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Education Savings Accounts: A Blueprint for 21st Century Parental Choice

January 1, 2016 - 3:37pm CST

A schooling system that largely rations education based on where children’s parents can afford to live is a relic of a bygone era that cannot provide the customized preparation students need to succeed in a rapidly changing, increasingly competitive world, Vicki Alger writes. ESAs are popular, easy to use, fiscally responsible, and constitutional. Best of all, they empower parents to choose how, not just where, their children are educated, which customizes learning to degrees no one-size-fits-all system could ever match—no matter how lavishly funded.

Sixty years ago the late Nobel Prize-winning economist Milton Friedman published a radical idea: just because we fund schools through government doesn’t mean politicians know how to run schools or what education is best for other people’s children.

To improve American education for all students, Friedman argued that parents should decide what schools are best for their children, schools and teachers should be free to innovate, and public funding should follow students to schools of their parents’ choice.1 “Education spending will be most effective,” Friedman explained, “if it relies on parental choice and private initiative—the building blocks of success throughout our society.”2

Similar to Adam Smith, Thomas Paine, and John Stuart Mill, Friedman advocated a system of publicly funded vouchers because it would free parents to choose the schools they thought were best for their children, and schools would have to compete for students and their associated funding. 

Today, parental choice in education not only includes publicly funded voucher scholarship programs but also privately funded tax-credit scholarship programs—as well as personal-use tax credits and deductions to help offset out-of-pocket costs of private schooling and other education expenses. Altogether these programs are helping more than 1.2 million students.3

Education savings accounts (ESAs) are the latest advance in educational choice, fostering an unprecedented level of personalized learning opportunities for students customized by those who know and love them best: their parents.

Unfortunately, Oklahoma failed to enact its own ESA program during the 2015 legislative session, a failure The Oklahoman’s editorial board decried as “one of the major black marks of this year’s legislative session.”4 Rather than halting parental choice progress, the state should add to its five-year-old momentum (starting with the Lindsey Nicole Henry Scholarship Program and the Equal Opportunity Education Scholarship Program) by implementing ESAs.

The concept behind ESAs is simple. Parents who do not prefer a public school for their child simply withdraw him or her, and the state deposits most or all of what it would have spent into that child’s ESA. Parents receive a type of dedicated-use debit card to pay for authorized expenses including private school tuition, online courses, testing fees, tutoring, and special education therapies. Any leftover funds remain in the child’s ESA for future education expenses, including college.

ESAs are also fiscally responsible. ESA funds are disbursed quarterly, but only after parents submit expense reports with receipts for verification. Regular audits also help prevent misspending. If parents misuse funds they forfeit their child’s ESA and must repay misused funds or face legal prosecution.

Today ESAs are helping nearly 3,000 Arizona and Florida students, and so far this year ESA programs have been enacted in Mississippi, Tennessee, and Nevada. Operational and recently enacted ESA programs offer important lessons for state policymakers, including:

1. Make ESAs universal
2. Fully fund ESAs
3. Blow the lid off program caps
4. Beware of pilots
5. Let all education providers compete
6. Private administration is best

ESAs empower parents to customize their children’s learning to degrees no one-size-fits-all system could ever match—no matter how lavishly funded. Rather than debating the future of parental choice through ESAs, Oklahoma policymakers should be enacting them.

Personalized Learning

Using public dollars for private education providers is not an earth-shattering idea. Currently, nearly 9 million college students nationwide are using more than $32 billion in federal Pell Grants to attend the colleges and universities of their choice, public and private, nonsectarian and religious alike. In fact, more than 102,000 Oklahoma undergraduate students are using $363 million in federal Pell Grants to attend postsecondary institutions, including 26,000 students who are using almost $92 million in public funds to attend private and proprietary postsecondary institutions.5

In just a few years most of those students will likely graduate and become parents themselves; however, they will largely be restricted from using public dollars to send their own children to the elementary, middle, and high school programs of their choice—until, of course, those children turn 18 when they too will be allowed to use public funds for their personal higher education choices.

Education savings accounts expand the kind of personalized learning that has long been available for higher education students but not for school-age children—like Austin Fox, who has Asperger’s syndrome.

