Perspectives in Education- Part 13: Decreasing Federal Dollars

Transitioning to a Voucher System

In the previous entry, I noted the problems with the total elimination of federal dollars in K-12 education. Although the idea is tempting to many a conservative- like saving the federal government $77 billion annually- any such system would create either serious negative effects in some states or an unfair system where wealthier states, based on median household income, would be subsidizing education in poorer states using a hybrid system of eliminating federal expenditures in this area. Instead, the 2001 Woessmann study provides a beautiful outline for improving student academic achievement. There is not a single industrialized country in the world where the federal government provides zero educational funds to schools- zero, none, nada. But obviously, some countries get a better bang for the buck.

I am still firmly convinced, as the Woessman study confirms what many of us believe intuitively, that the future of true educational reform lies in a vibrant private educational establishment that serves a viable alternative to the monopoly that pubic schools have on every child’s education today. Unfortunately, not every child and not every family have the financial means to make those choices. The result is confinement to a failing local public school system. Often, these are in urban, minority-dominated areas. It galls me that the black or Hispanic civil rights community would walk lockstep with teacher unions in their response to educational choice and reform. In essence, they are keeping their constituents on the educational plantation except every taxpayer in the country is funding that plantation. The current system is nothing short of wealth redistribution disguised as educational reform. Socialism is alive and well when it comes to educational funding at the federal level. This cycle needs to be broken because it is the students- not the teachers, not their unions, not any other special interest group- that is suffering. As I have attempted to illustrate, the current system of “more money” is simply a losing proposition that has done nothing to increase student achievement.

So what is a country to do? What is a state to do? The best alternative is to enhance private educational choice to break the cycle of monopoly by the public schools. The best way to do that is through a working voucher system aided by the federal government. And the best way to illustrate this is to compare and contrast certain methods using the criteria of the Woessmann study. That study determined that the greater the federal funding of private, independent schools, the more the deleterious effect on student achievement and with good reason. In effect, the private schools became de facto public schools. However, the study also found that federal expenditures on private educational sources had a positive effect on student achievement in both private and public schools. There appeared to be a critical mass with regards to these expenditures. That level was at about the 45% level; when that level was reached, achievement seemed to stagnate or decline. Therefore, commonsense would dictate that the federal government fund no more than 45% of any voucher system, preferably less. But, I will use the 35% level for illustrative purposes to start. Also, in this analysis I will be assuming 35% student participation in each state in the voucher program and that each student taking advantage of the system receives full funding at a maximum dollar amount of $9,000. As was stated in a previous entry, actual voucher amounts would be tied to household income with higher earners receiving a smaller dollar amount voucher. Also, states would be free to tie voucher amounts to inflation or even exceed $9,000 if they wanted. Indiana, which has the most extensive working voucher system, has a maximum amount of $9,370 and a cut-off point of $62,000 annual household income. Finally, it is anticipated that not all students would take advantage of a voucher system which is why I used the 35% participation rate. There are fine public schools in America and a family may simply opt to keep their children in such schools. Some affluent public schools actually spend more than nearby private schools.

One unfortunate outcome will be the necessity of increasing taxes at the local and/or state level in certain states. One solution would be to have three tiers of federal contributions to vouchers- 20% for the 17 richest states, 35% for the 17 middle ones and 50% for the 17 lowest household median income states. It should be noted that this does not necessarily mean an increase in taxes but could very well entail a reallocation of funds with more going to education, sometimes partially coupled with tax or usage fees. Nine of the 17 lowest income states would fall into this category as well as 6 of the middle income states and three of the top income states. All the other states would see significant local or state tax decreases. However, that is using figures that bring states not at the national per pupil expenditure figure up to that average. It also drops states above the national average to somewhere near that average, but less than their current expenditures on a per pupil basis which, again, may not be a bad thing.

