In 2015, Nevada lawmakers passed the most ambitious educational choice law in the nation: a nearly universal education savings account (ESA) program. The program was scheduled to launch this year, but it immediately drew two separate lawsuits from opponents of educational choice. Last week, the Supreme Court of Nevada upheld the constitutionality of the ESAs, but ruled that the program was improperly funded. Choice opponents were quick to declare that the ESA program is dead, but as Tim Keller of the Institute for Justice noted, the program is only mostly dead, which means it is slightly alive.
Whether the program is fully revived depends entirely on the lawmakers who won plaudits for enacting it in the first place. On Monday, the legislature will meet in a special session to consider whether to subsidize the construction of a football stadium for the Raiders. Fixing the ESA funding would be a much more productive and beneficial use of their time. Sadly, Governor Brian Sandoval announced this week that ESAs would not be on the agenda:
Passage of Education Savings Accounts (ESAs) set a national precedent for school choice and symbolized a significant step toward education equality for every student. I recognize the magnitude of this sweeping policy measure and consider it a major component of the reform package ushered in during the last legislative session. Protecting this program is a top priority for me. There is simply not enough time to add it to next week’s Special Session with full confidence that a rushed outcome will pass constitutional muster.
Instead, the governor is launching a working group to fix the funding issue at a later date and he pledges to include the ESAs in his final budget recommendations for the upcoming biennium. There's only one problem with this plan: the new legislature next year might not be as supportive of educational choice as the present one. If Gov. Sandoval and legislative leaders fix the funding issue now while they have legislative support for the program, they will cement their legacies in the history of education reform. If they fail to do so and the next legislature blocks efforts to fix the funding issue, their legacy will be a massive squandered opportunity.
There's no need to roll the dice. There are various constitutional ways the legislature could fix the funding issue through existing or new funding streams while still saving the state money. The state supreme court barred the legislature from diverting funds that it had already committed to meet the basic funding requirements of the district school system, but otherwise left the door open to various funding possibilities.
At the very least, the legislature could fund the accounts via tax credits. As Jonathan Butcher and I described in a report we published earlier this year, the state could offer tax credits to individuals and corporations who donate to nonprofit scholarships organizations that could manage the ESAs, similar to tax-credit scholarship programs already in effect in 17 states. Florida's ESA program is already managed by the scholarship organizations that participate in the state's tax-credit scholarship program, and Nevada has a similar tax-credit scholarship program that has been in effect for more than a year.
If the Nevada legislature has the time to waste on subsidizing football stadiums for billionaires at taxpayer expense, then surely they can find the time to fund ESAs for children who want a better education while saving the taxpayers money.
This week is National School Choice Week, the annual celebration of policies that empower families to choose the education that best meets the individual needs of their children. There have already been several important school choice developments this year, not all of them positive. Below is a roundup of the good, the bad, and the ugly.
Florida expands its education savings account program
It will be hard to top 2015 (the Year of Educational Choice), but 2016 has already seen a flurry of legislative activity. Last week, Florida Governor Rick Scott signed legislation expanding the number of students with special needs who can receive education savings accounts. The bill also renamed the Personal Learning Scholarship Accounts to honor their legislative champion, Senator Andy Gardiner.
The legislation comes on the heels of a large rally at the state capital supporting school choice and calling on the state teachers union to drop its lawsuit against the state's scholarship tax credit law. A judge previously dismissed the suit, but the union has appealed. More than 10,000 protesters attended the rally, which featured Martin Luther King, III:
“I just find it interesting that in our country we have the gall to debate about how our most precious resource — our children — are treated,” [Martin Luther King, III] said.
“My dad, I don’t really know if I can actually speak to what he would speak today, but I can say is that he would always stand up for justice,” he added. “This is about justice.”
Martin Luther King, III marches in the "Rally in Tally." Image from RedefinED.
Several more states are considering educational choice legislation
Arizona is also considering expanding its ESA by making all incoming kindergarteners eligible. Several other states are considering new ESA laws, including Iowa, New Hampshire, New Jersey, North Carolina, Oklahoma, Oregon, Texas, and Virginia. In addition, Sen. Ted Cruz filed legislation to create an ESA for students in Washington, D.C.
Earlier this month, the New York Senate passed a scholarship tax credit (STC) bill. However, the bill faces a tough fight in the state assembly. Maryland will also likely consider STC legislation after a survey showed that seven in ten citizens in favored STCs, as will Kentucky, Maine, Missouri, Nebraska, New Jersey, South Carolina, Texas, and likely several other states. Tennessee is considering a new voucher law.
Meanwhile, Missouri is considering the nation's first tax-credit-funded ESA, similar to what is proposed in a new Cato Institute report I coauthored with Jonathan Butcher and Clint Bolick of the Goldwater Institute (now Justice Bolick of the Arizona Supreme Court).