Before 2011, when Arizona enacted the country’s first ESA program, Austin was a sophomore on the verge of dropping out of his public high school. “He wasn’t receiving an education,” explained Austin’s mother Crystal. “He was just being moved on.” All that changed once Arizona enacted ESAs.6

ESAs are akin to dedicated-use education debit cards. Parents who do not prefer a district or charter public school for their child simply withdraw him or her, and the state instead deposits most or all of the funds it would have spent into an ESA designated for that child. With those funds parents can pay for authorized education expenses including private school tuition, online courses, testing fees, homeschooling curricula, tutoring, and special education therapies. What’s more, any leftover funds remain in the child’s ESA and can be used for future education expenses, including eventually college.

When Crystal told Austin that he could choose any school he wanted thanks to his ESA, Austin says he was “overjoyed.” After touring a number of schools, Austin and his mother found one that he describes as “the perfect fit.” Austin’s teachers report that he came “out of his shell” and began thriving socially and academically. In fact, within just two years Austin’s grades soared from a C average to straight A’s, he earned high ACT and SAT scores, and upon graduation he had multiple college offers. Crystal credits the ESA program with “saving Austin’s life.”7

There is no good reason Oklahoma schoolchildren should be denied the educational opportunities a growing number of students like Austin now have.

Oklahoma’s Educational Options

Oklahoma enacted its first private school parental choice program in 2010, the Lindsey Nicole Henry Scholarships for Students with Disabilities. Through this voucher program nearly 400 students with disabilities (or children of active-duty members of the armed forces who have been stationed in Oklahoma) are enrolled in almost 40 private schools of their parents’ choice using scholarships worth an average of $7,600. From 2012 through 2015 alone participation has nearly tripled, up from 135 students.8

The following year the Equal Opportunity Education Scholarship program was enacted. It is one of the most generous programs around, with regular education student scholarships worth up to $5,000 or 80 percent of per-pupil public school spending, and up to $25,000 for special education students.

Students from low- to moderate-income families ($134,589 for a family of four in 2015-16) or those who attend or live in the attendance zone of a public school deemed “in need of improvement” are eligible. Oklahoma district schools earned an overall statewide performance grade of D+ (68 percent) in 2014, and 499 schools (28 percent) earned grades of D or F.9 More than 700 students are using tax-credit scholarships worth an average of $566 to attend 33 private schools of their parents’ choice. From 2013 through 2015 program participation has increased almost 20-fold, up from 38 students.10

Despite the growth of these programs, combined enrollment barely exceeds 1,000 students statewide—even though 15 percent of Oklahoma students meet the eligibility requirements for the Lindsey Nicole Henry Scholarship Program, while 94 percent of families meet the Equal Opportunity Education Scholarship Program income-eligibility requirements.

It appears Oklahoma parents want more freedom not just over where their children are educated, but how they are educated.

Education Savings Accounts Offer Unlimited Choices

ESAs turn the prevailing one-size-fits-all wisdom of the schooling establishment on its head by personalizing learning to unprecedented levels.11 Not only are parents more satisfied having greater options, students are thriving academically and socially for less than what it costs in a typical public school setting. The rapid expansion of ESA programs also shows that there is tremendous demand for more customization in education—not less.

Since 2011 Arizona has annually expanded its ESA program to include more students, such as those who would otherwise attend failing public schools, students in or adopted from the foster care system, children of active duty military parents who reside in-state or who were killed in the line of duty, eligible kindergarteners, siblings of current and former ESA students, and children who reside within Indian reservation boundaries.12 The program is so popular that participation has roughly doubled each year, growing from around 130 students in 2011 to more than 1,300 today.13

The freedom to choose not simply where but how their children are educated results in high parental satisfaction with ESAs. Fully 100 percent of participating Arizona parents report being satisfied with the program, with 71 percent reporting they are “very satisfied.” In contrast, just 43 percent of parents reported any level of satisfaction with their children’s previous public schools.14

ESAs are also expanding to students well beyond the Grand Canyon State. Florida was the second state to adopt ESAs for special-needs students in 2014, and 1,700 students participated.15 The 2014-15 school year had barely finished when it was reported that close to 2,000 ESA applications had already been submitted for the upcoming school year.16  Meanwhile, in June 2015 funding for the program was tripled from $18 million to $54 million, and student eligibility was expanded to include a greater number of diagnosed disabilities.17