This scheme would cost the federal government $50.5 billion annually, which is $27 billion less than current expenditures. Assuming state and local governments kept public school per pupil expenditures somewhere near where they are now while funding the balance of the vouchers, 15 states would have to raise state or local taxes with Georgia being the most affected in terms of dollars. However, that would entail almost doubling their existing per pupil expenditure so obviously any increase below that level represents a lower state/local tax increase. States that would benefit the greatest from this system- that is, saving at least $3 billion per year- would be New Jersey, Massachusetts, Illinois, New York, and Indiana. Five of those 6 states are financial disasters with Indiana being the exception. Even still, although less than now, New Jersey’s education expenditures would still be in the top 10 in the country as would Maryland, Connecticut and Massachusetts- other current top 10 states.

Of course, we can restrict the federal contributions even further. If the federal government funds the top ten income states at 10%, the second ten at 20% and so on until the bottom 11 states are funded at 50%, the federal government spends $43.9 billion annually for a savings of $26.1 billion. Those states listed above would still see huge state/local tax decreases while the increases required in a state like Georgia would shrink somewhat.

Most importantly, this would force many states and local school districts to undertake reforms that increase student achievement while providing a private education option. That private option is (1) cheaper and (2) more effective with regards to improving student achievement. It needs to be mentioned that this program is not a wealth redistribution system, nor is it some social engineering program to integrate private education. It has two primary goals, each equally important. The first goal is to provide educational choice to parents and students. Second, it is meant to facilitate the proliferation of private educational institutions. One can think of it as a Obamacare individual mandate in reverse. Instead of saying, “You must have insurance and if you are lucky enough to meet some criteria, we may help you with its purchase,” this system (in the educational sense) is saying, “You may send your child to a private school if you wish, and we will help you financially.”

It should also be mentioned that with greater participation in a voucher program, costs on the federal side may go up, while costs on the state/local side will may do down. However, it should be remembered that not every participant would be eligible for the full $9,000 stipend. As one’s household income increases, the voucher amount decreases. There can even be household income thresholds. Indiana’s is $62,000, which is rather lenient. Even then, 85-90% of their vouchers go to low income households, so the system does work in getting the voucher to those most in need. Obviously, depending on the parameter’s of a state’s program, the federal costs would could possibly be below those dollar figures mentioned earlier.

Most importantly, this would not only cut federal expenditures while helping the federal budget, it would also be improving student achievement, performance, and discipline. Public school teachers would actually have a lighter workload in that class sizes would be smaller without necessarily affecting their current salaries. Any teacher who may lose a job as a result of downsizing of the public school system in any locale could possibly find another job at the expanding private system, albeit at a lower salary in many instances. However, the better working conditions compensate for the lower income. That is a decision that any individual teacher would have to make. But, again, this is not a program to get back at teachers or to break the power of teacher unions. It is a system designed with concerned parents and failing students in mind first and foremost. The current rich, affluent, well-performing public schools will go unaffected by and large.

No matter how one looks at it, this is an all around winning proposal in most cases. States are granted greater control over their school systems, possibly one of the greatest, historically significant and traditional roles of states, not the federal government- the education of its residents. The federal government saves billions of dollars annually. Students are afforded the opportunity to get out of the yoke of mediocrity and stagnation. Public school class sizes are decreased and teacher work loads lightened while still receiving funding greater than that diverted to private school vouchers. State and local governments would be free to experiment with techniques and programs without the heavy hand of federal interference in their affairs. What may work in Alabama may not work in the Bronx. Parents are empowered not only with school report cards they barely know how to read but also have the more tangible money in the form of vouchers to determine where their children are educated. Some states currently more than adequately educate their students for a fraction of the cost of other states. Generally speaking, a Utah student is fairly identical in performance to a New Jersey student although there are some differences. For example, New Jersey has a higher graduation rate, but Utah’s students have higher SAT scores. Yet all things considered, they are about equal. New Jersey spends over $18,000 per student while Utah spends about $7,000 per student. New Jersey’s financial state is in shambles; Utah’s is not.

In a system where a majority of the states are afforded state and local tax relief- an option they can take if those desire (they can always divert part of the savings to other programs), it is a winning proposition. In a system where the federal government definitely saves money, it is a winning proposition. In a system where students and parents are afforded a choice in education, it is a winning proposition. Most importantly, in a system where student achievement is improved, it is a winning proposition.

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