Tag: education savings accounts

ACLU v. Nevada Children

The American Civil Liberties Union announced today that it is filing a legal challenge against Nevada’s new education savings account program. The ACLU argues that using the ESA funds at religious institutions would violate the state’s historically anti-Catholic Blaine Amendment, which states “No public funds of any kind or character whatever…shall be used for sectarian purposes.”  

What “for sectarian purposes” actually means (beyond thinly veiled code for “Catholic schools”) is a matter of dispute. Would that prohibit holding Bible studies at one’s publicly subsidized apartment? Using food stamps to purchase Passover matzah? Using Medicaid at a Catholic hospital with a crucifix in every room and priests on the payroll? Would it prohibit the state from issuing college vouchers akin to the Pell Grant? Or pre-school vouchers? If not, why are K-12 subsidies different?

While the legal eagles mull those questions over, let’s consider what’s at stake. Children in Nevada–particularly Las Vegas–are trapped in overcrowded and underperforming schools. Nevada’s ESA offers families much greater freedom to customize their children’s education–a freedom they appear to appreciate. Here is how Arizona ESA parents responded when asked about their level of satisfaction with the ESA program:

 Parental satisfaction with Arizona's ESA program

And here’s how those same parents rated their level of satisfaction with the public schools that their children previously attended:

Parental satisfaction among AZ ESA families with their previous public schools 

Note that the lowest-income families were the least satisfied with their previous public school and most satisfied with the providers they chose with their ESA funds.

Similar results are not guaranteed in Nevada and there are important differences between the programs–when the survey was administered, eligibility for Arizona’s ESA was limited only to families of students with special needs who received significantly more funding than the average student (though still less than the state would have spent on them at a public school). By contrast, Nevada’s ESA program is open to all public school students, but payments to low-income families are capped at the average state funding per pupil ($5,700). Nevertheless, it is the low-income students who have the most to gain from the ESA–and therefore the most to lose from the ACLU’s ill-considered lawsuit.

Educational Choice: Getting It Right

Over the last couple weeks, the Thomas B. Fordham Institute has been holding its second annual Wonk-a-thon. In the wake of Nevada enacting a groundbreaking, nearly universal education savings account (ESA) law, Fordham asked practitioners, scholars, and policy analysts what Nevada must “get right in order to provide positive outcomes for kids and taxpayers.”

Readers can vote for the wonk who offered the wisest analysis here. For a summary of the various recommendations, see here.

ESAs have the potential to radically remake the education landscape. Rather than choose just a single school, parents can use ESA funds for a variety of educational goods and services. Students may spend part of a day in a classroom, part on a computer, and part with personal tutors. Someday, students may even learn in “education malls” where they will choose from among numerous education providers for each subject, each with a different approach or focus. Or perhaps there will be explosive growth in full or partial homeschooling or blended learning. Frankly, we cannot predict with any certainty how education will change over the next few decades in a robust market.

The Year of Educational Choice: Update III

This is the fourth post in a series covering the advance of educational choice legislation across the country this year. As I noted in my last entry in May:

[At the beginning of the year,] the stars appeared to be aligned for a “Year of Educational Choice.” By late April, state legislatures were halfway toward beating the record of 13 states adopting new or expanded school choice laws in 2011, which the Wall Street Journal dubbed the “Year of School Choice.” The major difference in the types of legislative proposals under consideration this year is that more than a dozen states considered education savings account (ESA) laws that allow parents to purchase a wide variety of educational products and services and save for future education expenses, including college.

Since the end of May, five more states enacted new or expanded educational choice programs, bringing the total to 13 new or expanded programs in 10 states so far this year. Of these, the most exciting new choice program is Nevada’s education savings account, the fifth ESA in the nation and the first to offer nearly universal eligibility.

In addition, at least eight states are still seriously deliberating educational choice legislation. Here’s the tally so far:

New Educational Choice Programs

  • Arkansas: vouchers for students with special needs.
  • Mississippi: ESAs for students with special needs.
  • Montana: universal tax-credit scholarship law.
  • Nevada: tax-credit scholarships for low- and middle-income students.
  • Nevada: nearly universal ESA for students who previously attended a public school.
  • Tennessee: ESAs for students with special needs.