Georgia donors max out tax credits
Once again, Georgia donors hit the cap on tax-credit-eligible donations to scholarship organizations on the first day. The law only grants $58 million in tax credits, which last year was only enough to provide scholarships to fewer than 13,500 students of Georgia's nearly two million students. The tax-credit scholarships were worth about $3,150 on average, far less than the more than $10,000 per pupil spent on Georgia's district school students according to the most recent NCES data.
The Georgia legislature may consider adopting a second, highly regulated, corporate-donor-only STC, but it would be better to simply raise the total tax credit cap on the existing program.
The Obama administration quietly ends questionable investigation of Wisconsin voucher program
For several years, the Obama Department of Justice has been investigating Milwaukee's school choice program based on bogus allegations. However, it appears they can no longer keep up the charade:
Parents and advocates of Milwaukee’s storied school voucher program are feeling relief and frustration in learning that the U.S. Department of Justicehas quietly closed a four-year, “legally dubious investigation” into the parental choice program without charges of wrongdoing, according to the head of a school choice advocacy group.
“It was always an unwavering dedication to serving all children with all the resources you have in these (private) schools and knowing that there was no discrimination going on,” said Jim Bender, president of Wisconsin School Choice. “But when you have a long investigation without much information, you get skeptical.
“You are left feeling helpless, especially when you are dealing with the federal Department of Justice and the (Wisconsin) Department of Public Instruction,” said Bender, whose nonprofit organization serves the state’s growing market of educational alternatives to public education.
This is second time in just the last few months that the Obama administration had has to end its legal harrassment of a school choice program. Back in November, the Fifth Circuit Court of Appeals rejected the Obama administration's attempt to exercise control over Louisiana's school voucher program using a decades-old desegregation lawsuit. Writing for the majority, Judge Edith Jones slammed the administration's case as "disingenuous" and "a fishing expedition."
Nevada judge issues injunction against ESA program
Meanwhile, Nevada's ESA program just had its first legal setback when a judge halted implementation of the program pending litigation:
A state judge Monday put the brakes on Nevada’s education savings accounts, granting an injunction sought by opponents who said it would drain critical funding resources from Nevada’s public schools and is unconstitutional.
District Judge James Wilson, in a 16-page ruling, said the state constitution requires “the legislature to set apart or assign money to be used to fund the operation of the public schools, to the exclusion of all other purposes.”
Wilson said because Senate Bill 302 diverts some general funds appropriated for public schools to fund private school tuition, it violates sections of the constitution.
“Plaintiff parents have met their burden of clearly proving that there is no set of circumstances under which the statute would be valid …” Wilson wrote.
An appeal to the Nevada Supreme Court is anticipated.
The ESA is facing two other legal challenges, including a challenge from the ACLU under the state's historically anti-Catholic Blaine Amendment. Tim Keller of the Institute for Justice explains why the ESA law should pass constitutional muster even if some families use their ESA funds at religious schools:
Yes, parents may voluntarily choose to enroll their children in a religious school — and use the funds deposited in their student's ESA to pay for tuition. Under the terms of the program, the government stays out of each family's educational placement decision. By offering educational benefits on even terms to all families, both religious and nonreligious, the state protects religious liberty.
Moreover, by structuring the ESA program to give families a genuine, independent choice as to how and where they use their ESA funds, the state complies with the plain language of Article 11, Section 10. From the state's perspective, every single dollar is spent for the purpose of educating children. And there is no constitutional bar to using public funds for educational purposes.
U.S. Supreme Court to consider religious liberty case
In related news, SCOTUS will soon consider a case that may impact whether Blaine Amendments are themselves constitutional. The state of Missouri created a program that gives schools and other organizations recycled tire products to use for children's playgrounds. However, the state excludes religious schools and organizations from participation. The Alliance Defending Freedom challenged the law, arguing that the state must exercise neutrality and may not actively discriminate against religious groups:
“No state can define religious neutrality as treating religious organizations worse than everyone else,” said ADF Senior Counsel David Cortman. “That isn’t neutrality; it’s a hostility to religion that violates the First Amendment. That’s the primary issue that the Supreme Court will address. In this case, the state should not have excluded this preschool from the recycled tire program simply because a church operates the school.”
“Children’s safety is just as important on church daycare playgrounds as it is on other daycare playgrounds,” added ADF Senior Counsel Erik Stanley. “Missouri and every state should understand that the U.S. Constitution prohibits religious hostility, which is what Missouri exhibited when it denied Trinity Lutheran’s scrap tire grant application. This case has huge implications for state constitutional provisions across the nation that treat religious Americans and organizations as inferiors solely because of their religious identity.”
A victory for the plaintiffs would call into question whether Blaine Amendments are constitutional under the First Amendment.
In 2014, New Hampshire's scholarship tax credit law survived a Blaine Amendment challenge in the state supreme court. You can learn more about how educational choice benefits students — and how defenders of the status quo are attempting to use Blaine Amendments to deprive families of that choice — in the Cato Institute’s short documentary, “Live Free and Learn”:
Yesterday, Sen. Ted Cruz introduced legislation to create an education savings account (ESA) program for students in Washington, D.C. In a press release, Cruz's office stated that the legislation was modeled after Nevada's ESA, and Cruz called educational choice "the civil rights issue of our era."
