Education Savings Accounts Catching On in Additional States

Published March 12, 2015

Education Savings Accounts were first approved in Arizona in 2012 as a statewide reform. An ESA program underwent a fast implementation process in Florida in 2014, where this year 1,600 students received funds.

Now ESAs are moving from a two-state phenomenon to potential legislation in more than a dozen states as legislators draft bills, some to serve all students and others population-specific to serve disabled students. ESAs are catching on much like their reform predecessor tax credit scholarships, but education analyst Matthew Ladner compares tax credits to rotary phones and ESAs to iPhones in the evolution of the education market.

Ladner, a senior advisor for policy and research at the Foundation for Excellence in Education, recommends implementation of Education Savings Accounts nationwide.

“Tax credit scholarships and vouchers only do one amazing thing,” Ladner said. “The sort of options that an ESA gives you is the difference between exercising choices between schools and choices between [forms of] education. There is versatility and the ability to customize the education of your child.”

Parents with access to ESAs can customize their child’s education, using the funds to create a unique blend of approved services such as private tutoring, therapy, online courses, and private school, as well as saving for postsecondary education.

“We are in the very early stages of this, but it’s clearly a superior technology,” Ladner said.

Early Success

“[Education Savings Accounts] have given us a ton of positive evidence, [in terms of] student achievement for participants and positive impacts they have on traditional districts,” Ladner said.

Florida polls show parents are more satisfied with their child’s education given the choice of ESAs, regardless of whether they took advantage of the funds.

“Arizona showed you could put parents in charge of a child’s education finances, and Florida is following in those footsteps,” said Patrick Gibbons, public affairs manager for Step Up for Students. “ESAs really are the next step in a long line of steps public education is taking to customize learning for each child.”

Step Up for Students, one of two organizations providing Personal Learning Scholarship Accounts in Florida, has found parents are capable of customizing their children’s education and improving their academic outcomes.

“We are finding in Florida that most of the parents are making smart decisions on services that are easily defined as truly educational,” Gibbons said.

Demand and Supply

Demand is high for low-cost, parent-driven reform measures, and ESAs meet the need, says Andy Smarick, a partner at Bellwether Education Partners.

The nation is still waiting to see the long-term effects of ESAs, he said.

“Charter laws were really good about thinking of the supply of schools, not just demand of parents, and that enabled a new wave of charter schools to be developed,” Smarick said. “[Education Savings Accounts] are good at responding to demand, but we have yet to see how it will affect supply. I’m encouraged, but it’s too early to see [based on current policy].”

The ESA model creates a very powerful incentive for education providers to offer competitive costs for quality services, Ladner said.

Arizona ESAs ranged from $4,600 to $5,400 for 1st-12th grade students this year, with additional funding allotted for disabled students, far below average per-pupil spending in the state.

“One of the allowable uses of the ESA program is to save money for future higher education, up to a limited amount,” Ladner said. “Basically, what this does on the provider end is it creates a powerful incentive to provide as much bang for the buck [as possible].”

ESAs can also offer choice to middle class and upper class families who do not have access to reforms based on income level, he said.

“By putting the money in the hands of parents, we are discovering needs and wants no one considered before,” Gibbons said. “It also enables parents who have students with special needs to enlist the help of health care professionals and others who were previously excluded from the education marketplace. We can’t predict exactly how the market will evolve, but we know it’s going to be parent- and student-focused.”

Quality Control

The ESA approval process in Arizona is technology-based, with debit cards ensuring financial accountability through approved vendors and product codes attached to approved purchases.

Technology developed to improve social services, such as the food stamps program, have provided blueprints for financial accountability and techniques to prevent financial fraud in ESA programs, Ladner said.

The majority of ESA funds go toward private school tuition, with about 35 percent of parents in Arizona “mixing and matching services in the first year,” Ladner said. 

“The public school system and interest groups lobbying tend to view [ESAs] as very threatening,” Ladner said. “Last time anyone surveyed Arizona, there were 30,000 private school seats in the state and well over a million public school kids. The reality is we could shift the entire funding system such that every child’s parent or guardian used a restricted debit card,… but there would [not be enough private school slots] to move every student. The difference would be, they would all be [in public schools] by choice and we would still have a public education system, but it would be run by the parents in a fundamental way.”

Ashley Bateman ([email protected]) writes from Alexandria, Virginia.

Image by Max Klingensmith.