Squeezing Public Schools

Can we afford to spend public money on private education?

Money in Education

Five Figures to Consider

90% of K-12 pupils in the U.S. are educated in public schools
29 states provide less overall public school funding today than in 2008
1.4 million additional K-12 students enrolled in public schools since 2008
5.3% proposed decrease in federal education budget for fiscal 2019
$1 billion is the amount of a new federal Opportunity Grants program for states to expand use of school vouchers

Maintaining a high-quality public education system, particularly in the face of increasing global competition, is one important function of government. In the U.S. 90% of all K-12 pupils are educated in public schools. However, new federal policies that redirect public dollars for K-12 education toward private education undermine this mission.

As witnessed by recent teacher walkouts, many public school systems are budget-crunched.  In 29 states per pupil funding is below 2008 inflation-adjusted levels, and in 19 of those states, local government per pupil funding has dropped simultaneously.  Meanwhile, overall K-12 enrollment in public schools has risen by 1.4 million students. Despite this, the U.S. Department of Education’s budget for fiscal 2019 proposes an overall 5.3% reduction in spending, eliminating or reducing 39 programs. The steepest cuts are to Title II, a teacher recruiting and training program, and 21st Century Learning Centers, which provide enrichment programs during non-school hours.  Amplifying the budget hit, the proposal’s $1 billion Opportunity Grants voucher program coupled with the 529 plan expansion incentivize families to leave the public school system and take public funding with them. The squeeze comes at a time when cities and states are still recovering from the Great Recession. Property tax revenue, which provides the bulk of local school funding, is below its pre-recession peak in about 65% of U.S. markets, and in many states corporate tax revenue has declined as local governments have handed out tax breaks to attract new business. Closing the gap by raising local personal taxes won’t be easy, especially now that local taxes are no longer federally tax-deductible.

Although the federal government provides just 8% of public school funding, the federal expansion of 529 savings plans and the proposed $1 billion Opportunity Grants program, which provides states with funds to expand voucher use at private and public schools, have a disproportionately negative effect on already challenged public school budgets. How? The programs further reduce state income tax revenue, a primary source of school funding, without reducing fixed costs.   

529 savings plans originated to help families save and pay for college exempt from federal and capital gains taxes. To further encourage residents, 34 states and Washington, D.C., offer full or partial state income tax deductions for contributions to state 529 plans. The expansion of 529s to fund K-12 educational expenses including tuition means those states have less revenue to fund schools and subverts the original intent of helping families pay for college.

Private school vouchers force public school districts to do the same with less. Although vouchers that provide tuition for use at private schools currently represent a fraction of overall vouchers, Education Secretary Betsy DeVos and President Trump are pushing for expansion. Voucher use has grown 130% since 2009. Schools receive state funding largely based on the num­ber of students enrolled in district schools. When a stu­dent uses a voucher to transfer from a public school to a private one, the school district no longer receives state funding for that student. However, district operating costs, such as building maintenance, curriculum, technology and administration, remain fixed.  Additionally, un­less a substantial number of students leave a single school, there is no change in the number of teach­ers needed. If a few students leave, the district must still cover those fixed expenses with fewer funds. Furthermore, private schools can expel students at any time for any reason. So, money that went to a private school at the beginning of the year can’t be recovered when a student, unexpectedly, re-enters the public system later in the year. Currently, 14 states and Washington, D.C., operate state-funded voucher programs that allow pupils to use public money to attend private school. Opportunity Grants will encourage other states to follow suit.  Private school voucher programs are costly. Indiana runs the nation’s largest voucher program serving more than 34,000 or 3% of the state’s students at an annual cost of $131.5 million, at a time the state predicts a $60 million school funding shortfall.  Standardized test results of students in Indiana’s private school voucher program show decreases in math and reading scores in the first two years after leaving public school. Recent studies on the impact of voucher programs in Washington, D.C., Louisiana and Ohio have shown similar drops on standardized tests.

Of course, how much money matters for educational outcomes has long been debated. The most recent studies find increased school spending improves student outcomes, especially for low-income students, in a variety of ways including 1) improved test scores, 2) increased high school graduation rates, 3) increased college attendance and 4) higher adult wages. It turns out things money can buy such as special education, enrichment classes, mental health counseling and qualified teachers make a difference.  

FIVE FIGURE THINKING
The choice to send a child to private school should remain private. Our country can only afford one education system, and it should be the one that educates 90% of our students. We should focus on strengthening our public schools instead of incentivizing private education.

Sources

Mark Berends of the University of Notre Dame and R. Joseph Waddington of the University of Kentucky, MIT, National Bureau of Economic Research, Institute of Education Sciences, Saving for College, Rutgers University – Shanker Institute, Indiana State Teachers Association, Center on Budget and Policy Priorities, National Center for Education Statistics, Trulia, Office of Budget and Government, EdChoice