Education Savings Accounts Can Help Students Without Hurting Public Schools

By Steve Buckstein

School choice programs allow students to choose schools or other educational resources and pay for them with a portion of the tax funding that otherwise would go to the public school assigned to them by their ZIP code.

While school choice is popular with large segments of the public, opponents often claim specific programs like vouchers or Education Savings Accounts (ESAs) drain funds from the public school system, and so must be rejected.

What opponents overlook is that public funding for K-12 education should actually help educate students, not simply fund specific schools whether or not they meet specific student needs.

The latest and most versatile school choice programs sweeping the country are Education Savings Accounts. ESAs deposit a percentage of the funds that the state otherwise would spend to educate a student in a public school into accounts associated with the student’s family. The family may use the funds for private school tuition or other approved educational expenses such as online learning programs, private tutoring, community college costs, higher education expenses, and other customized learning services and materials. Funds remaining in the account each year after expenses may be “rolled over” for use in subsequent years, even into college.

Here in Oregon, this school choice debate will center upon the latest proposal to offer all K-12 students many more educational options: a universal Education Savings Account program contained in Senate Bill 437. SB 437 is also known as the Educational Opportunity Act: The Power of Choice.

So, will this bill drain funds from public schools, or will it leave them harmless while allowing many students to make different choices? The answers depend on several assumptions which have now been evaluated in a new review and evaluation of a universal ESA program for Oregon.

The amount of the ESA deposits is the biggest driver of fiscal impacts. As introduced, SB 437 would provide participating students with disabilities and in low-income households $8,781 per year (current state funding) in their ESAs. All other participating students would receive $7,903 (90% of current state funding).

As Introduced, based on the assumptions below, the Fiscal Impact on the state and local school districts could be in the range of $200 million annually based on the following assumptions:

■ 90 percent of 61,000 students currently enrolled in non-public education would participate in the program.
■ Seven percent of 563,000 students currently enrolled in public schools would participate.

Based on these assumptions, the program has a fiscal “break even” for state and local school districts combined at an ESA annual amount of $6,000 for each participating student with disabilities and/or in a low-income household and $4,500 for all other students. These are the dollar amounts proposed in the -1 Amendment to the bill.

The Figure below shows the net fiscal impact on state and local budgets across a range of ESA amounts, again based on the assumptions above. 

If fiscal impact were the only measure by which to evaluate this ESA program, the Figure shows that the program is “optimized” at an amount of $3,000 for each participating student with disabilities and/or in a low-income household and $2,250 for all other students. Once fully implemented, the program would save state and local governments $53 million a year.

Figure:

ESA_FIGURE

Of course, fiscal impact is not and should not be the primary measure of this or any well-designed school choice program; but it is a political reality that such a program should not impose a fiscal burden on the state at a time that all budgets are under pressure.

The primary measure of this ESA program should be that it offers Oregon families as much choice as possible in how their children take advantage of educational opportunities funded by the state.

The full report, Education Savings Accounts: Review and Evaluation of a Universal ESA in Oregon, can be found online here.


Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization.

Arizona’s Universal Education Savings Account Law: A “Breakthrough” in Education Financing for Students Today

By Kathryn Hickok

Six years ago, Arizona became the first state to pass an Education Savings Account law for some K-12 students. Last week, Arizona lawmakers passed a new ESA bill which expands the program eligibility to include all Arizona children, phased in over the next few years.

The Heritage Foundation’s education policy fellow Lindsay Burke explains:

Education savings accounts represent a breakthrough in public education financing. Instead of sending funding directly to district schools, and then assigning children to those schools based on where their parents live, parents receive 90 percent of what the state would have spent on their child in their district school, with funds being deposited directly into a parent-controlled account.

Parents can spend the money on the educational services that best meet their children’s individual needs, such as private or home schools, tutors, online courses, and therapy. Funds not used by the student in a given year can be rolled over for future years.

Florida, Mississippi, and Tennessee also have ESA programs limited to particular groups of students, such as those with special needs. Nevada passed a near-universal ESA bill in 2015, but it is yet to be funded.

“When parents have more choices, kids win,” said Arizona Governor Doug Ducey. It’s time for Oregon parents to have those choices, too. For more information about Oregon’s Education Savings Account bill, under consideration this legislative session, visit schoolchoicefororegon.com.


Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Oregon program at Cascade Policy Institute, Oregon’s free market public policy research organization.

 

Educational Choice: An Economic Development Catalyst for Urban Neighborhoods

By Kathryn Hickok

A case study on urban renewal suggests that private and charter schools can act as positive drivers of economic development and neighborhood stability. The report, Renewing Our Cities, was produced by EdChoice, a nonprofit, nonpartisan organization promoting educational choice for all families.

The report’s authors state:

We find that the school is a strong relocation attractor, and families gravitate toward the school after their children enroll. To the extent public charter schools and/or other parental-choice options influence family relocation decisions, continued growth in these programs may provide a useful policy tool informing urban design and revitalization initiatives in areas where economic growth is otherwise stunted by inferior assigned schools.

These findings are meaningful. A common argument against school choice for low-income children is that neighborhoods and schools would be worse off if families left their assigned public school for a school they thought better met their children’s needs.

This viewpoint doesn’t recognize that private and charter schools are part of the neighborhood, too. When parents have educational options within their communities that are helping their children succeed, they have an incentive to remain part of their neighborhoods and even to move closer to those schools. This supports economic development and a more vibrant civic life in those areas.

Urban economic development is one more way educational choice can be good for both kids and their communities.


Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Oregon program at Cascade Policy Institute, Oregon’s free market public policy research organization.

Selling Bonds to Buy the Elliott State Forest Would Be a Breach of Fiduciary Trust

By John A. Charles, Jr.

State Treasurer Tobias Read has announced that he is now prepared to support a plan being developed by Gov. Kate Brown to sell bonds that would “buy out” the Elliott State Forest from the Common School Trust Land portfolio and keep it in public ownership.

Unfortunately, this would saddle taxpayers with debt service on the bonds, thereby reducing or even eliminating the financial benefits of adding the bond proceeds to the corpus of the Common School Fund. This would be a breach of fiduciary trust on the part of the State Land Board.

Members of the public may not understand that bond sales don’t create “free” money; the face amount must be repaid over some designated period of time, with interest.

For example, if the legislature authorizes the sale of $100 million in general obligation bonds, total principal and interest will likely exceed $150 million over several decades.  All Oregon taxpayers will be legally obligated to pay off that debt.

Another option might be the sale of bonds backed by future earnings on the Oregon Lottery. But lottery revenues are essentially the same as General Fund revenues. Paying debt service on lottery-backed bonds will inevitably take money from public schools.

The Governor’s proposal to have the public buy a forest it already owns is akin to someone losing money in an IRA, then transferring funds into the account from a 401(k) to make up for the loss. If both accounts are owned by the same individual, there is no net gain; the loss is just disguised.

As the state’s elected Treasurer, Tobias Read should know better. The only way to decouple the Elliott State Forest from the Common School Fund is to sell it to private parties with no taxpayer financing involved.

Such an offer is sitting in front of the Board today. The Board should accept the offer of $220.8 million from the Lone Rock Timber consortium, place the net proceeds into the Common School Fund, and let the money begin immediately working for public school students.


John A. Charles, Jr. is President and CEO of the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization.

 

Now Is the Time: Oregon’s Educational Opportunity Act, The Power of Choice

By Steve Buckstein

Oregon now has the chance to become an early adopter of a universal Education Savings Account program. An ESA program allows Kindergarten through 12th grade students to use part of the state funds allocated to their local school districts for other educational expenses and services of their choice, such as private or home schools, tutors, and online courses. Funds not used by the student in a given year can be rolled over, all the way to college.

Senate Bill 437 as Introduced would allow 100 percent of the average annual state funding (currently $8,781) for disabled and low-income students, and 90 percent for all other students, to fund ESAs for any students wishing to use them. This likely would result in a $200 million fiscal impact on the state and local school districts combined. A small price to pay for educational freedom, but not likely to happen in a legislative session facing a budget shortfall.

So, the bill has been amended to virtually eliminate any negative fiscal impact. It lowers ESA accounts to $6,000 for disabled and low-income students and $4,500 for all other students. These accounts represent real money…for real educational opportunities…for every student—with no fiscal impact on the state budget.

