Ep. 118: The Monthly Debrief – May Looking to June 2019

June 11, 2019

In this Monthly Debrief podcast, EdChoice’s Senior Director of State Relations Michael Chartier, Director of Policy Jason Bedrick and Director of State Relations Lauren Hodge discuss the latest school choice happenings in the states. They talk about everything from a pilot ESA program in Tennessee to an appropriations bill in North Carolina.

Michael Chartier: Hello everybody. This is Michael Chartier, your senior director of state relations, welcoming you to another EdChoice Chat, here in the studio at the 26th floor of Salesforce Tower. Joining me, Lauren Hodge.

Lauren Hodge: Hi there. Glad to be here this afternoon.

Michael Chartier: And on the phone from the annex west in sunny and warming up Arizona, Jason Bedrick.

Jason Bedrick: Yes, happy to be here this morning.

Michael Chartier: It’s afternoon here, so got to love the time changes. So, we’ll get right into it. This is a podcast looking at what happened in the month of May and moving forward, and maybe talking about some things that might be happening in June. And spoiler alert, we actually know a few things that happen in June, because this podcast is being recorded in June. But we’ll get right down to some of the states that had some legislative movement in May. I know that Jason’s going to be leading off with the other sunny state, the state of Florida. Jason, you want to tell some folks what’s happened down in Florida?

Jason Bedrick: Yeah. We talked a little bit about last month that the Florida legislature passed SB 7070, which was an omnibus education bill that among other things contained a new voucher program that will serve 18,000 children from low- and middle-income families. As regular listeners know, Florida already has the largest tax-credit scholarship program in the country, serving nearly 100,000 students, and there was a wait list of about 14,000 students. This is going to fully fund the wait list with these vouchers and even have a few extra for other families that might want to apply. It should grow by about 7,000 students per year. That’s great.

Florida also, in their state budget, included a $23 million increase for the Gardener Scholarship program, which is an education savings account program for students with special needs. So, Florida was certainly on the forefront this year of expanding educational choice options. And of course, they’re already the state that really has the most educational choice already. Certainly blazing a trail that other states should follow.

Michael Chartier: Jason, what do you think about, as you pointed out, Florida is sort of blazing the trail for school choice. It’s got multiple programs at this point. What are your thoughts on having … Should a state do one big program, if they can get that done? Or you think states should go the Florida route of having multiple programs, each serving different constituencies? Do you have a thought on what’s preferable or anything like that?

Jason Bedrick: I think that really depends on the local context. Ideally, every state would have a program or multiple programs that would have the net effect of providing educational choice for every single child. But whether the right approach is to have just one program that does that or to have multiple that have the net effect of doing that, I can’t say in general. I think that’s up to each state’s particular context.

Michael Chartier: Got it. I was just curious if you have any thoughts about that, because I was just kind of thinking as I was looking at the map of states, I was like, “Whoa.” There are states like Indiana they have one sort of big program. Well, I guess we have two, but the tax-credit and the voucher. But you’ve got Florida that’s got a handful of programs and they seem to be chugging along just fine. I just was curious if you had any thoughts about that.

Jason Bedrick: Yeah. Even Florida has the largest tax-credit, the largest really school choice program of any type for private school choice in the country and that’s its tax- credit scholarship program. The ESA, again, only for now serves those students with special needs. The interesting thing is that the voucher program serves essentially the same student population as the tax-credit scholarship program. The major difference is the funding mechanism. Instead of a tax credit, it’s directly funded by the state. I think that going forward, there are those in Florida who believe that they may have maxed out the amount of revenue that they can generate via the tax credit, so like the district school system and charter schools, they want to move in the direction of direct public funding so that they will be able to achieve scale.

It wouldn’t shock me if at some point in the future, not the near future, but maybe 10 or so years out, that they actually switch over to an entirely publicly funded system. And very possibly by that point as well, we’ll see them move from a voucher to the ESA. I think that right now they’re still working out some of the kinks. They’re still trying to move from the sort of receipt based system that they have to an online platform that will make it much more user friendly for families to use the ESA and also have a much greater degree of financial accountability, and also academic accountability, because their online platform is going to include user reviews, so that … and other sorts of information, so that families when they’re using their ESA to select from various schools and other education providers would be able to see how effective those various providers and goods and services are.

So, I expect that at some point when the system is ready to reach scale, we will see Florida move in the direction of the universal education savings account program. But again, maybe if they had enacted that right away, first of all, probably would’ve been very difficult politically. Second of all, if they had done it right away, the system may just not have been ready. They really needed to build the infrastructure, like I said, work out some of the kinks, and then I think they’re going to get there. In that sense, I think Florida was wise to take an incremental approach, but always having that universal goal in mind.

