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Research & Commentary: Universal ESA Program Would Make Arkansas a National Leader in Education Choice

January 20, 2017

Universal ESA Program Would Bring Arkansas To The Forefront Of The Education Choice Movement

A bill has been introduced in the Arkansas House of Representatives that, if passed, would be the nation’s first universal education savings accounts (ESA) program to be funded via tax-credit scholarships. These ESAs would then be available for use by parents to pay for tuition and fees at private and parochial schools, should parents choose to do so.

Under the proposed program, nonprofit organizations, after receiving approval from the state, would be eligible to grant scholarships to Arkansas students. Individuals and businesses would then donate to these nonprofits and receive a tax credit equal to as much as 100 percent of the amount of their contribution. Donations for $10 million in tax credits would be allowed in 2017, with the potential for a total increase of 10 percent annually.

Each student awarded an ESA would receive a grant in the amount of 100 percent of Arkansas’ “foundation funding” amount, which was $6,646 for the 2016–17 school year. The funds could also be used to pay for textbooks, tutoring services, or to cover fees associated with a national standardized achievement test, such as the SAT.

Students with disabilities could also use the ESA funds for educational therapies or other educational services or for transportation. However, disabled students would not be able to receive both an ESA and a voucher under the Succeed Scholarship Program for Students with Disabilities.

For all students, leftover ESA funds could be rolled over into the following year, and, if rolled over, the funds would be available until the student is 22 years old. This means the ESAs could also be used to pay for college tuition and fees.

While all students would be eligible for the ESA, certain students would be given higher priority, such as children who belong to a family that qualifies for the federal free or reduced-price lunch program ($44,955 for a family of four in 2016–17) and children who qualified for the ESA program during the previous year, as well as their siblings.

Arkansas’ traditional public schools are failing. Only 32 percent of Arkansas 4th graders and 25 percent of 8th graders tested “proficient” in math on the 2015 National Association of Education Progress (NAEP) test, also known as the Nation’s Report Card. Only 32 percent of 4th and 27 percent of 8th graders tested proficient in reading. These results show Arkansas’ public school system is failing to educate roughly seven out of 10 4th grade and 8th grade students to a proficient level in reading and mathematics.

Arkansas’ sub-standard performance on NAEP underscores the desperate need for the state to expand school choice opportunities far beyond what is currently available. Too many public schools in the Natural State are failing to adequately prepare students for productive lives. Parents should be allowed to choose the schools their children attend and should not be penalized financially if that choice is a private religious or secular school.

In May 2016, EdChoice released a report examining 100 empirical studies on school choice programs. Eighteen of these studies used random assignment to measure outcomes, referred to in academia as the “gold standard.” The overwhelming majority of the available empirical evidence makes it clear educational choice offers families equal access to high-quality schools that meet their widely diverse needs and desires – and does so at a lower cost – while simultaneously benefitting public school students. 

Currently, private school choice in the Natural State is available only to children with special needs, but educational choice programs would give all families a greater opportunity to meet each child’s unique education needs. Providing a universal ESA program would instantly bring Arkansas to the forefront of the education choice movement. Allowing all students in Arkansas to receive ESAs would be a giant step toward remedying Arkansas’ lackluster record of failing to educate its children. When parents are given the opportunity to choose, every school must compete and improve, which gives more children the opportunity to attend a quality school.

The following documents provide more information about education savings accounts.

A Win-Win Solution: The Empirical Evidence on School Choice (Fourth Edition)
https://www.heartland.org/publications-resources/publications/a-win-win-solution-the-empirical-evidence-on-school-choice-fourth-edition?source=policybot
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.

2016/17 School Choice Report Card
https://www.heartland.org/publications-resources/publications/201617-school-choice-report-card
This report card published by the American Federation for Children scores 27 active non-special-needs voucher, scholarship tax-credit, and education savings account programs against ideal standards for program quality. The report is an excellent tool policymakers and researchers can use to help improve education programs and maximize student participation. 

Exploring Arkansas’ Private Education Sector
https://www.heartland.org/publications-resources/publications/exploring-arkansass-private-education-sector-1?source=policybot
This report details the results of EdChoice’s survey of Arkansas private schools and U.S. Department of Education data, including schools’ awareness of the state’s Succeed Scholarship Program for Students with Disabilities. The report also shows whether private schools are willing to participate in educational choice programs, what reservations they have about such programs, the number of available private school seats, Arkansas private school tuition costs, and more.

Estimating the Fiscal Impact of a Tax-Credit Scholarship Program
https://www.heartland.org/publications-resources/publications/estimating-the-fiscal-impact-of-a-tax-credit-scholarship-program?source=policybot
This essay from the Show Me Institute claims a near-universal tax-credit scholarship program in Missouri covering 88 percent of all students ages 5–18 could save local school districts up to $39.6 million per year. According to the Show Me Institute’s estimate, the combined state and local net fiscal impact would be as much as $57.6 million per year.

