Skip Navigation

Research & Commentary: Education Savings Accounts Would Accrue Fiscal and Non-Fiscal Benefits to New York

July 15, 2022

Program Could Possibly Save State Government And Local Districts $2.36 Billion Annually

A report issued by the Manhattan Institute for Policy Research details how an education savings account (ESA) program would benefit the Empire State both fiscally by saving the state money and non-fiscally by accruing to New York children the benefits that generally come with education choice programs.

With an ESA, state education funds allocated for a child are placed in a parent-controlled savings account. Parents then use a state-provided debit card to access the funds to pay for the resources chosen for their child’s unique educational program, such as tuition at a private or parochial school, tutoring, online classes, transportation, specialized therapies, textbooks, and even college courses while still in high school. Unused ESA funds may also be rolled over from year to year and can be saved to pay for future college expenses.

The analysis begins by noting that per-pupil funding in New York public schools in Fiscal Year 2019 was $27,310, an 80 percent increase above inflation since 1994 and increasing annually over that time by 3.2 percent above inflation on average.

If New York enacted an ESA program that set its funding level at 90 percent of the state average marginal per-pupil cost—roughly $6,500—and just 1 percent of state students participated (roughly 26,800 students), it would result in combined savings to local districts and the state government up to $301 million annually. If 10 percent of Empire State public school students participated (roughly 268,000 students), the program would generate $3.01 billion in savings on a yearly basis. This translates to $11,200 in savings per-pupil.

Similarly, an ESA funded to $9,900—100 percent of the statewide average amount of total per-pupil state aid—would result in combined savings of $236 million if just 1 percent of students participated, or $2.36 billion if 10 percent of students participated, equaling $8,800 in savings per pupil.

“A common critique of educational choice programs is that they siphon resources from public schools,” the report notes. “But while schools may receive less funding, they also have fewer students to educate. Deciding how to reallocate resources when enrollment declines is, of course, challenging. And because not all school funding is allocated according to the number of students, the relative drop in funding is often less than the decline in enrollment. Indeed, in both scenarios considered (1% and 10% take-up rates), district budgets would remain almost fully intact. For a 1% decrease in enrollment, budgets would be reduced by 0.2% on average, implying that 99.8% of their total budgets would remain intact. If 10% of district students choose to participate in an ESA program, budgets would be reduced by 2.3% on average, implying that 97.7% of districts’ budgets would remain intact.”

Copious empirical research on school choice programs such as ESAs makes clear these programs offer families improved access to high-quality schools that meet their children’s unique needs and circumstances, and that these programs improve academic performance and attainment and deliver a quality education at lower cost than traditional public schools.

Additionally, education choice benefits public school students and taxpayers by increasing competition, decreasing segregation, and improving civic values and practices. Research also shows students at private schools are less likely than their public school peers to experience problems such as alcohol abuse, bullying, drug use, fighting, gang activity, racial tension, theft, vandalism, and weapon-based threats. There is also a strong causal link suggesting private school choice programs improve the mental health of participating students.

Further, New York’s public schools are habitually failing the state’s children. In 2019, only 37 percent of public school fourth-graders and 34 percent of eighth-graders tested “proficient” to grade level in mathematics on the National Assessment of Educational Progress (NAEP) examination, colloquially known as the “Nation’s Report Card.” Just 34 percent of fourth-graders and 32 percent of eighth-graders tested “proficient” in reading. Essentially, and embarrassingly, the state’s public schools are failing to educate roughly 7 out of 10 New York children to grade-level proficiency in reading and math.

It is probably for these reasons, and also because teacher unions have repeatedly played politics with school closings during the COVID-19 pandemic in direct conflict with students’ best interests, that education choice programs like ESAs are more popular with parents than ever before. Polling by EdChoice released in September 2021 found 78 percent support for ESAs among the general public and 84 percent among current school parents. These findings are mirrored in the American Federation for Children’s eighth-annual National School Choice Poll, released in March 2022, which found 77 percent support for ESA programs.

New York legislators would do well for their constituents by taking up and enacting an ESA program in what is left of the 2022 legislative session. The goal of public education in the Empire State today and in the years to come should be to allow all parents to choose which schools their children attend, require every school to compete for every student who walks through its doors, and make sure every child can attend a quality school.

The following documents provide more information about education savings accounts and school choice.

Education Savings Accounts: How ESAs Can Promote Educational Freedom for New York Families and Improve State and Local Finances
https://media4.manhattan-institute.org/sites/default/files/MI-Lueken-ESA-fiscal-brief-v2.pdf
This report from the Manhattan Institute for Policy research discusses the potential fiscal effects of education savings accounts for K-12 in New York on the state and local taxpayers.

The 123s of School Choice (2020 Edition)
https://www.edchoice.org/wp-content/uploads/2020/04/123s-of-School-Choice-2020-4.pdf
This report from EdChoice is an in-depth review of the available research on private school choice programs in America. Areas of study include: private school choice program participant test scores, program participant attainment, parent satisfaction, public school students’ test scores, civic values and practices, racial/ethnic integration and fiscal effects.

A Win-Win Solution: The Empirical Evidence on School Choice (Fourth Edition)
http://www.edchoice.org/wp-content/uploads/2016/05/A-Win-Win-Solution-The-Empirical-Evidence-on-School-Choice.pdf
This paper by EdChoice details how a vast body of research shows educational choice programs improve academic outcomes for students and schools, saves taxpayers money, reduces segregation in schools, and improves students’ civic values. This edition brings together a total of 100 empirical studies examining these essential questions in one comprehensive report.

Fiscal Effects of School Choice
https://www.edchoice.org/wp-content/uploads/2021/11/Fiscal-Effects-of-School-Choice-Condensed.pdf
This EdChoice analysis of 40 private educational choice programs in 19 states plus D.C. summarizes the facts and evidence on the fiscal effects of educational choice programs across the United States and finds they have provided up to $28.3 billion in net fiscal savings to state and local taxpayers through Fiscal Year 2018. The programs in the analysis include three education savings accounts programs (ESAs), 19 school voucher programs, and 18 tax-credit scholarship programs.

The Public Benefit of Private Schooling: Test Scores Rise When There Is More of It
https://object.cato.org/sites/cato.org/files/pubs/pdf/pa830.pdf
This Policy Analysis from the Cato Institute examines the effect increased access to private schooling has had on international student test scores in 52 countries. The Cato researchers found that a 1 percentage point increase in the share of private school enrollment would lead to moderate increases in students’ math, reading, and science achievement.

The Effects of School Choice on Mental Health
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3272550
This study from Corey DeAngelis at the Cato Institute and Angela K. Dills of Western Carolina University empirically examines the relationship between school choice and mental health. It finds that states adopting broad-based voucher programs and charter schools witness declines in adolescent suicides and suggests that private schooling reduces the number of times individuals are seen for mental health issues.

Child Safety Accounts: Protecting Our Children through Parental Freedom
https://www.heartland.org/_template-assets/documents/publications/CSAccountsPB.pdf
In this Heartland Policy Brief, Vicki Alger, senior fellow at the Independent Women’s Forum and research fellow at the Independent Institute, and Heartland Policy Analyst Tim Benson detail the prevalence of bullying, harassment, and assault taking place in America’s public schools and the difficulties for parents in having their child moved from a school that is unsafe for them. Alger and Benson propose a Child Safety Account program, which would allow parents to immediately have their child moved to a safe school – private, parochial, or pub­lic – as soon as parents feel the public school their child is currently attending is too dangerous to their child’s physical or emotion­al health.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit School Reform News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Heartland’s government relations department, at governmentrelations@heartland.org or 312/377-4000.