“Each and every child has the right to access a quality education,” Sen. Cruz said. “Not only does school choice give low-income children the same choices and opportunities that children from wealthy families have always had, it also improves the public schools, making them stronger and more effective. This legislation ensures that every child in Washington, D.C., regardless of race, ethnicity, or zip code, has the same opportunity to choose the school that best fits their needs and will help them achieve their very best.”
Last September, Lindsey Burke of the Heritage Foundation and I explained why it's imperative to break the link between housing and education in D.C. and how an ESA could do just that:
Sadly, access to a quality education is too often dependent on a family’s ability to purchase a home in an expensive area. As The Washington Post reported recently, the median price of a three-bedroom home in a D.C. neighborhood zoned to a public school where reading proficiency rates exceed 80 percent is about $800,000. The median price of similar homes near Eaton Elementary, where the Hills enrolled their children, is north of $1 million. Where the Hills resided in Maryland the median home prices ranged from a much more affordable $330,000 to $460,000.
There is a strong correlation between these housing prices and school performance. In nearly all D.C. neighborhoods where the median three-bedroom home costs $460,000 or less, the percentage of students at the zoned public school scoring proficient or advanced in reading was less than 45 percent. Children from families that could only afford homes under $300,000 are almost entirely assigned to the worst-performing schools in the District, in which math and reading proficiency rates are in the teens.
If policymakers truly believe in equality of opportunity, they must do more to sever the link between education and housing. The District has taken some important steps in the right direction — allowing parents to apply to charter schools and out-of-boundary district schools — but long waiting lists at the best schools have limited their usefulness for most families. [...]
ESAs are restricted-use savings accounts parents can use to purchase a wide variety of educational products and services using a portion of the public funding that would have been spent on their child at their assigned district school.
ESAs are an improvement on the traditional voucher model because they empower families to completely customize their child’s educational experience. In addition to private school tuition, parents can spend ESA funds on tutors, textbooks, online courses, special education services and therapies, home-school curricula, and individual public school courses. ESAs even enable families to roll over unused funds from year to year.
These features also make ESAs more economically efficient than vouchers. Whereas traditional vouchers must be spent in their entirety at a single school each year, thereby creating a price floor, there is no minimum amount that ESA holders must spend in one place. The ability to spend ESA funds at multiple vendors or save them for future educational expenditures also gives parents a stronger incentive to economize, which should mitigate tuition inflation. [...]
Because the District is under federal jurisdiction, Congress has a rare opportunity to advance a robust school choice option that is both constitutionally appropriate and would make a real difference in the lives of its young citizens by making every child in D.C. eligible for an ESA.
One of the most promising recent developments in education policy has been the widespread interest in education savings accounts (ESAs). Five states have already enacted ESA laws, and several states are considering ESA legislation this year. Whereas traditional school vouchers empower families to choose among numerous private schools, ESAs give parents the flexibility to customize their child’s education using a variety of educational expenditures, including private school tuition, tutoring, textbooks, online courses, educational therapies, and more.
Today the Cato Institute released a new report, "Taking Credit for Education: How to Fund Education Savings Accounts through Tax Credits." The report, which I coauthored with Jonathan Butcher of the Goldwater Institute and Clint Bolick (then of Goldwater, now an Arizona Supreme Court justice), draws from the experiences of educational choice policies in three states and offers suggestions to policymakers for how to design a tax-credit-funded ESA. Tax-credit ESAs combine the best aspects of existing ESA policies with the best aspects of scholarship tax credit (STC) policies. Like other ESA policies, tax-credit ESAs empower families to customize their child's education. And like STC policies, tax-credit ESAs rely on voluntary, private contributions for funding, making them more resistant to legal challenges and expanding liberty for donors.
Here's how it would work: individuals and corporations would receive tax credits in return for donations to nonprofit scholarship organizations that would set up, fund, and oversee the education savings accounts. There's already precedent for this sort of arrangement. In Florida, the very same nonprofit organizations that grant scholarships under the state's STC law also administer the state's publicly funded ESA. Moreover, New Hampshire's STC law allows scholarship organizations to help homeschoolers cover a variety of educational expenses, similar to ESA policies in other states.
For more details on how to design tax-credit ESAs, how they would work, and the constitutional issues involved, you can read the full report here. You can also find a summary of the report at Education Next.
This is the seventh and likely final entry in a series on the expansion of educational choice policies in 2015. As I noted at the outset, the Wall Street Journal declared 2011 “The Year of School Choice” after 13 states enacted new school choice laws or expanded existing ones. As of my last update in late September, 15 states had adopted 21 new or expanded educational choice programs, including three education savings account laws, clearly making 2015 the "Year of Educational Choice." As I wrote 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.
Readers will find a complete tally of the new and expanded programs at the bottom of this post, as well as a list of anti-school-choice lawsuits decided in 2015 or still pending.
