared to confront teamster unions when such action was deemed advisable.

The structure of public education in the United States is even more favorable to the teacher unions. School board members are legally the top managers, but unlike private sector managers, school board members per se have no personal economic stake in the outcome of negotiations. Of course, all board members want union contracts that are favorably received, and many a member of the city council, or mayor, or state legislator was initially an elected member of a school board, eager to achieve a favorable attitude to enhance his/her chances for political advancement. Nevertheless, management by school board members differs significantly from management in private industry. In the latter, individuals are responsible individually for managing a part of the enterprise: manufacturing, sales, advertising, research, and so on. It is rare that important policy decisions affecting a private enterprise as a whole are made collectively. A CEO may elicit the views of the managers who report to him/her, but that is a matter of managerial discretion. In contrast, school board members do not exercise day to day managerial direction over any aspect of school district operations. Supposedly, board members resolve important policy in issues that are implemented by staff personnel.

Another critical distinction relates to the managerial stakes in the enterprise. As previously noted, the jobs of school board members and their economic fortunes are not on the line when they act in their school board role. In the private sector, however, the relationship is direct and immediate. School board members might achieve an agreement by concessions, such as enhanced retirement benefits, that are not evident to the public until long after the responsible board members are no longer on the board. In the private sector, such agreements would have immediate repercussions for management because owners of stock in the company constantly monitor company developments. An agreement that provided generous future benefits would be noticed immediately, and the value of stock in the company would drop immediately if the agreement provided excessive long range benefits. In contrast, substantial number of school board members owe their election victories, past or anticipated, to the teacher unions, thus weakening their incentives to avoid excessive union influence on school district operations. In this connection, it is interesting to note that even employee stock ownership plans (ESOPs) exercise precautions to ensure that the union and/or the employees do not run the enterprise. ESOPs provide the employee owners with more generous shares of the profits (if there are any) but even the private sector unions know better than to support union exercise of managerial control over operations.

Two additional favors render it even more difficult for school boards to avoid union domination. School board members do not represent any particular interest group with a stake in avoiding union domination. In the Teamster example cited previously, the employers had a huge stake in the outcome of negotiations; the viability and profitability of their companies could be weakened or even destroyed by a poor agreement. Thus, there was a strong incentive for employers to join together to resist union overreaching. This is not the case in education, as evidenced by the pervasive weakness of state and national school board organizations in the United States. In a teacher strike, the local teacher union can rely upon immediate assistance from its state and national affiliates. The assistance might cover the costs of advertising, radio and television messages, legal advice, and strategic/tactical advice generally. The local school boards are left to flounder on their own; outside of a press release deploring the strike, few, if any, school boards receive any help from their state school board associations, and rarely from the National School Boards Association (NSBA).

Another important consideration is that it is extremely difficult for school boards to work together to counteract overwhelming union power to dominate school boards in collective bargaining In many industries where a strong union bargains with a multitude of employers in the same area or industry, the employers join hands to enhance their bargaining power. For instance, the hotel owners in Las Vegas and Reno delegate the conduct of bargaining to a single entity, who is kept informed on what concessions their principals can and cannot make in the bargaining. In this way, the employers avoid the likelihood that the union will extract the most generous benefits from the weakest employers and then cite these benefits as the minimum for other employers.

School boards in the United States cannot adopt this strategy. First of all, it would contravene the legal prohibitions against the delegation of powers by legislative bodies. Second, in any group of school boards, the presence of any union supporters renders it impossible for school boards to maintain cohesion or confidentiality regarding their bottom lines. The difficulties of educational reform in the United States should now be apparent. Any change at the local level that affects teacher unions negatively faces an insurmountable management gap. At the state level, the problems are ordinarily insurmountable because the teacher unions are always one of the strongest interest groups that interact with the legislators. At the same time, school boards are unable to muster the political resources required to curb excessive union influence.

In considering the prospects for reform therefore, one of the first questions to be asked is the union reaction to it. Of course, there are degrees of union interest and support or opposition to proposed reforms, but generally speaking, the more important the reform, the more likely that it contravenes important union interests. This is why the advent of a new administration is not likely to bring about any basic changes in U.S. education. Despite campaign rhetoric to the contrary, education is not and cannot be a more important priority than national defense, foreign policy, the economy, social security, health care, and other problem areas that are federal responsibilities, regardless of whether this is a desirable situation.

Clearly, a federal administration determined to effectuate educational reforms will have to address the teacher union veto power over basic change in public education. Even with the most competent leadership, this problem is not subject to resolution in a few years. This is why we should not anticipate any major changes in the educational status quo in the United States for some time to come.