If the competition told them they were inefficient in any other industry, it's easy enough for the customer to go and get another product. The education industry is not like that; not everybody has the privilege or options of being able to relocate themselves and their children.
While I'd entertain the idea of a system from scratch with more choice or vouchers (I'm still reading up on it), we aren't starting from scratch; are we supposed to just tell everybody who's in a failing public school, "Sorry, this one's a mulligan. You're just gonna have to be the collateral damage while we gut the system you ended up in."
Also, another problem is teacher's unions; want to downsize or fire a bad teacher? It's too difficult, even if a school wants to! I'm still reading up on contradictory things on this as well; MA has one of the best public systems as well as a strong union.
It's fine if you don't think more money is needed, I'm not entirely sold on it, either. But what I cannot understand is how you think defunding a given public school would improve the quality of the education instead of making it worse.