Research & Commentary: Education Savings Accounts

Published November 8, 2012

A new report pinpoints education savings accounts as the next-generation school voucher system for states committed to real education reform. ESAs deposit state per-pupil education spending into an account that parents control, letting them choose how to spend their child’s education dollars among different options such as online and in-person classes, tutoring, and textbooks, and to save some for future college expenses. ESAs have two advantages over the typical voucher program, says report author Matthew Ladner: greater freedom for families, and fewer state constitutional barriers. The greater freedom and flexibility improve on the cost and quality benefits vouchers offer.

ESA opponents offer many of the same objections they make toward conventional vouchers, as both proposals vest parents with the final authority over their child’s education. Anti-reformists argue government funds should not be controlled by individuals and families because the money is intended to benefit the entire public, and they say increasing the variety of schools may decrease mixing of children of different backgrounds. They express fear of budget cuts and layoffs because vouchers could reduce enrollment at public schools. They also claim private accounts are ripe for waste, fraud, and abuse of taxpayer dollars. Finally, they object to parents spending public money on private institutions because some of the latter may earn a profit.

ESA proponents note the accounts actually expand diversity by allowing families to choose among varied schooling styles and learning communities. Empowering families who previously could not afford school options suggests choice schools will enroll children from a greater variety of backgrounds. Children who attend private schools tend to be better socialized and more tolerant than those attending public schools, and they are better educated. All of this makes them more likely to become more productive and informed citizens.

This variety and choice make an ESA system more equitable and just than the current system of assigning children by geographic location. As to the effect on educators, increasing the number of schools will create greater demand for good teachers and allow them to specialize.

Although tax fraud could occur in an ESA system, fraud already occurs in public schools—and in fact the opportunity for fraud is greater in the current system because it gives fewer people more power over greater amounts of taxpayer dollars than do individual ESAs. Public programs that operate on a voucher system, by contrast, have revealed good ways to police fraud.

The following documents offer more information about education savings accounts.


New Report Labels Education Accounts ‘Way of the Future’
A new study says the optimal education system would deposit government K-12 spending in an account for each child, which parents control and can split among various offerings or save for college, School Reform News reports. Arizona’s governor first signed education savings accounts into law for disabled students in 2011 and signed a 2012 expansion to include children attending failing schools, foster children, and military dependents. ESAs expand on the original voucher concept. Funding students directly and giving families both choice and power is the best way to save critical taxpayer dollars and create a custom education for every child, the report’s author says.

Can Education Savings Accounts Level the Playing Field for All American Students?
Education savings accounts rest on the belief that parents should be free to choose the best learning environments for their kids, writes James Marshall Crotty at ESAs are the most innovative way to address the lack of market incentives in education, which has caused mediocrity to reign, imperiled safety, and drastically increased costs. Voucher programs so far have been extremely limited to a small pool of eligible students from one school system (public) to another (private). ESAs could rectify the current economic bias, and concomitant under-supply of students, in existing voucher programs by enabling all parents to become buyers in a genuine free market of school services, he writes.

Education Savings Accounts Offer Hope for Special-Needs Kids
Meet Lexie, the autistic little girl who also has cerebral palsy and who inspired Arizona’s special-needs school choice. She was not getting the care her mother wanted in her public school, reports Jonathan Butcher for the Goldwater Institute, so her mother tried all the options available until the state finally passed a law that allows her to attend a private school for autistic children. There, she thrives.

North Carolina K-12 and School Choice Survey
Fifty-six percent of North Carolina voters support education savings accounts in a poll commissioned by the Friedman Foundation for Educational Choice. Twenty-eight percent of voters opposed the idea. Polling firm Braun Research surveyed 601 people in June 2012 using industry standard practices, with an error margin of plus or minus 4 points.

ESA Basics: Key Points of Empowerment Scholarship Accounts
This fact sheet from the Goldwater Institute discusses how Arizona’s education savings accounts work. It describes eligibility and basic regulations on how parents may use the funds.

Preventing Fraud and Abuse in Education Savings Accounts
Any system that uses taxpayer dollars is subject to waste, fraud, and abuse, notes Jonathan Butcher in the Tucson Sentinel. Experience with government programs such as Medicaid and food stamps provides insight into how to stop and prevent similar fraud in Arizona’s education savings account program. Potential safety measures include random audits, a fraud reporting system, and letting parents buy surety bonds using account funds.

School Finance in the Digital-Learning Era
If states and localities combined their K-12 education spending, divided it by enrollment, and distributed dollars to schools only as students enroll, they could simultaneously eliminate the barriers to innovation and improvement inherent in current funding systems while dramatically slimming costly administrative structures, writes Paul Hill in a working paper for the Thomas B. Fordham Foundation. Parents could be given full access to their children’s education funds and allowed to purchase any form of instruction they wanted from any source. To reduce risk of mismanagement or fraud, he recommends limiting money and education options to small amounts and enrichment programs such as violin lessons.

The Way of the Future: Education Savings Accounts for Every Family
Nobel Prize-winning economist Milton Friedman proposed a system of school vouchers more than 50 years ago to improve education outcomes and efficiency. Technological advances now allow programs that replace state-funded tuition vouchers with actual accounts parents can manage to the last penny. Writing for the Friedman Foundation for Educational Choice, Matthew Ladner notes ESAs allow parents to choose between a much wider range of instruction than under the current system, including schools, tutors, online educational programs, and higher education. This gives parents incentives to judge education providers both on quality and cost—a unique and crucial trait currently lacking in publicly financed K-12 education.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the School Reform News Web site at, The Heartland Institute’s Web site at, and PolicyBot, Heartland’s free online research database, at

If you have any questions about this issue or The Heartland Institute, contact Heartland education policy research fellow Joy Pullmann, at 312/377-4000 or [email protected].