Michael Chartier: That was, as always, a very thorough answer. No, that makes complete sense to me, Jason. What other states were you going to talk about? I believe Pennsylvania and then briefly mention Illinois?

Jason Bedrick: Yeah. In Pennsylvania, we’ve been tracking HB 800, which is the bill that is going to increase the amount of tax credits available for their tax-credit scholarship program by about $100 million, and actually include an inflator, or in some states called an “escalator,” which would allow it to grow by 10 percent a year. Interestingly, Arizona, they just passed legislation that phases out their inflator. And that’s because the program has already been growing for more than a decade and a half, and actually about 20 years it’s been growing. It started out very small, but those familiar with the magic of compounding interest understand that it can actually, it grows quite quickly after it reaches a certain size. So, they are phasing it out.

Right now, it grows at 20 percent a year. It’s phasing down to 15, 10, 5 in the greater of 2 or inflation. So, it’s going to grow by about another $150 million.

Michael Chartier: That’s real money.

Jason Bedrick: It is real money, yes, very much so. The concern in Arizona was that at a certain point, it would actually consume all of the business taxes. They need those taxes to run all sorts of other state programs, you know, emergency services and healthcare and whatnot. They wanted to limit it a certain point. But it has grown tremendously over the years and will, because of the inflation, it will at least continue to keep up with inflation. And then in Pennsylvania, it has not yet really reached scale. So, that’s why they’re going to be hopefully adding this inflator. The bill as sponsored by the speaker of the house. It passed with the support of 100 percent of the republican caucus and a fair number of democrats as well, so it did have bipartisan support and that is now going over to the state senate. So, we will see, but many are hopeful that this will actually pass.

And then we don’t really know what the governor’s going to do. He’s kept his views pretty close to his chest. But we should probably find out within the next month or so.

Michael Chartier: Got it. We’ll definitely continue to watch that as it moves through the process. I know that Lauren was going to give us an update on North Carolina. Sorry, did I cut you off, Jason?

Jason Bedrick: Actually, just one last state really quickly and this wasn’t in May, but this did happen at the very beginning of June. We see that in Illinois, we’ve been watching for an effort to actually phase out the state’s tax-credit scholarship program. This was a bill that was passed as a part of a compromise between then-Governor Rauner two years ago in 2017, and he’s a republican, and the democratic state legislature. They were at an impasse over the budget and the way they broke that was to reach a compromise. Part of that compromise was a $100 million tax-credit scholarship program that would help potentially tens of thousands of low- and middle-income students in Illinois.

But it had a five year sunset clause, so in a few years, it would be disappearing. This year, they have a democratic governor, Governor Pritzker. He was talking about putting the scholarship program on the chopping block, phasing it out faster than those five years, and then using the revenue that they wouldn’t be losing to the tax credits for other things. Now, interestingly, it wouldn’t actually have saved the state any money, because the value of the scholarships is lower than what they are spending, the state level on a per people basis. But in any case, that was the plan. But there was a lot of grassroots pushback, especially from the parents who have children participating in the program. There was a massive effort to have those families, thousands of those families, contact their legislators, come to the state capital, share their stories, and so Governor Pritzker’s office announced late last week that they would be backing off of putting the scholarship program on the chopping block in the state budget.

So, it looks like the program is going to be safe for now, at least until it’s time for the sunset to kick in. And of course, hopefully before then, those same families will be able to persuade the legislature to extend the life of the program.

Michael Chartier: OK. Let’s hope that it continues on for those kids. I know that $100 million is definitely helping out a lot of kids in the state of Illinois. We’ll definitely continue to keep an eye on that. Moving here into the studio, I know that Lauren is going to give us an update on some budget issues that happened in North Carolina that’s going to affect the school choice programs out there, so Lauren, why don’t you give us an update on what happened in North Carolina?

Lauren Hodge: Yes. Thanks so much and happy to talk about North Carolina and I give my first caveat, as you know, I like to speak in disclaimers always. It’s a byproduct of law school and litigation. What I’m about to talk to you guys about is not passed yet. It is coming to you from the appropriations bill in North Carolina. It has passed both chambers, but we’re waiting to see what’s going to happen to it next. If passed, it would be a pretty big deal. What it would do is structurally change the way that the programs are functioning in North Carolina. So, in the words of one my favorite professors, the best way to look for it is to first look back.

