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Please Don’t Send Us Any More Business!  (Says the Oldham County School Board)

By Pat Pending

Last week, we learned that the Oldham County, Kentucky school board is begging the county not to issue any more building permits for  new houses, because it can’t handle the huge growth in the number of students.  This is an interesting phenomenon that I have not seen before, and it bears some thought.

Have you ever heard of a McDonald’s, a Walmart, a doctor’s office, a dry cleaning company, or any other business that serves the public asking anyone to stop issuing building permits because its business is too successful?  Of course not!  Many businesses pay a huge premium in order to locate in a fast-growing area, because that helps ensure the health of the business.  And, if one McDonald’s can’t handle all the fast food business, that’s alright, because there will soon be a Burger King, a Wendy’s and many other restaurants nearby if the customer base will support them.

Businesses make their money by serving the public, and they usually are very happy to have the opportunity to serve additional customers.  Obviously, the Oldham County school board has a different view.  Unlike other businesses that serve the public, it doesn’t want to serve any more customers, and, in fact, it is taking the extreme step of trying to halt the construction of new houses in the county in order to ensure that it does not get any new customers.  Why would anyone take such an extreme step? 

Obviously, part of the problem is that government schools are funded differently from other businesses that serve the public.  For example, while other businesses can charge a higher price for better quality goods or services, the government schools are funded through a force-based tax system, with the state sending a fixed amount of money per pupil, and the school board is not in a position to raise prices commensurate with the quality of the services.  This puts Oldham County Schools at a disadvantage.  They have gained a reputation for high quality, and, as a result, they are attracting lots of new customers, whom they do not want.  Their tremendous success is creating a serious problem for them. 

If they are not able to stop construction of new homes, then what else can they do to ease their burden?  Reduce the quality of their services in order to drive customers away?   It’s strange that we would be willing to create such a perverse incentive, which discourages schools from providing the best possible service, when we claim to care so much about educating children!

Another difference between the Oldham County Schools and other businesses serving the public is that the county school system is a monopoly.  It receives all the tax money for education, and it is required to educate all students who wish to attend.  Since the school system is compelled to take all students who live in the county, and it cannot rely on competitors to take up the slack, it is under tremendous pressure.  Other businesses do not have such a burden.  If the McDonalds becomes overcrowded, people will soon migrate over to the Wendy’s, or vice versa.  Private businesses generally do not have the burden of being required to take care of all potential customers, no matter what.   In fact, other businesses know that, as soon as they are not competitive in meeting the needs of their customers, they will be out of business.  As a result, businesses are always striving to do a better job serving customers.  Not so for the school system, which will be in business no matter what its quality of service. 

The free market system works extremely well to reward businesses that do a good job of serving their customers, to weed out those that do not.  It provides us the best computers, the best groceries, the best automobiles, and the best dental care at the best prices.  No other business serving the public has an incentive to reduce growth by stopping construction of homes, providing poorer service, or any other negative mechanism.  Isn’t it a pity that, in the most important service of educating children, we continue to rely on a force-based, monopoly system, where those who provide the best quality service are punished?