Education Savings Accounts: Review and Evaluation of a Universal ESA in Oregon
By Eric Fruits, Ph.D.
Education Savings Accounts 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 to spend on private school tuition or other educational expenses. Funds remaining in the account after expenses may be “rolled over” for use in subsequent years.
Empirical research on private school choice finds evidence that private school choice delivers benefits to participating students—particularly in the area of educational attainment.
Currently, Arizona, Florida, Mississippi, and Tennessee have active ESA programs that are 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. Oregon Senate Bill 437 would introduce a universal ESA program in the state covering all K-12 students.
ESAs frequently are designed so the amount of funding support provided is less than the amount the state otherwise would pay for a student to attend public school, with the state recouping the difference. In this way, ESAs can be designed to produce a net fiscal benefit (i.e., cost savings) to state and local government budgets.
A fiscal analysis of Oregon’s SB 437, as introduced, would cost the state approximately $390 million a year but would lead to savings of about $190 million a year to local school districts, for a net state and local impact of approximately $200 million in additional costs. This net impact of SB 437 can be reduced—and turned into a net cost saving to state and local governments—by adjusting the annual amount deposited into the ESAs. The program would “break even” at an amount of $6,000 for each participating student with disabilities and/or in a low-income household and $4,500 for all other students. Once fully implemented, the program with these ESA amounts would save state and local governments more than $6 million a year.
Eric Fruits, Ph.D. is an Oregon-based economist and adjunct professor at Portland State University. Fruits has
been invited to provide analysis to the Oregon legislature regarding the state’s tax and spending policies. His
testimony regarding the economics of the Oregon public employee pension reforms was heard by a special
session of the Oregon Supreme Court.