“[Vouchers], although important, work only with schools and don’t always allow parents to choose a different approach to education….ESAs, on the other hand, give parents the flexibility to fill in their children’s learning gaps with specialized services, like tutoring or online courses. There’s not any other tool that allows parents to do that.”  –State Senator Rick Murphy (R-AZ)

The Friedman Foundation released a report by Matthew Ladner, Ph.D., “The Way of The Future, Education Savings Accounts for Every American Family.”  We at TNSC are fans of ESAs and have written of them previously (Here).  The report is roughly 19 pages and much of it is charts and graphs.  It is very easy to read and wouldn’t take long at all.  To read the report in full click HereHowever, as is our fashion we will post a few snippets below and post a permanent link to the report on our Fact-Finding page for future reference.

Education savings accounts are the way of the future.  Under such accounts—managed by parents with state supervision to ensure accountability—parents can use their children’s education funding to choose among public and private schools, online education programs, certified private tutors, community colleges, and even universities.

Arizona lawmakers were the first to create such a program, called Empowerment Scholarship Accounts (ESAs). Through that program, the state of Arizona deposits 90 percent of the funds for a participating child into an account, which can cover multiple educational services through use-restricted debit cards. Parents can choose to use all of their funds on a single method—like private school tuition—or they can employ a customized strategy using multiple methods (e.g., online programs and community college classes). Critically, parents can save some of the money for future higher education expenses through a 529 college savings program. That feature creates an incentive for parents to judge all K-12 service providers not only on quality but also on cost.

Providing parental choice through school vouchers has earned a proven record of accomplishment, including improved    academic outcomes, stronger parental satisfaction, and higher high school graduation rates. Now an opportunity exists to build upon that impressive record by designing choice programs that will deepen the level of competition between education providers.

Parental choice supporters should transition their reform efforts to create a system of managed accounts that can be used to pay for multiple educational services, including private school tuition, online education, certified private tutors, community colleges, and higher education tuition.  Parent-managed education savings accounts represent the next logical step to promote customized education for children with providers of all types competing both on quality and cost.

Friedman argued that the biggest winners under a voucher system would be those suffering most with the status quo.  Competition and incentives work in every sector of the American economy. K-12 education is not “too important to leave to the market,” as some parental choice critics claim. Rather, Friedman argued, it is too important to divorce from the market.  Indeed, the competitive mechanisms for K-12 education reward success and either improve or eliminate failure.

Relative to a voucher program, a system of parent-managed accounts may have constitutional advantages over school vouchers: The broader possible use of funds may help to immunize choice programs from court challenges under “Blaine Amendments” in some state constitutions.

Adopting a decentralized system of education funding in which service providers compete based on both quality and cost will provide powerful incentives for educators to deliver high-quality services at the lowest price possible. With the correct incentives, Americans can and will reinvent a largely moribund system of schooling into a much more vibrant system.

The average American public school student cost taxpayers $4,060 in 1970, but $9,391 in 2006 (adjusted for inflation). If schools today were as efficient as those in 1970 were, lawmakers could reduce total state spending and/or tax burdens by 25 percent.  Despite that stunning fact, the public remains largely unaware of the vast increase in spending, and thus consistently supports more spending, both in polls and at the ballot box. Despite the sizeable rise in per-pupil funding, much of the public continues to believe that lawmakers “underfund” public schools. “The pervasiveness of this assumption that   schools are inadequately funded says more about the state of our public thought about education than anything else,”  Jay Greene wrote. “It is simultaneously the most widely held idea about education in America and the one that is most directly at odds with the available evidence.”

With spending up and achievement flat, America has suffered a collapse in the return on investment in K-12 education.

The most important group of students in Figure 3 is the 17-year-olds, as they are the closest to finished products of the K-12 system.  Their average reading scale score increased by a single point on the 500-point exam between 1971 and 2008.  The slightly larger improvements seen among 9- and 13-year-old students failed to persist to high school.

Figure 4 demonstrates the trend for mathematics achievement during the same period. Among 17-year-olds,  math  scores  increased  by  just  two  points  on  a 500-point scale between 1971 and 2008. Those minimal gains came despite a vast increase in spending per pupil in the American schooling system, resulting from a tremendous increase in the hiring of adults in the public school system, particularly non-teachers.

Americans do not just suffer from high dropout rates and unacceptable racial achievement gaps:  We build them.  Every system, whether intentionally or not, is designed to achieve the results associated with it. The school system in the United States year after year produces extraordinary gaps in achievement based on race and income.

The collective failure of schools and society to educate low-income and minority students has produced what McKinsey & Company describes as a “permanent national recession” in America.  Obviously, the economic impact of this failure falls primarily on the poor, but with consequences for everyone.

The experience with school vouchers reveals the apocalyptic scenario of students leaving public schools en masse as nothing more than a scare tactic meant to maintain the status quo, as Florida has proved.  Since 2001, all students with special needs attending Florida public schools have had the option of attending a public or private school of their choice. A decade into full parental choice for Florida’s students with special needs, just more than 5 percent of eligible students make direct use of the program.

The broader uses afforded under education savings accounts might accelerate the pace a bit. Even so, the tales of harm done to public education have been highly exaggerated.   Despite full parental choice for these students, Florida’s districts have as many students with special needs enrolled today as they did in 1999 when the McKay program first passed (342,183 students in 1999; 374,669 students in 2010).

As a result, however, some ask whether a program with a 5 percent participation rate can make a difference in outcomes.  The evidence clearly indicates that it has benefits for both for participants and non-participants.

The job of a private school, private tutor, or community college accepting funds from an ESA is decidedly not to teach the state K-12 academic standards.  Rather, people should understand ESAs as an opt-out of the public school  system,  not  as  an  extension  of  it  into other  delivery  methods.  The hope of an ESA system would be to allow a broad diversity of approaches. We should view dictating a single set of curriculum as a self-defeating anathema to such a project.

The public does have an interest in the academic progress of students in such a system nonetheless.  Requiring students to take a national norm-referenced exam would serve the needs of transparency in a fashion that does not dictate curriculum to providers or students.

How should we address equity issues? First, we need to understand that the current system of public schooling contains systematic bias in favor high-income children. States have made efforts to equalize funding among districts;   however,   district averages often conceal school-level inequities. Far more critically, the bias in the system goes far deeper than money.

Treating the limited supply of highly capable teachers poorly by doing nothing or next to nothing to recognize their    accomplishments compounds the problem. Predictably, many of those people leave the profession, enter administration, or migrate to the leafy suburbs. Inner-city children get the very short end of the stick.

Lawmakers can and should vary aid according to individual circumstances and special needs.

Under an ESA system, lawmakers could make their own decisions regarding how much to weight student circumstances, using the public school’s system of funding weights as a baseline. Factors such as being an

English Language Learner or other disadvantages have varying additional funding sources attached to them in state funding formulas. Lawmakers should revisit those weights and revise them in an education savings account system. They may very well decide to factor attributes like poverty more heavily than current formulas by giving lower-income   students meaningfully higher levels of subsidy.

“ESAs are a real game changer,” says Clint Bolick, vice president for litigation at the Phoenix-based Goldwater Institute. “They have the potential to completely change the delivery of educational services while at the same time surviving legal challenges that have forestalled voucher programs.”


1/26/12:  The Maricopa County Superior Court rejected a legal challenge by the Arizona School Boards Association and the Arizona Education Association against the accounts, known formally as empowerment scholarship accounts (ESAs).

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