Tag: scholarships

School Choice Survives Repeal Attempt in New Hampshire

By
Jason Bedrick

Just moments ago, New Hampshire’s state senate rejected an attempt to repeal the state’s nascent scholarship tax credit law by a 13-11 vote*. The program grants tax credits to businesses worth 85 percent of their contributions to nonprofit scholarship organizations that fund low- and middle-income students attending private or home schools. The program took effect on January 1 of this year but scholarships will not be distributed until the new school year in the fall.

The support of Senate Education Committee Chairwoman, Senator Nancy Stiles, was decisive in saving the program. Last year, Sen. Stiles had voted against the school choice proposal, but she decided to oppose the repeal because she believed “it would be irresponsible to overturn it without seeing whether the legislation made a positive difference.” She also noted that without having had the opportunity to evaluate the program’s effectiveness, the opponents of the school choice program want to “rescind a program, not based on its effectiveness, but on philosophical differences. I cannot support or be a part of this effort.”

The legislative battle does not end here, however, since the NH House also repealed the scholarship tax credit program in the House version of the budget. Budget negotiations between New Hampshire’s Democrat-controlled House and Republican-controlled Senate are expected to continue until about mid-June.

The law is also being challenged in court by the Americans for Separation of Church and State and the ACLU, who claim that the school choice program violates the state’s historically anti-Catholic Blaine Amendment, which prohibits public funding of private schools. Their argument is based on a false premise, which is why the courts have ultimately rejected it wherever it has been tried. A citizen’s money is her own until it reaches tax collector’s hand. A private donation therefore does not constitute “public funding” even if it qualifies for a tax credit or deduction. While impossible to predict the future, it is likely that the Granite State courts will rule in line with other states’ interpretations of the Blaine Amendment and the U.S. Supreme Court’s understanding of tax credits.

*UPDATE: I originally reported that the vote was 14-10 to table the repeal bill. In fact, one state senator had mistakenly voted for the motion when he intended to vote against it and that was later corrected. The 13-11 vote was along party lines.

Topics: 
Education and Child Policy

What, Us Worry about Paying for College?

By
Neal McCluskey

Listen to the media and you might think every American is scared silly about paying for college, and  public aid is stretched micron thin to help just the neediest of students. A new report analyzing what and how Americans paid for higher education last year, however, puts the lie to that image.

How America Pays for College: 2012, from Sallie Mae and Ipsos Public Affairs, offers an interesting breakdown of who pays what and how for college, and furnishes some welcome contextual data. I’m not sure there is a unifying message in the numbers – other than people seem to be economizing a bit since the 2009-10 academic year – but some of the potential lessons are striking.

The first lesson is don’t believe that government aid is just for the poor. Families making $100,000 or more used federal loans, tax-incentivized savings programs, and federal, state, and school-based grants – which do not include scholarships – to cover 27 percent of their total cost of attendance.

Next, don’t get caught up in the overblown controversy over private student loans. It’s a diversion from the much bigger impact of government aid. Only 1 percent of the total cost of attendance last year was covered by private loans, versus 4 percent by federal Parent PLUS loans, 13 percent by other federal loans, 1 percent by federal work-study, and 16 percent by federal, state, or school-based grants. And don’t forget: much of the cost of public institutions is borne by taxpayers before the tuition bills even go out.

Perhaps most interesting, it appears that even though the sticker price of college has risen at astronomical rates, most people aren’t sufficiently concerned that they plan ahead for how they’ll pay. 50 percent of respondents either “somewhat” or “strongly” disagreed with the statement that “before my child/I enrolled, our family created a plan for paying for all years of college.” Only 39 percent somewhat or strongly agreed with the statement.

What does this tell us? Potentially many things, but one might be that many people assume someone, no matter what, will ensure that they or their child will be able to go to college. Unfortunately, that “someone” often ends up being the American taxpayer.

Topics: 
Education and Child Policy, Finance, Banking & Monetary Policy, General

Market Structure & Barriers to Entry in Education Tax Credit Programs

By
Adam B. Schaeffer

I want to thank John Kirtley for his gracious reply to my criticism of his policy guidelines. He has spilled a tremendous amount of blood, sweat, and tears on the ground fighting to establish, protect, and expand the largest private school choice program in the country, and I, quite simply, have not. I think this kind of policy debate is good for the health of the school choice movement, however, so on it goes …

Andrew Coulson posted a response to many of John’s points, but I think some areas deserve an expanded treatment. One of the primary issues in our discussion is centralization vs. diversification of scholarship organizations. I did not claim there was a “mandated” monopoly, which I take to mean government-mandated. Step Up for Students is, however, the only active scholarship organization in the state. It became the sole scholarship organization through hard work and good performance. John mentions Microsoft in his defense of market dominance, but Microsoft never fully monopolized any product or service. There is, however, a literal monopoly of the education tax credit system that was produced and is maintained by problematic provisions in the credit program that create a very high barrier to entry. The structure of the education tax credit in Florida all but ensures a monopoly in the education tax credit program.

