The movement to provide choice in schools increasingly, and perhaps predictably, offers more choices. If vouchers represented an advance on charter schools, Education Savings Accounts (ESAs) appear as another evolutionary step.
Just five states make ESAs available, and Nevada, alone among those states, makes it almost universally available. This looks to change very quickly.
Legislatures in Georgia, West Virginia, Mississippi, and points beyond ponder bills to grant parents greater control over the educations of their children through ESAs.
New Hampshire’s senate passed ESA legislation earlier this year. The state’s house education committee put the bill, which allows parents to consider a multitude of curricular options, on hold earlier this year until 2018. Rather than a finite menu of fixed choices, ESAs offer education à la carte.
“Parents who apply for this, it’s called an educational savings account, get a debit card,” New Hampshire state senator John Reagan tells The American Spectator. “They can go to a private school, and have the money deducted for that. If they’re home schoolers, they can access the account for supplies. It puts the parent in charge, and they get to go shopping for what they think is best for their children.”
ESAs mesh well with a state that boasts Live Free or Die as its motto. But it’s really the efficiency of the program that appeals to frugal Yankees. In New Hampshire, where state senators such as Mr. Reagan make $100 a year, saving dollars — in government coffers and personal pocketbooks — makes sense.
“My bill allots 90 percent of the state contribution to the parents to go buy their kids’ education,” Senator Reagan explains. New Hampshire, which forgoes both income and sales taxes, provides a larger contribution to local schools than other states since it consumes a greater portion of property taxes that normally fund services, such as schools, at the local level. So, the 90 percent contribution Senator Reagan refers to amounts to a massive overall number.
Since the subtraction of a student and most of the state money to support the child corresponds with a subtraction of the financial obligations the school districts owe to the students who opt out, the plan puts the public schools on a better financial footing even if in absolute terms their allotment shrinks. Importantly, the money goes to education whether it first passes through a bureaucracy or a parent’s special account.
And the program includes safeguards against private schools looking at school choice as a license to increase tuition. Aside from empowering parents to choose, education-savings accounts encourage them to get the best deal for their dollars. “The money stays in the account,” Reagan notes. “And the next year, they get a new allotment. They can roll this over.”
In other words, New Hampshire’s proposed program avoids the pitfalls inherent in a straight subsidy to private institutions that at the collegiate level results in an incentive to increase tuition in response to the increased subsidy. When the Higher Education Act passed in 1965, tuition, room, board, and other major costs associated with four-year colleges amounted to $1,325 a year. The annual price tag approaches about twenty times that number today. Taking inflation into account, the price in constant dollars ballooned two-and-a-half times. Rather than make college more affordable, government grants perversely encourage a rise in costs. One can easily see the same inflationary spiral taking place at the high school level.
Why, for instance, would any school charge students less than the state’s annual voucher allotment? If the state provides a $7,500 voucher, this incentivizes a private school that charges $5,000 to increase tuition by 50 percent. ESAs remove that inducement to raise price. By allowing parents to roll over money granted for future educational costs, the program encourages parents to get the best deal possible rather than spend money that disappears if not used.
Just as reining in health care costs ranks as such a high priority nationally because it represents the largest expenditure at the federal level, getting more bang for the education buck deserves focus, in part, because it constitutes the largest slice in the state budgetary pie graph. The urgency comes from both health and education amounting to not just numbers but people — our bodies and minds. Thirty percent of state and local government expenditures funds education. The second largest expenditure, welfare, receives less than half of what education does.
This unburdening of budgets — both for taxpayers and the states — spurs optimism in the proponents of ESAs.
“I think it’s going to happen because it promises taxpayer relief,” Senator Reagan tells The American Spectator of his in-limbo bill. “It relieves the local property-tax payer.”
And in a state that pays its state senators less than a dollar a day, and remains the sole state without a sales and an income tax, taxpayers still speak loudly.
Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.
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