Lawmakers across the nation are already beginning to consider educational choice proposals for the 2016 legislative session, including Maryland, Oklahoma, South Dakota, Tennessee, Texas, and several others, but Florida will likely be the first state to expand choice next year.
Florida: Expanded Choice on the Horizon But Legal Threats Loom
Florida's legislature is currently considering legislation to expand both the number and types of students who are eligible to receive ESAs, known in Florida as Personalized Learning Scholarship Accounts. The legislation has already cleared committees in both the Florida House and Senate, but the legislation is not expected to reach the governor's desk until the new year.
Meanwhile, a Florida judge delivered a partial legal victory to families using tax-credit scholarships. Leon County Circuit Judge George Reynolds ruled that petitioners in a lawsuit contending that the state is not adequetely funding district schools do not have standing to challenge the constitutionality of the state's scholarship tax credit law. However, the judge allowed the petitioners to proceed in their challenge to the constitutionality of the McKay Scholarships for students with special needs. The petitioners may also present any evidence that either of the choice programs contribute to what they argue is the inadequate level of funding of district schools. That will be a hard case to make, given that Florida's nonpartisan Office of Program Policy Analysis and Government Accountability estimated that the state saves $1.44 for every $1.00 in reduced revenue resulting from the tax credits. Likewise, a Friedman Foundation fiscal analysis calculated that the McKay Scholarships have saved the state more than $835 million over 12 years.
The scholarship tax credit law is also still facing a second legal challenge to its constitutionality.
Pennsylvania: Budget Stalemate Threatens Scholarships
Earlier this year, Pennsylvania appeared poised to expand the amount of tax credits available for its two scholarship programs. Now, however, a stalemate over budget negotiations has jeopardized even this year's tax credits because some state officials say the state cannot award the credits without a state budget:
Approval letters have not gone out to businesses for the 2015-16 year.
"Without those approval letters, businesses are not going to be willing to write those checks without knowing they're going to get credit for it," said Aaron Anderson, CEO and Head of School at Logos Academy. "By Dec. 31 if this hasn't happened, they're going to have to pay their tax bills."
Jeff Sheridan, spokesman for Gov. Tom Wolf, said letters can't go out until there is a 2015-16 state budget. Without a budget, the state doesn't know what limits will be put on the amount of tax credits that can be legally issued, he said.
"The Department of Community and Economic Development has been accepting and reviewing all applications and is prepared to issue award letters as soon as possible once there's a budget," he said.
However, proponents of the choice laws disagree with that interpretation. According to Ina Lipman, executive director of Children’s Scholarship Fund Philadelphia, the scholarship tax credit laws require the state to issue the credits whether or not the state adopts a new budget:
“This is not a matter of appropriation that needs yearly approval,” Lipman said. “So many of the arguments that Gov. Wolf’s administration are setting forth are smokescreens. The governor is in full control of whether the DCED can issue these approval letters and issue them in time for this tax credit year and not jeopardize so many organizations that are really in the field to help low-income children to gain access to educational opportunities across the board.”
More than 40,000 low-income students depend on the tax-credit scholarships, so community leaders are speaking out and holding prayer vigils and rallies to encourage lawmakers to take action. If legislators fail to reach a budget compromise or fix the issue outside of the budget process, it's not only the scholarship students who will suffer. The state would soon find that failure to approve the credits was a costly error. According to a 2014 Show-Me Institute report, if every scholarship student were to enroll at their local district school instead, the schools "would require an additional $892 million in revenue to handle the additional enrollment."
Montana and Colorado: Exclusion of Religious Schools Invites Lawsuits
Earlier this year, Montana adopted a new scholarship tax credit law. Unfortunately, not only did the law have several flaws that will limit the ability of scholarship organizations to raise money and issue scholarships, but bureaucrats at the Montana Department of Revenue (DOR) unilaterally decided to forbid scholarship organizations from granting scholarships to students to attend religious schools. Legislators who passed the law are not pleased. According to a poll of Montana legislators, a majority believe the revenue department officials are not following the legislature's intent.
The Montana DOR officials claim that the state's constitution prohibits using tax-credit scholarships at religious schools, but the state attorney general's office sent a letter to the DOR advising them that they are in error:
The DOR has proposed excluding religious schools from the rule on the grounds that the Montana Constitution bars appropriations to sectarian schools, organizations or affiliated groups.
However, in his letter, [Solicitor General Dale] Schowengerdt argues, “The Montana Constitution does not authorize, much less require, the wholesale exclusion of religious entities from being considered qualified education providers under SB 410.”
He later argues that the rule’s rationale “that the Montana Constitution requires categorical exclusion of religious entities from SB 410’s tax credit program is in error because the tax credit envisioned by SB 410 is not a direct or indirect appropriation by the state to a religious entity.” And he said it excludes religious entities from a neutral benefits program without good reason.
Schowengerdt said Attorney General Tim Fox did not believe the proposed rule would be defensible in court.
The attorney general's office also warned the DOR that it is their proposed rule, not the scholarship law, that is unconstitutional because discriminating against religious schools would put "Montana’s Constitution in potential conflict with the U.S. Constitution."
