A Choice Option that Saves Money for Public Schools?

Last June, shortly after the U.S. Supreme Court issued its historic ruling upholding the Cleveland school voucher program, organizations opposed to school choice criticized the decision. For example, Ralph B. Neas, president of People for the American Way, warned that the decision would cost public schools “millions of dollars.”

If that’s the crux of objections to school choice, the problem is easily solved.

A tuition tax credit could be crafted so that it would not drain funds from public schools at all. In fact, such a tax credit—for parents, individuals or companies who pay private school tuition or contribute to scholarship funds—could actually increase average per-pupil expenditures in the public schools.

How would such a system work? Suppose Michigan voters amend the state constitution and enact an educational tax credit initially worth $600. A reasonable assumption is that parents of about 5 percent of all current public school children in the state (about 85,000 children) would take advantage of the tax credit from the first year. This would mean a total of approximately 265,000 children would be eligible for the $600 tax credit—the 85,000 children who leave Michigan’s public schools, plus the 180,000 children currently enrolled in Michigan’s private schools.

Multiplying the $600 per child credit by the number of eligible children comes to around $159 million in the first year. This constitutes the “loss” opponents often cite as the reason why we should reject school choice.

But this loss can be recouped in a couple of ways. First, a point opponents regularly neglect to mention is that when a child transfers from a public school, it’s true that the school district no longer receives the state funding allocated for that child—$6,700 per student in fiscal 2003—but the state and district are also relieved of the cost of educating that child. Although everyone understands these savings don’t translate into simply doing everything “$6,700 cheaper” for each child who changes schools, it also is true that the savings are substantial, and not to be ignored in tallying the tab for school choice.

On top of that, state lawmakers could craft a tuition tax credit in such a way that when a parent makes use of the credit, the public school district could keep the $6,100 remainder of the per-child foundation grant. In other words, instead of posting a $6,700 budget loss when a child leaves for private school, school districts could keep the $6,100 left over—it is still being paid by the taxpayer taking the credit, after all—and use it to improve educational quality.

Multiply the $6,100 school districts could keep by the 85,000 students likely to take advantage of the credit, and it comes to a cool $518.5 million per year. In the first year after the enactment of tax credits, then, the basic state aid fund could increase by nearly $360 million—$518.5 million minus the $159 million loss due to the $600 tax credit—for the remaining 1.7 million public school children. The amount of the credit could be gradually increased over a number of years to a maximum, as recommended by the Mackinac Center for Public Policy, of about $3,500.

These savings are already in evidence in a way we seldom realize: If all the children now in private schools were to switch to the public system, Michigan taxpayers would have to pay more than $1.2 billion in additional taxes. A well-crafted tax credit plan will simply relieve the public schools of the obligation to teach a relatively small percentage of students across the state, while providing the resources to increase the average student expenditure.

In the end, the charge that choice drains funds from public schools is a red herring designed to obfuscate the real issue: Too many public schools are failing our children and parents are demanding options. Tax credits could give those children and parents some real hope, save money for the public school system, and give public education new competitive incentives for improvement.

Vouchers failed in Michigan in 2000, but that doesn’t mean school choice is dead. Recent polls indicate that a majority of the same Michigan electorate that defeated vouchers would support tax credits. School choice is an idea too good to resist for long.

(Kirk Johnson, Ph.D., is director of education policy for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. More information on education policy is available at www.mackinac.org. Permission to reprint in whole or in part is hereby granted, provided the author and his affiliation are cited.)