For the first six years of the program, scholarship organizations were required to spend 100 percent of the credit funds they raised on scholarships. In other words, they had no money for overhead, which made establishing and running a scholarship organization difficult and expensive … a non-profit would need to seriously cannibalize its established charitable funding, likely already committed, and/or fundraise along two separate tracks for administrative and scholarship funding.

To put this in context, Charity Navigator, which rates non-profits, considers it acceptable for a charity to spend close to one-third of its revenue on non-program expenses. Even the 4-star rated Inner-City Scholarship Fund spends over 13 percent of its revenue on overhead expenses.

Scholarship programs, especially ones with relatively high compliance costs such as requiring detailed checks on a family’s income, require significant but entirely normal overhead spending. Furthermore, local scholarship organizations in a decentralized system act as more than a high-volume processor of financial applications. They act as community organizations that consider the needs and struggles of individual families and children, which requires spending more time and resources on each family. A 10 percent overhead allowance is eminently reasonable, indeed, within the bounds of best practices for such charities. Denying any overhead to non-profits ensured that few charitable organizations would be capable of fundraising and processing scholarships under the law.

Exacerbating this problem, scholarship organizations are not allowed to target the use of scholarship funds they raised to particular kinds of educational environments. What this means is that a non-profit would have to a) cannibalize money raised from other sources and for other purposes, and b) possibly fund educational environments that directly conflict with their conscience, mission, or best judgment. For instance, a Catholic charity would be required to fund an atheist, Wiccan, Protestant fundamentalist, Lutheran, Islamic, or any other school which met the basic requirements of the legislation. Even a non-sectarian scholarship organization is required to issue scholarships to any school, regardless of quality, as long as it meets the basic legal requirements.

In addition, the Florida tax credit applies only to corporate taxes, the vast majority of which are paid by large corporations based outside of the state of Florida. This means that fundraising is relatively difficult and time-consuming, not to mention extremely volatile, as large corporations shift revenue and expenses to minimize their tax burden year to year. It can take two years for a large corporation to begin disbursing funds after first being solicited. And fundraising requires expensive out-of-state traveling.

The corporate-only credit acts as an additional barrier to entry that grows over time and with centralization. Step Up for Students entered this constrained market efficient and well-capitalized, and spent the next decade bringing on the biggest corporate taxpayers in Florida as donors. A new entry into the credit scholarship realm would need to raise very substantial funds for fundraising for years before they saw a return in credit donations. Even should the very high quality of Step Up decline in the future, its relationships with the biggest donors, scale, and general dominance would pose a very formidable wall to climb for any non-profit. Indeed, it is far more likely that the state government would intervene long before any non-profits entered the market to impose the discipline of competition.

With extremely high start-up costs, low return for many non-profit missions, a fully established monopoly, and no profit motive or access to investment funding, the Florida education tax credit scholarship organization opportunities are all but nonexistent under current law.

Topics: 
Education and Child Policy

Ed. Policy Reality Check (Now with More Reality!)

By
Andrew J. Coulson

The Orlando Sentinel published an article over the weekend titled “Education: Big reforms haven’t yet produced big results.” It seems to have been meant as a reality check, and certainly it does contain a few relevant facts, but it also leaves this statement from “critics” unchallenged: “schools won’t get better without more money.”

Slight problem: Florida’s k-12 scholarship tax credit is raising academic achievement at less than half the per pupil cost of the traditional state-run schools. That’s according to academic studies commissioned by the state of Florida and by the state’s own spending and enrollment data.

Figlio and Hart, 2010, found that the scholarship tax credit program improves academic performance in public schools; and Figlio, 2011, found that students using the scholarships to attend independent schools are also benefiting academically. As for cost, the average scholarship is about $4,000. For comparison, the state’s public school districts spent $27 billion in 2009-10 (bottom of page 21, first column), for 2.6 million students, for per pupil spending of just over $10,000.

Topics: 
Education and Child Policy, General

I’ll Take “Whatever Evidence I Like” for Hundreds of Billions, Alex

By
Neal McCluskey

Right before the President’s 2012 budget proposal was released, I wrote a bit about what I was hearing the administration would call for with Pell Grants. Notably, ending year-round Pell on the grounds that the cost was too high and “there was little evidence that students earn their degrees any faster.” I found this argument a bit odd because eligibility to get more than one Pell award annually started in just the 2009-2010 academic year – way too recently to have any conclusive evidence on its effect one way or the other.  I was also surprised because, well, evidence of success has never been important in decisions to keep or kill programs.