Indeed, the U.S. Supreme Court may soon consider that very issue. In June, a plurality of the Colorado Supreme Court interpreted the state constitution's historically anti-Catholic Blaine Amendment to prohibit the use of vouchers at religious schools. Now four educational choice organizations are asking SCOTUS to review that decision and consider striking down Blaine Amendments across the United States. The Goldwater Institute, the Foundation for Excellence in Education, the Hispanic Council for Reform and Educational Options, and the American Federation for Children argue that the Blaine Amendments were "motivated by bigotry" and "present an obstacle to the provision of high-quality educational opportunities for millions of American schoolchildren" that must be removed in order "to vindicate our nation's sacred promise of equal educational opportunities."
Likewise, in an interview with RedefinED, Michael Bindas of the Institute for Justice argued that the First and Fourteenth Amendments forbid discriminating against religious schools. "Singling out religious schools is not even handedness," Bindas argues. "It is discrimination."
Louisiana: Legal Victory for a Flawed Voucher Program
In a stinging rebuke, the Fifth Circuit Court of Appeals rejected the U.S. Department of Justice's "disingenuous" attempt to use a decades-old desegregation lawsuit to curb or control Louisiana's voucher program for low-income students assigned to failing district schools. The DOJ claimed the voucher program imperiled desegregation efforts but two studies showed that the vouchers actually improved racial integration. Indeed, since the vast majority of voucher recipients are black, a victory for the DOJ would have meant keeping black students trapped in failing schools. Fortunately, the court ruled differently.
Educational choice advocates can issue three cheers for the court's decision, but the voucher program itself deserves only one. Unfortunately, the program is hobbled by excessive regulations that are intended to guarantee quality but might actually be undermining it. For example, the state requires private schools that accept vouchers to administer state test, which drives what schools teach and even how and when they teach it. As I explained in a recent symposium on testing and educational choice at RedefinED:
First, the mandate puts significant pressure on schools to teach subjects at the same time and in a similar manner. A school that taught subjects in years that they are not tested or taught them in a manner that is not aligned with the test would be putting its students at an unnecessary disadvantage. That creates a powerful incentive to conform.
Second, such mandates drive down school participation in school choice programs. A recent American Enterprise Institute study found that states with lightly regulated school choice programs had much higher rates of school participation than highly regulated states. Nearly every private school in Arizona is willing to accept tax-credit scholarship students while only about one-third of Louisiana private schools are willing to accept voucher students due to the program’s regulatory burden.
What's the difference between the schools that accept the vouchers with all their attached strings and those that don't? We don't yet know for certain, but Professor Jay P. Greene warns that it's likely the least successful and most desperate private schools that accept the regulations:
“The only schools who are willing to do whatever the state tells them they must do are the schools that are most desperate for money,” Greene said. “If you don't have enough kids in your private school and your finances are in bad shape, you're in danger of closing — probably because you're not very good — then you're willing to do whatever the state says.”
Pelican State lawmakers should study the impact of the excessive regulations and consider modifying the law to allow private schools to administer one of the many nationally norm-referenced tests as an alternative to the state exam.
The Year of Educational Choice: The Final 2015 Tally
Here is the (likely) final tally for new and expanded choice programs in 2015, as well as the private educational choice lawsuits decided this year or still pending:
New Educational Choice Programs (8 in 7 states)
- 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.
- South Carolina: Voucher-like “refundable” direct tuition tax credit for students with special needs.
- Tennessee: ESAs for students with special needs.
- Wisconsin: Vouchers for students with special needs.
Expanded Educational Choice Programs (13 in 9 states)
- 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.
- Florida: Expanded ESA eligibility to include more categories of students with special needs and increased the budget from $18.4 million to nearly $55 million.
- Indiana: Increased amount of tax credits available for donations to scholarship organizations ($2 million over two years).
- Indiana: Eliminated cap on the value of each voucher. Vouchers are worth 90 percent of the state’s per-pupil funding.
- Louisiana: Expanded school voucher program (funding roughly 600 additional vouchers).
- North Carolina: Expanded school voucher program for low-income students ($17.6 million in 2015-16, $24.8 million in 2016-17).
- North Carolina: Expanded school voucher program for students with special needs(vouchers increased from $6,000 to $8,000, total funding increased by $250,000 to $3.25 million annually).
- Ohio: Increased the value of several categories of vouchers.
- Ohio: Raised the funding caps for special-needs 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.
- Wisconsin: The state budget raises and eventually eliminates the statewide voucher cap.
Legal Challenges to Educational Choice Laws Decided in 2015
- Alabama: The state supreme court upheld the state's refundable scholarship tax credit law against a Blaine Amendment challenge.
- Colorado: A plurality of the state supreme court declared that the state's Blaine Amendment prohibits the use of public funds at religious schools. One justice held that vouchers violated other statutes.
- Florida: A judge tossed out a procedural challenge to the legislation creating the state's ESA program.