Please share your interest in Senate Bill 437, the Educational Opportunity Act, with your state legislators. And get involved at the Educational Opportunity Act Facebook page and at SchoolChoiceforOregon.com.


Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Parental Choice Champion Betsy DeVos Confirmed as U.S. Secretary of Education

By Steve Buckstein

Opponents of Betsy DeVos tried everything they could to keep her from becoming U.S. Secretary of Education. In the end, she was approved by the Senate on Tuesday with Vice President Pence breaking a 50-50 tie vote.

In addition to arguments that she is wealthy (which she is) and that she never attended public schools (which she didn’t), opponents feigned shock that she had the temerity to argue that educating children takes precedence over protecting and funding public schools that may not meet their needs.

Perhaps her opponents’ biggest error is thinking that private schools are not providing “public education.” But they are. Many Americans recognize that meeting the educational needs of children trumps meeting the financial needs of the adults who work in public school buildings.

Public education means educating the public—or it should. Students don’t suddenly stop being part of the public just because their parents believe they will be better educated in other than their local public school building.

Betsy DeVos believes that public funding of education shouldn’t be limited to schools dominated by public teachers unions. She may not be a friend of those unions, but she is a friend of children who may need those funds to help them learn somewhere else. She has, and will advocate for school choice programs including charters, vouchers, and Education Savings Accounts that allow those children to take their public education funds to the schools they and their families—not the government—choose.


Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

“Facing Reality” Report Offers Solutions to Governor Brown’s $1.7 Billion Budget Hole Without Raising Taxes

FOR IMMEDIATE RELEASE

Media Contacts:

Steve Buckstein (503) 242-0900

Jeff Kropf (541) 729-6229

PORTLAND, Ore. – Cascade Policy Institute and Oregon Capitol Watch Foundation jointly released a new report Wednesday, entitled Facing Reality: Suggestions to balance Oregon’s budget without raising taxes. The report offers practical solutions to fill Governor Kate Brown’s estimated $1.7 billion budget hole without raising taxes.

Facing Reality is the third budget blueprint in a series: In 2010 and 2013 Cascade Policy Institute and Americans for Prosperity-Oregon published Facing Reality reports that offered state legislators an opportunity to “reset” state government using the time-tested principles of limited government and pro-growth economic policies.

“Oregon has over one billion dollars more to spend than the last budget but is still nearly two billion short because Governor Brown’s budget continues out-of-control and unsustainable spending,” said Jeff Kropf, Executive Director of Oregon Capitol Watch Foundation. “It’s time to face the reality that raising taxes will never provide enough money to build the fantasy utopia envisioned by the Governor and current legislative leadership. There is no free lunch, and new taxes are only going to hurt the poor and the middle class.”

Facing Reality outlines $1.3 billion in reduced spending in seven specific areas which, coupled with small across-the-board agency reductions, equals $1.7 billion, enough to fill the Governor’s estimated budget hole and removing the need to raise taxes.

“Keep in mind that even with our Facing Reality budget reductions, the state of Oregon will still be spending more money than the previous budget,” said Steve Buckstein, Senior Policy Analyst and Founder of Cascade Policy Institute. “The reality the Governor and the legislature must face is that the bill for years of overspending is coming due, and raising taxes that hurt the economy is not the answer. Reducing how fast spending grows is the sustainable way forward.”

This third Facing Reality report offers politically possible solutions to meet the needs of Oregonians. It still gives most state agencies more money to spend, but without enacting new taxes being proposed by the several dozen tax increase bills introduced for consideration in the 2017 legislative session.

Here are the seven specific budget reductions proposed in Facing Reality:

Solution Impact
PERS—$100,000 cap $135 million
Department of Administrative Services—halt additional hiring $120 million
Medicaid—opt out of ACA expansion $360 million
Cover All Kids—reject expansion $55 million
Department of Human Services—targeted reductions $321 million
Department of Human Services—cash assistance reforms $160 million
State School Fund—reject Measure 98 $139 million
Total $1,290 million

For agencies not identified for specific reductions in the report, across-the-board reductions of about three percent from Governor Brown’s budget would eliminate the shortfall she identified. If this plan were implemented, none of the tax and fee increases outlined in the Governor’s budget would be necessary.

