Perspectives in Education- Part 12: Feds Out, Vouchers In

The Orderly Transition of Vouchers In, Lesser Federal Role

As noted in previous articles in this series, school vouchers granted by the state in any form are generally opposed by teacher unions. The main fear is economically-driven- a drop in dues paying members and less union revenue. But, if we are going to talk economics, then let us talk economics. There is no denying the fact that, on balance, private schools turn out a better product- more academically proficient students with higher graduation rates and a greater proportion of graduates attending college. They generally have higher NEAP and SAT scores. Several reasons have been proposed for this phenomena: smaller class sizes, smaller teacher to student ratios, better discipline, and greater parental involvement among others. My personal guess is that this last factor is most likely the main reason. As educational consumers, parents are more involved in the success of their child’s education because they have a very real, visible stake in the outcome. With public schools, despite the grousing about property taxes (and renters indirectly figure into the property taxpayer group), the costs are more diffused and are not visible. Publication of such arcane ideas as per pupil spending mean little to the majority of public school parents. That is not to say that there are public school parents who are not involved, but the costs of education are certainly more transparent for private school parents.

The number one complaint about vouchers from teacher unions and other liberal groups is that it will divert precious financial resources away from public schools. This actually defies logic. If together a state and local government is going to expend, for example, $11,000 per public school pupil, giving a voucher for $8,500 to a parent actually SAVES the state $2,500 for every voucher issued. They argue that voucher programs would likely benefit only parents who currently have children in private school. While it is true this would help those parents financially, it would also open up opportunity for a private school education to a whole new pool of potential students, especially those in poor performance districts. Meanwhile, public school per pupil expenditures would actually likely increase assuming funding levels remained reasonably constant because there would be less public school students to educate. This would also decrease class size and teacher to student ratios, something teachers yearn for. The union solution to these wants is to simply add more public school teachers and classrooms and increase the budget.

The first step is to phase in an extrication of the federal government from K-12 funding. There are two ways to do this, but the overall goal is to give states the time to develop an alternative voucher system and to be fair in that decrease of funds. Some states are more dependent upon federal funds for education than other states. For example, at the high end is New Mexico where the federal government contributes 21% of all public school funding in that state. At the opposite end of the spectrum is Wyoming where the federal government contributes only 7.3% of public school funding. Overall, the average is 12.4% although of that $77 billion annual expenditure, about 70% of it makes it into the classroom with the remainder dedicated to overhead, compliance, administrative and regulatory costs.

An across the board cut in federal funds spread over 10 years would create hardships along the way, but they would be more acute in the states that, on a percentage basis, rely more heavily upon federal funds. In the case of New Mexico, a ten percent cut in the first year would cost the state more than $71 million and assuming the state did not make up for that loss, actually worsen New Mexico’s per pupil expenditures which are considerably below the national average to begin with. Meanwhile, the losses in states that rely less on federal funds would be less acute with minimal changes in per pupil spending figures. In a state like California, although the actual dollar amounts may be large, those federal dollars amount to about the national average of 12.4%. In other words, a 10% cut in federal funding can be more easily absorbed by a state like California or New Jersey more so than a state like New Mexico.

Instead, the better system is a hybrid “cold turkey/phase in” system where wholesale state funding would be eliminated starting with the least dependent (on a percentage basis) states first. For example, in the first year, Colorado, Connecticut, Maryland, Massachusetts, Nevada and Wyoming would be weaned from federal funds for a savings to the federal government of $4.291 billion. In the second year, the federal government would cut an additional $9.228 billion among the District of Columbia, New Jersey, New York, and Virginia. And so on. In the final tenth year, the states currently most dependent on federal funds on a percentage basis- Idaho, Louisiana, Mississippi, New Mexico and South Dakota- would be eliminated. Before the cuts automatically set in, there would be a 2-year grace period for the first two groups of states to, in effect, establish a voucher system to offset the loss of federal funds. The other states- groups three would ten- would have at least two years regardless to enact the reforms with the final group actually having 12 years. In fact, some states may already have working and successful voucher systems. It should also be noted that with a few exceptions among the last three groups of states, they all include what many would agree are low-income states and, thus, most “in need” of federal funds at present. Dollar amounts would vary each year from a high of $15.33 billion in year 7 (Georgia, Hawaii, Missouri, North Carolina and California) to a low of a little over $4 billion in the final year.

But, this would not work without a viable voucher system in each state. There are regional and state-to-state variations in the per pupil costs of private education. Overall, it averages $8,500 nationally. But even then, there are differences. For example, the average cost of an private elementary education is about $6,500 and $10,500 for a high school education. Non-sectarian private schools generally charge even higher. Meanwhile, the average cost for a private, parochial Catholic elementary education is $4,400 and $9,500 for a high school education. But, for the sake of simplicity, we will use the $8,500 national average as a starting point. Assuming that is the maximum allowed under a voucher system (states could conceivably go higher or lower based on these regional variations), the actual amounts would be related to household income. The higher the income, the less the voucher with a cap on income much like the system used in Indiana. Working from a worst case scenario, lets assume that all the recipients are from low-income households and eligible for the full $8,500.