This is great news for Florida parents of special-needs children like Stacey, who reports that the freedom to use her young son’s education funding for the tailored services he needs has sparked dramatic improvements in his learning. “Liam … is reading on grade level, which is huge. … It’s helping his speech … and his overall communication has improved. …This program is just such a game-changer for parents.”18

These results are especially impressive since under existing programs ESAs are funded at just 90 percent of what states would have otherwise spent to educate students. They also undermine another common refrain that more spending—rather than more efficient spending—is what schools need to achieve better results.

In 2015 Mississippi,19 Tennessee,20 and Nevada also enacted ESAs. Nevada’s program stands out for making all public school students eligible, not just those with special educational needs or circumstances.21 If recent public opinion survey results are any indication, several more states will likely adopt ESAs as well.

ESAs Are a Popular Form of Parental Choice

A national poll released by the Democratic polling firm Beck Research in early 2015 found that close to seven out of 10 likely voters support greater parental choice in education and believe competition improves public schools.22 A subsequent nationally representative poll released in June indicates that ESAs are the most popular form of parental choice among Americans. Fully 62 percent of respondents favored ESAs compared to favorable ratings of 61 percent for voucher scholarships, 60 percent for tax-credit scholarships, and 53 percent for charter schools.23

Support for ESAs is also strong across nearly all demographics, especially adults ages 18 to 34 (75 percent). Importantly, support for ESAs was strong across the political spectrum, at 60 percent or higher for both Democratic and Democratic-leaning respondents as well as Republican and Republican-leaning respondents, and nearly two-thirds (65 percent) of Independents.24 In fact, respondents who favor ESAs indicate that they are far more likely to vote for pro-ESA political candidates, ranging from 25 percent more likely among middle-income voters up to 40 percent more likely among voters ages 18 to 34.25 

Finally, contrary to prevailing political wisdom that holds parental choice programs should be limited to certain groups of students, two out of three respondents believe that all students should be eligible for ESAs, not just select populations.26

Support for ESAs among likely Oklahoma voters is similarly strong with approval ratings of 56 percent.27 Similar to results from the national survey, nearly 60 percent of Oklahoma respondents (58 percent) also prefer parental choice programs that are open to all students.28 Parental choice in education is both popular and has a proven track record of success.

Parental Choice Works

Oklahoma parents clearly want more educational options, and research backs them up. Today, significant numbers of children with special needs and circumstances struggle academically, including students with disabilities, from military families, the foster care system, and those who are in or assigned to failing public schools.29 Students in or assigned to schools plagued by violence and chaotic classrooms also suffer academically.30

Research consistently shows that parental choice improves academic outcomes of participating students, most of whom are disadvantaged.31 In fact, 13 of 14 “gold standard” random assignment studies to date find that disadvantaged students, including low-income and minority children, who use scholarships to attend the schools their parents think are best perform better in reading and math and have higher high school graduation rates, college attendance rates, and college graduation rates than their peers who do not use scholarships. No study to date has ever demonstrated negative impacts on students’ academic outcomes. Moreover, the sole study finding no impact was subsequently discredited for its unscientific methodology. Upon re-analysis using scientifically sound methodologies, researchers from Harvard University documented statistically significant improvements in student achievement.32

Parental choice programs also introduce competition for students and their associated funding, putting powerful pressure on public schools to improve, thereby benefiting public school students as well. In fact, 22 out of 23 empirical studies show positive impacts from school competition, including improved reading and math achievement, and none found negative effects.33 Researchers from Columbia University’s Teachers College also reviewed more than 200 scientific analyses and concluded that competition benefits public schools “across all outcomes,” including higher student achievement, graduation rates, efficiency, teacher salaries, and smaller class sizes.34

Likewise, evaluations of the country’s largest scholarship program for special needs students, Florida’s McKay Scholarship Program, show that parental satisfaction rates with their children’s chosen private schools are nearly three times greater than with their previous public schools (93 percent compared to 33 percent). Participating private schools were also more responsive to children’s unique needs, and scholarship students had fewer behavioral problems, were victimized less, and enjoyed smaller class sizes.35 Competition for students from the McKay Program also had positive effects on public school student math and reading performance.36

By expanding the realm of parents’ educational choices beyond where their children are educated to how they are educated, ESAs maximize the positive effects of existing voucher and tax-credit scholarship programs, since a greater number and variety of education providers can compete to meet children’s unique educational needs. Additionally, ESAs have several program advantages state policymakers should consider as they work to expand education options.

