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The New Hampshire legislature, in its wisdom, has decreed how much an adequate education costs. It’s right there in statute, RSA 198:40-a. 

Legislators wrote in three concise paragraphs that the cost of an adequate education totals precisely $3,561.27 in 2015 dollars, plus an additional $1,780.63 for students eligible for a free or reduced-price meal, $697.77 extra for English language learners, $1,915.86 extra for special education students, and $697.77 extra for third graders who score below proficient in reading. (The statute requires those figures to be adjusted for inflation, which they have been.)

Four school districts, led by Contoocook Valley, have sued the state, claiming that an adequate education actually costs much more than the state provides. Fourteen additional districts have joined the lawsuit. 

When the state Supreme Court trial began on April 10, the attorney for the districts said, “There’s no place in the state where an adequate education can be provided for less than $4,000 per student.”

In New Hampshire, public school districts spend, on average, more than $23,000 per student in local, state, and federal funds on all expenses, including transportation, construction, and interest. State figures show that 60 percent of that funding comes from local property taxes and 27 percent from state adequate education aid. 

The large gap between actual spending and the state’s decree forms the basis of this lawsuit.

The state says the cost of adequate education is whatever the legislature says it is.

The districts say the cost is determined by how much the districts spend.

Economically, they’re both wrong.

Or, more precisely, they’re both using the wrong measure. No one can know the true cost of an adequate education because no market exists to find it. 

There is no functioning K-12 education market in New Hampshire. By law, students are assigned to public schools based on where they live. Spending levels are set by government formulas, not by parents making choices among competing options.

Without a market in which competition spurs innovation and creates efficiencies, there’s no way to know how much an adequate education should cost.  

The districts’ spending levels are a poor measure because each district is its own regional monopoly. The small amount of competition from chartered public schools isn’t enough to trigger the sort of large-scale efficiency gains that drive prices down and productivity up. 

The state’s method of determining costs—legislative debate—also relies on what districts spend in the absence of a competitive market. Legislators looked at what was spent and calculated costs based on that. 

So we have a debate between government entities, each of which thinks it can set prices accurately on its own. Nowhere along the way have consumers been empowered to do what consumers do: improve quality and lower prices. (Case study: Wisconsin.)  

Imagine if grocery stores were provided by government in the same way public schools are. Each community got a government-determined number of stores, and people were assigned to shop at the store closest to their homes. The government sent your grocery money directly to the store, not to you. If you wanted to buy from a different store, you could, but the government-provided store got to keep your government-allocated grocery money. What would happen to prices?

At the state Supreme Court, each of these two sides will argue that it has the authoritative method for determining the true cost of an adequate education. But what’s missing is the voice of the consumer.

The truth is that the only authoritative method for discovering the cost of an adequate education is creating an open and competitive educational marketplace. Government formulas are no substitute for individuals empowered to make their own choices.