Topic: Education and Child Policy

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.

Do Housing Vouchers Help Poor Children?

Why do poor parents have children who also grow up to be poor? One possible reason is that poor families do not have access to credit that would allow parents to invest more in the improvement of the human capital of their children. The conventional policy recommendation for this diagnosis is to increase transfers to poor families in order to remove their credit constraints.

The expansion of the Earned Income Tax Credit (EITC)—which uses the tax system to transfer money to low-income households—has been shown to increase standardized test scores. But critics of this research argue that factors unobservable to researchers but correlated with EITC receipt are responsible for children’s success, not the EITC transfers themselves.

Increasingly, economists use clever research designs that involve an element of random assignment, much like clinical trials of new pharmaceuticals, to provide more conclusive evidence of a program’s effectiveness or ineffectiveness. Recently, three researchers used a policy change in Chicago to test the effects of a change in housing subsidies.

Unlike many other welfare programs, housing subsidies are not given to everyone who qualifies for them, but are handed out on the basis of availability. In 1997, for the first time in 12 years, Chicago accepted applications for housing vouchers. About 82,000 people applied out of 300,000 poverty households in Chicago at the time. The applicants were randomly assigned a position in the waiting list. The first 35,000 on the list were told their number and that they would be offered a voucher within three years. The rest were told that they would not receive vouchers.

By 2003, 18,000 of the first 35,000 applicants had received vouchers. The Chicago Housing Authority had issued as many vouchers as it could fund, and stopped offering any new vouchers.

In a study I review in my “Working Papers” column in the current Regulation, Brian Jacob, Max Kapustin, and Jens Ludwig examine the outcomes 14 years later for children whose families “won” the Chicago housing vouchers versus the children of families that were told they would not receive a voucher. Families that won the lottery received a very large positive income shock—the equivalent of $12,000 a year—relative to the average income in the sample ($19,000 a year). If income alone allows families to improve the human capital in their children, we should see results from this experiment. 

The authors find very few effects on schooling, crime, or health outcomes—and none were significant. “Our estimates imply that extra cash transfers beyond the current level provided in the United States are likely to have a smaller impact per dollar than the best-practice educational interventions explicitly designed to improve children’s human capital,” they write. Their results are consistent with the findings of sociologist Susan Mayer, who concluded in her 1997 book What Money Can’t Buy (Harvard University Press) that there is “little reason to expect that policies to increase the income of poor families alone will substantially improve their children’s life chances.”

Disagreement over Chile’s National School Choice Program

A week ago, the Atlanta Journal Constitution published an on-line op-ed critiquing Chile’s nationwide public-and-private school choice program. In a letter to the editor, I objected to several of the op-ed’s central claims. The authors responded, and the AJC has now published the entire exchange. A follow-up is warranted, which I offer here:

Comment on the Gaete, Jones response to my critique:

Their response consists chiefly of “moving the goalposts”—changing the issue under debate rather than responding to the critique of the original point. The first claim in their original op-ed to which I objected was that “there is no clear evidence that [Chilean] students have significantly improved their performance on standardized tests.” In contradiction of this claim I cited the study “Achievement Growth” by top education economists and political scientists from Harvard and Stanford Universities. That study discovered that Chile is one of the fastest-improving nations in the world on international tests such as PISA and TIMSS—which were specifically designed to allow the observation of national trends over time. It is hard to conceive of clearer evidence that Chilean students “have significantly improved their performance”, contrary to the claim of Gaete and Jones.

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.

National School Choice Proposal Heartening, Frightening

According to the American Federation for Children, Sen. Marco Rubio (R-FL) and Rep. Todd Rokita (R-IN) have reintroduced “the Educational Opportunities Act, which would create an individual and corporate tax credit for donations that pay for scholarships for students to attend a private school of their parents’ choice.”

It is encouraging to see growing support for scholarship tax credit school choice programs, which have been found to simultaneously boost achievement for students who switch to private schools, do the same for students who remain in public schools, and save taxpayers millions of dollars every year–a win-win-win scenario. Nevertheless, it is ill advised to pursue such a program (or other school choice programs) at the federal level.

Years ago I summarized those problems when President George W. Bush advocated creating a federal school voucher program. Such programs are not only beyond the mandate accorded to Congress by the Constitution, they bear the risk of suffocating private schools nationwide with a raft of new regulation, defeating their very purpose of increasing the range of educational options available to families with limited means.

In the past few years I have visited Sweden and Chile and studied their federal school chioce programs. Both confirm my earlier worries about national programs. Chile’s entrepreneurial voucher schools grew rapidly at first, but with a recent change of government hostile to the program they have sensed the new climate and stopped expanding.The new government is trying to enact regulations to diminish the scope and freedom of private schooling in Chile.

Meanwhile, something similar is happening in Sweden. Among other things, the government has mandated that all schools hire graduates of government-certified teacher training programs, despite the well known fact that those programs are currently attracting the lowest-achieving college students.

