This is the first in a series of three blogs over the coming weeks that will investigate ways for improving Milwaukee’s failing education system. Today, we examine the concept of Education Savings Accounts (ESA).
In light of the continual failure of Milwaukee Public Schools to undertake even the most modest reforms, there are increasing calls for a larger scale overhaul of the school district, such as breaking up the largest school district in the state. Why the urgency? According to the Department of Public Instruction, more than 80% of the students in Milwaukee’s 55 failing schools scored ‘basic’ or ‘below basic’ on the Badger Exam in mathematics. These students are also about 10% more likely to be economically disadvantaged than students in other Milwaukee schools.
But could an Education Savings Account (ESA) be the solution for students trapped in Milwaukee’s failing schools?
In a recent WILL study, “A 21st Century Education Policy,” WILL President Rick Esenberg and Education Policy Analyst Alexandra Hudson explained how ESAs are the latest tool for education reform throughout the country. With an ESA, parents can use an account from the state to pick and choose education services from a wide variety of providers to best fit the needs of their children.
Some may dismiss an ESA as simply another version of the MPCP. Yet, in reality, an ESA affords a parent far more freedom in tailoring an education specific to their child, and will do significantly more to foster market competition among all education service providers in Milwaukee. Let’s explore each point at greater detail.
Access to more services: Whereas a voucher in the Milwaukee Parental Choice Program opens doors to a private school (which is very worthwhile), an ESA could give parents greater opportunity to mix and match services that are judged to be of the greatest benefit to their child, such as summer school, and after-school programs. For example, a parent could utilize a portion of their ESA to fund attendance at a private school, while utilizing another portion to fund a tutoring program in a subject area in which their child struggles. Another parent may save a portion of the ESA to help fund a summer school program.
By opening up access to programs beyond the traditional school day, an ESA could help close the achievement gap between poor – predominately minority – students and their peers.
Education scholarship shows that the time disadvantaged students spend out of school is one of the key causes of the achievement gap. Programs that fill out-of-school time with enriching activities can reduce this. For example, participation in after school activities has been found to increase academic performance and motivational attributes among poor students. Even more problematic is the time that poor students spend out of school in the summer. Differences in exposure to enrichment activities in summertime, particularly in the elementary school years, is a key component of the achievement gap that exists by the time rich and poor students enter high school. An ESA would allow parents to pay for after school and summertime activities for their children that would keep them away from the negative social environment that may exist in their home community.
Market Discipline on Cost: This idea only works if market forces can keep control on school spending; otherwise, the ESA will be spent entirely on school. Currently, state-law prohibits schools from charging students more than the voucher amount. While this is admirable for keeping the option for voucher schools open to everyone, it also introduces a severe limit on competition. By providing a single voucher that is accepted for full payment at every choice school, there is little ability for educational prices to adjust based on market demand, nor particular educational programs that have greater market value (e.g. STEM classes) to come to the fore. Despite decades of choice under the voucher system, Milwaukee Public Schools still ranks 13th in the country in per-pupil spending among districts with more than 40,000 students. Previous research by WILL has shown that traditional public schools in Milwaukee are significantly less efficient with taxpayer dollars than choice schools, providing even more evidence that the current system has not introduced sufficient competition.
School Choice 2.0: While the current voucher system is a step in the right direction, it falls short of living up to Milton Friedman’s vision of fostering an educational marketplace and disrupting the status quo monopolies. Under an ESA, parents are encouraged to exercise discretion with their spending so that they can either have the money to pay for additional educational services and/or save money from the ESA for subsequent educational expenses such as college. Because Milwaukee schools would be competing for these education dollars, they would face a large incentive to either increase the quality of education that they offered or to lower the cost of their current education sufficiently to compete for ESA dollars.