Using the example of a year 9 state- Alabama- (and remember they would still be receiving federal funds until year 9)- they currently spend $9,582 per pupil on 756,000 students. Without the federal money, that figure drops to $8,039 per pupil- even worse than the national average than the current amounts. If we assume that 35% of eligible students opt for the voucher and those students go to private school, that removes 264,443 students from the public schools. Assuming state and local expenditures to remain the same, the per pupil spending amounts with vouchers and minus federal funds would increase to $12,368 per pupil. In other words, Alabama would be educating 491,109 students at $12,368 per pupil per year and 264,443 students at $8,500 per year for a total of $6.298 billion. This would save the state $655 million annually. Of course, if they then increase state spending, the savings would be less, but they could actually still infuse more money into public schools and still save money. Under the new spending scheme (35% participation in full voucher amounts minus federal dollars), per pupil spending in public schools could potentially actually increase. However, some of that increased spending could be offset in the form of property tax relief. However, nowhere in this plan is there advocacy for TOTAL elimination of the property tax contribution to education and the state assuming 100% funding. Instead, if Alabama property taxes were cut 25% and state funding remained the same, instead of the 60/40 split between state and local funding that currently exists in Alabama, the new split would be 78/22. Thus, there certainly is advocacy for SOME property tax relief in the plan which, incidentally, adds more expendable income to a family.

Looking at a more “affluent” state like New Jersey, today the average per pupil spending amount, including federal funds, is $18,435, one of the highest in the nation. New Jersey would lose over $2.4 billion in federal funding as a year 2 state. Again, assuming all of the vouchers go to fully eligible students at $8,500 per voucher and there is 35% participation from current public school student populations, that moves 491,050 students into private education for a total cost of $4.174 billion annually. Assuming state/local spending remains the same, that actually increases the per pupil expenditures in the state from $18,435 to $19,191 per pupil. This can be actually further dropped to below the current level by adopting property tax relief. A 25% reduction in property taxes in addition to no changes in state funding would drop per pupil spending to slightly under $18,400 per year, about where it is now. Of course, states can even better manage educational finances by increasing or decreasing their contributions.

Another thing that needs to be addressed is the fact that private enterprises like corporations and charitable foundations regularly award scholarships to students. This further alleviates the burden on the voucher system payment amounts as well as the fact that not every student would be eligible for the full $8,500 stipend. Naturally, the vouchers would have to go to educational institutions that meet or exceed state standards on a regular basis. The idea is not to shift the lowest performing students into private education thus lowering their standards. Liberal groups will decry the fact that the low income students will still be at a disadvantage because whereas under the current system, the state may be spending $18,000 on them, now they are spending $8,500 on them. However, these groups are ignorant of the fact that achievement and proficiency rates are higher in private schools than in public schools. Instead, they are focused like lasers on the per pupil metric, not the performance metric.

There are additional benefits. One is smaller class sizes in public schools albeit at the cost of potentially larger class sizes in private schools. Just regarding public schools, smaller class size and lower teacher to student ratios, which can be achieved by keeping the number of teachers constant (or adding teachers) would be a natural outgrowth of this program. This would result in more individualized instruction in public schools which should, in theory, increase student achievement. Likewise, there are now online educational instruction programs that are even cheaper than private or parochial school attendance. That is another savings below the $8,500 threshold in the voucher system. States would have greater control over their finances and funding of schools as they would not be limited to $8,500 as a maximum and could conceivably go higher although going lower would actually create more problems. Therefore, starting at $8,500 as a base and factoring in regional or state-to-state differences plus inflation, the savings to state/local expenditures would be lower. This analysis was based on the $8,500 figure for the sake of simplicity and assumed 35% participation at full $8,500 funding. Incidentally, figures greater than 35% participation would actually represent greater savings to the state and local governments.

Also, since private schools would be competing for these studentss, there would be pressure to keep costs low. For example, your average Catholic elementary school charges $4,400. Even if they had to raise tuition 50% to account for the increase in students and, thus, more teachers and classrooms and everything that goes with climbing enrollment, it would still amount to an average of $6,600 which is still considerably below the $8,500 average. There would likely be a proliferation of private schools competing for these dollars that never existed before which would further place downward pressure on tuition. In fact, what do private schools do in reaction to declining enrollment? They increase tuition for the remaining students to make up for the shortfall, or they simply close down. A voucher system would serve to stabilize private and/or parochial school enrollment rates. What the public schools fail to acknowledge is that in its current form, private and parochial schools actually lessen the burden on public schools anyway.

While the liberal groups will argue that the system still favors the affluent, the current system favors the affluent whether we are talking public or private school. The very expensive preparatory schools or boarding schools common to the highest earners will still be available to them and the costs, even with an $8,500 voucher in hand, may pay at best 50% of the tuition at one of the lowest-tuition “exclusive” schools. The remainder would have to be made up with private funds (unlikely) or scholarships (more likely to qualified students, but not likely the full cost). But this system at least gets a low income student half way there. Thus, the affluent will not have to worry about low income students flooding the halls of their exclusive schools.

With regards to the affluent public schools, they will likely see a decrease in state funding which will require that they either make cuts to spending overall or, in the alternative, increase local property taxes to maintain the many frills they currently offer. That is a decision they will have to make. In fact, this program will likely more even out the playing field and per pupil expenditure figures not by throwing more state money at the low performing/low income schools (which it can still do), but by also decreasing those figures at the more affluent school districts.

Most importantly, it would provide parental choice in where or how their child is educated. This would only increase parental involvement in that child’s education. If they feel their child is being adequately educated in a nearby public school, then they are free to leave that child enrolled there…no harm/no foul. But, if not, they are given an opportunity that currently exists for the middle income earners with some personal cost saving and sacrifice along the way and no financial worries for the high income earners. What can be more harmful and more racist than subjecting these students to failure or, at best, mediocrity? By denying these groups opportunity and their parents a choice in education, it is the intransigent liberal groups like the NAACP and the ACLU who are being racist in rhetoric and action.

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