- Louisiana: The Fifth Circuit Court of Appeals ruled against the U.S. Department of Justice's "disingenuous" attempt to use a decades-old desegregation lawsuit to curb or control the state's voucher program.
- North Carolina: The state supreme court upheld the state's voucher law.
Pending Educational Choice Lawsuits
- Alabama: Public school superintendents claim that the Alabama Accountability Act, which created the state's refundable scholarship tax credit law (among other things), was improperly adopted by the state legislature in violation of certain provisions of the state constitution.
- Florida: The state's largest teachers union claims that the scholarship tax credit law violates the state's Blaine Amendment and "uniformity" clause, which they claim bars the state from funding or otherwise aiding any school system besides the public schools. A lower-court judge previously threw out the lawsuit, but the union has appealed.
- Florida: A public education group claims the state is failing in its constitutional duty to adequately fund public schools. They amended their lawsuit to challenge two school choice programs as well. A county circuit judge denied standing for petitioners to challenge the constitutionality of the state's scholarship tax credit law, but allowed them to proceed with their challenge to the constitutionality of the McKay Scholarships for students with special needs. Petitioners may also present evidence that either or both programs contribute to the supposed inadequacy of the state's funding of public education.
- Georgia: The Southern Education Foundation claims Georgia's scholarship tax credit law violates the state's Blaine Amendment.
- Nevada: The ACLU claims Nevada's ESA program violates the state's Blaine Amendment and other provisions of the state constitution.
- Nevada: A public education group, Educate Nevada Now, claims Nevada's ESA program is improperly funded because it violates the state constitution's requirement that the legislature fund "a uniform system of common schools," among other provisions. The Institute for Justice is seeking intervenor status to defend Nevada's ESA from both lawsuits.
- Oklahoma: Plaintiffs claim Oklahoma's voucher program for students with special needs violates the state's Blaine Amendment.
To learn more about how educational choice benefits students — and how defenders of the status quo are attempting to use the courts to deprive families of that choice — watch the Cato Institute's short documentary, "Live Free and Learn":
Perhaps the most interesting development in education policy this year has been Nevada's adoption of the first education savings account program to offer nearly universal eligibility. Students who attended a charter or district school in the previous year are eligible to have a portion of the state funds that would have been spent on them instead deposited into an account that they can use to purchase a wide variety of educational goods and services. By empowering families with more alternatives to the generally low-performing district schools, the ESA program is also a pressure relief valve for Nevada's severely overcrowded schools.
However, although low-income families have the most to gain from the ESAs, it appears that higher-income families have been the first to apply for the accounts. The Las Vegas Review-Journal reports:
Overall, half of the nearly 3,100 applications submitted as of Oct. 28 list an address in a ZIP Code among the top 40 percent of median households in Nevada. That's in contrast to just 10.7 percent of applications from households with median incomes in the bottom 40 percent.
It's important to note that these are not the final ESA enrollment figures. As Matthew Ladner of the Foundation for Excellence in Education pointed out, these are merely the "earliest of the early adopters." At the time of the Review-Journal report, Nevada families still had more than two months to apply for an ESA before the program commenced. Nevertheless, opponents of parental choice have seized on the development:
"It's what we expected," said Sylvia Lazos, policy director for the education reform group Educate Nevada Now [which is suing to end the ESA program].
The ESA program "was not tailored to low-income parents. It was not tailored to parents with children in (low-performing) schools," she said. "With every program of this nature, it's just the reality that affluent and high middle-income families are always in the best position to take advantage of government programs."
Yet nowhere is this more true than in the government schools. Because the government assigns students to district schools based on the location of the home their parents can afford, wealthier families have access to district schools that are safer and higher quality than those to which low-income students are assigned. It's not resources that account for the difference in performance -- Washington, D.C. spends nearly $30,000 per pupil for one of the worst school districts in the nation. Culture certainly plays an important role, but so does the ability to exit.
Bill Gates can send his children to their assigned district school at no charge (beyond what he already paid in taxes), but he can also afford to enroll them elsewhere. Because Gates and other higher-income families can afford to leave, the district schools have to be responsive to their needs in order to keep them (and the state funds allocated based on their enrollment). By contrast, low-income families often have no financially viable alternative. Their assigned district schools have no financial incentive to be responsive to a captive audience.
Unlike a geography-based school system, a market-based system creates incentives for all schools to be responsive to parents' wishes and to find ways to provide a better education at a lower cost. That is why it is the poor, not the rich, that that stand to gain the most from a market in education. As Milton and Rose Friedman explained in Free to Choose:
Industrial progress, mechanical improvement, all of the great wonders of the modern era have meant relatively little to the wealthy. The rich in Ancient Greece would have benefited hardly at all from modern plumbing: running servants replaced running water. Television and radio? The Patricians of Rome could enjoy the leading musicians and actors in their home, could have the leading actors as domestic retainers. Ready-to-wear clothing, supermarkets – all these and many other modern developments would have added little to their life. The great achievements of Western Capitalism have redounded primarily to the benefit of the ordinary person. These achievements have made available to the masses conveniences and amenities that were previously the exclusive prerogative of the rich and powerful. [Emphasis added.]