Buckstein and Kropf note, “Most Oregonians must face their own family budget realities every day. Facing Reality is a good-faith effort to hold our state government to the same budgetary realities. We look forward to working with state legislative and executive branch leaders to help implement such realities in 2017.”

Read the full report here: Facing Reality: Suggestions to balance Oregon’s budget without raising taxes

Founded in 1991, Cascade Policy Institute is a nonprofit, nonpartisan public policy research and educational organization that focuses on state and local issues in Oregon. Cascade’s mission is to develop and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity.  Oregon Capitol Watch Foundation is a 501(c)3 charitable educational foundation dedicated to educating Oregon citizens about how state and local governments spend their tax dollars by researching, documenting, and publicizing government spending and developing policy proposals that promote sound fiscal policies and efficient government.

###

The Past, Present, and Future of School Choice in Oregon

By Steve Buckstein

The vast majority of Oregonians attended public schools assigned to them based on their ZIP codes. Yet, everyone has friends or relatives who made different choices such as private, religious, and home schooling.

Few know, however, that these other choices were almost eliminated in the 1920s. Bigotry was strong across America then, and not only against Blacks. The Ku Klux Klan and others placed a measure on Oregon’s 1922 ballot that would have required children to attend only schools run by the government. The Oregon Compulsory Education Act was defended as “a “precautionary measure against the moral pestilence of paupers, vagabonds, and possibly convicts.”

Approved by a narrow margin, the measure was challenged and overturned by a unanimous U.S. Supreme Court decision in 1925. In its ruling the Court said “the fundamental theory of liberty upon which all governments in this Union repose excludes any general power of the State to standardize its children by forcing them to accept instruction from public teachers only. The child is not the mere creature of the State; those who nurture him and direct his destiny have the right, coupled with the high duty, to recognize and prepare him for additional obligations.”

So, while choices other than public schools remained available, most families have been unable to afford public school taxes and private school tuition at the same time. This reality caused a small group, including myself, to place a citizen initiative on Oregon’s ballot in 1990. Measure 11 would have provided refundable tax credits to every K-12 student in the state, which they could use to attend any public, private, religious, or home school of their choice. No state had voted on such a sweeping reform before, and we felt it was time for Oregon to lead the way.

On election night that November we came up short, with only about one third of the vote. That didn’t surprise us, because school choice was a new concept to most people, and it was easy for our opponents to scare voters into saying No. Before the votes had even been tallied, we began thinking about how we could move our school choice agenda forward in the future. We decided that Oregon needed a free-market think tank to advocate for school choice as well as other limited government ideas. We incorporated Cascade Policy Institute two months later. In the 25 years that have now passed some significant progress on the school choice front has been made.

We worked hard to introduce the charter school concept in the state in the mid-1990s. By 1999 the Oregon legislature passed a charter school bill that now allows more than 120 public charter schools to operate across the state.

Also in 1999 we evolved from just talking about school choice to actually providing choice to hundreds of low-income kids in the Portland area through our Children’s Scholarship Fund program. We initially raised $1 million of private money that was matched by $1 million nationally to provide partial scholarships to over 500 students for four years at the schools of their choice. The fact that over 6,600 children applied for those 500 slots demonstrated that the demand for school choice is great in Oregon. We can’t help them all, so we continue to advocate for broader programs that will.

In 2011 three school choice bills passed as part of an education reform package, including expansion of online charter schools, more options to sponsor new charter schools, and open enrollment between public school districts.

Over these past twenty five years Cascade and others have brought a number of national speakers to the state talking about the benefits of school choice elsewhere, including some 61 privately or publicly funded scholarship programs, charter schools, education tax credits, vouchers, and Education Savings Accounts (ESAs).

In 2014, Cascade proposed a limited Education Savings Account bill to help disabled, foster, and low-income children. ESAs allow students to take some or all of the money the state would spend on them in a public school and put it on a restricted use debit card. They can fund a wide variety of approved educational options, such as private school, individual tutoring, and distance learning. Any money not used in a given year can be rolled over to spend on educational expenses in the future, even into college.

