Association for Public Policy Analysis & Management

After Hurricane Katrina, the state of Louisiana took over almost all traditional public schools in New Orleans and eventually replaced them with charter schools. A major promise of the educational reform was that charter schools would provide educational services more efficiently than traditional public schools.

There are many reasons, however, why such a district wide reform may not result in the expected increase in efficiency. First, decentralizing an entire school district is likely to lead to a loss in economies of scale potentially leading to more spending for formerly centralized services. Second, transaction costs may increase as authorizers, but also charter management organizations, have to oversee schools and hold them accountable regarding performance but also for certain regulations related for example to services for students with disabilities. Finally, negative externalities, such as cream skimming for higher performing students, may lead to a loss in efficiency as students transfer between schools, disrupting learning experiences of other children while at the same time being denied a proper education.

Our analysis is based on a unique school level data set including operating expenditures for different spending functions (e.g. instruction, administration, and support services) and objects (e.g. salaries and benefits) for all schools in Louisiana from 2008/09 to 2013/14. We generate measures of technical and allocative efficiency at the school level using an input distance function. The efficiency measures are bootstrapped to address potential error in input process and performance measures. We further analyze the differences in efficiency between charter schools and traditional schools with regard to hiring and compensation practices, school themes, and the length of time a school is operating. Preliminary results suggest that New Orleans charter schools are not systematically more efficient than traditional schools. School size, being part of a charter school management organization, and administrator salaries are important factors determining the efficiency of a charter school.