National school choice programs have proven to be a prime case of “staff car legislating.” The legislators who enact them are not always the ones in the official staff cars, making the rules. New lawmakers with different preferences ultimately come to power and can wreak havok on a nation’s entire K-12 education sector.

This problem can be minimized by leaving school choice legislation to the state level, where the Constitution rightfully leaves it. We thus have a “laboratory of federalism”–a variety of different policies across states that make it easier to determine how best to design such programs.

Scholarship Tax Credits Do Not Financially Benefit Donors

In a desperate attempt to halt New York legislators from enacting a new school choice law, teachers and their allies have resorted to misrepresenting what the proposed law would do.

Scholarship tax credit laws make donations to nonprofit scholarship organizations eligible for tax credits, rather than merely tax deductions. The scholarship organizations help low- and middle-income families afford tuition at the schools of their choice. The New York proposal, known as the Education Investment Tax Credit, would create a 75 percent tax credit, meaning that a $1,000 donation to a scholarship organization would reduce a donor’s tax liability by $750. Between the donation and the remaining $250 in tax liability, the donor would have given a total of $1,250.

New York teachers unions and the think tank they fund are trying to portray this arrangement as somehow financially benefiting the donors. Sadly, some media outlets have reported their spin verbatim, including WXXI News:

“It’s nothing more than a giveaway to the wealthy and corporations,” said Ron Deutsch, with the think tank Fiscal Policy Institute, which is in part funded by unions.

He says it’s also bad tax policy that could harm other charitable organizations. Under current laws, a million dollar charitable donation nets the donor just $22,000 in tax credits. He says education tax credit donors would get $750,000 back from a million dollar donation. Under a Senate version of the plan, donors would get $900,000 dollars back.

It takes real chutzpah to describe an arrangement that decreases the amount of money in the donor’s pocket as a “giveaway.” Deutsch falsely claims that the donors receive a “net” benefit, but the net is actual in the negative. The hypothetical donor that Deutsch describes could have paid only $1,000,000 in taxes, but instead chose to pay $250,000 in taxes and donate an additional $1,000,000. In other words, the donor would have saved $250,000 had she decided not to donate anything.

Some giveaway!

Scholarship tax credits expand educational opportunities for low-income families–the type that have been rallying in support of the proposal in recent weeks. Donors do not financially benefit from their donations whatsoever. Media outlets should not let themselves be used to spread misinformation to the contrary.

For those interested in learning how scholarship tax credit laws affect the lives of real families, watch the Cato Institute’s recent film, “Live Free and Learn”:

UT-Austin’s Secret Racial Preferences Undermine Its Admissions Policy

In 2013’s Fisher v. University of Texas at Austin, the Supreme Court delivered a blow to the use of racial preferences in university admissions by reversing a lower-court opinion that had allowed the use of race in UT-Austin’s admissions policy.

That wasn’t the end of the story, however; after holding that the university bears the burden of proving that its use of racial preferences is necessary and narrowly tailored—a point on which university administrators are due no deference—the Court remanded the case back to the U.S. Court of Appeals for the Fifth Circuit. That court was to determine whether UT had offered evidence sufficient to prove that its use of race was “narrowly tailored to achieving the educational benefits” of diversity. Recall that UT-Austin’s admissions program fills most of its spots through a race-neutral Top Ten Percent Plan—which offers admission to high school graduates in the top 10 percent of their class—then fills the remaining seats with a “holistic” rating that takes into account various factors typical to admissions programs (including race for certain preferred minorities).

Well, on remand, the Fifth Circuit panel split 2-1 but once again sided with the university, holding that even if the Top Ten Percent Plan already provided a “critical mass” of minority students, the use of racial preferences was necessary to achieve some other special kind of diversity. The dissenting opinion by Judge Emilio Garza pointed out how the majority deferred, once again, to the university’s hand-waving claim that its use of racial preferences is tailored to an actual, appropriate interest, without having actually proven anything approaching what is constitutionally required.

After being denied a rehearing before the full Fifth Circuit, Abigail Fisher, the former applicant suing UT-Austin, has now petitioned the Supreme Court to hear her case once again. And Cato has again filed a brief supporting that petition. We argue that the Court should hear the case because (1) UT-Austin’s “qualitative” diversity rationale is still a complete and unjustified sham, (2) the university continues to openly flout its disregard of Supreme Court precedent governing the use of race in higher education admissions, and (3) leaving the Fifth Circuit’s shockingly deferential and judiciously lazy ruling on the books will give other schools a roadmap for circumventing the Equal Protection Clause’s limitations on the use of race.

Among other evidence we marshal is the recently discovered program of secret racial preferences run out of the university president’s office, which flouts Supreme Court precedent and belies the stated rationale of UT’s admissions policy. This is just the latest example of college administrators’ massive resistance to the Fourteenth Amendment’s charge not to discriminate based on race or ethnicity.

The Court will decide whether to take up Fisher v. UT-Austin (again) later this spring.

Cato legal associate Julio Colomba contributed to this blogpost.