The ‘diner’s dilemma’ and Vermont education spending

By Rob Roper

There is a phenomenon in behavioral economics called the “diner’s dilemma” that tracks how people act when evenly splitting a dinner check versus paying individually. The conclusion of these experiments shows that when people pay for their own consumption they spend less than when sharing the cost with others. As several studies show, roughly 30 percent less.

Rob Roper

Rob Roper is the president of the Ethan Allen Institute.

Vermont’s education financing system is built on a dynamic very similar to splitting the check. Local districts order what they want for their “meal,” then the state collects the money in one large pool and redistributes it to cover the total bill. The psychological incentive is for districts to spend more so that other districts will end up subsidizing their portion of the bill and not the other way around. The result is a bigger total bill, much to the NEA’s delight, which is why the system is designed as it is.

Adding to the problem, and also by design, under our current system there is no real accountability. The legislators who set the tax rates blame the local voters for passing high school budgets, and local officials blame the legislators for the funding system that leads to high property tax bills. So, whom do you vote out of office if you don’t like the results? Who’s really accountable? Hard to say.

This is the dynamic that must be broken. But Act 60, which guarantees students have equal access to education funding, makes “separate checks” illegal. So what do we do?

Gov. Scott is proposing to increase mandates from Montpelier for, specifically, things like staff-to-student student ratios. The Legislature is implementing mandated mergers under Act 46. All of these solutions are serious infringements on local control, a concept that since Act 60 has become largely a myth.

Here’s a proposal to rein in costs, reinstate some measure of local control and inject accountability into the process: Have the Legislature set a uniform per-pupil spending level (with some allowances for special needs students), but allow local school boards full rein over how to best spend the money, free from state-level interference.

Under this system, a school’s budget would be determined by the number of students in the school times the set tuition rate. There would be some loss of local control as to how much to spend, but far more local control over how to spend. (Would you prefer a $13 meal I choose for you, or $10 to spend on whatever you like?) If you don’t like your tax bill under this system, fire your state representatives and senators; they are responsible for how much or how little is being spent. If you don’t like how the local school is being run, fire the local school board; they’re the ones calling the shots. There’s accountability.

This is pretty much the model under which Vermont’s independent schools that accept tuitioning students operate. And, for the most part, they get tremendous results for fewer taxpayer dollars. We know this works, as the model has a century-and-a-half-long track record in Vermont. Moreover, it would be a much fairer model, complying with and even exceeding the equal access to funding Act 60 demands. Whereas now students only have equal access to funds but unequal per-pupil funding from school to school across the state, they would have equal funding under the proposed system.

Rob Roper is president of the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.

Images courtesy of Flickr/401kcalculator.org and Rob Roper

3 thoughts on “The ‘diner’s dilemma’ and Vermont education spending

  1. Regarding the lack of local control under CURRENT law. Laws can and should be changed if found not to bring desired results for citizens and tax payers. We need more local control, not less. As we all know, the current trend is a death spiral.

  2. ‘Diner’s Dilemma’ another good analogy Mr. Roper. The Governor’s plan will never fly
    as he really doesn’t have control in Montpelier ……. Pretty Sad.

    The best part of this article, If you don’t like your tax bill under this system, fire your state representatives and senators; they are responsible for how much or how little is being spent.

    If you don’t like how the local school is being run, fire the local school board; they’re the ones
    calling the shots………………..There’s Accountability !!

    All we have to do is Start………

    • The problem is the teachers union (and their promised votes and cash) own many Vermont dems and progs, add all of the people on entitlement programs, all of the antis and enviros and they’ve got all the votes they need to continue destroying our once proud state.

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