Education savings accounts would be costly, wasteful

Hats off to Indiana’s nonpartisan Legislative Services Agency. Thanks to it, we can put a price tag on a proposal for a private-school voucher program open to all students, regardless of family income:

At least $170 million a year.

Statehouse domeHouse Bill 1675, sponsored by Columbus Republican Ryan Lauer, would create what’s called an education savings account program. Students who attend accredited private schools could set up the accounts, and the state would deposit funds that they could use to pay tuition and other expenses.

It would go far beyond Indiana’s existing private-school voucher program, which is already one of the biggest and most generous in the country. It comes close to enacting the “universal voucher” plan that libertarians have fantasized about since Milton Friedman suggested the idea in 1955.

Based on model legislation from the right-wing American Legislative Exchange Council, the bill would let parents spend money from the accounts on a variety of goods and services in addition to tuition, including transportation, curricular materials, computers and exam fees. In other states, flexibility and loose oversight of the programs has led to fraud. An audit of Arizona’s path-breaking education savings account program found $700,000 in fraudulent purchases, with some parents using the accounts to buy beauty products, sports apparel and computer repair services.

The bill says explicitly that the state can’t impose regulations on private schools that participate in the program. That means religious schools that receive the state funding will be able to teach religion and discriminate against students, parents and staff by sexual orientation, gender identity and disability.

Indiana’s current voucher system, called the choice scholarship plan, funds private-school attendance for about 35,000 students at a cost of $154 million. Students who qualify get a tuition subsidy worth 90 percent of the cost of attending public school if their family is low-income, or 50 percent of the cost if their family is middle-income.

The Education Savings Account proposal would boost those figures significantly. Every private-school student, even the children of billionaires and millionaires, would be eligible for a grant worth at least 75 percent of the basic funding that Indiana spends, per student, on public schools – currently about $4,000. Students with disabilities, children of military families and students from low-income families would qualify for 100 percent of what the state spends on public schools.

A fiscal impact statement from the Legislative Services Agency estimates that tens of thousands of students would receive the grants at a cost to the state of $150 million to $170 million a year. But that’s only part of the bill’s cost.

It would also create tax credits for individuals and corporations that contribute to students’ education accounts or to nonprofit organizations that fund the accounts. The corporate tax credits would cost the state up to $12 million per year. The loss of state revenue from individual tax credits is “indeterminable” but could be significant, according to Legislative Service Agency. There would also be costs for the Indiana treasurer’s office, which would administer the program and would be required to market it to the families of all eligible students.

The cost of funding the education savings accounts — $170 million a year – is more than the 2 percent increase in overall K-12 funding that Gov. Eric Holcomb has proposed as part of his two-year budget proposal. It’s a lot of money in a year when legislators say they will struggle to find any money beyond what’s required to upgrade the Department of Child Services and fund Medicaid.

That’s why the bill is not likely to be approved, at least in its current form. But advocates for public schools can’t afford to ignore it. Supporters of education savings accounts could push to establish the program now, with plans to fund and grow it later.

Remember that Indiana’s current voucher program was sold in 2011 to help poor children escape “failing” public schools. Now it has become an entitlement for religious and private education, open to middle-class families. And the cost keeps going up.

1 thought on “Education savings accounts would be costly, wasteful

  1. OMG! HB1675 is another Mitch/Pence GOP way of telling public school teachers .. we don’t believe in you .. and more importantly allow parents to increase discrimination and run away from the real world that public schools symbolize. Parents of public school advocates should be outraged.

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