Exploring the Rate and Causes of Voucher School Failure

Forty-one percent of all private schools that participated in the Milwaukee Parental Choice Program (MPCP) between 1991 and 2015 failed. I do not mean failed as in they did not deliver academically, I mean failed as in they no longer exist. These 102 schools either closed after having their voucher revenue cut off by the Department of Public Instruction, or simply shut their doors. The failure rate for entrepreneurial start-up schools is even worse: 67.8 percent.

Fredrik Andersson and I discuss these data in a new article just published online in Policy Studies Journal entitled “Determinants of Organizational Failure in the Milwaukee School Voucher Program.” We frame the article in the context of public and educational entrepreneurship “with the goal of explaining the factors that put voucher schools specifically, and public entrepreneurial public polices in general, at greater failure risk.” The Milwaukee voucher case is particularly fertile ground for this line of inquiry due its long history, organizational churn, and relevance as the birthplace of the modern school voucher movement.

We test several hypotheses using a survival model and find:

• Start-up voucher schools have a much higher failure rate. It takes almost ten years for a new voucher school to lower its failure risk to that of previously existing schools;
• When new MPCP schools fail they tend to fail quickly, on average just 4.3 years into program participation;
• Schools without a religious affiliation are more likely to fail;
• Stricter program regulations led to more failure; and
• Schools can reduce their failure risk by gaining market-share.

There is much more in the article related to the theoretical implications of our findings, and if you are so inclined, I encourage you to dig in. But to most non-academics and those interested in education reform and/or Milwaukee, the most striking finding may be the failure rates. As we conclude in the article:

The larger, perhaps more troubling legacy of the first 25 years of the Milwaukee voucher experience is the problem of externalities…When a school closes, students and parents must find new schools, student records may be lost, student achievement will likely suffer, and the public investment in failed institutions is lost.

In other words, school closures are disruptive, and inevitable in market-based school reforms that encourage entrepreneurship. Anyone in Milwaukee over the past two decades can remember specific cases of school failures, so the fact that failure occurred is likely not surprising, but I was admittedly stunned by the high failure rates. It speaks to something someone said to me back when I was on the front lines of school voucher policy…we have underestimated just how hard it is to build a quality choice school.

Some will view these findings as evidence of a failed policy. Others may view them as proof that a market-based education policy weeds out weak providers. I think the lesson, which goes beyond Milwaukee, is that entrepreneurship often leads to failure, and when policy makers take an entrepreneurial approach to the delivery of public goods, some negative consequences should be expected. In the education context, I am hopeful an emerging literature on how to deal with school closures can find ways to mitigate these negative consequences. But it is a sticky problem, and one to which policy makers, advocates, and citizens need to be aware.

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