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Beyond Vouchers: How Trump Could Boost Private School Choice

By Andrew Ujifusa — December 19, 2016 8 min read
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Since President-elect Donald Trump nominated Betsy DeVos to be his education secretary, there’s been a lot of discussion about how a Trump administration could expand school choice. Could Trump and DeVos, for example, push to “voucherize” at least some federal education money? Trump has expressed support for the idea on the campaign trail through his $20 billion choice proposal, and DeVos has a long history of backing vouchers in Michigan and elsewhere.

But getting vouchers through Congress might be a very tough sell. Similar proposals, including the idea of making Title I money for disadvantaged kids “portable” at states’ discretion, have been tried before without success. And there are also big questions about a federal voucher program’s reach and logistical challenges. So what other avenues are there for Trump, DeVos, and Congress to expand private school choice? Let’s explore a few of them.

Tax-Credit Scholarships

Generally speaking, tax-credit scholarships allow individuals and corporations to claim a tax credit of some kind, in exchange for a donation to an organization that provides scholarships to children. So, unlike vouchers, they don’t involve the government directly providing financial support to parents for school choice.

Right now, according to EdChoice (formerly the Friedman Foundation), 17 states provide some form of tax-credit scholarships for students. In 2015, Sen. Marco Rubio, R-Fla., and Rep. Todd Rokita, R-Ind., introduced the Educational Opportunities Act, which would grant a tax credit of up to $4,500 for individuals and $100,000 for corporations that provided donations to nonprofit scholarship-granting organizations that award needs-based scholarships to defray students’ cost of private school scholarships. The American Federation for Children, the school choice advocacy group chaired by DeVos until recently, applauded the legislation when Rubio and Rokita introduced it.

President-elect Donald Trump greets Betsy DeVos, his pick for education secretary, during a rally in Michigan. If confirmed, she would be part of the tidal wave about to sweep through Washington as political appointees take over key policy positions in federal agencies.

Here’s one major advantage that a tax-credit scholarship program could have in Congress: To pass it, lawmakers could use a process called budget reconciliation that would only need a majority of votes in the GOP-controlled Senate to get approval. That would mean such a program would be immune from a possible filibuster led by Democrats opposed to using the federal tax code to support school choice. By contrast, budget reconciliation could not be used to make federal Title I money “portable” to private schools.

“It doesn’t upset the apple cart of Title I or create a brand-new funding stream within the Department of Education that would annually need to be appropriated. It definitely has upside,” said Andy Smarick, a resident fellow at the American Enterprise Institute who recently wrote about how the federal government should consider supporting private school choice.

(Congress could use reconciliation to pass a new, one-time $20 billion school choice program run by the Education Department. But it’s unclear whether that would get the required votes either, and the vote could hinge on the funding source.)

And here’s another possible advantage of that approach for choice advocates: States without tax-credit scholarship programs could be motivated to start their own if they see other states with such programs on the books taking advantage of any new federal tax credit, said Adam Peshek, the director of education choice at the Foundation for Excellence in Education. And a federal, nationwide tax credit could also increase interstate support of such scholarship programs, he added.

“Someone in the state of Wyoming, where this is no such [scholarship] granting organization, could donate to one in Georgia,” Peshek said.

Major questions around any such legislation would include any required qualifications for scholarship-granting organizations, if there would be a cap on the total tax credit available, and whether it would means-test potential students for economic background (or other characteristics) or be universal.

So what are the potential downsides? Republicans who want the federal tax code simplified might not look too kindly on any such tax-credit scholarshp program, Smarick said: “Although this would accomplish a policy goal, it would add complexity to the way we calculate taxes.”

And other lawmakers might have concerns about the loss of federal revenue under such a program.

Although such scholarships may not have the profile (and attract the controversy) that vouchers do, Peshek noted, it’s unclear how those outside the school choice community would respond to such a proposal in Congress. So factors like eligibility and caps on the total tax credit could be key.

