School Choice Saves Money for Government Schools – and Governments

(Guest post by Greg Forster)

OCPA carries my latest on how school choice saves money for government schools, as well as state budgets:

That choice “drains money” from affected government schools is a canard. If I choose to have my appendix taken out at St. Paul’s Hospital, I am not “draining money” from the budget at St. Peter’s—not robbing Peter to pay Paul, as it were. If the government sues my business for declining to make a wedding cake for a man who’s marrying a shoe, and I choose to hire Atticus Finch to defend me, I am not “draining money” from Perry Mason. The government school monopoly is the only place anyone ever thinks of people as “draining money” from every service provider they don’t choose to work with.

Many JPBGers will be familiar with the reason choice typically improves the budget situation in affected government schools: variable costs, which go down when a student leaves, are much larger than variable revenues. This means that when schools lose a student, while their revenues go down, their costs go down even more.

A large body of empirical research confirms this. See this recent major study by Marty Lueken.

There are, of course, a few provisos and a couple of quid-pro-quos:

Whenever a choice program is enacted, education special interests wail to the cameras about the enormous proportion of their budgets supposedly made up of fixed costs, which remain in place when students leave. It’s a funny thing, though; when state legislative committees get together every year to set funding formulas for state support that’s based on enrollment, those same lobbyists suddenly get a strange form of amnesia. They wail to the committees about their need for big per-student allotments from the state to cover their enormous variable costs….

It’s also true that children who enter a choice program when they are beginning school for the very first time do not save government schools money, although they do save states money (because they never enter the more-expensive government school system). The evidence finds this isn’t a big enough effect to remove the net savings. Also, if a choice program gets high participation, we can expect local governments eventually to adjust their tax burden—but that’s very unlikely either to happen quickly or to remove all the savings.

Above all, you know who is in the details. The specific design of each choice program determines how much is saved. Some programs are revenue-neutral for schools and/or states. A few even cost small amounts rather than saving money, because the program design didn’t prioritize savings.

This is yet another reason to favor ESAs, which – unlike vouchers or tax-credit scholarships – allow us to know in advance precisely how much money each participating child will cost, thus allowing us to exert very fine control over the fiscal impact of the program when we design it.

It will cost you nothing to let me know what you think!

One Response to School Choice Saves Money for Government Schools – and Governments

  1. Malcolm Kirkpatrick says:

    Why not mandate that school districts –must– hire parents on personal service contracts to provide for their children’s education if (a) the parents apply for the contract and (b) the children are at or above age-level expectations (say, the district’s median score) on standardized tests of Reading and Math?
    Parents could then homeschool, hire tutors, extend daycare to age 18, or supplement the contract amount and pay tuition to an independent or parochial school.

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