Provide Adequate Funding

Tuition vouchers or tax credits should be sufficient to enable parents to choose high-quality schools, including parochial schools as well as secular schools that are not subsidized by churches, temples, or mosques.

Setting the Value of Vouchers and Tax Credits

Ideally, the amount of tax dollars following students to the schools chosen by their parents should be the same no matter what kind of school it is: public, private, charter, secular, or religious. The current weighted per-pupil funding formulas used by many public school systems could be the basis for setting the voucher or tax credit level.

If parents of children already attending private schools become eligible for tax dollars or tax credits, spending on public schools would have to be reduced or overall public spending would have to increase, perhaps requiring tax increases. To avoid these politically unpopular alternatives, voucher and tax credit advocates have proposed limiting eligibility to students currently attending public schools or setting the voucher or credit amount below current public school per-pupil spending (Merrifield 2001; Bast 2002a).

Various levels of support have been proposed, ranging from tax deductions of $250 or less to vouchers worth $10,000 to $12,000 per year for children from the poorest 20 percent of families (Reich 2000). Milton Friedman, one of the earliest proponents of vouchers, originally called for them to be set at levels equal to the current per-pupil spending of public schools (Friedman 1962). He later recommended a lower voucher value reflecting the ability of the private sector to produce goods and services at approximately half the total cost of the public sector (Friedman and Friedman 1980).

Allow Parents to Add to Vouchers and Tax Credits

The lower the dollar value of school vouchers and tax credits, the greater is the need to allow parents to pay part of the tuition directly. Such “tuition add-ons” have the advantage of coaxing parents to become more closely involved in their children’s education (Coulson 1999).

Opponents of vouchers, and some voucher proponents as well, oppose tuition add-ons fearing they would worsen socioeconomic stratification and racial segregation in education (Witte 2000; Coons and Sugarman 1978, rev. 1999). Such fears are misplaced.
Most private schools in most parts of the country are not characterized by ethnic or social segregation; many already educate large numbers of low-income and minority students (Alt and Peter 2003). In fact, by some measures, public schools in major cities are more segregated than private schools (Peterson et al. 2001). Current pilot voucher programs show that even low-value vouchers make effective and integrated schools available to low-income and minority students (Rouse 2000; Moe 2001). Given this range of considerations, what is the most productive solution?

Reward Parents who Choose Less-Expensive Schools

If voucher or tax credit levels were set at current public school spending levels, schools that currently spend less could raise their tuition to the amount of the voucher or tax credit. Parents, insulated from the true cost of the schooling their children receive, would not be price-conscious shoppers, and schools would not be encouraged to become more efficient.

To avoid this problem, voucher proposals can establish Education Savings Accounts (ESAs) in the name of each qualified student, into which parents can deposit the difference between the voucher value and the actual tuition charged (Bast 2002; Ladner and Dranias 2011). If a voucher were worth $7,000, for example, and a parent chose a school charging $6,000 for tuition, the $1,000 difference would be deposited in the student’s ESA. Withdrawals from the ESA would be permitted only to pay for tuition, tutoring, and other educational expenses for the student. When a student reaches a certain age (19, 21, or 23 are often suggested), anything left in the account would revert to taxpayers.

Recommended reading: John Merrifield, The School Choice Wars (Kent, England: Scarecrow Press, Inc., 2001); Matthew Ladner and Nick Dranias, “Education Savings Accounts: Giving Parents Control of Their Children's Education,” Goldwater Institute, January 28, 2011.