The School Voucher AuditDo Publicly Funded Private School Choice

Programs Save Money?

Presented by Jeff Spalding

OUR FOUNDERS“We have concluded that the achievement of effective parental choice requires an ongoing effort to inform the public about the issues and possible solutions, an effort that is not episodic, linked to particular legislative or ballot initiatives, but that is educational. This Foundation is our contribution to that objective.”

Rose D. FriedmanNoted Economist

1910-2009

Milton FriedmanNobel Laureate

1912-2006

Available at: http://www.edchoice.org/Research/Reports/The-School-Voucher-Audit--Do-Publicly-Funded-Private-School-Choice-Programs-Save-Money-.

aspx

What we found: 10 school voucher programs have saved $1.7 billion over 20 years (cautiously

estimated) Over 500,000 student FTEs awarded school vouchers Over 470,000 students FTEs diverted from public schools (94%)

Behind the overall net savings number:• Average Public School Variable Cost per Voucher Student - $9,647

Range: $4,958 FL Opportunity Scholar to $22,359 OH Autism• Average Voucher Cost - $5,637

Range: $2,257 Cleveland to $14,862 OH Autism• Average Net Savings per Voucher Student - $3,375

Range: $1,018 FL Opportunity Scholar to $7,532 OH Autism

$9,647 - $5,637 = $4,010 not $3,375WHY?

Some voucher students would have still attended a private school without the voucher’s financial assistance….so, they are not diverted from public school!

The cost of vouchers for students not diverted is similar to the “free rider” or “deadweight loss” problems in economics.

If you invested $5,637 each to educate students and 94% of the time you saved $4,010 while 6% of the time you lost $5,637…what’s your ROI?

Milwaukee Parental Choice Program

UT - Carson Smith Special Needs Scholarships

FL - A+ Opportunity Scholarships

DC Opportunity Scholarships

Ohio Autsim Scholarships

Cumulative Weighted Average ROI

FL - McKay Scholarships for Students with Disabilties

LA - Student Scholarships for Educational Excellence

OH - Educational Choice Scholarships

Georgia Special Needs Scholarships

Cleveland Scholarship & Tutoring Program

0% 20% 40% 60% 80% 100% 120% 140% 160% 180%

20.9%

24.3%

25.8%

27.4%

50.8%

59.9%

78.1%

83.0%

99.5%

111.0%

167.1%

School Voucher Return on Investment (ROI)Cumulative ROI from Inception through 2011

Rate of Return

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-15%

0%

15%

30%

45%

60%

75%

90%

105%

120%

135%

150%

165%

180%

195%

210%

225%

School Voucher Return on Investment (ROI)Annual Return from Inception through 2011

LA - Student Scholarships for Educational Excellence Georgia Special Needs ScholarshipsOH - Educational Choice Scholarships UT - Carson Smith Special Needs ScholarshipsOhio Autsim Scholarships DC Opportunity ScholarshipsFL - A+ Opportunity Scholarships FL - McKay Scholarships for Students with DisabiltiesCleveland Scholarship & Tutoring Program Milwaukee Parental Choice ProgramWeighted Average ROI

School Year Ending

Rat

e of

Ret

urn

Recent down trend in ROI has been due primarily to a tightening of public school spending.

Program Design Drives ROINew school choice programs frequently have participation caps, modest voucher maximums, and rigid eligibility restrictions to limit fiscal risk……and appease school choice agnostics.

• Maximum total student or total voucher payout cap• Maximum individual voucher award limit (e.g. X% of average public school spending per student)• Prior public school enrollment requirement• Income eligibility limit(s)

High ROI is no surprise. Risk mitigation in the program design drives up the ROI by limiting access to a narrowly targeted population of students.

Trade-off: Tighter limits/restrictions sacrifices larger total savings…to a point!

Savings are MAXIMIZED when eligibility and voucher amounts are raised to the point that the “deadweight loss” induced by the expansion EQUALS the net savings for the additional students diverted from public schools.

So, how much have school vouchers affectedpublic schools?

About 70,000 students used school vouchers in 2010-11 About 66,000 were diverted from public schools (94%) Thus, only 0.13% of all public school students were diverted (≈ 50 million) Granted, the impact is larger where school vouchers are available

For the 10 school voucher programs examined, utilization rate was only 7% -8% Equates to 900,000 eligible students nationwide (850,000 likely public school students) Thus, about 1.7% of all public school students were eligible for school vouchers in 2010-11

0.13% 0.22%

99.65%

Impact of Private School Choice on K-12 Public Schoolsby Students Diverted for 2010-11

School Vouchers Other Private School Choice Not Diverted from Public School

Note: Ballpark Esti-mates

1.7%

5.5%

92.8%

Impact of Private School Choice on K-12 Public Schoolsby Eligibility Exposure for 2010-11

School Vouchers Other Private School Choice Not Eligible for Private School Choice

Note: Ballpark Esti-mates

There is still a VERY long way to go before any lasting, national impact on the K-12 education marketplace will be felt……though noticeable benefits have occurred in isolated communities where school choice is now more robust!

See my blog post – Less money for public schools makes them better – about a study of the Milwaukee Parental Choice Program conducted by the Federal Reserve Bank of New York.

So what happened to the $1.7B in net savings?Most of these savings were passively re-spent…typically rolled back into funding public schools• State’s school finance laws often protect public schools from a full funding loss as their enrollment declines• Political pressure to annually raise per student funding is immense

Since public school spending is rarely cut, this gives credence to opponents’ claims that no voucher savings actually occurred.

But just because the monies were re-spent……does NOT mean the savings never happened!

State’s typically don’t annually track savings from school choice programs• This needs to change!• Indiana requires annual tracking and reporting, but its process is seriously flawed

Jeff SpaldingDirector, Fiscal Policy & Analysis

317-681-0745 | jspalding@edchoice.org