ESAs Are Easy to Use

Though all ESAs operate similarly, each state’s program is unique—from which students are eligible, to funding levels, to certain mechanics. These elements are detailed in the Summary Appendix Table at ocpathink.org/esa. In general, parents of eligible students who do not prefer a public school education for their child simply inform their state education agency. They sign a contract promising not to enroll their child in a public school as long as they are using an ESA, and the state deposits 90 percent of what it would have spent into a designated ESA for that child instead. ESA programs in Tennessee and Nevada stand out for depositing 100 percent of that funding into students’ ESAs. Under ESA programs in Arizona, Tennessee, and Nevada quarterly deposits are made, and parents make education-related purchases with dedicated-use debit cards.

Florida parents of special education students apply to one of the two non-profit scholarship funding organizations authorized to oversee the ESA program and inform their local public school that their child will be participating in the ESA program instead. The non-profit then deposits an amount worth 90 percent of what the state would have spent into the child’s ESA.37 The two Florida non-profits overseeing the ESA program have similar procedures for participating families. One issues unique identification cards for parents to access their child’s ESA account and submit quarterly preauthorized payments and expense claims.38 The other authorizes debit transfers for pre-approved purchases.39 Mississippi’s ESA program also transfers reimbursements for authorized education purchases. With such approaches, it is important to have policies in place, as one Florida non-profit does, to assist low- and moderate-income families who cannot afford upfront, out-of-pocket expenses.

ESAs Are Fiscally Responsible

As Friedman noted decades ago, we make better choices when we’re spending our own hard-earned money. Thus the more we avoid third-party payer schemes, the more sensitive we are to prices, costs, and most important, value. ESAs go a long way toward achieving that goal by putting parents directly in charge of their children’s education funding and accounting for every expenditure—down to the last penny each quarter before additional funds are disbursed.

By design most ESAs are funded at 90 percent of state per-pupil public school amounts. Thus, even if parents spent all of their children’s ESAs each year, the state would still realize a savings. For example, one analysis of Arizona’s ESA program estimates that the state saves approximately $2.5 million for every 1,000 students who use ESAs, increasing to more than $12 million for every 5,000 students.40

Savings estimates for Oklahoma ESAs are even higher at approximately $1,000 to $3,000, even if they were funded at 100 percent, because expenses not funded by state aid, such as employee health and pension benefits and transportation, would not be covered.41

Additionally, ESA programs have built-in transparency and accountability requirements that most public school finance systems would struggle to meet, starting with providing current-year, quarterly reporting that is actually comprehensible. Today, most states’ public school finance systems make sense to almost no one except a relative handful of seasoned experts capable of navigating the complexities of prior-year budgeting and byzantine formulas. Thus the simplicity and transparency of ESAs alone are a significant advantage, especially since K-12 education spending typically represents the largest share of states’ general fund budgets, averaging 35 percent nationally.42

There is growing recognition that a student-centered funding approach would serve children far better and streamline Oklahoma’s byzantine and bureaucratic public school financing scheme.43 Because ESAs are a student-centered finance approach instead of a system-centered one, reporting requirements are about as challenging as balancing the family checkbook. Participating parents must submit quarterly expense reports, with supporting documentation, to the agencies or organizations overseeing the programs, typically state education departments and/or treasury departments. They are also required to abide by clearly defined parent responsibilities. Administering agencies are also required to conduct quarterly, annual, and/or random account audits themselves or hire independent, licensed public accounting agencies. Arizona also has established anonymous toll-free telephone and online fraud reporting, and Tennessee plans to follow suit.

