Spreading Freedom and Saving Money

Independent study evaluates fiscal impact of D.C. voucher program

January 31, 2006

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WASHINGTON — The District of Columbia’s federally funded school voucher program saves the city nearly $8 million. But, according to the program’s first-ever independent fiscal assessment released today by the Cato Institute and the Milton and Rose D. Friedman Foundation, the program provides little incentive for improving the fiscal responsibility or accountability of the District’s public schools.

In “Spreading Freedom And Saving Money: The Fiscal Impact of the D.C. Voucher Program,” Susan Aud, senior fellow at the Friedman Foundation, and Leon Michos, adjunct professor of economics at George Washington University, evaluate changes to the D.C. voucher program that would create incentives for public schools to improve - and still save the city $3 million even without the federal funding included in the current program.

The authors argue that the process by which the D.C. Public School System (DCPS) and its schools are funded is not conducive to efficiency or excellence. Under the program’s current design, DCPS is rewarded for declining enrollment.

“Although market forces are one of the primary rationales behind voucher programs, such forces are reversed in the D.C. voucher plan. There is, in fact, a financial incentive for the District and DCPS to encourage students to leave their system,” the authors report. In other words, public schools are not losing money for students they do not have to educate.

Aud and Michos then evaluate the fiscal impact of several proposed changes to the D.C. program. They find that “The prospect for smaller budgets due to declining enrollments would provide DCPS with the necessary incentive to improve,” under a “locally funded means tested” version of the voucher program. In addition, the authors note the advantages of an expanded universal school choice program: “Given that nearly every voucher student saves D.C. money, it might be beneficial to open the program up to all parents rather than just to a limited number of low-income parents.”

Special Research Monograph: http://www.cato.org/pub_display.php?pub_id=5365