Take the embattled – and near dead – Washington, DC voucher program. There is currently a concerted effort to revive the program, but the Obama administration and most congressional Democrats evinced no qualms about killing it despite its well-documented success with graduation rates and parental satisfaction. Documented, in fact, using “gold-standard,” longitudinal, random-assignment research methods. That documentation is why Cato Center for Educational Freedom director Andrew Coulson last week testified to the House education committee that “there is one federal education program that has been proven to both improve educational outcomes and dramatically lower costs. That is the Washington, DC Opportunity Scholarships Program.”

Sadly, the administration – and, to be honest, pols of all stripes – are as happy to ignore the evidence of success in programs they dislike as the very common evidence of failure in programs they support.

Take the 21st Century Community Learning Centers program, which funds after-school activities intended to keep kids off the streets and provide them with social and educational enrichment.  A series of studies – the last published in 2005 – found that not only didn’t the program appear to provide many positive results, it might have had overall negative effects:

Conclusions: This study finds that elementary students who were randomly assigned to attend the 21st Century Community Learning Centers after-school program were more likely to feel safe after school, no more likely to have higher academic achievement, no less likely to be in self-care, more likely to engage in some negative behaviors, and experience mixed effects on developmental outcomes relative to students who were not randomly assigned to attend the centers.

 
In light of its (at-best) impotence, did the program go away? Of course not! In FY 2010 it was appropriated $1.17 billion, and the Obama administration has asked for $1.27 billion for FY 2012. And this despite not just poor performance, but a pesky $14 trillion national debt.

This is small potatoes, though, compared to some other programs. Take Head Start: Run by the Department of Health and Human Services, Head Start is supposed to give poor kids an early boost in life. In reality, however, it has proven itself to be largely worthless, with benefits disappearing after just a few years. It’s a finding that was repeated in a federal evaluation released in 2010, which reported that “the advantages children gained during their Head Start and age 4 years yielded only a few statistically significant differences in outcomes at the end of 1st grade for the sample as a whole.”

Despite this fecklessness, the administration wants to increase funding for Head Start from $7.23 billion in FY 2010 to $8.10 billion in FY 2012.

Clearly, “evidence” doesn’t drive budgeting decisions – it’s just a term that’s invoked when it’s politically expedient to do so. But maybe one more bit of evidence is in order to illustrate this. Compare increases in overall federal spending on K-12 education to the academic performance of 17-year-olds, our schools’ “final products”:

In light of this, if federal policymakers really cared about evidence, would they still be spending money on education at all? The evidence on that, unfortunately, is almost indisputable.

Topics: 
Education and Child Policy, Tax and Budget Policy

Vouchers, Tax Credits, and Social Conflict

By
Andrew J. Coulson

Yesterday, I contended that education tax credits substantially avoid the compulsion inherent in school voucher programs – that vouchers compel all taxpayers to fund every kind of schooling (including ones they may strongly object to) whereas tax credits do not.

In his most recent response, NRO’s Robert VerBruggen disagrees. He writes

I don’t see how [tax credits do] anything whatsoever to change this, at least mathematically speaking. Whenever someone earmarks their tax dollars for a certain purpose — in this case, by “donating” to a voucher program and being reimbursed with a tax credit — the government has to devote a higher share of everyone else’s tax dollars to the rest of the budget. Non-”donating” taxpayers, therefore, subsidize the voucher program to the exact same degree they would have if the government funded it directly.

Let’s deal with the core of our disagreement by following the money. Under a voucher program, you pay your taxes as always, the money goes into a big government pot, and it pays for every type of schooling – including some that may violate your convictions. About this sort of thing, I agree with Thomas Jefferson, who wrote in the The Virginia Statute for Religious Freedom that:

to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves is sinful and tyrannical

(Well, I agree with the tyrannical part, anyway).

Tax credit programs like Arizona’s are different. From the start, taxpayers are given a choice. If they wish, they may donate to any of a wide range of k-12 scholarship organizations that subsidize private school tuition, and receive a dollar for dollar tax cut to offset the cost. That portion of their money – and only that portion of their money – is then used for scholarships for private schooling. So far, there is no conviction-violating compulsion.

Alternatively, taxpayers may choose not to donate to any scholarship organization, in which case they pay their taxes as always and the money goes into the state treasury. From there, the only k-12 educational uses to which it can be put are funding the secular public and public charter school systems. In this scenario, none of the taxpayer’s money goes to fund religious instruction of any kind.

There is no intermixing of funds between these separate options. There are two different pots of money, and each individual taxpayer decides which pot will receive his money.

It is not true that “the government has to devote a higher share of everyone else’s tax dollars to the rest of the budget,” because the government is no longer financially responsible for the education of children once they accept scholarships. To understand this, we again just have to follow the money.