Administering agencies must also ensure that all prior quarter ESA expenses are legitimate before disbursing subsequent quarterly funds. Parents who do not comply forfeit their child’s ESA. Arizona’s program, for example, has a zero-tolerance policy for misspending. ESA accounts are immediately frozen if there is any suspicion of misspending. If misspending is substantiated, parents are removed from the program, and they must repay misspent funds or face legal prosecution.44 Programs in other states have similar sanctions for ESA misspending or fraud.

In addition to their structural program accountability, ESAs incentivize responsible stewardship and fiscal discipline. Unlike many government agency accounting schemes that encourage use-it-or-lose-it spending sprees near the end of each fiscal year, all existing ESA programs allow parents to roll over unused funds from one year to the next. This policy gives parents powerful motivation to find the best quality programs at the best prices and conserve leftover funds. For example, more than $670,000 in total Arizona ESA funds were left over at the end of the program’s first fiscal year alone.45 Programs in Arizona, Florida, and Tennessee maximize this value proposition by allowing parents in those states to save unused funds for even more distant education expenses, such as college tuition.

ESAs Pass Constitutional Muster

Regardless of how effective or popular parental choice programs are, opponents have tried to litigate them to death for more than two decades, insisting they violate bedrock constitutional principles. ESAs are no exception. The ink was barely dry on the enabling legislation when lawsuits to kill newly enacted ESA programs in Arizona46 and Florida47 were filed by teachers, school boards, and public school employee union members, among others. Courts in those states, however, have consistently ruled that ESAs pass constitutional muster for several reasons, summarized in the Appendix Table at ocpathink.org/esa.

First, ESAs are neutral with regard to religion because they make a variety of educational options available to parents, and they—not government—do the choosing. Second, ESAs do not run afoul of constitutional religious aid bans or Blaine Amendments because funds are for the benefit of students, not schools, and no ESA funds are ever directed by government to any particular education provider. Third, state courts have made clear that ESA students do not forfeit their rights to a free public education because they can re-enroll in public schools if they leave an ESA program. Finally, the courts have rejected out of hand the notion that parental choice through ESAs harms public schools, students, and teachers by draining money. In fact, if that were the case no family would ever be allowed to move away from their current neighborhood, much less out of state, since local public schools would lose students’ associated funding in a subsequent budget year.

These state court rulings regarding ESAs reflect recent U.S. Supreme Court decisions upholding publicly funded voucher scholarships (Zelman v. Simmons-Harris, 2002) and privately funded tax-credit scholarships (Arizona Christian School Tuition Organization v. Winn, 2011).48 They also bode ill for the pending lawsuit brought by the American Civil Liberties Union (ACLU) of Nevada on August 27, 2015, against the state’s ESA program. The claim alleges that because the Nevada’s ESA program allows parents to choose religious educational options for their children, it furthers a religious and sectarian purpose. The Institute for Justice successfully defended Arizona’s ESA program, which served as a model for Nevada’s program, and it is now helping defend Nevada’s ESA. According to Institute for Justice senior attorney Tim Keller, “The ACLU claims the ESA program unconstitutionally furthers a religious or sectarian purpose because it allows parents to choose religious educational options for their children … But it is precisely the independent decision-making by parents that severs any link between church and state. As with all constitutional educational choice programs, parents—and not the government—decide the best educational setting for their child. … The Supreme Court of the United States, as well as numerous state supreme courts, have already held that educational choice programs, like Nevada’s ESA Program, are constitutional … We expect the same from Nevada courts.”49

Regardless of the pending Oklahoma Supreme Court ruling concerning the Lindsey Nicole Henry Scholarship Program,50 empowering parents over their children’s education through ESAs is consistent with fundamental constitutional principles.

Conclusions and Recommendations: The Time Is Now for ESAs in Oklahoma

Oklahomans know that a schooling system that largely rations education based on where children’s parents can afford to live is a relic of a bygone era that cannot provide the customized preparation students need to succeed in a rapidly changing, increasingly competitive world. ESAs are popular, easy to use, fiscally responsible, and constitutional. Best of all, they empower parents to choose how, not just where, their children are educated, which customizes learning to degrees no one-size-fits-all system could ever match—no matter how lavishly funded.

