Policy Documents

Texas Taxpayers’ Savings Grants: Q&A No. 2 - Will Supply Increase?

August 24, 2012

Taxpayer Savings Grant Program
Questions and Answers

by Joseph L. Bast
President, The Heartland Institute
Last Updated: August 2012

Q2: Would there be enough space in private schools to meet the surge in demand?

Answer in brief: Yes! Research and real-world experience show that the supply of private schooling is highly elastic – it expands quickly if demand rises – and the Taxpayer Savings Grant Program (TSGP) would make available more than $1 billion a year to finance the expansion.

The longer answer: The labor, facilities, and other resources needed to launch new schools are not scarce, so they would be readily available to meet the new demand for private schools. Other school choice programs have not experienced supply-side restrictions. The TSGP would provide sufficient capital to current private-school operators and entrepreneurs to start new schools, and it erects no new barriers to entry into the marketplace.

Background and Analysis

1. TSGP could increase private-school enrollment by approximately 350,000 in the program’s second year, and more in subsequent years.

The version of the Taxpayer Savings Grant Program (TSGP) introduced in 2011 as HB33 read,

Any parent or legal guardian of a school-age child who resides in Texas and is entering kindergarten or attended a public school for all of the academic year prior to their participation in this program ... may receive reimbursement from the state for tuition paid for enrollment of said child at a private school in the amount of actual tuition or sixty percent of the state average per-pupil maintenance and operations expenditure, whichever is less....

State average per-pupil maintenance and operations (M&O) expenditure, according to the Legislative Budget Board, was $8,801 in 2011. The savings grant would be a maximum of 60 percent of that amount, or $5,280. 

Based on a review of the academic literature and the experience of two somewhat comparable school choice programs, The Heartland Institute estimates that approximately 350,000 students would use savings grants to enroll in private schools in the second year of the program.

According to the U.S. Department of Education, private schools in Texas enrolled approximately 235,241 students in 2007-2008. So private schools will need to more than double their capacity.

2. The “inputs” needed to expand existing schools or create new schools are plentiful.

Existing private schools can fill empty seats, then expand by renting nearby space or opening additional campuses. New schools can be created by national or local nonprofit organizations, for-profit firms, and by teachers and administrators leaving the public school system. We expect all of these activities to start occurring immediately after the TSGP is enacted. 

Nationwide, some 200,000 new teachers enter the market every year, and there are many more applications than positions in virtually all school districts. Successful schools already operate in office buildings, strip malls, and other commonly available spaces, and public schools can lease space to new schools. Vacant space suitable for new schools is plentiful.

Charter school management companies have become very skillful in opening new schools. They have systems in place to recruit boards of directors, principals and administrators; choose curriculum, find and renovate space, buy insurance, and register with government authorities. 

The TSGP does not increase the total amount of schooling demanded, but merely changes the shares of the public and private sectors. Resources would be released from the public sector in amounts roughly equal to their acquisition by the private sector.
Introduction of competition and choice in the delivery of other public services has led to more efficient use of resources. If education savings grants bring the same effect to schooling, the same number of children could be taught with fewer resources than are currently used, resulting in less demand and lower prices for those resources.

3. Capacity expanded to meet demand in cities with similar school choice programs. 

Experience in other states and in the Edgewood School District in San Antonio demonstrates that private schools can increase their capacity quickly.

Milwaukee did not experience a shortage of private schools after the 1997-1998 school year, when religious schools were allowed to participate and legal challenges to the program ended. In 1998-1999, enrollment stood at 5.75% of public school enrollment; the next year it was 7.6 percent. Today, nearly 25% of students attend private schools using publicly funded vouchers. 

According to the American Federation for Children, “In June 2011, Governor Scott Walker signed the 2011-13 Wisconsin state budget into law expanding the Milwaukee Parental Choice Program and creating the Racine Parental Choice Pilot Program. Changes to the Milwaukee Parental Choice Program include: removing enrollment caps, expanding student eligibility, expanding school participation eligibility, and increasing accountability. The Racine Parental Choice Pilot Program allows students in the Racine Unified School District to receive a scholarship to attend a participating private school. The program has an enrollment cap of 250 students in the first year, 500 students in the second year, and no enrollment cap in subsequent years.”

The Edgewood Tuition Voucher Program, which operated in Edgewood, Texas, from 1998 to 2008, increased private school enrollment from nearly zero to 5.8 percent of the number of students enrolled in Edgewood public schools in the first year of the program, and to 6.8 percent in the second year. It accomplished these pick-up rates despite limiting participation to low-income families in a geographically limited area, offering scholarships worth considerably less than the TSGP grants, and public awareness that the program was to run for only a limited period of time.

4. The TSGP would generate sufficient revenue to fund rapid expansion.

The TSGP would bring approximately $1.6 billion of new money to private schools in the first year and $1.8 billion in the second year, a revenue flow sufficient to attract new investment making rapid expansion possible.
($5,281 x 350,000 = $1.85 billion in the second year; x .85 in the first year (during scale-up) = $1.57 billion, 2 years total = $3.4 billion).

5. The TSGP erects no new barriers to entry into the marketplace.

Unlike many voucher programs and even tax credit plans, the TSGP erects no new rules or regulations applying to schools that accept students using publicly financed tuition grants. For example, admission need not be by lottery, and school administrators need not inquire about the income of a student’s family or even where they live.

This means every accredited school currently operating in Texas is eligible to participate, with practically no changes necessary to its current operational methods. Individuals who may be interested in starting new schools in Texas are well-familiar with the rules they must follow to be accredited.

The Texas Private School Accreditation Commission is authorized by the state commissioner of education to accredit private schools. Unlike a state’s board of education or department of education, this commission is not biased in favor of public schools, and therefore is not likely to impose unnecessary restrictions on new private schools. This has been a persistent problem with school choice programs in other areas, such as Milwaukee.

Among the requirements for accreditation currently in place in Texas are the following:

Private schools seeking accreditation must have adequate financial resources; must demonstrate professional management of their resources; must provide a clearly stated philosophy with objectives that are adequate to implement the philosophy; and must have a physical plant and facilities adequate to support the program.

Other requirements include administration of a nationally normed achievement test approved by the accrediting agency, school days and school years that are equivalent in terms of classroom hours to those of public schools, and maintenance of student academic records and achievement levels necessary for graduation comparable to those required in public schools.

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All of the following sources are available online at www.heartland.org/ideas/taxpayer-savings-grants:

John Merrifield and Joseph L. Bast, “Budget Impact of the Texas Taxpayers’ Savings Grant Program,” Policy Brief, E.G. West Institute for Effective Schooling and The Heartland Institute, April 2011.

Joseph L. Bast, “Corrections to Fiscal Note for Taxpayers’ Savings Grants Programs,” Policy Brief, The Heartland Institute, June 8, 2011.

Joseph L. Bast, “Making Texas Public Education More Efficient: Taxpayer Savings Grant Program,” Testimony to the Texas Senate Committee on Education, August 24, 2012.

For more information, contact Joseph Bast, Joy Pullmann, or John Nothdurft, The Heartland Is Institute, at 312/377-4000 or by email at jbast@heartland.org, jpullmann@heartland.org, or jnothdurft@heartland.org.