For example, imagine that half of all taxpayers donate to the scholarship program, and half do not. Are the half that do not make donations “subsidiz[ing] the [scholarship students] to the exact same degree” as if it were a voucher? No. Under a voucher program, every taxpayer would be paying some portion of the cost of the program. With tax credits, the entire cost of the private school scholarships is being borne by those taxpayers who are making the donations. The taxes still being paid by non-donors do not go toward scholarships and they do not go up. On the contrary, if anything, the taxes paid by non-donors go down.

Educating students in private schools via scholarship programs costs less than placing them in government schools. The more students leave the government system for independent schools, the less it costs to operate the government schools. [And anyone out there who thinks that fixed costs are dominant in the public school sector should consult the relevant econometric literature. I and others have done marginal cost estimates of public schooling and found it to be in the 80 to 85 percent range – so when a child leaves the public school system, the system saves almost the entire average per-pupil cost.] And as the cost of the public school system goes down, the amount of revenue that needs to be appropriated for it goes down as well. In most states, state level public school appropriations are tied to enrollment, so appropriations will fall as students leave the government system.

The only scenario in which non-donating taxpayers could be said to have an “increased” tax burden due to an an education tax credit program is one in which there was never a tax-funded government school system in the first place. Then, there would be no savings from moving children out of public schools. But even in that fictional scenario, no taxpayer would be forced to pay for devotional religious instruction. They would always have the choice of donating to secular scholarship organizations, if they so wished.

So credits don’t suffer the same conviction-violating, conflict-generating, compulsion problem that afflicts vouchers.

I should add, of course, that public schools are much worse than vouchers in this regard. The conventional public school system not only forces all taxpayers to fund a single official government organ of education, sparking endless battles over what is taught, it puts huge financial pressure on all families to place their kids in that system, by virtue of its lavish funding monopoly. How a nation founded on liberty was ever lured into adopting such a compulsion-laden, Balkanizing system is a very interesting story of its own.

Topics: 
Education and Child Policy

The Case of the Missing Evidence

By
Andrew J. Coulson

Last fall, the 9th Circuit Court of Appeals reinstated a lawsuit against Arizona’s K-12 scholarship donation tax credit program. Under the program, citizens can donate to non-profit organizations that help families pay for private school tuition, and in return, the donors receive a dollar-for-dollar tax cut. The 9th Circuit, ruled that the program violates the Establishment Clause of the First Amendment, because many taxpayers choose to donate to religious scholarship-granting organizations whose scholarships are only usable at religious schools. This, in the Court’s view, meant that the program unconstitutionally favored religious scholarship-seeking parents over secular ones.

Supporters of the program will soon be appealing this decision to the U.S. Supreme Court. They’re very likely to win, for a variety of reasons. Foremost among them, the Establishment Clause forbids only  governments from favoring religion, but imposes no similar limit on individual citizens. It is for this reason that charitable tax deductions can be claimed for donations to both religious and secular charities without running afoul of the First Amendment – even if taxpayers overwhelmingly choose to donate to religious charities.

In rereading the original complaint, I noticed something interesting: even if the 9th Circuit’s misconstrual of the Establishment Clause were correct, plaintiffs still wouldn’t have a case. That’s because the evidence they presented did not – and still does not – support their claim that secular parents have been at a comparative disadvantage in obtaining scholarships. To see why, read on….

The only evidence plaintiffs presented to show the claimed disadvantage of secular parents was that most of the scholarship funds have been distributed by religious organizations. That is not dispositive. To prove that secular parents were at a disadvantage in getting scholarships, plaintiffs would have to show that secular parents were being rejected by scholarship programs at a higher rate than religious parents, or that, at the very least, the share of religious-only scholarship funds was higher than the share of parents seeking religious schooling.

That, as it turns out, was not the case in the school year (1998-99) for which plaintiffs provided data, and it is not true today. In 1998-99, about 75.5 percent of private school children were in religious schools, but only 75 percent of (the very tiny amount of) scholarship funds distributed in that year were reserved for religious schooling. In 2007-08 (the most recent year for which data are available), 81.4 percent of private school students were in religious schools, but only 65 percent of the donated scholarship funds in 2008 were reserved for religious schooling.

There is thus no evidence that secular parents are any more likely to be turned away for a scholarship than are religious families, because the share of scholarship funds available for use at secular schools is now nearly twice as large as the share of children being enrolled in secular schools.

So even if plaintiffs and the 9th Circuit were right on Establishment Clause jurisprudence, which they certainly are not, the evidence still wouldn’t support their case.

For all the relevant numbers I used to reach the above conclusion (sourced from the Arizona Dept. of Revenue and the National Center for Education Statistics)  see this Excel spreadsheet file.

Topics: 
Education and Child Policy, Law and Civil Liberties, Tax and Budget Policy