Operational and recently enacted ESA programs offer important models for state policymakers interested in expanding such learning opportunities. Lessons from these programs include:

1. Make ESAs universal. Of the five enacted programs, Nevada’s ESA makes the most students eligible, both disadvantaged students as well as general education public school students. Although Arizona’s ESA makes several targeted populations of students eligible, and will likely include more groups in the future, this approach involves practical and principled problems. Annually re-writing and promulgating new regulations, not to mention expansive handbooks and applications, adds hefty administrative burdens to regular ESA program management. As a matter of principle, every student has unique academic needs and deserves a personalized education their parents can customize for them. An Oklahoma ESA program should be truly universal by making all school children eligible, including those who currently attend private schools or are educated at home. After all, these children’s parents pay taxes, too, and should not be discriminated against because they prefer non-public education providers. ESA eligibility should also be extended to preschool-aged children, especially since Oklahoma is one of the few states where the overwhelming majority of four-year-olds attend public and government-run preschool programs, 76 percent, compared to the national average of 23 percent.51

2. Fully fund ESAs. Advancing parental choice programs is politically challenging enough for state lawmakers. That is why so many programs are designed to achieve positive fiscal notes. Though understandable, it’s worth recalling that taxpayer funding for education is supposed to be for the benefit of students, not a single provider. Tennessee and Nevada fully fund ESAs for special needs and low-income students; however, this practice should be the rule for all students as a matter of fundamental fairness. Furthermore, even at 90 percent funding, as is the case with the remaining ESA programs and regular education students under Nevada’s program, it will be interesting to see just how much education funding remains at the end of each school year with parents in charge of purchasing decisions. For instance, altogether Arizona parents currently have hundreds of thousands of dollars left over at the end of each year for future education expenses. This reality is even more striking given that participating students are disadvantaged and likely require more expensive educational services than general education students. Such results challenge claims that public education is under-funded. State policymakers should keep this lesson in mind because ESA results to date certainly appear to show that it is indeed possible to do more with less once we stop subsidizing costly overhead and administration along with various bells and whistles that have little to do with actual student learning.

3. Blow the lid off program caps. At best program caps are unnecessary, and at worst they are unjust. Limiting participation in parental choice programs is a common strategy state lawmakers use to pacify opposition just enough to enact or advance programs. For example, Mississippi caps the number of ESAs at 500 for the first year, increasing by 500 each subsequent year. Yet it is important to recognize—and counter—the illogic of calls for capping parental choice programs, including ESAs. If parents are indeed satisfied with existing education options under the status quo, as parental choice program opponents often insist, then it makes no sense to cap non-existent demand. It is probably more accurate to say that what opponents fear most is unleashing pent-up parent demand for more personalized education options—even in states like Arizona that have had a variety of expansive parental choice programs for nearly two decades. As part of its ESA expansion in 2013, Arizona capped the number of ESAs at no more than 0.5 percent of total prior-year public school enrollment (approximately 5,400 ESAs) until 2020. The official bill analysis at the time concluded that the cap would likely not be reached based on prevailing growth projections.52 Yet program growth has far exceeded expectations, roughly doubling each year. With more than 1,300 ESAs as of the 2014-15 school year, the cap could be reached as early as the 2016-17 school year if the empirical growth trend is any indication, potentially leaving thousands of students languishing on waiting lists for years.

4. Beware of pilots. Similar to program caps, enacting pilot programs rather than full-scale programs is a common political compromise. Currently, only Mississippi has enacted its ESA as a five-year pilot program. State lawmakers, however, should be wary of pilots for several reasons. Knowing a program may not last can discourage parents from enrolling their children. Pilot programs also often limit the types of students and education providers who can participate. These consequences have several negative ripple effects. Diminished enrollment makes it easier for political opponents to claim the program is unnecessary, unwanted, or ineffective. Also, in spite of well-intentioned efforts to phase in programs that are pilot-tested to improve program awareness, pilots are rarely meaningful tests of full-scale parental choice programs. From a practical standpoint, with few exceptions (notably, Florida’s McKay Scholarship Program), historically parental choice opponents have successfully directed substantial resources toward killing smaller pilot programs or preventing their expansion.53

5. Let all education providers compete. Government should not be in the business of cherry-picking service providers. Parents know and love their children best, so they should be in charge of choosing their children’s education service providers. If parents are not satisfied, ESAs make it easy for them to choose better providers. Such freedom introduces immediate rewards for success and consequences for failure. This approach better ensures program accountability and efficiency than top-down mandates, which are expensive and can take years to enforce. Similarly, government is simply not well situated to pick winners and losers, particularly given the break-neck speed of technological and other advances that can benefit students. To maximize personalized learning opportunities for students, state lawmakers should foster diversity and competition among all education providers and be open to including future kinds of providers as well.

