Topic: Education and Child Policy

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.]

Disappointed Broad Foundation Pauses its $1 Million Prize for Urban Schools. Foreseeable?

The Broad Foundation has decided to halt its 13-yr-old prize for academic improvement.The idea of the prize was that recognizing and celebrating top performance within our traditional district-based school system would lead to widespread emulation of the most successful practices. The proximate cause of the decision is reportedly the Foundation’s disappointment at the paucity of high performing districts. It may also have to do with the the fact that earlier prize-winners did not spark the mass replication of successful methods, as hoped.

While no doubt frustrating for the Foundation, it was neither unforeseeable nor unforseen. Two years before the Prize for Urban Districts was launched, I reviewed the Foundation’s programs and plans. Concerned, I addressed a letter to Mr. Broad, which I reproduce in its entirety below.

March 14, 2000

Dear Mr. Broad:

It was with great pleasure that I read your letter describing the creation of the Broad Foundation. Your organization’s dedication to encouraging exemplary educational leadership has the potential to do great things for our nation’s children.

Having also read the brief prospectus enclosed with your letter, I wonder if I might raise a question which I consider crucial to the Foundation’s success? It seems as though the Foundation will be promoting pockets of excellent leadership in urban districts around the country. My question is this: Does the Foundation have a plan for ensuring that these pockets of excellence will 1) consistently endure beyond the lifetime of the individuals involved, and 2) systematically expand to reach all students rather than remaining isolated?

Much of my research on educational governance has been historical, chronicling the relative merits of education systems from 500 BC to the present. One of my findings is that, while there have been few periods that lacked isolated pockets of excellence, these pockets very rarely lasted for more than a generation or two, and very rarely spread beyond a tiny fraction of the population.

There have been only a handful of exceptions to this sad historical record, such as classical Athens, the early medieval Islamic world, and early 19th century England and America. The difference between these remarkably successful periods and their less successful counterparts was that they enjoyed a mechanism that reliably perpetuated excellence over time, and relentlessly drove its spread to an ever wider group of children.

The specific nature of that mechanism is not the point of my letter. My point is to highlight the compelling need for some such mechanism given the patently transitory nature of nearly every education reform effort in the history of civilization. The goals of the Broad Foundation, which I share, are too important to be left to erode in the sands of time like the mighty works of Ozymandius, or to burn like a few solitary candles amidst a vast and lingering educational darkness.

There have been many foundations created for the improvement of education over the years. The ones that will be remembered will be those that understand excellence is not intrinsically self-perpetuating—that it only endures and thrives within systems whose incentive structures inexorably drive people to perpetuate it. I hope that your organization will be among this rare group of insightful foundations.

Please feel free to call or e-mail me if you would like to discuss this issue in detail.

Yours very truly,

Andrew J. Coulson

School Choice Survives Repeal Attempt in New Hampshire … Again

School choice is safe in the Granite State.

This morning, the New Hampshire Senate Education Committee voted 3-2 along party lines against SB 204, a bill to repeal New Hampshire’s trailblazing scholarship tax credit law, which was the first in the nation to include homeschoolers. The repeal bill is likely to be rejected in a vote of the entire state senate later this week. A similar repeal attempt failed two years ago. Thus far, no state has legislatively repealed a school choice law.

Last month, the Cato Institute released a short documentary on the fight for school choice in the “Live Free or Die” state, titled “Live Free and Learn: Scholarship Tax Credits in New Hampshire.” You can watch the film here:

When Mean-Tested Benefits Rose, Labor Force Participation Fell

The U.S. job market has tightened by many measures – more advertised job openings, fewer claims for initial unemployment insurance, substantial reduction in long-term unemployment and the number of discouraged workers.  Yet the percentage of working-age population that is either working or looking for work (the labor force participation rate) remains extremely low.  This is a big problem, since projections of future economic growth are constructed by adding expected growth of productivity to growth of the labor force.

Why have so many people dropped out of the labor force?  Since they’re not working (at least in the formal economy), how do they pay for things like food, rent and health care?

One explanation answers both questions: More people are relying on a variety of means-tested cash and in-kind benefits that are made available only on the condition that recipients report little or no earned income.   Since qualification for one benefit often results in qualification for others, the effect can be equivalent to a high marginal tax rate on extra work (such as switching from a 20 to 40 hour workweek, or a spouse taking a job).  Added labor income can often result in loss of multiple benefits, such as disability benefits, supplemental security income, the earned income tax credit, food stamps and Medicaid. 

This graph compares annual labor force participation rates with Congressional Budget Office data on means-tested federal benefits as a percent of GDP.  The data appear consistent with work disincentives in federal transfer payments, labor tax rates and refundable tax credits.

Live Free and Learn: Scholarship Tax Credits in New Hampshire

For School Choice Week, Austin Bragg and I produced a short documentary that details the struggle to adopt and implement a scholarship tax credit program in New Hampshire. The program had to overcome a governor’s veto, a repeal fight and a lawsuit that went to the New Hampshire Supreme Court. We talked with three families that have benefitted from the scholarship program and people working to keep the program.

Cato’s Jason Bedrick has detailed the history of this program at length. He also played a key role in adopting and evaluating the results of the scholarship program in the face of sometimes less-than-civil opposition.

On Monday, we hosted an event featuring Jason and two other folks who played a key role keeping scholarships alive in New Hampshire where we discussed the potential for scholarship tax credits in other states with so-called “Blaine amendments.” And feel free to snag a free DVD of our short film while supplies last.

Georgia Has it Right on School Choice—Though on Too Small a Scale

Georgia has a schoalrship donation tax credit program that makes it easier for lower-income families to afford private schooling—if that’s what they think is best for their children. The program is so popular that the cap imposed upon it by the legislature was reached within the first few hours of January 1st, this year. Over at Education Next I argue today that raising the cap would do a lot of good for Georgia children.

Conflicted on 529s

If you like feeling conflicted, you’ll love being a libertarian thinking about President Obama’s recent proposal – and even more recent rescinding of that proposal – to essentially end 529 college savings plans. The President proposed killing the ability to use funds saved under a 529 plan tax free to pay for college, which would have gutted the program’s real value.

On one side, a libertarian should be aggravated by such a proposal. The goal certainly seemed to be income redistribution, generating new revenues from relatively well-to-do Americans and giving it to (presumably) less well-to-do Americans with free community college and expanded “refundable” tax credits. It also seemed intended to support a divisive, rhetorical war of the “middle class” vs. “the rich” (though certainly many people who use 529s consider themselves middle class). And unlike federal grants, loans, and those refundable credits that are often essentially grants for people who don’t owe much in taxes, 529s are about people saving their own money to pay for college, not taking it from taxpayers.

On the other side, libertarians – heck, everyone – should want a simple tax code that isn’t riven with special breaks, loopholes, and encouragements to do things politicians decide are worthy but which have massive negative, unintended consequences. And when it comes to higher education, those consequences are huge, including rampant tuition inflation, awful completion rates, major underemployment, serious credential inflation, and a burgeoning academic water park industry. And where does the federal government get the authority to incentivize saving for college in the first place? Not in the Constitution.

So how should libertarians feel about the demise of the President’s 529 plan? I guess a little sad, because the Feds simply shouldn’t be in the business of encouraging college consumption. Even more, though, they should feel angry, because we are so deep in a federally driven, college-funding quagmire.

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