Sunday, December 6, 2009

Sick? State Formula Says Go To School

In November, in a blog item about organ donation, I blogged about what's known as misaligned incentives in economics. An example was offered from Steven D. Levitt and Stephen J. Dubner's SuperFreakonomics from the ambulance business in mid-20th century America.

"Ambulances were often run by the local mortuary. It is hard to think of a better example of misaligned incentives: a funeral director who is put in charge of helping a patient not die!"
Now we have another example much closer to home. After the jump, how the state of Texas encourages local school districts to get sick children to drag their sorry butts out of bed and get to school.
The Dallas Morning News reports that school districts risk big cuts in state funding because of student absences due to swine flu.
"The swine flu may be mostly gone now from North Texas, but school districts across the state are worried that the malady will linger on - in their finances. Because school funding in Texas is tied to student attendance rates, the extra absences due to swine flu could cost some districts millions. Based on absences so far this school year, Richardson is worried about more than $800,000. Mesquite could be on the hook for $2 million."

Because state funding to school districts is based on average daily attendance, even a single day's absence by a single student has a real impact on the amount of money the state provides the school district to educate that student.

Illness is not conducive to learning. A sick child feels miserable. The teacher acts more as nurse than teacher. Other children are short-changed and at risk of infection themselves, thus spreading the disease and impacting the learning of many more. Obviously, such outcomes are undesirable. So, how does the state set up the economic incentives for school districts? The immediate incentive for the school district is to get that sick kid out of bed and into a desk in the classroom because there's real money left on the table if he or she stays home in bed. What might seem to be a reasonable state policy leads to another case of misaligned incentives at the local level.

Why not realign the economic incentives so there's no question that the right policy is to encourage sick children to stay home? Why not use some kind of step function for calculating attendance? For example, if the average student misses, say, three days of school a year due to illness, then the state should not count absences until an individual student's absences exceed three. There are undoubtedly other formulas that could be used. But the existing formula is flawed and should be changed.

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