Expanding Educational Opportunity in the Granite State

The following is a guest article written by Jason Bedrick, Director of Policy for EdChoice. Previously, he was policy analyst with the Cato Institute’s Center for Educational Freedom. He also served as a legislator in the New Hampshire House of Representatives and was an education policy research fellow at the Josiah Bartlett Center for Public Policy.

New Hampshire lawmakers are currently considering legislation to create an education savings account (ESA) program. ESAs allow parents to customize their child’s education using a portion of the funds that the state would have spent on their child at his or her assigned district school. Parents can use ESAs to pay for private school tuition, tutoring, text books, online courses, educational therapy and other approved educational products and services. They can even save unused funds for future educational expenses, including college.

In a recent op-ed, Rep. Marjorie Porter (D-Hillsboro) raised four primary objections concerning the constitutionality of ESAs, their propensity for benefitting students, their fiscal impact, and how education providers are held accountable. As we shall see, ESAs are a constitutional and fiscally responsible method of expanding educational opportunities for those most in need that enable parents to hold education providers directly accountable.

ESAs are Constitutional

The question of constitutionality must be addressed first. No matter how beneficial a policy might be, if the state is not constitutionally authorized to enact it, there’s no point in discussing it further. Fortunately, ESAs are constitutional under both the U.S. and New Hampshire Constitutions.

The U.S. Supreme Court ruled more than a decade ago in Zelman v. Simmons-Harris that educational choice programs are constitutional under the First Amendment’s Establishment Clause so long as they have a secular purpose (expanding educational opportunity) and the use of funds at any religious school is indirect and incidental to choices of families. As with Pell Grants, the recipients can choose from among numerous secular and religious options but the government remains religiously neutral, neither favoring nor disfavoring any particular religion or religion in general.

Opponents of educational choice point to two provisions in the New Hampshire Constitution that they claim prohibits the state from enacting ESAs or similar policies. The first is Part I, Article 6, which states that “no person shall ever be compelled to pay toward the support of the schools of any sect or denomination.” The other, Part II Article 83 states “no money raised by taxation shall ever be granted or applied for the use of the schools of institutions of any religious sect or denomination.” However, what the framers of the state constitution had in mind was not a religiously neutral educational choice program, but rather the direct subsidy of sectarian schools. With an ESA, the state is giving a benefit to families, not to schools, and the high courts in states with substantially similar constitutional language have ruled that parents using ESAs are spending their own money, not the state’s money. (Likewise, the beneficiary of food stamps is the hungry, not grocery stores, and there is no constitutional issue if the beneficiary uses the food she purchases for a religious feast.) In Arizona, the nation’s first ESA withstood constitutional scrutiny on exactly this question:

The ESA does not result in an appropriation of public money to encourage the preference of one religion over another, or religion per se over no religion. Any aid to religious schools would be a result of the genuine and independent private choices of the parents. The parents are given numerous ways in which they can educate their children suited to the needs of each child with no preference given to religious or nonreligious schools or programs. […]

The ESA is neutral in all respects toward religion and directs aid to a broad class of individuals defined without reference to religion. The ESA is a system of private choice that does not have the effect of advancing religion. Where ESA funds are spent depends solely upon how parents choose to educate their children.

Porter expressed amazement at the fact that, “like magic,” public funds become private funds once they enter the accounts. She even bizarrely and very inappropriately argued that this is called “money laundering when drug dealers do it.” In fact, the government regularly transfers money to individuals, with or without restrictions, and the courts have long held that these funds, upon reaching the beneficiary, are their private funds. Once Grandma cashes her Social Security check, those are her private funds—no magic necessary. The same is true for TANF, SNAP, WIC, Medicare/Medicaid, and a host of other entitlement and welfare programs that our state and federal legislators have adopted, including many that Porter has previously supported. Does Porter think these are all magical, money laundering schemes?

Earlier this year, the Nevada Supreme Court upheld the state’s ESA program under a similar constitutional provision, noting:

Once the public funds are deposited into an education savings account, the funds are no longer “public funds” but are instead the private funds of the individual parent who established the account. The parent decides where to spend that money for the child’s education and may choose from a variety of participating entities, including religious and non-religious schools. Any decision by the parent to use the funds in his or her account to pay tuition at a religious school does not involve the use of “public funds” and thus does not implicate Section 10 [which states that “No public funds of any kind or character whatever…shall be used for sectarian purpose”].

ESAs should pass constitutional muster in the Granite State for the same reasons.

ESAs Expand Educational Opportunity

Just because a policy is constitutional doesn’t mean it is beneficial. Fortunately, ESAs are both. High-quality research on educational choice policies finds that they raise student achievement and increase rates of high school graduation and college matriculation. However, Porter argues that low-income families won’t be able to benefit from ESAs:

Proponents say these “scholarships” will help poor kids get a choice, too. Ninety percent of adequacy aid is about $3,100. Tuition at Bishop Brady is $11,400; at Derryfield it’s $30,900; at the Well School it’s $8,800, and at St. John’s it’s $5,660. Add to that the cost – and time – needed for transportation back and forth. Who do you think will be taking advantage of these scholarships? All kids? Or is this just a tax break for the wealthiest families?

