An indispensable new book on Education Savings Accounts.
Education Savings Accounts: The New Frontier in School Choice (Rowman & Littlefield, 2017) takes a fresh, perhaps first, look (in bound form, at least) at 21st-century education unbound from 19th-century bureaucracy.
Education Savings Accounts (ESAs) rest on a couple of basic ideas embraced across the political divide. First, that providing for an educated citizenry remains an interest of state and local governments. Second, that parents, rather than bureaucracies, should retain the authority to determine what constitutes a quality education. This means that governments fund the education but do not automatically administer the education.
People like this idea. “ESA programs… found significantly higher support among Democrats [than tax credits],” Robert Enlow and Michael Chartier note in a chapter on the growing popularity of ESAs among lawmakers. “Sixty percent of Democrats support ESA programs while only 30 percent are in opposition.”
Most parents may choose to utilize the public schools when given more options through ESAs. But in areas where public schools fail, or in situations where parents desire schooling that differs from what local public schools offer, ESAs provide parents choices.
Within the last decade, five states — Nevada, Florida, Tennessee, Mississippi, and Arizona — have codified ESAs for at least a portion of their students, with the Silver State boasting the gold standard with near-universal access to ESAs for interested parents. At least eight more states consider pending legislation to create ESAs. With the president making school choice a priority in his budget outline, a quintet of states establishing ESAs in the last six years, and legislation in motion in several more states, the book arrives as interest in the topic dramatically increases.
“The concept of parental-controlled ESAs was born out of an Arizona Supreme Court decision that struck down two publicly funded voucher programs,” Adam Peshek and Gerard Robinson point out in the book’s introduction. Indeed, ESAs, by granting money directly to parents rather than private schools that in many instances include religious instruction, remove objections on First Amendment or Blaine Amendment grounds from the mouths of judges. This pragmatic approach increasingly makes ESAs the popular choice among the increasing choices in school choice.
On policy grounds, ESAs appeal in part because they save money — for schools, states, and students.
“Competition on price and quality should lower prices, increase pressure to improve quality, or both,” Nat Malkus writes in a chapter that explores issues of dollars and cents. “As the supply side develops to offer more high quality providers at competitive prices, demand among families who have not yet taken advantage of ESAs should increase until the supply and demand meet an equilibrium. In this way, ESAs can build a sustainable market for the education services they make possible.”
More so than vouchers, ESAs act to decrease costs to parents. The program allowing parents to roll over dollars from year-to-year encourages cost consciousness. “This ability to save surplus funds creates something absent in our current K-12 funding system: incentives for parents to make the most of their education dollars,” Malkus writes.
Apart from allowing parents to roll over dollars saved, ESAs relieve government of the inflationary effects of some voucher programs. Matthew Ladner points out in the first chapter that “it can be expected that schools will build their cost structures around the maximum voucher amount. But what if an innovator develops a high-quality school model that could deliver high results for less, say, $5,000 per child?”
If the voucher amount exceeds this number, the government grants encourage education providers to raise prices, i.e., to make education more expensive. ESAs, in allowing for carrying over balances from one year to the next, provide a check against this inflationary impulse. In doing so, they save money for both parents and taxpayers.
By reducing the obligations of the public schools while allowing them to retain a portion of the per-pupil expenditures for students relying on ESAs, the program actually saves money for the public schools. Whether public-school employees appreciate this, budget-conscious taxpayers surely do.
State and local governments expend increasing amounts on education.
“According to the National Association of State Budget Officers, state governments spent $344.6 billion on elementary and secondary education in 2014,” Peshek and Robinson note. “Although Medicaid was the largest state expenditure at $445 billion, of which the federal government paid 58.2 percent, elementary and secondary education remains the largest recipient of general funds in the states. When it comes to the source of spending, state governments provide 45.6 percent, local governments 45.3 percent, and the federal government 9.1 percent.”
And those numbers do not include state spending on post-secondary schooling, which, combined with K-12 allocations, makes education the #1 expense for state governments. Just as reining in spending at the federal level means reining in health spending, reining in spending at the state level means reining in education spending. And not controlling costs in one likely means a budgetary crisis for the other.
In both instances, a way to control costs without harming students and patients means a la carte services that do not force consumers to buy what they do not want or need. With medical savings accounts an established reality, legislators find little controversial in them. But with education savings accounts more idea than reality at this point, short-sighted lawmakers lacking imagination remain closed to them. That’s changing, as poll numbers dictate epiphanies and the successful experiments in the laboratories of democracy find eager imitators.
The government makes a poor parent but a wealthy patron. It possesses the funds to pay for a quality education but lacks the knowledge to determine what a quality education means for every student. Education Savings Accounts: The New Frontier in School Choice advances a message that transcends the political divide: generously fund schooling, as many Democrats demand, but provide maximum flexibility for parents, as many Republicans desire. This means giving both sides of the political divide something they like.
In an era in which compromise ranks as the longest of an ever-proliferating lexicon of four-letter words, this giving in to get something out remains easier said than done.
Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.