North Carolina has three choice programs. They have an opportunity scholarship program, which is a voucher style program. And that is for low income children. They then have two other programs in North Carolina that will have special needs focus, and that would be the education savings account and the voucher. What the proposed appropriation bill has in it is the combination of the special needs programs into a single education savings account program. For those of you that are familiar with North Carolina and know more about that history, the very first special needs program to pass there was the voucher style program, which was passed in 2013, enacted in 2014, and those were for children that had an individualized education plan, and IEP, and were receiving services on a daily basis.

Then they came along with an education savings account for children with special needs, in particular those with more aggravated special needs, those that maybe had a more robust portfolio of needs, including additional services—things like the educational therapies, things like physical therapies, speech therapies. And that was kind of the niche that the education savings account helped fill. So, what has been happening in North Carolina over a number of years, is that the two special needs program are stackable. So, you could apply essentially for both of them and try and get both of them into your bucket, so to speak, to be using for school choice.

In the 2019 appropriations bill, what they’re talking about doing is combining both of those special needs programs into a single ESA> the value per pupil would be about $9,000 for a full-time student, $4,500 for a part-time student, and then if you have a select number of disabilities including autism, more moderate to severe mobility disabilities, you can have up to $17,000 put into that education savings account. What’s a unique feature of the proposed structure is that this would then be stackable with the opportunity scholarship program. And so that’s a new feature that could potentially come into play into North Carolina where if you’re also a child that is in a low-income family, there would be another bucket to possibly pull from.

This isn’t through yet. And as we’ve noted, I think a couple of times throughout this year, North Carolina’s been all over the place, as far as the school choice legislation’s gone. We’ve seen programs that have tried to expand school choice and simplify the regulations around it. We’ve seen bills that have tried to sunset it out. It’ll be interesting to see what happens next with this part of the appropriations bill. It’s too early to tell, but it’s certainly something that we are continuing to watch.

Michael Chartier: Thank you, Lauren, for that update. I always find it fascinating that each of these states are so different. You’ve got states that are repealing programs, states that are expanding programs, states that are combining programs. It really is kind of the laboratory of democracy all over the place. And even on the same coast, different states doing different things.

Lauren Hodge: That’s it exactly. We’ll stay tuned.

Michael Chartier: Thank you for that. I’ll give I think the last update for, the last true sort of May update, and then might tell you some stuff about June. It brings us to the state of Tennessee. I think that most of our listeners know that the state passed what they were calling an ESA program. I think we’re looking at it more as a voucher program, or some sort of a voucher plus program. Basically it requires that students attend a private school in some form or fashion, and then are able to spend money on other things, so there is that tie in to a private school.

But again, so Governor Bill Lee in May signed HB 939 into law. That was passed by both of the chambers, both house and the senate in May. They went to a conference committee, fought it out back and forth. You can probably follow some of the news coverage there were some stories written about how that happened, there was in fighting back and forth and there were some allegations of campaign money being used to get legislators’ votes and whatnot, and all of that’s well documented in the news media. But after all of that happened, basically there was a conference committee report that was adopted by both chambers, and again, Governor Bill Lee signed that bill into law.

Basically what that does is it creates a low-income, geographically-restricted program for students in two counties, and that’s Davidson and Shelby counties. So, only kids in those two counties are able to utilize the program. That was kind of done to, I guess as I understand it, from what I read in the news, basically helped some legislators to be able to say, “Look, this program is going to affect kids that desperately need it in those two counties, but my county is fine. We don’t need this choice program, so we’ll allow it for those counties, but it won’t affect me.” That was some sort of a political compromise to help sort of get votes in order to pass the program.

The funding is equal basically to the average state and local funding that the students receive in public schools. It’s a large amount of money compared to some of the other choice programs and again, that will only come from the state portion, but it’ll be equal to what that student would have received in both places. And the students are required to take the state tests. We’ve seen what’s happened with that particular piece of regulation in terms of the Louisiana program. That has potentially stopped some higher performance schools from taking part in the program, because they think they’ve got this education thing down. They don’t want to mess with things, so they know that if they continue to do what they’re doing, it’s working well for them, they’re not going to change to take the state test, because that would not be beneficial to them.

But other schools that maybe don’t have as high enrollment, they have declining enrollment, I know that Jason has wrote extensively on this as well as Matt Ladner on Jay Green’s blog. They’ve looked at schools with declining enrollment are more likely to take advantage of the program because they need that additional revenue. They’re willing to perhaps take the state test, change up their educational requirement to make that happen. So, I’ll continue to follow that to see what happens in Tennessee. There’s also some potential for constitutional litigation. I know there’s a couple of avenues, that’s already being talked about in terms of suing the program and stopping that program from taking place. We know what happens when that happens, like what happened in Nevada. I know that we’re going to be talking a little bit about Nevada here later on in the program.

