The Indiana School Scholarship Act (House Bill 1003): Commentary and Analysis

Published June 7, 2011


The Indiana School Scholarship Act (ISSA), signed into law by Gov. Mitch Daniels in May 2011, creates a school voucher program for low- and middle-income families in Indiana, doubles the preexisting cap on a scholarship tax-credit program, and creates a tax deduction for any family that pays out of pocket for educational expenses relating to private or home schools. The full text of the law appears in Appendix 1.

Since the tax credit and tax deduction parts of the bill are small in dollar terms, they are relatively inconsequential. What is notable is the voucher program, a statewide program for families with incomes up to 150 percent of the amount required for the individual to qualify for the federal free or reduced price lunch program. A family of four earning up to $61,000 per year would be eligible to participate in the voucher program.

Households with annual incomes of not more than the amount required for the student to qualify for the federal free or reduced priced lunch programs will qualify for vouchers equal to private school tuition or 90 percent of the state’s current share of per-pupil public school spending, whichever is less. Students from households with incomes between that mark and 150 percent of that mark qualify for vouchers equal to tuition or 50 percent of state per-pupil spending, whichever is less. Vouchers for grades 1-8 are capped at $4,500, but vouchers for high schools are not capped.

The ISSA is a breakthrough for school choice in a pivotal state. Although participation is limited to 7,500 students in the first year and 15,000 in the second, there is no cap after the second year. The amount of the vouchers for high school students is likely to be greater than that of other voucher programs already operating elsewhere. Millions of children could benefit from the program, and schools will improve as they are subjected to competition.

The comments below identify “good provisions” in the act – language and policies that comport with design guidelines developed by experts on school choice legislation over the years2 – followed by “bad provisions” in the act – language and policies that contradict those guidelines. Singling out good provisions is a way to direct policymakers in other states to good language and ideas as they work to design their own school choice programs.

The criticism implicit in the “bad provisions” is not aimed at the law’s architects or supporters, since every law is the product of compromise and negotiation. By seeing the shortcomings of the ISSA, policymakers can avoid making the same mistakes, and perhaps school reformers in Indiana can work to improve the law.