The battle to give more Kentucky families choices in who educates their children rages on, as lawmakers continue to consider a scholarship tax credit bill, introduced to the legislature this year as HB 205/SB 118. Eighteen other states have such a policy, which creates a tax credit that encourages private donations to scholarship that help eligible families pay tuition at non-public schools.
I've written extensively about how this policy works, how it does not threaten public education, how it does not violate the state or federal constitutions, and how it uses private money to give more families the chance to find a school that best meets their child's needs, the same kind of privilege affluent parents enjoy every day. You can read some of my most recent posts on these topics here, here, and here.
As to be expected, the education establishment in Kentucky has ferociously opposed scholarship tax credits, arguing that education is underfunded and a reduction in state revenues would further harm public schools, despite an abundance of analyses that show such policies work out to be revenue neutral in other states. Superintendents have argued that they would be terribly burdened even if only a handful of students left their assigned public school because they have fixed costs that cannot easily be absorbed.
Many of these arguments are condensed in a blog post by Anna Baumann of the Kentucky Economic Policy Center, an organization that opposes school choice policies. Ms. Baumann makes three major claims: 1) the cost savings of scholarship tax credits depends on the number of students switching from public to nonpublic schools; 2) schools will suffer because of the "fixed costs" argument noted above if students do switch, and 3) the income eligibility level for families applying for scholarships under this proposal is too high.
In this post I'd like to respond to some of these specific claims. As always, let me be clear that views I express on this website are mine alone do not necessarily reflect the views of anyone else affiliated with Western Kentucky University (where I am professor of educational administration, leadership, and research) or the Kentucky Board of Education (where I am a member and chair of the Curriculum, Instruction, and Assessment Committee).
First, regarding switchers, this issue is only relevant for calculating cost savings at the state level (not the district level). What we know from other states is the switcher rate does not impact the bottom line on state-level fiscal impact - which is that the state winds up saving money in the long run because of this tax credit. And that is the case regardless of whether students switch or choose private school from the kindergarten forward. Any time families opt out of public schools, you generate a net savings because these families continue to pay taxes but the state doesn't have to educate their kids. Currently there are about 72,000 kids in Kentucky who attend private or homeschools. If they all showed up tomorrow wanting a public education, we'd need almost an extra $300 million a year. That's almost 3% of the state's general fund. Scholarship tax credits do not drain revenues from public schools that would otherwise be used to increase education spending.
At the district level things get a little more complicated, because when a local school is no longer educating a student, they no longer get state education dollars (SEEK funds) for the student (and shouldn't; they aren't educating him/her any more). Note that every argument that follows from the anti-choice crowd is essentially based on the idea that these students shouldn't be allowed to leave, because this will generate a loss of revenue for the district. I reject that kind of thinking outright.
But taking the fact of lost revenues seriously, it is still unclear what impact this has on students who stay. If large numbers of students leave, then you actually increase the likelihood of the district being able to reap savings through reduced fixed expenses (cuts to personnel and other large overhead costs), which contradicts Ms. Baumann's argument. And if large numbers leave, you don't have a school choice problem; you have an internal problem to the school that is causing so many families to want another alternative. Moreover, we know that per-pupil calculations are the most relevant revenue/cost issue at hand for schools (rather than fixed costs) because that's why we fund schools based on enrollment.
If small numbers of students leave (which is much more likely), on the other hand, then we're talking about management adjustments that districts can and should be able deal with all the time. You can, in fact, reduce some expenses when small numbers of students leave (fewer software licenses, instructional materials, etc.), but unless you're willing to argue that no student should ever be able to leave a school, districts must have the management sense to deal with small enrollment fluctuations. And they do.
When I looked at this issue in the past, I tried to apply some of this to a specific example: the Warren County School district, one of my two local districts. For FY 16, that district had $122 million in revenues; only $47 million of that was from SEEK (Kentucky's state per pupil educational allotment), or 38.5%.