6. Private administration is best. Ensuring taxpayer dollars are used as intended is a core government responsibility. Most ESA program oversight and administration are handled by state education agencies and/or treasury departments. Administrative fees for existing ESA programs range from 3 percent (Florida) to 6 percent (Mississippi). Those fees are needed to cover the labor and overhead costs associated with processing applications, quarterly expense reviews, ongoing ESA audits, and other tasks. Administration costs must be accounted for in any parental choice program to ensure program continuity. However, good government oversight does not require government administration. In fact, this structure is far from ideal because no matter how supportive government agencies may be of ESAs and parental choice in general now, there is no guarantee that the political tides will not turn after the next election. Moreover, customer service is not exactly a hallmark of government bureaucracies—even ones that perform well by public-sector standards.  For example, Arizona’s ESA is administered by the state education department, and the program garnered a 100 percent parental satisfaction rate. Participating parents even ranked the department as the most helpful of several available information resources. Nevertheless, it rejected close to half of the 2,300 ESA applicants for the 2014-15 school year.54 The department claimed those applicants simply were not eligible, but it was criticized for failing to answer applicants’ phone calls and conducting informational workshops during regular working hours when most parents are at their jobs.

Thus, even as supportive as Arizona’s education department is to ESAs and other parental choice programs, commonsense practices that are standard for the private sector are still exceptional in government, including hiring personnel to staff 24-hour information hotlines and online Web chats, conducting live interactive online workshops that can be recorded and archived for viewing later by parents who could not attend in person, providing Web-based ESA applications, and having personnel available to help non-native English speakers with ESA application questions. In contrast, non-profit scholarship organizations handle ESA administration in Florida, which helps overcome the innate inertia and inflexibility of government bureaucracy and minimizes the potential for program politicization.55 Other private-sector administration models exist as well.

Private financial institutions already have the infrastructure in place for defined-use debit or credit cards and detailed expense reports, not to mention highly trained staff and streamlined processes to answer cardholders’ questions and process paperwork. For example, the military uses pre-programmed travel cards that allow authorized purchases, flag questionable purchases that may have to be refunded unless subsequently approved, or decline if a charge is obviously not travel-related. Moreover, travel cards can be automatically de-activated during non-travel periods to prevent fraudulent purchases. Online banking also provides real-time transparency, the tools to scan transaction receipts, and the ability to generate reliable expense reports. Additionally, categorized annual spending reports can be generated automatically, like the ones most credit card companies already provide to customers. Using existing private-sector capacity would help provide necessary ESA program oversight at a fraction of the government-sector overhead and labor cost.

Every student, regardless of his or her circumstances, should have the opportunity for personalized learning. Parents empowered over their children’s education funding in a growing number of states are now free to seek a variety of education service providers. And, because education providers are not constrained to work within a rigid, bureaucratic public school system, more providers can enter the education marketplace where they have the freedom to innovate and tailor their services to the needs of individual students. This situation increases competition for students and introduces powerful pressure on all providers to offer effective, high quality programs at reasonable prices, or lose students to other providers. ESAs are a student-centered funding mechanism that can personalize learning for all students by putting their parents in charge. This policy approach is a win-win for students, families, and taxpayers.

To view endnotes or the chart, visit ocpathink.org/esa.

Vicki Alger (Ph.D., University of Dallas) is a research fellow at the Independent Institute in Oakland, California, with a forthcoming book on the history of the U.S. Department of Education. Alger holds senior fellowships at the Fraser Institute in Vancouver, British Columbia, and the Independent Women’s Forum in Washington, D.C.