A perfect example of this is the $10 smartphone that Walmart is selling that has better specs than the original iPhone:
For less than $10 (plus the cost of data access) the user gets access to the Google Play app store, giving him or her the power to summon transportation at the push of a button, instantly connect with friends, and watch livestreams from all over the world. A bona fide smartphone, in other words.
It’s perhaps even more impressive when you consider that its modest specs—a 3.8-inch display, 3G and Wi-Fi networking, and a 3-megapixel camera—surpass those of the original iPhone, which was referred to in the tech press at the time as the “Jesus phone.”
Higher-income individuals were the early adopters of the iPhone and other smartphones. They paid a premium which allowed tech companies to recoup their investment in research and development and earn a significant profit. Those profits created incentives for them to expand production and for other companies to follow suit. Over time, real prices fell even as quality improved dramatically. The original iPhone models sold for $499 to $599 but later generations already sell for much less, making them accessible to the poor. Indeed, even as of 2012, more than half of American 18- to 24-year-olds earning less than $15,000 per year owned a smartphone. At just $10 a piece, smartphones will be ubiquitous.
Of course, the wealthy still have access to better quality (and much more expensive) smartphones with the latest and greatest features. But as Michael McShane of the American Enterprise Institute has explained, "markets work when the spectrum of relative quality drives improvements in absolute quality." [Emphasis added.] Wealthier individuals continue to pay a premium for the cutting-edge technology, which later becomes standard and more affordable for everyone.
Likewise, higher-income families may be the first adopters of ESAs, but expanding the market in education will benefit everyone in the long run. Even in the short run, the initial research on ESA programs shows that low-income families benefitted the most from greater educational opportunity. In 2013, Jonathan Butcher of the Goldwater Institute and I conducted the first parental-satisfaction survey of Arizona families using ESAs. All of the respondents had students with special needs who had previously attended their assigned district schools. Unsurprisingly, low-income families were the least satisfied with their district schools:
By contrast, the lowest-income families were the most satisfied with the education they purchased with their ESA:
This does not mean that educational-choice advocates can remain complacent. If anything, the Review-Journal report shows that greater efforts are needed to inform low-income families about the choices that are available to them. Fortunately, those efforts are already underway.
Last week, Georgia Governor Nathan Deal's Education Reform Commission released its draft recommendations for improving and expanding the state's school choice programs. While some of the commission's proposed changes are meritorious, the commission failed to recommend expanding the state's highly popular, nearly universal scholarship tax credit (STC), instead proposing that the state create a new STC that is highly regulated and much more limited in scope.
The commission's two proposed changes to the existing STC (having the Department of Revenue count actual contributions against the tax credit cap rather than mere pledges and changing the start date for claiming credits) would make it easier for scholarship organizations to raise funds. The commission also explored the possibility of converting the STC into an education savings account (possibly still funded through tax credits, though the report is not clear about that), enabling families to use the scholarship funds for a variety of educational goods and services beyond private school tuition along the lines of what I described in my testimony before the commission in May.
However, while the commission recommended some minor improvements the existing STC, it is unclear why they did not recommend expanding it. This is especially puzzling because donors not only hit the $58 million tax credit cap on the first day credit were available this year, but taxpayers actually applied for about $91.5 million in credits--$33.5 million more than the cap. Additionally, one 2014 poll found that 62 percent of Georgia voters supported raising the cap to $100 million while another poll found that 64 percent of Georgia voters and 70 percent of parents of school-aged children wanted to raise the cap.
Moreover, the commission's proposed new STC contains numerous troubling features that the policymakers who designed the existing STC wisely avoided.
Income Eligibility Requirements
Unlike Georgia's existing STC, the commission's proposed STC would limit the scholarships to low-income students. Although well-intentioned, this proposal would reduce the overall support for the program exclude some needy families.
As Wilbur Cohen observed in a debate with Milton Friedman: "a program for the poor people will be a poor program." Friedman later accepted Cohen's view because he realized that broader eligibility translates into broader political support. Survey data supports this observation. In a recent poll by the Friedman Foundation for Educational Choice, 66 percent of respondents nationwide supported universal educational choice while only 36 percent supported restricting eligibility based on income. Likewise, one of the aforementioned polls of Georgia voters found that 55 percent of respondents supported a universal STC while only 11 percent supported restricting access based on income.
Moreover, a family's need is not always reflected on their tax statements. Families in which there was an illness, a parent lost his or her job, there is a student with special needs, or other exigent circumstances may be denied assistance under a strict income eligibility requirement. By contrast, Georgia's existing STC gives scholarship organizations the flexibility to consider each family's unique situation.
Like other nonprofits, scholarship organizations tend to prioritize based on need. Indeed, the available evidence suggests that the STC primarily benefits those most in need. As I detailed in my testimony:
The Peach State’s largest [scholarship organization], Georgia GOAL, has awarded more than 92 percent of its scholarship funds since its inception to students from families with a household income of $48,000 or less, including more than 80 percent to families earning $36,000 or less. [page 7] They are not alone. Studies of education tax credit laws in Arizona, Florida, and New Hampshire have found that SSOs target low-income families to a greater extent than required by law.