Expanded Educational Choice Programs

  • Alabama: Raised the annual scholarship tax credit cap from $25 million to $30 million and raised the contribution cap from $7,500 to $50,000. However, the expansion came at a price: the legislation lowered income eligibility threshold from 275 percent of the federal poverty level to 185 percent (from about $67,000 to about $45,000 for a family of four). Current scholarship recipients are grandfathered in.
  • Arizona: Expanded ESA eligibility to include students living in Native American tribal lands.
  • Arizona: Expanded the types of businesses that can receive tax credits for donations to scholarship organizations.
  • Indiana: Increased amount of tax credits available for donations to scholarship organizations ($2 million over two years).
  • Indiana: Eliminated cap on the number of vouchers available for elementary school students.
  • Louisiana: Expanded school voucher program (funding roughly 600 additional vouchers).
  • Oklahoma: Expanded eligibility for its special-needs tax-credit scholarships and raised the tax credit value from 50 percent–tied with Indiana for the lowest in the nation–to 75 percent. 

Pending Legislation 

  • Delaware: Considering ESA legislation.
  • Florida: Earlier this year, both the FL House and FL Senate unanimously passed slightly different versions of legislation to expand the state’s ESA program. However, due to a legislative standoff over unrelated matters, the legislature failed to reach an agreement before adjourning for the summer and the legislation appeared to be dead. Nevertheless, on Monday legislative leaders reached an agreement to include a significant expansion of the ESA program in the budget, more than doubling the funding and expanding the eligibility requirements to additional categories of students with special needs. 
  • North Carolina: Both the NC House and NC Senate passed budgets that expanded funding for the state’s voucher program and increased the size of vouchers for students with special needs.
  • Ohio: Considering an expansion to the state’s school voucher program.
  • Pennsylvania: Considering an expansion to the state’s Opportunity Scholarship Tax Credit.
  • Rhode Island: Considering ESA legislation.
  • South Carolina: The legislature is considering a new “refundable” scholarship tax credit that blurs the line between tax credits and vouchers. A wiser path would be expanding the state’s existing scholarship tax credit to include all students and provide enough tax credits to meet demand for scholarships.
  • Wisconsin: The WI Legislature’s Joint Finance Committee approved an expansion to the statewide school voucher program that eliminates the restrictive and arbitrary 1,000-student enrollment cap. The proposal would also make students with special needs eligible.

The Year of Educational Choice: An Update

Back in February, I speculated that 2015 might be the “Year of Educational Choice” in the same way that the Wall Street Journal declared 2011 the “Year of School Choice” after 13 states enacted new or expanded school choice laws.

This year, in addition to a slew of more traditional school choice proposals, about a dozen legislatures considered new or expanded education savings accounts (ESAs). As I explained previously:

ESAs represent a move from school choice to educational choice because families can use ESA funds to pay for a lot more than just private school tuition. Parents can use the ESA funds for tutors, textbooks, homeschool curricula, online classes, educational therapy, and more. They can also save unused funds for future educational expenses, including college.

Currently, two states have ESA laws: Arizona and Florida. Both states redirect 90% of the funds that they would have spent on a student at her assigned district school into her education savings account. The major difference between the two laws is that Arizona’s ESA is managed by the Arizona Department of Education while Florida’s is privately managed by Step Up For Students and AAA Scholarships, the nonprofit scholarship organizations that also issue scholarships through the Sunshine State’s tax credit law.

Both Arizona and Florida expanded their ESA programs this year. Earlier this month, Arizona expanded eligibility for the ESA to students living on Native American reservations. And just today, the Florida House of Representatives voted unanimously to expand its ESA. Travis Pillow of the RedefinED Online blog explains:

Victories for Educational Choice in the Southwest

It’s looking more and more like the Year of Educational Choice each week.

Yesterday, Arizona Governor Doug Ducey signed a bill expanding eligibility for the state’s pioneering education savings account (ESA) law to all students living on Native American tribal lands. The ESAs were originally limited to students with special needs, but the state subsquently expanded eligibility to include students in adoptive care, students with an active-duty military parent, siblings of an ESA recipient, and students zoned to a district school rated D or F.

On the same day, Nevada became the third state this year to adopt a new educational choice law in both legislative chambers, behind Mississippi and Arkansas. In addition, the Montana Senate recently voted to create a new scholarship tax credit (STC) law, and Alabama Senate voted last week to expand the state’s existing STC law.

Nevada’s Assembly Bill 165 creates a STC law. Corporate donors will be able to receive tax credits for contributions to nonprofit scholarship organizations that aid low- and middle-income students attend the school of their family’s choice. The scholarships can be worth up to $7,755 in the first year, which is significantly less than the average $9,650 cost per pupil in Nevada’s district schools.

A Win for Educational Choice in Mississippi

Mississippi is poised to become the third state, behind Arizona and Florida, to enact an education savings account (ESA) law. Yesterday, the Mississippi Senate voted to concur with the state House’s version of the bill, which would provide ESAs for students with special needs to cover numerous education expenses, including private school tuition and fees, tutoring, textbooks, educational therapy, assistive technology, and higher education expenses. Gov. Phil Bryant has indicated that he will sign the legislation.

