Means-Tested Education Savings Accounts Best Promote School Choice

Photo: Sofi

In the aftermath of Glenn Youngkin’s bellwether victory in Democrat-leaning Virginia, which was fueled by determined parents demanding an end to one-size-fails-all “progressive” policies like the termination of gifted student programs and the prioritization of harmful social theories over basic skills like reading and writing, education reform has become the rallying call for libertarians, conservatives, and concerned parents across the country. 

Chief among proposed education reforms is school choice — the idea that students should have more enrollment options than the often failing public school assigned to them by their school district. School choice’s power to transformatively expand enrollment options, especially for low-income students assigned to the nation’s worst-performing schools, is well documented, so there’s little question on the efficacy of the overall idea. However, the universal education savings accounts (ESAs) proposed by many education reform advocates as the primary means of implementing school choice have often had a counterproductive effect on expanding private school access by driving schools to dramatically increase tuition, resulting in major growth in private school revenue but not enrollment

To limit these harmful systemic effects while expanding education opportunities, education reform advocates must ensure that ESAs, which place state funds in rollover savings accounts parents can dedicate towards a number of education-related expenses in lieu of attending their assigned public school, are limited to low-income families and phased out with higher incomes. Otherwise, tuition increases resulting from the explosion in unrestricted state subsidies will only serve to promote waste, excess, and decay in the private school system. Worst of all, these subsidies will enrich administrators and contractors while condemning the very students they were meant to empower to the failing public schools that perpetuate the intergenerational cycle of poverty and despair that drives too many millions of our citizens to lives of laxity, violence, and crime. 

Leading school choice advocacy groups ranging from EdChoice, founded by famed economists Milton and Rose Friedman, to Fix California, a growing reform group in California led by Ric Grenell, certainly are correct about many of their criticisms of the public education system: Public schools waste an estimated 38% of their funds, according to a cost comparison with private schools by the Foundation for Economic Education. And American public school students have been lagging behind their peers and competitors in Europe and Asia in basic academic competency for decades while our private school students vault ahead. Combined, these two facts lead to an apparently obvious conclusion that public funding of students, not schools, would lead to dramatic increases in spending efficiency and educational attainment. 

It may not be that simple. 

Data demonstrates that ESAs that are actually implemented into policy follow two distinct patterns, one positive and one negative, depending on whether or not there are restrictions on who qualifies for them. 

In states with income-dependent restrictions, private school enrollment significantly expands with little to no change in tuition. This is consistent with the idea that highly targeted subsidies would have the effect of making private schools accessible to audiences who otherwise would have to rely on scholarships and financial aid available in limited supply. But in states without eligibility restrictions whatsoever, tuition and revenue for private schools explode, with little change in enrollment. By creating universal demand for private school at a new, often higher price point than the average private school tuition (per pupil public school spending is lower than the average private school tuition in 42 states), private schools have no reason not to raise their prices and eliminates any incentive for private schools to maintain their cost savings over their public competitors.

After all, if a family that can already afford the average national private school tuition of $12,350 receives $14,891 (the average national spending per public school student) deposited into an ESA, they can now afford to pay any increase in tuition up to $27,241 without spending another cent. With universal ESAs, any private school that fails to raise tuition leaves money on the table. Thus, though well-intended, universal ESAs serve as nothing more than significant wealth transfers from taxpayers to the private school system, bloating private school budgets without creating any incentive to improve academic performance or educational access. 

Now, one could argue that the leftward march of public school curriculums demands that ESAs be employed to stop funding a system that champions rogue ideologies while ignoring student’s needs. However, because most public schools are funded based on enrollment or attendance, they don’t get funding from state appropriations for children who don’t sign up. To reflect this fact — and to curtail the shortfalls associated with universal ESAs, it would be more prudent to simply deduct the state’s savings per child from parents’  tax burden should they decide not to send their child to public school. In other words, parents shouldn’t be taxed for a service they’re not using. If they send their children to a private school, they should get a tax break. Given that states spend far more per student than they receive from the average household in taxes, such a measure would be revenue-neutral, delivering even greater financial freedom and choice than universal ESAs would provide. 

Unfortunately, the conversation around school choice appears to be solidifying around universal ESAs, as both EdChoice and Fix California have placed their growing weight behind such initiatives. And as Youngkin’s victory in Virginia shows, parents concerned with continuing online education and left-wing indoctrination are decisively swinging to the Republican party out of concern for their children’s educations, which means that school choice reforms have a real chance at becoming policy across our nation. 

But as dire as the situation in our public schools may be, the mission to provide more options for schooling must not come at the cost of introducing excess and an incentive to drastically raise tuition to a well-functioning private school system already strained by rising enrollment and tuition. Assuming that Republican policymakers are prioritizing educational outcomes and not merely attempting to purchase swing votes from well-off suburbanites with subsidies, they should follow the evidence which dictates that calls for universal ESAs must be rejected in favor of means-tested programs that have a proven record of success.  

Kenneth Schrupp
Kenneth Schrupp is a Young Voices contributor writing on the intersection of business, politics and media. He’s a public affairs consultant and serves as editor in chief of the California Review, an independent political journal.