Ep. 281: The Fiscal Effects of School Choice

November 11, 2021

A new, updated analysis of the fiscal effects of school choice is out now!

Drew Catt: Hello, and welcome to another episode of EdChoice Chats. I’m Drew Catt, EdChoice’s Director of State Research and Special Projects. And I’m here to talk about our newest research, a report called Fiscal Effects of School Choice, analyzing the costs and savings of private school choice programs in America. I’m here today with author Marty Lueken, who’s the director of the Fiscal Research and Education Center at EdChoice, to have a conversation about the report. Thanks for joining me today, Marty.

Marty Lueken: Hey, good to be on, Drew.

Drew Catt: So Marty, would you mind starting by maybe talking about why you did the research, kind of what inspired it?

Marty Lueken: Sure. Well, this is actually a report that we’ve done in the past with a few tweaks and updates to the methods. But essentially, probably the most pernicious argument that we hear against having educational choice is that these programs siphon or drain resources from public schools, and therefore, they harm public school students. And so, the purpose for having doing this report is to equip policymakers and state influencers with essentially basic facts about how the fiscal effects of choice programs work and what those fiscal effects are.

Drew Catt: Yeah. So you’re saying this is really for the people that kind of impact policy in the states with policymakers and the people that write the fiscal notes and et cetera?

Marty Lueken: And if there are any nerds out there as well who like to study the fiscal effects of different policies.

Drew Catt: Awesome, Marty. Now, would you mind telling our listeners a little bit about the methods, especially what you described as a methodological tweak? And also, what can people kind of find in the report?

Marty Lueken: Sure. So, we compare the costs of these programs with the savings to taxpayers. So, the idea is that these programs not only cost the voucher, education savings accounts or the tax credits for tax-credit scholarship programs, for example, but whenever students that are enrolled in public school systems choose to participate in these programs and switch to a private school or other non-public setting, then those students represent savings to taxpayers. The idea is that when you have fewer students in the system to serve, then your costs go down and they go down by the average variable cost amount in the short run. So we essentially take the comparison between the cost of the education savings accounts programs, of school vouchers, the cost of disbursements in tax-credit scholarship programs and compare that to the short run variable cost savings. And that gives us a net overall fiscal impact on state and local taxpayers combined.

Marty Lueken: So with our estimates, we actually get a range of estimates. We estimate both the short run impact on these programs, and we also estimate an upper bound, which represents the long run total impact of these programs, the fiscal impact. So the long run impact, we use the total cost. We estimate the cost to educate the students who participate in the programs, we look at what it would cost to educate them in the district schools, compare those amounts and we end up with a range of fiscal effects. So we have a lower bound and an upper bound estimate for that.

Drew Catt: Yeah. Let’s skip right to the punchline. What were those upper and lower bounds?

Marty Lueken: Sure. So through fiscal year 2018, we studied 40 educational choice programs and those programs generated between $12.4 billion and $28.3 billion. That range represents $3,300 per student up to $7,500 per student. So put another way, for every dollar spent on these educational choice programs, they generated net savings for taxpayers overall worth between $1.80 and $2.80.

Drew Catt: Let’s back up a minute. You said billion with a B?

Marty Lueken: That’s right. Correct. Yeah.

Drew Catt: That is unbelievable, just to think that these programs could save that much. So is that in a single year or is that in the aggregate?

Marty Lueken: That’s cumulative, overall.

Drew Catt: That’s amazing. Just to think if these programs would’ve been around longer and/or how long they will be around in the future, what the potential savings are over the course of a student’s lifetime.

Marty Lueken: Sure. I mean, these programs, they serve as a release valve in public finance. In a lot of states, they’re under budgetary pressures. The cost for public education has been going up and up over time. So these choice programs can provide, if states want to, they can provide some relief to their budgets while at the same time, of course, providing a program that is family-centric, is student-centric and offers families a way to find the best fit for education for their child.

Drew Catt: Yeah. So other than serving as a kind of release valve, are there any other policy implications that you can think of?

Marty Lueken: Yeah. I mean, with these savings, they could do a lot of things. What usually tends to happen is that the money just gets circulated and put back into public education. So as a byproduct, actually, of these programs, you see that the amount of resources for each student who remain in the public school system actually go up. So students who remain in public schools have more resources for each kid, and we see that born out in the research, right? We have a lot of studies, about 27 I believe, that have looked at the competitive effects of these programs. What are the effects of these students on their academic learning? And almost every study finds that students who remain in public schools that have increased competition from these choice programs, that they tend to do better academically. So I think it’s a win, win. It’s a good thing for taxpayers, it can help with public finances and it’s a good thing for families.

Drew Catt: And with these numbers just growing and growing every year, do you intend to keep replicating this research on an annual or semi-annual basis and kind of keep everything current as time passes?

Marty Lueken: Yeah. So we also have dashboards on our website. We have a fiscal effects dashboard, which you can find at the Fiscal Research and Education Center section. We plan to keep those updated each year. The report is pretty thick. We have 40 programs in there and it includes profile sections for each program in case anyone wants to dig into the details for programs in their specific state. So it’s a pretty large publication. We may or may not be creating that every year. I’m not making any promises, that’s up to the powers that be, but we will be updating the information at least and posting it on our dashboard.

Drew Catt: Yeah. So, what’s next for FREC or the Fiscal Research and Education Center?

Marty Lueken: Well, I mean, right now, we are planning for next year. I think we’ll be doing some work on a school of funding formulas, looking at those and just gathering data related to choice, hoping to gather some data on private schools in terms of their finances. And we also have a staffing dashboard, which is built on the work of our fellow, Ben Scafidi. So, he’s done a series of reports on the staffing surge. So, we’ll continue to update that information as well.

Drew Catt: Yeah. Sounds like a wealth of information at the Fiscal Research and Education Center. So hat tip to our listeners for taking the time to learn a little more about this new study. And Marty, thank you so much for filling us in on the fiscal effects of school choice in America.

Marty Lueken: Hey, good talking to you, Drew. Thanks.

Drew Catt: Awesome. Stay updated on the latest school choice research, legislative news and more. Please remember to subscribe to our EdChoice Chats podcast wherever you get your podcasts for more of our coverage of new school choice research, education reform policy chats and more. If traditional social media is your thing, follow us on Twitter, Instagram and Facebook. You can find us at EdChoice. If TikTok is more your style, check out EdChoice.official where, bonus, you can also hear about pension reform research from the Fiscal Research and Education Center. Thanks again for listening. And until next time, take care.