Issues to consider: Like any major reform, the devil is in the details and there are a number of issues that policy-makers will have to consider, such as:
- Where does the money come from? There are a number of ways that an ESA program could be funded. It could replicate the funding method of the current Milwaukee Parental Choice Program, funded through a combination of taxes at the state and local level. Alternatively, some states, like Florida, have utilized a tax credit scholarship as the means of funding the program. A tax credit ESA is funded by donations to a general fund by individuals or businesses that is tax deductible for the donor. While tax credits may have less of an impact on the state financially, they also introduce uncertainty into the funding of the ESA as it can never be known how much companies and individuals will contribute. Such funding methods may be most useful in states with strong Blaine amendments such as Missouri, where funding school choice through traditional means is challenging. This is something that is not a major concern in Wisconsin.
- Who would be eligible for an ESA? Some states have limited ESAs to certain categories of students. For example, Arizona limits ESAs to students in schools earning a ‘D’ or ‘F’ on state report cards (among other categories). In contrast, the proposed ESA in Nevada is far broader, encompassing the vast majority of students. Implementing an ESA that is limited to students in failing schools has the advantage of being more palatable to legislators.But the creation of a functional education marketplace requires the creation of an ESA that is as broad as possible. Schools must have an incentive to set prices for educational services that the market will support. If only a portion of parents in the school system have the ability to negotiate prices, this incentive will be lessened. While there are a number of public schools that perform well, the system on the whole is in dire need of reform.
- Where can an ESA be used? While students may be able to take classes at a public school, the primary purpose of an ESA is to give parents options outside of the traditional public school environment. One option is to place MPS on an even-playing field with other education providers when it comes to ESA dollars. Public schools could compete for ESA dollars under this system, but would not be given any additional funding beyond the ESA when taking on an ESA student. This system has the advantage of further instilling an educational marketplace, as all education providers would be encouraged to provide what the market desires. A second option is to explicitly ban ESA participants from using public school services. This system would function more like the traditional voucher system, and would exclude MPS from competing for ESA dollars.
- Access to additional services? In order for parents to have the ability to take advantage of an ESA for additional services like summer school, the amount of the ESA must be closer to the per-pupil funding level than the current voucher, which is at least $3,000 less. Parents must have sufficient funding to negotiate for extra services, and an ESA that barely funds current tuition is unlikely to suffice.
- How exactly does it work? Different states have implemented different models for delivery of ESA funds. Arizona uses a pre-funded debit card which parents can then use for approved educational services. Other states have utilized a reimbursement system. Each system has pluses and minuses. A reimbursement system makes fraud prevention easier, as the government exercises discretion on whether or not to fund every request. On the other hand, a reimbursement system may prevent many poor parents from taking advantage of ESAs, as they lack the funds to pay for educational costs up front.
- Can ESAs co-exist with MPCP? Whether the ESA would co-exist with the current MPCP system or replace it is a critical question. The most straightforward system might be the conversion of the current MPCP system into an ESA. However, this is likely to meet with high levels of political discord that would make legislation difficult to pass. Those parents who are happy with the education their children are receiving in their choice school could continue to utilize the MPCP, while parents who wanted more options for their child could take advantage of the ESA. One potential model for coexistence is Florida, where a disability voucher and a disability ESA exist simultaneously. In Florida, the voucher is available to a broader group of students, while the ESA has a significantly higher average funding amount (approximately 35% higher). If an ESA is created at a higher funding level than MPCP, however, it is likely that the MPCP would gradually whither as more parents would choose the program with greater control and greater funding.
- How will fraud be prevented? Policymakers must set up systems to prevent the expenditure of ESA funds on non-educational items. Similar systems are already in place to prevent fraud in Wisconsin’s public assistance programs, and should serve as a model for institutional control of an ESA.
In the early 1990s, Milwaukee was at the forefront of education reform. Under the leadership of people like Superintendent Howard Fuller, the city was the first in the country to implement broad-based school vouchers. This program has had many benefits for participants, including increased graduation rates and lowering the likelihood that participants will become involved in the criminal justice system. However, the leadership for continued reform is clearly absent in Milwaukee Public Schools today. An ESA takes power away from a school system that seems content to allow it’s children to fail, and puts it in the hands of parents to take control of their children’s educational experience.
CJ Szafir is vice-president of policy and deputy counsel and Will Flanders, PhD, is Education Policy Director at WILL.