According to the most recent data, three-quarters of scholarships statewide were awarded to students from families earning less than $62,202 annually. Moreover, as the Atlanta Journal-Constitution's Kyle Wingfield observed, families in the top income quartile could still qualify for for a free-or-reduced-price lunch at their district school depending on their family size.
The commission's proposal is a solution in search of a problem.
Eliminating Scholarship Organization Missions
The commission's proposal would "require that scholarships are portable during the school year and can be used at any qualifying school that accepts the eligible student according to a parent’s wishes." At first glance, that seems like a sensible policy that prioritizes parental choice. However, in practice, this policy would prohibit private organizations from setting their own institutional missions and substantially constrict the freedom of donors.
Under Georgia's existing STC law, scholarship organizations are free to set their own mission and donors are free to choose the organizations that align with their values. There are currently dozens of scholarship organizations with a variety of different missions. Some serve families who want to send their children to Christian or Jewish schools; others support students attending schools with a particular pedagogical approach; and others have their own unique mission, such as a focus on students who serve their communities. These organizations foster stronger communities by bringing together scholarship recipients, private schools, and individual and corporate donors.
Under the commission's proposed STC, scholarship organizations would be forbidden from setting their own institutional mission. Just as customers could choose any color Model T so long as it was black, donors could choose from any type of scholarship organization so long as it granted scholarships to low-income students attending any school of their choice. That's a noble model, but it's not the only worthy model.
As it happens, the largest scholarship organizations under the existing STC tend to be those that prioritize the needs of low-income families and grant scholarships to students to attend any school their families choose. Donors to Georgia GOAL, for example, can recommend that their contributions be used for scholarships to (unspecified) families desiring to attend particular private schools or types of schools or who live in a particular community, or they can contribute to the general fund that helps families wherever they choose to enroll. Individual and corporate donors are free to support them in their mission or they are free to support any number of smaller organizations with more specific missions. Eliminating that freedom is unnecessary and counter-productive.
Again, this is a solution in search of a problem.
Emphasis on Corporate Donors
This change could also affect the composition of the donor base. The ability to recommend the private schools at which donors desire their contributions be used to provide scholarships is a popular feature of the existing STC because donors can help low- and middle-income families in their communities. The proposed STC prohibits donors from doing so, which will likely depress individual taxpayer participation, so the vast majority of new credits will likely be claimed by large corporations.
Corporate donors have previously raised the concern that individual donors are better positioned to claim the existing credits because their income is more predictable, therefore the majority of the credits are claimed by individuals before the corporations have an opportunity to apply for the credits. Why this is problematic is not clear--what's most important is that there is sufficient funding available for the scholarship students, regardless of the source. For that matter, a model that relies on a large number of smaller individual donors rather than a smaller number of large corporate donors has several advantages. The individual-donor model is likely to be more reliable through changing economic circumstances and it fosters a wider base of support and more community involvement than the corporate-donor model.
Ideally, the state would eliminate the cap altogether, but short of that, there are other ways to give corporations the opportunity to donate through the existing STC. As Kyle Wingfield has explained:
If simply raising the cap substantially won’t work, a sensible compromise would be to spread out the credits throughout the year, maybe semiannually or even quarterly. That would give potential donors more time to determine their tax liability. To the extent that increased corporate donations, it could increase funds for low-income families without moving Georgia away from choice for all.
Once again, this is a solution in search of a problem.
Unlike Georgia's existing STC, the commission's proposed STC would mandate that all schools accepting scholarship students administer either the state test or a nationally norm-referenced test. Standardized tests are an important method to measure learning progress, which is why most private schools administer them, but requiring schools to administer the tests would be a mistake. A testing mandate would force schools and parents that are ideologically opposed to standardized testing to choose between their principles and their pocketbooks. Many parents are fleeing the district school system because they are concerned about over-testing. A testing mandate on private schools would leave them with no alternatives.
Parents who want their children to attend a school with high test scores currently have that prerogative, but parents generally want more than scores. A Friedman Foundation survey of Georgia scholarship families found that standardized tests scores ranked low among parents' priorities when selecting a school for their children (only 10 percent listed it as one of their top five reasons for choosing a school). Parents were more concerned about their children receiving personal attention, the student-teacher ratio, the curriculum, student discipline and safety, and the college acceptance rate.
Under the current law, parents who want standardized testing can get it and parents who want to avoid it can also do so. Donors who want to ensure their money is being used wisely can choose scholarship organizations that require standardized testing while donors with other priorities can contribute accordingly.
Yet again, this is a solution in search of a problem.
Georgia's existing STC is expected to serve about 20,000 students statewide this year and donors are prepared to support tens of thousands more. It is highly popular and has numerous advantages over the commission's proposal. If Georgia lawmakers want to better serve all students, their best course of action is simply to raise the cap on the existing scholarship tax credit.