The federal “No Child Left Behind” law (NCLB) is creating some unwanted consequences for high-performing schools. Even though only a tiny fraction of the children eligible to transfer to a better school under NCLB have done so, reports say that the effects are beginning to be felt. Once confirmed, Margaret Spellings, the Bush administration’s pick for Secretary of Education to replace current Secretary Rod Paige, will have to contend with the troublesome transfer issue.

The transfer provision of NCLB has come under fire for a number of reasons: too few available seats in good schools, too little parent interest, and transfers offered to students who don’t have achievement problems. The main complaints, though, center on the claim that low-achieving students will dilute the average achievement levels of high-performing schools. This marginal effect (from student transfers) could be significant enough to undermine the goal of higher average achievement in some schools.

Several years ago, while teaching a principles of economics class, I offered my students a proposition: the first student who could accurately describe the relationship between marginal and average cost (we had arrived at that point in the course) would pass without having to attend any further classes. I was serious, but I was also 99+ percent confident that I wouldn’t have to deliver on that offer. And I didn’t, even though, as I told them, they already understood the marginal/average relationship. All students do. They understand that if their next (marginal) test grade is lower than their current average grade, their class average will fall, and vice versa.

The architects of NCLB may have missed this one, however, when they decided that low-performing students would benefit from transfers to high-performing schools, and then included the school’s performance in the federal accountability criteria. The law does not seem to take into account the fact that average school performance can suffer (or fail) while trying to improve individual student performance at the margin.

NCLB measures academic performance by student, by school, and by school district. If too few students in a school achieve the academic proficiency that is required, the school fails under the federal law (“fail” has recently been dropped in favor of “needs improvement”). After two failing years, these schools must allow students to transfer to a non-failing school.

What happens if transfer students reduce the average academic performance of their new school? That is what some school administrators and legislators are concerned about. Everything else equal, when you transfer in students whose achievement is below the average achievement of students already in a school, average achievement will fall. By including school achievement in the federal mandates, NCLB creates a catch-22 for schools that accept low-performing transfer students.

Some high performing schools are beginning to complain about the achievement effects that transfer students have on schools. In New York State, Sen. Hillary Clinton has joined the NCLB critics who protest transfer-driven overcrowding in good schools, along with declining standards. Critics worry that the reputation and performance of “good” schools will be damaged if additional students cause the schools to fall short of their goals.

The student transfer policy in NCLB has another dilemma. We can’t assume that the additional focus needed to bring poorly-performing students up to standard leaves everyone else unaffected. We already find thathigh-achieving schools and students are slipping. Evidence points to smaller learning gains for traditionally high-performing students.

Even if transfer student performance does have a depressing effect on overall school achievement under NCLB, the effect is likely to be limited for now. Most school districts that are required to offer a transfer option have many more candidates for transfer than available seats at non-failing schools in the district. Until education officials either work out alternatives or exceptions to the policy, such as prohibiting high-achieving students in low-performing schools from transferring, progress along this avenue of education reform will remain exceedingly slow.