Association for Public Policy Analysis & Management

This paper examines the budgetary responses of public schools to competition driven by school choice. Open enrollment policies foster an environment in which consumers of education (students and their parents) choose schools based on relative preferences for short travel distances, extracurricular activities, nurturing school environments, academic outcomes, among others (Harris and Larson, 2014). Schools then compete for students based on these dimensions. Thus, in addition to its intended purpose of promoting innovative instruction, choice policies such as open enrollment may lead to market-like outcomes such as product differentiation across schools, whereby some schools focus more exclusively on academic outcomes while others increase investment in extracurricular activities.

In this paper, I identify differences in New York City (NYC) high schools’ budgetary changes in response to a discrete change in the choice set available to students in 2003-2004. This new choice set may have changed how various types of schools competed with one another. For example, the new choice policy removed default assignment of unmatched students to zoned programs, increasing competition among schools formerly offering zoned programs and perhaps leading to large changes in budgets (nearly 1/3 of students were default assigned before 2003-2004). Alternatively, schools that operated academically screened programs (by exam or previous academic achievement) may have little change in competitive pressure and few changes in budget allocations. In addition, education option programs (part screened and part lottery admissions) that traditionally compete with zoned schools for students based on academic outcomes may increase academic expenditures in the more competitive choice setting, while those that had been competing based on their nurturing environments may augment that further.

In this study, I exploit the change in school choice policy and variation in program selectivity, admissions methods, and the set of schools competing each year in order to estimate the impact of school competition on school budgets. I use detailed data on school expenditures for NYC's 505 high schools operating at any time during the 1996-2011 academic years. In the 1999-2000 academic year, for example, there were 189 NYC high schools that offered 294 programs in all, including 59 academically screened programs, 25 audition screened programs (art or performing arts), 149 "education option" programs, 56 zoned programs, and 5 entirely unscreened programs. I estimate the impact of choice-driven competition on schools’ expenditures, assessing differences in impact on the basis of school admission method and selectivity.