UPDATE: Christopher T. Cross, the chairman of the education consulting firm Cross and Joftus who has served in the U.S. Department of Education and as a congressional staffer, has written us to point that any tax bill creating such scholarships could shift the politics of the issue significantly.

“It is important to remember that any tax bill, including tax credits for education, would be within the jurisdiction of the Ways & Means Committee in the House and the Finance Committee in the Senate. This would change the dynamics of education legislation as the regular education committees would not be the focus of action,” Cross writes. “The ‘usual suspects’ in education debates—teachers’ unions, state chiefs, school boards, administrators and civil rights organizations—may not be organized to lobby in this different environment.”

2-for-1 Scenario

Coverdell Education Savings Accounts are IRS-authorized education savings accounts—contributions to them aren’t tax deductible, but the money in them grows tax-free. They can be used for expenses at elementary and secondary schools, including private and religious ones. Eligible expenses include tuition, books, academic tutoring, and services related to students’ special needs. (They can also be used for higher education expenses.) The catch? There’s a maximum annual contribution limit of $2,000.

529 plans, also authorized by the IRS, are designed to help students save for higher education. There are two kinds: college savings plans and prepaid tuition plans. They’re sponsored by states and educational institutions. The contribution limits for many college savings plans exceeds $200,000.

Here’s Peshek’s suggestion: Congress could find some way to essentially combine the two and create a new education savings account applicable to K-12 (the way Coverdell is now), but without Coverdell accounts’ $2,000 annual contributions cap. “You could have some real money to play around with,” Peshek said.

A Capital Idea

Although it wouldn’t have the potential nationwide reach of other ideas, Peshek noted that expanding the District of Columbia Opportunity Scholarship Program is a straightforward way for Congress to expand choice in the nation’s capital.

There were 6,486 scholarships awarded under the Opportunity Scholarship program from the 2004-05 school year through the 2015-16 school year. For the 2016-17 school year, individual scholarship awards are up to $12,679 for high school and up to $8,452 for elementary and middle school.

President Barack Obama has been at odds with Republicans in Congress on this issue—many GOP lawmakers have been big fans.

Lessons From Charters

Smarick believes any such effort should heed lessons from the federal Charter School Program. This program provides money to help new charter schools get off the ground. It began in 1994, and since 1995 has spent less (about $3 billion, including $333 billion in fiscal 2016) than Obama-era Race to the Top grants, according to Smarick.

Here’s Smarick’s idea: an annual $250 million federal grant program to promote private school choice, the Diversity and Choice Demonstration Program—Smarick calls this appropriation “modest.” Of the total program, $240 million would be reserved for the actual grants, and $10 million would be for federal administrative expenses, with an average grant award of $24 million over three years.

Eligible grant proposals would include those from existing networks of private schools looking to expand, from nonprofits seeking to expand tutoring services eligible for use in education savings accounts, and from someone looking to train people to start new schools. Also receiving consideration would be nonprofits seeking to create measures of quality of private schools, and state education departments looking to develop an “inspectorate” approach to assessing school quality.

“The thread connecting these (and other successful) proposals is the development of diverse, high-quality, highly accountable, choice-based programs,” Smarick writes in his AEI paper.

Getting Online

Private online high schools aren’t a particularly large sector of online schools overall, let alone the broader K-12 sphere. A report examining online learning published last year by the Evergreen Education Group states, “The usage of online learning in private schools is generally lower than in public schools, but the use of supplemental online courses is growing. In some states, private school students have access to publicly funded online options on a limited basis; these may be used by students separately from their private school.”

Barriers to online education in private schools, according to the report, include:

  • Online education not necessarily providing the personal attention for students many private school parents expect;
  • Cultural or religious beliefs;
  • Teachers having greater control of their classrooms than in public schools, making school-level changes difficult.

The report did say that there is some activity among Catholic schools to increase online education, and cites the Virtual Catholic High School as one example. The report stated that as of 2015, 4.9 million students attended private schools, with 32 percent of those students attending nonsectarian or independent schools.

How else could Trump, DeVos and Congress look to expand private school choice other than vouchers? Leave your thoughts in the comments section.