Does giving parents education options "divert" money from schools? My TeachThought Podcast discussion on scholarship tax credits
02/16/2018
I recently had the pleasure of spending an hour discussing scholarship tax credits with Drew Perkins, host of the TeachThought podcast, and Anna Baumann, senior policy analyst with the Kentucky Economic Policy Center. You can access the podcast and related resources here.
I discussed the issue of scholarship tax credits in great length in a previous post. Essentially, this proposal creates a state tax credit that encourages businesses and individuals to make private donations to scholarship funds that help low- and middle-income students pay tuition at non-public schools.
I believe in school choice because, while education is a public good, it's not a generic, one-size-fits-all public good like the fire department provides. Every child is unique and no school, no matter how good, can meet the needs of every single student. We place an unfair burden on educators by asking them to be all things for all families. By giving families more options, we increase the likelihood that every family can find a school that is the best fit their own child. That's a luxury affluent families already enjoy. School choice encourages public policies that help every family have education options, regardless of their income.
Much of the podcast discussion focused on Anna's concern that using a tax credit to encourage school choice actually drains money from public coffers at a time when the state budget is in shortfall and schools are facing potentially large funding cuts.
I'm sympathetic to this worry. As our public pension liabilities mount and our tax structure fails to bring in sufficient revenues or grow the economy, education, which makes up so much of the state budget, is inevitably squeezed. I'd like to see long-term structural changes to our pension and tax structures so we can devote more resources to education. But our gloomy budget forecast is not a reason to continue denying low-income families choices in how their children are educated.
A new paradigm for education spending
For starters, if you accept that families should have some choices in who educates their children, then you've got to start thinking about education spending in a different way. Education dollars are a benefit for students, not for institutions. And like other public benefits, families should be able to take that benefit with them to the provider of their choice.
We've spent over a century delivering public education exclusively through local school districts, so naturally when people think about education spending, they think about dollars that are sent to and spent by local public schools administered by a local board of education. But education should be treated like other highly personal public goods. Medicare and Medicaid are personal benefits for the health care of the elderly and poor. Pell grants and the GI Bill are a benefit for the education of low-income college students or veterans. Foods stamps are a food security benefit for low-income families. But in all these cases we give the beneficiary some choice in where they obtain these public goods, because the needs and preferences of individuals are so diverse and the good in these cases is so highly personal.
If we are willing to concede that low-income families should also have some choices in where and how their children are educated, that means education dollars will follow their children to a new school. That isn't "draining money" from some other school, no more than we "drain money" from Hospital A when a Medicare patient has a procedure at Hospital B.
Unless you value maximizing dollars for the use of local public schools over the value of giving low-income families choices (and thereby forcing those students to stay in a school that may not be best for them...because you prefer to get their education dollars), we have to immediately see that it's a canard to say school choice is a financial threat to traditional public schools.
The cost-savings effects of non-public education
In the case of scholarship tax credits, money that would otherwise be in state coffers goes to a scholarship that helps low-income families exercise just the kind of option described above. So every one of those dollars still serves an educational purpose. But there's something unique about this particular kind of tax credit in that student attendance in non-public schools actually tends to have a cost-savings effect on overall public spending.
Kentucky's 72,000 non-public school students save the state about $287 million per year that otherwise would be spent on their education. In the case of scholarship tax credits, as long as the average scholarship awarded is less than average state per pupil spending, the result is a net savings to the state's education budget. Based on past experience, we can estimate that the average scholarship award will be around $3,200, well under the state's SEEK average. So while this tax credit will cause a reduction in state revenues, it will also generate a reduction of state SEEK expenditures of the same or an even greater amount.
The more thoughtful argument Anna raises in our discussion has to do with the fixed costs of operating schools. But as I argue in the podcast and have written before, based on past experience we can estimate that no more than 1-1.5% of students statewide will take advantage of the scholarship program in the first year, and that's well within the normal fluctuation of school enrollments. In short, public schools are well prepared to deal with the loss of SEEK funds for students whose parents decide another school option is best for them.
It's the wrong question
At the end of the day, none of this is about school choice versus education spending. I believe we need to make bigger investments in education, but whether our policy makers do that or not is not a reason to deny low-income families the dignity of a choice in who educates their children. We either believe that we should have policy mechanisms that give parents education options, or we believe that local government schools should have an exclusive franchise on education delivery for low- and middle income families. And that's the question we really should be talking about.
Usual disclaimer: All views expressed on this website are mine alone and do not reflect official positions of Western Kentucky University (where I serve as associate professor of educational administration, leadership, and research) or the Kentucky Board of Education (where I serve as a member).
Related posts:
- Why I support scholarship tax credits for Kentucky - and you should too
- Why the education establishment feels so deeply threatened by school choice
- A School Choice Primer, Parts I, II, and III
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