Put the brakes on ESA private school vouchers

February 24, 2016

The effort to expand private school vouchers at the legislature is a perfect example of ideology leading policy.  On Monday, Feb. 22 the Senate passed SB1279 and the House held its version, HB2482, today but will take it up soon.

The bill’s effectively make vouchers, known technically as education scholarship accounts (ESAs), available to all K-12 student in Arizona.

Why is this ideology leading policy?

(UPDATE: For more on how the current ESA private school voucher system disproportionately benefits high income families see the excellent investigative work of Rob O’Dell and Yvonne Wingett Sanchez of the Arizona Republic)

  1. Unlike the current Private Tuition Tax Credit Scholarships which have some limited levels of means testing, ESA’s have no means testing, so the more wealthy folks who would otherwise send their children to private school will now take advantage of this program.
  2. On Tuesday, Feb. 23rd, the Grand Canyon Institute released a report questioning high administrative costs of charter schools, finding them on a per pupil basis to be more than twice the cost of public school districts, with the worst offenders being the largest corporate charters who have about three times the cost of school districts per pupil.  This finding was only possible because charter schools are required to file Annual Financial Reports with the Dept. of Education.  There is no such requirement for private schools.  While financial accountability needs to be improved for charter schools, no financial or educational performance accountability exists for private schools.
  3. What’s the real cost?  The JLBC estimates that students switching from district schools to private school will actually cost the state an extra $700, presumably because district schools are partly funded by local property taxes (see http://www.azleg.gov//FormatDocument.asp?inDoc=/legtext/52leg/2r/fiscal/hb2482.docx.htm&Session_ID=115).  That estimation method leads to a fairly nominal cost estimate. These vouchers will be more than double the current average private school tuition scholarship—though the Arizona Dept. of Revenue notes there is no control over a student receiving multiple scholarships.  The cost of the private tuition tax credit program has mushroomed. In 2010 the cost of the program was $55 million.  Due to a vast expansion of it on both the individual and corporate levels, by 2014 it had cost $123 million (see https://www.azdor.gov/Portals/0/Reports/FY2014%20Private%20School%20Tuition%20Org%20Credit%20Report.pdf) . In 2009-2010 the number of private school students in Arizona was 44,550.  By 2011-2012 that number had DECREASED to 43,134 even though in that year the tax credit programs’ cost had risen to $70 million.  In about six months the biannual private school census for 2013-2014 will be available and we’ll know the enrollment. Doesn’t it make sense to get more facts about enrollment before embarking on an expansive new subsidy program for private schools? UPDATE: GCI was able to estimate the current tuition tax credit cost at $10,000 per additionally enrolled private school student.
  4. Likely outcomes? There is a family income reporting requirement, but no restriction on individual tax credit donation scholarship recipients.  According to the Dept. of Revenue report In 2014 about 1/3 went to families with incomes 185 percent or less of the federal poverty line, 1/3 went to families between 185 and 325 percent of the federal poverty line and 1/3 went to families with higher incomes than that.  The Corporate Tax Credits are restricted to families at 325 percent (technically 324.25%) of the federal poverty level or less which for a family of four is up to $83,000.  Under the new program students are not supposed to double dip in both ESA vouchers and tuition scholarships.  They may not, though enforcement and consequences are unclear.  The most likely outcome will be the individual tax credits will migrate to an increasing percentage of families above the corporate tax credit cap. And ESA’s will primarily be used by wealthier families.  So this legislation is really geared at higher income families, most likely.  As despite the vast resources poured into private schools via taxpayers’ tax credits, there is no evidence to date it has had an appreciative impact on private school enrollment.  A more informed choice is possible when the 2013-2014 enrollment data is in.  A recent report indicated that charters lack the demographic diversity of public school districts.  That information is reported annually to the Arizona Dept. of Education.  No reporting is provided on the demographic diversity of ethnicity of the private school scholarship recipients.

RECOMMENDATION: At minimum if lawmakers really want to expand taxpayer paid private school education, they should put the brakes on this move until we have data on private school enrollment for 2013-2014, so a proper assessment of the cost effectiveness of the current program can be done before implementing another one. (UPDATE–THE ESTIMATE IS IN! $10,000 PER PRIVATE SCHOOL STUDENT)