Taking Credit for Education: How to Fund Education Savings Accounts through Tax Credits
https://www.heartland.org/publications-resources/publications/taking-credit-for-education-how-to-fund-education-savings-accounts-through-tax-credits?source=policybot
This Cato Institute paper shows how legislators can design an education savings account (ESA) that is privately funded through tax-credit-eligible contributions from taxpayers, similar to tax-credit scholarship programs that already exist in states across the country. Tax-credit-funded ESAs would empower families with more educational options while enhancing accountability and refraining from coercing anyone to financially support ideas they oppose. Because they are funded through voluntary contributions, rather than public funds, tax-credit scholarships have been found by the U.S. Supreme Court and by every state supreme court that has considered the issue to be within the bounds of the U.S. Constitution and most state constitutions. In states that have Blaine amendments, which greatly restrict the ability of lawmakers to create some school choice programs, tax-credit ESAs could be a lifeline to families in need.

Competition: For the Children
https://www.heartland.org/publications-resources/publications/competition-for-the-children
This study from the Texas Public Policy Foundation claims universal school choice results in higher test scores for students remaining in traditional public schools and improved high school graduation rates.

Recalibrating Accountability: Education Savings Accounts as Vehicles of Choice and Innovation
https://www.heartland.org/publications-resources/publications/recalibrating-accountability-education-savings-accounts-as-vehicles-of-choice-and-innovation?source=policybot
This Special Report from The Heritage Foundation and the Texas Public Policy Foundation explores how education savings accounts expand educational opportunities and hold education providers directly accountable to parents. The report also identifies several common types of regulations that can undermine the effectiveness of the program and how they can be avoided.

The Tax-Credit Scholarship Audit: Do Publicly Funded Private School Choice Programs Save Money?
https://www.heartland.org/publications-resources/publications/the-tax-credit-scholarship-audit-do-publicly-funded-private-school-choice-programs-save-money
In this study, EdChoice Director of Fiscal Policy and Analysis Martin Lueken updates previous work examining the fiscal effects of private school choice programs on state governments, state and local taxpayers, and school districts. This report analyzes savings from tax-credit scholarship programs, which allow individuals and businesses to reduce their state tax liability by making a private donation to a nonprofit organization that provides scholarships for children to attend private schools of their choice. This audit examines 10 tax-credit scholarship programs operating in seven states between 1997 and 2014, which serve 93 percent of all students participating in tax-credit scholarship programs nationwide.

The Fiscal Effects of School Choice Programs on Public School Districts
https://www.heartland.org/publications-resources/publications/the-fiscal-effects-of-school-choice-programs-on-public-school-districts?source=policybot
In the first-ever study of public school districts’ fixed costs in every state and Washington, DC, Benjamin Scafidi concludes approximately 36 percent of school district spending cannot be quickly reduced when students leave. The remaining 64 percent, or approximately $8,000 per student on average, are variable costs, changing directly with student enrollment. This means a school choice program attaching less than $8,000 to each child who leaves a public school for a private school actually leaves the district with more money to spend on each remaining child. In the long run, Scafidi notes, all local district spending is variable, meaning all funds could be attached to individual children over time without creating fiscal problems for government schools.

How School Choice Programs Can Save Money
http://www.heritage.org/Research/Education/wm727.cfm 
This Heritage Foundation study of the fiscal impact of voucher programs notes Washington, DC vouchers cost only 60 percent of what the city spends per pupil in government schools. The study estimates if the states with the top eight education expenditures per pupil adopted voucher programs similar to the Washington, DC program, they could save a combined $2.6 billion per year.

How School Choice Can Create Jobs
https://www.heartland.org/publications-resources/publications/how-school-choice-can-create-jobs?source=policybot
Examining five South Carolina counties, Sven R. Larson found school choice programs were associated with gains of up to 25 percent in youth self-employment. Larson writes, “School Choice raises academic achievement and reduces the problems and costs associated with high school dropouts. But it also has a decisively positive impact on youth entrepreneurship and could provide a critical boost for the economies of poor, rural counties.”

Research & Commentary: Indiana School Choice Parental Satisfaction Should Lead to More School Choice
https://www.heartland.org/publications-resources/publications/research--commentary-indiana-school-choice-parental-satisfaction-should-lead-to-more-school-choice?source=policybot
In this Research & Commentary, Heartland Policy Analyst Tim Benson examines an expanded, follow-up study to a 2014 report by EdChoice that examines why Indiana parents choose to take advantage of the state’s Choice Scholarship Program voucher and use it to send their children to private schools.

 

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 John Nothdurft, Heartland’s director of government relations, at jnothdurft@heartland.org or 312/377-4000.

Author
Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.
TBenson@heartland.org @BenceAthwart