But I know that litigation, probably going to happen. We haven’t heard anything definitive yet. But it looks like there are people that are interested in suing the state to stop the implementation of the program. So, we will continue to follow that and as we hear more, we’ll continue to update you guys on the podcast.

I think that’s the end of the May portion of the state update. I know that I’ll give you guys just a quick tease here about what happened in June. The state of West Virginia went back into special session, I guess the West Virginia senate went back into special session on June 1, and the state senates passed out a bill for families of incomes of under $150,000 that were in public school in the prior year to be able to utilize an education savings account. That bill was passed out of the state senate. It moves over to the house of delegates where they will go back into special session on June 17.

So, we will continue to monitor that and probably update you on what happens to that in June. Likewise, the Nevada legislature [inaudible 00:20:08] this month, June. Two big school choice things. One, they kept the opportunity scholarships program, the tax-credit scholarship programs’ current funding levels intact, so the kids that are utilizing that program will continue to be utilizing that program. But then on the last day of session, they voted to repeal the ESA program. So, currently that’s waiting for Governor Sisolak, his signature or veto. It sounds like the governor is going to be signing that particular piece of legislation. So, the next time we talk, the Nevada ESA program might be repealed in full. We will continue to monitor that development in Nevada and we will continue to provide updates on that. That’s a good little teaser for what’s going to happen next week.

I know that Jason wanted to jump in and kind of tease something that he’s writing on about the tale of three states, I think it was, Jason?

Jason Bedrick: Yes. The interesting thing is, look, we know that there is a lot of bipartisan support among the rank and file, and we know that even among elected officials, there is bipartisan support and opposition to school choice. But in general, in most states, it’s the case that the republicans tend to be more supportive and that the democrats tend to be more in opposition. And there were three state legislatures this year that had democratic majorities where they tried to either eliminate a school choice program or phase it out, or divert resources from the program. And those states were New Hampshire, Nevada and Illinois. And yet we see that in Illinois, they did not succeed at phasing out the program on an expedited schedule.

In New Hampshire, there’s still the state budget to contend with, but there were three bills that would’ve either eliminated the program entirely or reduced its funding or diverted its revenue stream. All three of those bills were tabled, some of them with very lopsided majorities in favor of tabling the legislation. And then in Nevada, as you mentioned, there were two programs. One of them, the funding level was preserved and the other was eliminated. The one where the funding level is preserved is the tax-credit scholarship, which has students actually participating. The one that was eliminated is on the books, but thanks to the combination of a legal challenge followed by a change in the legislature, never actually got off the ground. It’s on the books only, it has never had a single dollar allocated to it. So, no children whose families apply for the program ever received an ESA.

Therefore, that was the only program that was actually eliminated. And probably Leslie will be talking about this on a later podcast, but there will be a legal challenge. It’s not clear that the way that bill was passed was constitutional. Because it was raising taxes, it probably required a two-thirds majority and the did not get that. It’s a question of whether that whole bill is going to be declared unconstitutional or maybe just the portions of it that raise taxes. There’s a whole legal fight on that. There’s an asterisk. But in terms of what the legislature actually did, the only program that has been legislatively repealed has been this one program that was not actually being implemented. In all of these other states, even with very large in some cases democratic majorities, in a few chambers actually super majorities, thus far they have been unable to repeal a program that is actually serving families who, as we saw in Illinois, as I mentioned, there were thousands of families.

These are low-income, mostly minority families who showed up at the state legislature. This was a face on the program. And they’re saying, “Please don’t take our scholarships away.” That was a very powerful message and the legislators listened to their constituents and did not eliminate the program. I think that this is, even though those in the school choice movement are—many of them feel very discouraged by what happened in Nevada—I think that if we step back and look at the whole picture, we should be actually very encouraged. The opponents of school choice really have only been able to slow down our momentum and they have never actually been able to take a scholarship away from a family that is using it to give their child a quality education. It’s really a matter of when, not if when it comes to school choice.

Michael Chartier: Just like Milton Friedman used to say. Well, thank you, Jason, and thank you, Lauren. With that, I think I will end this podcast. If anyone has any comments, questions, or anything they’d like just to talk about, please email us at media@edchoice.org. Please sign up to receive our podcasts at iTunes, SoundCloud and Stitcher. Follow us on social media @edchoice. And please sign up for our email updates at www.edchoice.org. Thank you very much for listening to this May podcast. We will look forward to talking to you in July about the things that happened in the month of June. With that everybody, thank you very much and have a good day.