School Choice Can Help Financially Troubled States

School Choice Can Help Financially Troubled States

It’s no secret that many American states are in serious financial trouble. In a variety of fiscal rankings, including those from the Mercatus Center at George Mason University, the PEW Foundation, and the Institute for Truth in Accounting, nine states — California, Connecticut, Delaware, Hawaii, Illinois, Kentucky, Massachusetts, New Jersey, and New York — have consistently been identified as plagued by unbalanced budgets, unsupportable entitlements, decaying infrastructure, and especially underfunded public pensions.

For legislators in those troubled states, the typical budgetary fix of simply raising the least painful combination of taxes and fees has become problematic. Levies in many are already high enough to prompt a self-defeating exodus of affluent residents — a flight that only threatens to accelerate, now that Congress has capped the federal deduction for state and local taxes.

The fact that all fiscally distressed states must eventually face is that the bulk of their spending goes to just two kinds of services: public education and health care. And if neither is to be sacrificed or compromised for the sake of solvency, then lower cost alternatives for each must eventually be adopted.

For anyone familiar with education finance, one obvious solution involves some form of school choice — allowing parents to take a portion of what the local district would have spent on their child and use it instead for private schooling, home schooling, online schooling, or some other academic program. A 2014 report by the Friedman Foundation for Educational Choice (now known as EdChoice), which examined the ten largest school voucher programs in the US, found that each participating student saved his or her community an average of $3,400 annually.

Two years later, another fiscal analysis by EdChoice — this time of ten programs in seven states that allowed tax credits for private schooling — revealed identical economies. Importantly, there was no evidence that any of these savings came at the expense of quality.

There is, of course, the practical problem that the very states most likely to benefit financially from choice also have powerful teacher unions adamantly opposed to any kind of education marketplace. It is not a coincidence that, of all 27 school choice programs established across the US since 2010, only one was passed in a fiscally troubled state (Illinois). And only then because the Republican governor had made his signature on a long-delayed budget conditional upon the enactment of a modest plan.

On the other hand, these same states are characterized by exceptionally high per pupil costs for public schooling. According to the latest U.S. Census Bureau analysis, the average expenditure in the nine most fiscally troubled states previously mentioned is $3,523 above the national average.

All of which got Dr. Marty Lueken of the EdChoice Foundation and me to wondering if a relatively small school choice plan — one targeted narrowly enough not to threaten the existence of conventional district schools – might generate enough savings to be politically viable. We decided to pick just one of the nine most fiscally distressed states (so that the local complexities of education finance could be fairly considered) and to calculate the consequences of giving a low of 2 percent of K-12 students, as well as a high of 10 percent, an annual $5,000 budget for independent schooling.

We thought Connecticut a good choice for a number of reasons, including the fact that all three of Wall Street’s big credit rating agencies had recently downgraded its debt. And while the Nutmeg State is known for its expensive private academies, the average tuition at its K-8 parochial schools (around $4,000) was in line with other parts of the country.  

Our findings, published by the Yankee Institute for Public Policy, showed that giving choice to 2% of Connecticut’s K-12 children would save $77 million annually, a modest plus for a state with a $20 billion budget. But when offered to 10%, the savings are closer to $400 million — almost exactly the amount that outgoing Gov. Dannel Malloy (D) has said must be raised each year to cure the state’s single biggest fiscal headache, its underfunded teacher pension plan.

What could a narrowly targeted choice policy do for the other eight fiscally distressed states?

Of course, no two legislatures fund K-12 education in the same way. But with a public school per pupil of $14,120 in Delaware, $15,592 in Massachusetts, $18,235 in New Jersey, and $21,206 in New York are compared to the national average of $11,392, one suspects that policymakers in those and other troubled states could do a lot worse than run their own numbers.

With studies of the coming bulge in baby boomer retirements showing that a modest shrinkage in the public-school workforce could easily be accommodated without layoffs, there has never been a better time to think about school choice as both an education and fiscal reform.

Dr. Lewis M. Andrews was executive director of the Yankee Institute for Public Policy from 1999 to 2009. This essay is adapted from his January speech to the International School Choice and Reform Conference in Lisbon.

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