Earlier tax credit and voucher programs are now seen as the rotary-dial telephones of the school choice movement. ESAs, with their expansive array of options and their ability to hold costs down as students plan and save for the future are seen as the smartphones of the movement— smartphones with virtually unlimited apps to help children learn in their own unique ways.

This year, Cascade is promoting a broad ESA proposal in the Oregon legislature. Senate Bill 437, and other bills that may emerge, are designed to enhance school choice for everyone. In the future, our mission—and yours if you choose to accept it—will be to help our fellow Oregonians understand and support what many now call the new civil rights issue in America: the right of every child, no matter where they live or their parents’ financial means, to reach their own potential by making their own educational choices affordable. Until this right is achieved, too many children will remain trapped in schools assigned to them by their ZIP code that fail to meet their needs.

We won’t stop advocating for school choice until every child has the real choices they deserve. We appreciate the help of everyone who shares this vision. It can’t become a reality too soon.


Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization. 

Measure 97 and the Mirage of School Funding

— Voters are destined for disappointment

 

By John A. Charles, Jr.

Proponents of Measure 97 have consistently claimed that if the measure passes, it will generate an additional $3 billion annually for public education and other social services. Judging from the comments I’ve read in various Oregon newspapers, many people are falling for this argument.

Apparently none of the letter writers have ever watched a legislative appropriations hearing. These are the meetings where a tiny group of senior politicians sit in a back room and decide how to spend billions of dollars. I’ve watched hundreds of such hearings, and the most predictable outcome is that politicians will spend money in front of them on whatever they want.

Let’s just take a simple example. Oregon was one of 44 states that sued the tobacco industry in the mid-1990s to recover the health care costs associated with smoking. Plaintiffs claimed that the tobacco industry had long been imposing uncompensated costs on states in the form of health care for smokers who became sick from use of the product.

The suit was settled through adoption of a Master Settlement Agreement (MSA) with the four largest tobacco manufacturers. As part of the agreement, each state was to receive payments every year from 1998 through 2025.

According to the plaintiffs, the estimated $25 billion of MSA money was supposed to be used for tobacco prevention activities and health care subsidies necessary to treat smoking illnesses. But that was not a formal part of the agreement. Each state was free to use the funds in whatever way its state legislature approved.

In Oregon, total MSA funds received since 1998 have exceeded $1.26 billion. Almost all of it was spent on programs that had nothing to do with tobacco cessation or public health. Only 0.8 percent was appropriated for tobacco prevention programs.

How could this be? They promised!

Yes, Virginia, they promised. But every two years, 90 legislators show up in Salem, and they each have their own priorities. Once you put a pot of money on the table for them to spend, it’s game over.

Almost no one in the Capitol remembers what the MSA was, and, furthermore, they don’t care. They only care about spending money for the stuff they want right now.

Measure 97 is a horrible tax proposal, for many reasons. It unfairly targets a small subset of all businesses directly, but hits all businesses and all of us indirectly. It taxes sales but not profits. It would be the largest tax increase in Oregon history.

But if voters ignore these concerns and approve it anyway because they think it will increase funding for schools, they are destined for bitter disappointment.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. This article originally appeared in the September 2016 edition of the newsletter, “Oregon Transformation: Ideas for Growth and Change.”

Flexibility Is Key: The Next Generation of Parental Choice Solutions

Families in five states now have access to a special program called Educational Savings Accounts.

Educational Savings Accounts, or ESAs, allow parents to take money the state otherwise would spend on their children in the public system and put it on a restricted use debit card. Parents can spend this money on a wide variety of approved educational options, including private school, individual tutoring, online classes, and other services. Any money not used is rolled over for parents to spend in the future.

The Friedman Foundation for Educational Choice surveyed Arizona families to see how they are choosing to spend the resources allocated for their kids. The survey found that more than a third of participating families used ESAs for multiple educational purposes, not just private school tuition. It also found that families saved a significant amount of their ESA money for future expenses.

This indicates that ESAs not only expand the learning options available to individual children, but they also encourage fiscal discipline within education spending.

Parents and lawmakers in nearly a dozen states, including Oregon, are working to make this flexible learning option available to more children. The next generation of education reform in America needs to embrace flexibility to meet the needs of every child, and Educational Savings Accounts are proving to be a simple but powerful way to do just that.

1 2 3 7