breaking down the tax-credit scholarship audit
TRANSCRIPT
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THE TAX-CREDITSCHOLARSHIP AUDITedchoice.org/ScholarshipAudit
BREAKING DOWN
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EDCHOICE.ORG
School choice advocates have always used the savings potential of choice
programs as a positive selling point for policymakers.
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EDCHOICE.ORG
Since the creation of the first modern school choice program in 1990, 30 empirical studies have
examined the fiscal impact of school choice on taxpayers.
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EDCHOICE.ORG
Of those studies, 27 find school choice programs save money.
SAVE MONEY
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EDCHOICE.ORG
Three find the programs theystudied were revenue neutral.
SAVE MONEY NEUTRAL
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EDCHOICE.ORG
No empirical study ever conducted has ever shown
negative fiscal effects.
SAVE MONEY NEUTRAL LOSE MONEYZERO
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EDCHOICE.ORG
But still, that wealth of evidence hasn’t stopped school choice critics from
claiming otherwise.
...in many states, including Pennsylvania and South Carolina, the wealthy can reap millions, while public schools continue to face deep cuts.
The research on Neovouchers says, A) They don’t save states money and B) They don’t increase achievement.
These and other state tax subsidies collectively funnel more than $1 billion in public funding toward private schools every year.
- Randi Weingarten, AFT
- Professor, California State Sacramento
- ITEP
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EDCHOICE.ORG
They say, simplistically, that school choice drains money from the public
school system.
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EDCHOICE.ORG
Context is helpful for evaluating such claims.
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EDCHOICE.ORG
For all the controversy around school choice programs, the reality is that their costs amount to drops in a bucket when compared
with states’ budgets for K–12 education.
AZ FL GA IA IN PA RI
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
0
Total Tax Support in SY 2014 Total Revenue, All Sources
Mill
ions
$121M
Total Tax Support as Percent of State’s Total K–12 Educational Costs, SY 2014
$286M $58M $12M $7M $68M $2M
$2,289M
$27,647M
$12,150M
$6,195M
$17,818M
$26,073M
$8,294M
1.5% ofTotal
Revenue( ) 1.1% ofTotal
Revenue( ) 0.3% ofTotal
Revenue( ) 0.2% ofTotal
Revenue( ) 0.1% ofTotal
Revenue( ) 0.2% ofTotal
Revenue( ) 0.1% ofTotal
Revenue( )
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EDCHOICE.ORG
But that rhetoric obscures an important fact: A public school is also relieved of costs for any student switching to private school.
$
$ $ $
$ $
VariableCost Savings
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EDCHOICE.ORG
By not acknowledging such variable cost savings, opponents implicitly argue that all public
school costs are fixed.
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EDCHOICE.ORG
By that logic: If there were no savings when a public school’s enrollment declines…
NO CHANGE IN COST
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EDCHOICE.ORG
…then when public schools take on more students, their costs wouldn’t increase either.
NO CHANGE IN COST
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EDCHOICE.ORG
Of course, that is not the case.
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EDCHOICE.ORG
Indeed, school officials will argue in front of their state’s
appropriations committee for more funding when their
enrollment increases.
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EDCHOICE.ORG
The truth is, the reduction in a school district’s funds when kids leave using school choice programs is usually similar to the reduction in that school district’s funds when kids move from one public school district to another.
OLD DISTRICT
NEW DISTRICT
PUBLIC SCHOOL
PRIVATE SCHOOL
CHANGEIN FUNDS( ) CHANGE
IN FUNDS( )
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EDCHOICE.ORG
Also, when school choice students leave their district, that district keeps federal and local funds.
FEDERAL
LOCAL
(No Change)
FEDERAL
LOCAL
$
$
$
$
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EDCHOICE.ORG
Colleges and universities do not keep any funds—public or private—when students transfer.
PELL GRANTS
PELL GRANTS
TUITION REVENUE
TUITION REVENUE
STATE APPROPRIATIONS
STATE APPROPRIATIONS
$
$
$
$
$
$
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EDCHOICE.ORG
You read that right.
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EDCHOICE.ORG
Public K–12 education is the only known enterprise in American
society where service providers keep a portion of people’s money even
after those people have determined they no longer want those services.
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EDCHOICE.ORG
Whether school choice critics want to admit it or not…
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EDCHOICE.ORG
School choice programs save money.
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EDCHOICE.ORG
But how much?
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EDCHOICE.ORG
In 2014, we estimated the cumulative savings generated by America’s school voucher programs over two decades.
Source: www.edchoice.org/research/the-school-voucher-audit
$1.76 BILLION
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EDCHOICE.ORG
This year, we continued that analysis by doing the same for seven states’
tax-credit scholarship programs, which cover 93 percent of total scholarships awarded to date.
1.2 MILLION SCHOLARSHIPS
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EDCHOICE.ORG
These types of school choice programs differ from school vouchers in
how they’re funded.
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EDCHOICE.ORG
Tax-credit scholarships programs allow individuals and businesses to reduce their state tax liability
by making a private donation to a nonprofit organization that provides
students scholarships to attend private schools of their choice.
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EDCHOICE.ORG
For a tax-credit scholarship program to result in savings, this must be true:
DISTRICTS' VARIABLE
SPENDING PER STUDENT
NETSAVINGS
PER STUDENT
DISTRICTS' TAX REVENUE
LOST PER STUDENT( () )>
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EDCHOICE.ORG
There are two other factors we took into account, which are explained in more
detail in the report:
The proportion of scholarship students who switched (or were likely to switch) out of public schools vs. those who already were in (or were likely to attend) private schools even without the assistance of the scholarship
Some programs allow students to receive multiple scholarships.
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EDCHOICE.ORG
To determine a tax-credit scholarship program’s net fiscal impact, use the
following equation:
Net Fiscal Impact = (p x C x E) - (t x E)
p = percentage of scholarships given to public-to-private school switchersC = average variable cost to educate a student in public schoolE = total number of program participantst = average amount of tax credits awarded per program participant
So (p x C x E) represents the total savings to the state and districts because students left public schools, and (t x E) represents the total cost to operate the program.
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EDCHOICE.ORG
We did the math.
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EDCHOICE.ORG
Our low-end estimate* reveals students have saved states and districts
$1.7 billion, or $1,647 per student, using tax-credit scholarships to
attend private schools.
*assuming a very conservative 25 percent of scholarships went to multi-scholarship students and a fixed 60 percent of
recipients were public-to-private switchers
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EDCHOICE.ORG
Yep, that’s the low end.
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EDCHOICE.ORG
The high-end estimate* shows tax-credit scholarships have saved $3.4 billion, or
$2,974 per student.
*assuming 10 percent of scholarships went to multi-scholarship students and state-specific rates for
public-to-private switchers
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EDCHOICE.ORG
These savings are most commonly captured by either the public school
districts or the state treasury, which can use them to do any number of things:
invest in other priorities such as law enforcement or healthcare,
reinvest in public schools,
build reserves, and/or
lower taxes.
lower total state spending,
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EDCHOICE.ORG
But what actually happens to those savings is anyone’s guess.
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EDCHOICE.ORG
State governments don’t do much, if anything, to track
where those savings go.
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EDCHOICE.ORG
But that doesn’t mean that savings aren’t there.
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Wondering about your state’s education spending? Check out individual program breakdowns and more in the full report at
EDCHOICE.ORG/ScholarshipAudit
To contact the author, EdChoice's Director of Fiscal Policy and Analysis
Marty Lueken, email [email protected].