Warren County has just under 15,000 students. It's anybody's guess as to how many students would leave for a private school if a scholarship opportunity presented itself thanks to scholarship tax credits, but currently there appear to be less than 1,000 students attending private schools in the county. Let's be extremely generous and assume that STC increases local private school enrollment by 10%. That means no more than 100 students leave the district (this isn't taking in account students who may leave other nearby districts instead). Warren County's FY 16 adjusted SEEK allocation was $3,647 per student. So SEEK funding for the district would decline by about $364,700...which accounts for only .002% of the district's revenues. And in a district of 15,000, I suspect total enrollment fluctuates by far more than 100 from year to year.
Perhaps I have more faith in our superintendents' abilities to manage such tiny budget changes than they do themselves. And if my math is incorrect here, I'm sure helpful readers will point that out. But even if my calculations are slightly off, the point remains: scholarship tax credits are not going to decimate the budgets of local schools.
What Ms. Baumann's analysis also doesn't consider in terms of costs at the local level is that parents who use private schools still pay local school taxes, partially offsetting any "loss" to the local district (which wasn't due those SEEK dollars to begin with!). This is an incalculable number of course, because it's based on the amount of taxes paid by each family. But it further illustrates the fact that the costs to districts for "switchers" or "never users" is small and should be something they can deal with. Districts are never in a position to do anything about affluent families who choose another option. It's only when it comes to policies like this that they try to stop families of more modest means from leaving. Which brings me to the last point of Ms. Baumann's blog post.
Scholarships funded by the private donations encouraged by HB 205 are needs based. Dollars go to the neediest families first and the bill puts kids with special needs, foster care kids, and kids on free or reduced lunch first in line. If money is left over, scholarships may then go to families whose income rises to 200% of the FRL level (remember this is all privately-donated money). Typically these families don't need full scholarships, but may need a little extra help making the full tuition payment, especially if they have more than one child in school. We can get into endless arguments about who is "upper income," but the fact is that, in my old school district, two married teachers with two kids are too "rich" to qualify for any scholarship help under this bill after just 5 years of teaching service if they also happen to have Master's degrees.
Conventional wisdom holds (and I agree), that teachers are underpaid, and yet the Courier-Journal reports the average Kentucky teacher salary is just under $54,000 per year ($63K in JCPS); the vast majority of teacher households would never be eligible for even a tiny bit of scholarship help under this proposal. The bottom line is that scholarship tax credits benefit families who otherwise could never access these schooling options.
At the end of the day, the argument that we should oppose school choice because education is underfunded is an excuse to defend local school districts' monopoly on education delivery. Scholarship tax credits will not cause damage to public schools, and ultimately the education establishment is always going to oppose school choice policies, no matter how much we increase education spending. Philosophically, many superintendents and teacher groups are just opposed to giving families choices in who educates their kids. They can't do anything about affluent families who always have the resources to make choices for their children, so they oppose policy mechanisms that help those who don't.
To help these families we'll always have to do it over the opposition of educator groups. That's a shame, but that's the way it is, and I'm willing to stand up to colleagues I admire and with whom I otherwise share so many common goals, and disagree.
Update, 3/8/2019: I keep hearing repeated arguments that scholarship tax credits are somehow a violation of either Kentucky's Constitution or the Establishment Clause of the First Amendment in the U.S. Constitution. This allegation seems to be premised on the notion that tax credits use "public" money to support private, religious schools.
If the opponents of scholarship tax credits think this policy uses "public" money to support religious schools, then I hope they didn't take a charitable deduction on their taxes for any donations to their church or other religious organizations. By their own logic, this, too, would be using "public" money to support religion. But it is not of course.
If you don't want to allow a tax credit because you simply don't like what people are going to do with their own money if they get to keep more of it (in this case, use it to help kids afford private school tuition), that's at least a logical position. But it is NOT the same thing as using "public" money to support religious schools, anymore than your charitable deduction for church donations is. (Which is why scholarship tax credits have withstood multiple constitutional challenges).
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