Porter’s argument is misleading in three ways. First, she excludes the differentiated aid that low-income families and students with special needs would receive in their ESAs. Depending on a family’s household income and a student’s special needs, the state would deposit between $3,561 to $8,653 into the ESAs each year.

Second, she does not account for the financial aid that many schools already give. The sticker price of tuition is generally not the tuition that low-income families actually face. For example, at Derryfield, 26 percent of the student body receives financial aid worth between 8 percent and 95 percent of tuition. At Bishop Brady, 40 percent receive tuition aid.

Third, she ignores the fact that there are numerous lower-priced schooling options around the state. In a study I conducted in 2012, I listed the tuitions at private schools in the ten most populous cities and towns in New Hampshire. The median sticker price of tuition was $5,000 at elementary schools and $7,978 at high schools. It’s likely the median prices have risen somewhat in the last five years, but the combination of state differentiated aid and schools’ tuition aid mean that most low-income families will have numerous options available to choose from.

ESAs Are Fiscally Responsible

Porter argues that ESAs “defund public schools,” but this is a baseless claim.

According to the New Hampshire Department of Education, district schools spend $17,565 per pupil annually on average (including operating costs and capital expenditures but excluding categories like summer school and adult education). The ESAs would be funded only with a portion of the state’s per-pupil funding, but about two-thirds of the district school funding comes from local and federal sources. Those local and federal funds would remain entirely with the district schools, and the state would continue to fund districts for the students they enroll.

Schools have both variable costs, which go up or down based on short-term changes in student enrollment, and fixed costs which do not vary with enrollment. Although all expenditures are variable in the long run, short-run variable costs include things like instructional staff support, student support, and food service while short-run fixed costs include items like capital expenditures, interest payments, transportation, and general administration. According to a 2012 study by Dr. Benjamin Scafidi, 72 percent of New Hampshire’s average per-pupil expenditures varied with short-run changes in enrollment. However, even using an extremely conservative estimate of 40 percent variable costs, the local and federal funding more than covers the average school’s fixed costs, meaning that decreases in enrollment translate into significant savings for district schools and more resources for students who choose to remain in public schools.

In other words, it is unlikely that the district schools will feel a fiscal impact from students leaving to accept an ESA. As it is, states that have similar educational choice programs tend to have take-up rates that are less than 5 percent—usually 1 percent in the first year and 2 percent in the second year—of the total student population, even when much higher percentages of the population are eligible. The impact on participating students can be tremendous, but the fiscal impact on district schools is barely noticeable.

Indeed, contrary to the choice opponents’ predictions of doom, the research on educational choice finds that district schools improve their performance in response to increased choice and competition. As Dr. Anna Egalite explained in a study published as a part of Harvard University’s Program on Education Policy and Governance Working Paper Series, “Of the 19 published studies of competitive effects from vouchers/ tax credit scholarships, all find neutral to positive results.” The positive effects tended to be modest but statistically significant. Not only do ESAs not “defund” district schools, but the additional competition may even spur them to be more effective.

Accountability to Parents, Not Politicians

Porter’s final objection is over the supposed lack of accountability:

We will be losing control over our tax dollars. Public schools have public school boards, elected by and answerable to the taxpayer. We get to approve the budget, and we get to examine how each and every dollar is spent. We can vote board members out of office if we are not happy with the job they are doing.

Not so at private schools. They have private boards over which the public has no say. The public has no say over the budget, or how money is spent.

This has the accountability question exactly backward. District schools may theoretically answer to the taxpayer, at least indirectly, but they’re not directly accountable to parents. Porter says that “we” can approve the budget and vote members out of office, but “we” often disagree. A parent who wants to change a policy in the district system has to persuade a majority of the school board to go along with her. Failing that, she has to wage a political campaign to unseat board members, which takes a considerable amount of time and energy without any guarantee of success. The zero-sum nature of political control over schools means that parents who disagree with each other – or who disagree with other non-parent taxpayers – are forced into social conflict.

By contrast, in a system of choice, private schools are held directly accountable to parents. Private schools have a strong incentive to meet parents’ needs because they know that if they don’t, those parents can take their child (and their money) elsewhere. With ESAs, the state would still ensure fiscal accountability – making sure that funds are only used for approved purposes – but academic accountability lies where it belongs: with parents.

Moreover, when different groups of parents have different ideas about pedagogy or curricular content, they can select the schools that align with their values and preferences rather than attempting to force their views on their neighbor. ESAs therefore not only make education providers directly accountable to parents, but they also foster a more peaceful educational pluralism.

Empowering Parents

Porter claims that supporters of school choice “begin with the assumption that our public schools are failing,” but that’s simply not the case. Even if every school performed well on average, as many of New Hampshire’s district schools do (including the ones I attended), there is no school that can best meet the needs of all the students who just happen to live nearby. As Porter herself concedes, “Not all kids fit in all settings.”

We shouldn’t expect every school to be all things to all students. Rather, we should empower parents to choose the learning environment that works best for their children. Education savings accounts are a constitutional and fiscally responsible way to do exactly that.