The Friedman Foundation for Educational Choice provides a useful breakdown of the ESA legislation. While about 63,000 Magnolia State students would be eligible for an ESA next year, “this opportunity is limited to 500 students in year one, with an additional 500 students added to the program each year during a ‘pilot’ period of five years.”

The state will fund the ESAs at $6,500 annually in the form of reimbursements for eligible expenses. The reimbursement model may make it difficult for lower-income families to participate—something policymakers should monitor and address if necessary. Arizona provides ESA parents with restricted-use debit cards that allow parents to conveniently access ESA funds while minimizing the potential for fraud.

In a 2013 survey, parents of students with special needs in Arizona overwhelmingly reported being satisfied with the education they purchased for their children with ESAs. ESAs empower parents to completely customize their child’s education based on his or her unique learning needs. As Lindsey Burke of the Heritage Foundation and I explained in a recent article:

Parents can also save unused funds from year to year and roll the funds into a college savings account. These two features of ESAs—the ability of parents to completely customize their child’s education and save for future educational expenses—make them distinct from and improvements upon traditional school vouchers. ESAs empower parents with the ability to maximize the value their children get from their education services. And because they control how and when the money is spent, parents also have a greater incentive to control costs.

Whether or not 2015 ends up being the Year of Educational Choice, Mississippi has taken an important step toward educational freedom.

2015: The Year of Educational Choice

The Wall Street Journal declared 2011 “The Year of School Choice” after 13 states enacted new school choice laws or expanded existing ones. By that measure, 2015 could be “The Year of Educational Choice” as at least 10 state legislatures consider new or expanded education savings accounts (ESAs) in addition to at least 11 states considering new or expanded scholarship tax credits.

ESAs represent a move from school choice to educational choice because families can use ESA funds to pay for a lot more than just private school tuition. Parents can use the ESA funds for tutors, textbooks, homeschool curricula, online classes, educational therapy, and more. They can also save unused funds for future educational expenses, including college.

Currently, two states have ESA laws: Arizona and Florida. Both states redirect 90% of the funds that they would have spent on a student at her assigned district school into her education savings account. The major difference between the two laws is that Arizona’s ESA is managed by the Arizona Department of Education while Florida’s is privately managed by Step Up For Students and AAA Scholarships, the nonprofit scholarship organizations that also issue scholarships through the Sunshine State’s tax credit law. As the Heritage Foundation’s Lindsey Burke and I explained in the most recent edition of National Affairs, there are several reasons to believe that Florida’s model holds advantages over Arizona’s:

First, the non-profit scholarship organizations are less likely to be captured by opponents than is a government agency. The non-profits are dedicated to the scholarships, and the idea of school choice is built into their mission. Second, awarding scholarships is the primary mission of a scholarship organization but only an ancillary function of a state education agency — which means that not only will they be more dedicated to the concept but they can generate and retain best practices more easily. Third, scholarship organizations have the ability and incentives to be more flexible in their operation than government agencies, and therefore more responsive to the needs of families. The Arizona education department did not offer workshops for parents outside of regular business hours because employees were not paid for those hours. Non-profits can more easily implement policies like flextime.

While both Arizona and Florida redirect public funds into the ESAs, a state could create an ESA that is funded through tax credits, which would minimize the threat of overregulation and avoid coercing people into supporting the teaching of ideas that they dislike. New Hampshire’s scholarship tax credit law already has an ESA-style provision that allows homeschoolers to use scholarship funds for a wide variety of educational expenses. 

Several state legislatures are moving fast to enact ESA laws this year. Both the Mississippi Senate and Virginia Assembly passed ESA bills last week. This week, the Virginia Senate’s Education Committee and Oklahoma Senate education subcommittee both approved ESA bills and a Florida Senate panel approved an expansion of their state’s ESA law. Arizona is also considering expanding eligibility for its ESA law.

Other states considering a new ESA law include Colorado, Delaware, Georgia, Montana, and Oregon. Additionally, Politico reported that Iowa, Nebraska, Nevada, Rhode Island, Tennessee, and Texas are likely to take up ESA bills as well. States considering new or expanded scholarship tax credit laws include Georgia, Indiana, Maryland, Missouri, Montana, Nebraska, Nevada, New Mexico, New York, South Carolina, and Texas. In addition, two state senate committees in Colorado have approved a personal-use education tax credit.

There’s no guarantee that any of these bills will become law, but the number of state legislatures exploring educational choice is encouraging.

[Updated to include Oregon’s ESA bill.]