In February, the Federal Reserve Bank of Minneapolis announced a new research initiative, the Opportunity and Inclusive Growth Institute, whose mission is to conduct research to inform policies that will improve the economic well-being of all Americans. One of my biggest surprises moving to Minnesota in 2016 was to discover the size of its persistent economic gaps, along both racial and geographic lines. These challenges have been around for a long time and are complex, touching education, housing, health care and finance, among other issues. Our new institute will utilize the Federal Reserve’s research capabilities to try to unravel these important problems.

Making progress won’t be easy, but I committed to updating the public as we gained insights and identified policy solutions. This essay is my first such update, focusing on education disparities.

On average, Minnesota schools are good, ranking sixth in the nation in reading and third in math. Yet Minnesota has some of the nation’s worst racial disparities in education. To try to close those terrible gaps, Minnesota has embraced various forms of school choice and is the birthplace of charter schools.

More choices should be better. But, while it turns out Minnesota has some excellent charter schools, it also has some lousy ones, such that charters in Minnesota perform worse on average than traditional public schools. What’s going on? More choice should lead to more competition, which should lead to better performance.

Well, it appears that compared with some other states, Minnesota is far too lenient on its charters, allowing the poor performers to keep operating. This hurts the kids in those schools and masks the good performance of Minnesota’s excellent charters.

My conclusion: We need to shut down Minnesota’s failing charter schools in order to allow our good ones to thrive.

Let’s start by looking outside Minnesota, where charters are, indeed, helping kids to achieve better academic performance.

In New York City in 2016, charter school students performed significantly better on average than students in traditional public schools in both math and English. And, because of that strong performance, those charters were substantially oversubscribed, with three times as many applicants as available seats. The high-performing Success Academy schools were oversubscribed almost 6 to 1. Parents of all backgrounds want a better life for their kids. Sending their kids to good schools is essential to achieving that goal. New York clearly needs more charter capacity to meet demand, but these facts suggest that it is headed in the right direction. Choice, competition and informed parents are leading to better outcomes for New York kids.

Now let’s contrast that with what I’ve learned about charters here. A light bulb went on for me while visiting one of Minnesota’s high-performing charter schools, the Hiawatha Academies in south Minneapolis. Students at Hiawatha perform substantially better on average than their traditional public school peers and they are disproportionately minority and low-income. When I asked the executive director, Eli Kramer, “How long is Hiawatha’s waiting list?”, he said there is no waiting list. They have capacity.

How can this be? Minnesota has some of the worst education disparities, yet parents aren’t flocking to its high-performing schools. A broader look at the available data on Minnesota’s charters suggest that Hiawatha is not an outlier. The state’s highest-performing charters tend to have unused capacity.

Discussions with educators and parents suggest that, given the wide range of quality among Minnesota’s charter schools, it is hard for parents to know which ones are doing well and which are performing poorly. The cost of keeping lousy charters around is twofold: First, obviously, the students in those schools are hurt by attending a poorly performing school. Second, the low average results of Minnesota’s charters are masking the remarkable performance of its good charters, leading to confusion among parents on where to send their kids.

If this state were to rigorously and dispassionately assess school performance and then proactively shut down failing charters, it would help parents find better schools for their children, and it would direct state education resources to the schools that are helping kids to succeed.

I do believe choice and competition are key ingredients to closing education gaps. But they must be paired with dispassionate accountability to weed out poor performers. Minnesota Nice is hurting the kids who need the most help.

The Minneapolis Fed is now looking into the best practices for bringing rigorous accountability to school choice programs, and I will update the public on our findings.

 

Neel Kashkari is president and CEO of the Federal Reserve Bank of Minneapolis.