The Leaflet: Education Savings Accounts

Published February 9, 2017

Education savings accounts (ESAs) have become a hot topic of discussion in many states. In January alone, legislators in Arkansas, Missouri, New Hampshire, North Dakota, Oklahoma, Texas, Virginia, and Wyoming – all states where Republicans control both legislative houses – have introduced ESA bills. Research shows ESAs encourage schools to compete to improve the quality of their educational offerings, benefiting children in the states where ESAs have been adopted.

In Texas, Lt. Gov. Dan Patrick has made school choice one of his top priorities for the 2017 legislative session. A proposal pending in the Texas Senate would establish both a universal education savings account and a tax-credit scholarship program.

According to Patrick, the ESA program would allow parents to use the money toward private, religious, or other schools of their choice. In a recent Research & Commentary, Policy Analyst Tim Benson says funds from the ESA program “could also be used to pay for textbooks, tutoring services, online courses, educational therapies and services for disabled students, computers and other approved hardware, and to cover the fees required to take national standardized achievement tests, such as the SAT and ACT.”

Similarly, a proposal in Wyoming would establish two private education choice programs. The first would set up a universal ESA program funded by tax credits.  The second would create a separate tax-credit scholarship program.  In another Research & Commentary, Benson says “providing a universal ESA program would instantly bring Wyoming to the forefront of the education choice movement, and would give all Wyoming families a greater opportunity to meet each child’s unique education needs.”

In a 2016 report titled Surveying State Legislators, EdChoice Vice President of Research Paul DiPerna wrote, “State legislators are twice as likely to say they favored education savings accounts (ESAs), compared with opposing the concept (61 percent favor vs. 30 percent oppose).” Another EdChoice report, A Win-Win Solution, examines 100 empirical studies on school choice programs, including 18 “gold-standard” studies that use random assignment to measure outcomes. The overwhelming majority of this empirical evidence, the report says, shows school choice programs provide parents with equal access to quality schools at lower costs, while simultaneously benefitting public school students. 

Lindsey Burke, the Will Skillman Fellow in Education Policy at The Heritage Foundation, argues in a 2016 Special Reportthat ESAs should be the goal of policymakers in every state. “The best way for policymakers in Texas and elsewhere to expand access to a high-quality education for all children is to provide all families with ESAs that give them the maximum possible freedom to choose the education providers that work best for their children.”

Providing education savings accounts for families is becoming a top priority not only for states such as Texas and Wyoming, but also for the new Trump Administration. Through ESAs, advocates hope school choice will provide parents with the opportunity to choose their child’s school, and encourage schools to compete with each other and improve the quality of education they provide. 

What We’re Working On

Budget and Tax
Research & Commentary: Balanced Budget Amendment in Kentucky
In this Research & Commentary, Lindsey Stroud examines a resolution in Kentucky calling for an Article V convention for a federal balanced budget amendment. “The resolution requires, except when facing a national emergency, such as war, ‘the total of all federal outlays made by Congress for any fiscal year may not exceed the total of all estimated federal revenues.’ If passed, Kentucky would be the 29th state to approve a balanced budget resolution, which means only five additional states would be needed to call for a convention,” Stroud writes.

Health Care
Research & Commentary: 10 Health Care Reform Options for States
In this Research & Commentary, Matthew Glans outlines ten steps state legislators can take to improve the cost and availability of health care in their states. “States should not wait for Congress and the White House to fix health care policy. States can take health care reform into their own hands and help create more competitive, accessible, and affordable care for all residents,” Glans writes.

Research & Commentary: Education Savings Accounts and Tax-Credit Scholarships Would Turn Texas into a National School Choice Leader
Texas is considering a proposal that would establish the Lone Star State’s first private school choice programs. The proposal contains provisions for both a universal education savings account (ESA) program and a tax-credit scholarship program. Funds left in the account at the end of the year would carry over and would be available to help pay for tuition at postsecondary schools. All Texas children that attended a public school during the preceding school year or are starting kindergarten or the first grade would be eligible for the ESA. In this Research & Commentary, Policy Analyst Tim Benson argues that providing a universal ESA would instantly bring Texas to the forefront of the education choice movement and would give all Texas families a greater opportunity to meet each child’s unique education needs.

Energy & Environment
Research & Commentary: Indiana Should End Net Metering
In this Research & Commentary, Policy Analyst Tim Benson writes about a proposal in the Indiana Senate that would end the state’s net-metering program by 2027. Under current law, households with their own electricity generation source, also called “distributed generation,” can sell the excess, unused electricity they generate back to their utility company’s grid. The utility company can then re-sell this electricity to other customers. Net metering is the billing mechanism that measures this excess electricity. Under current law, excess electricity is sold back at the retail-price rate. The pending proposal would change this, returning the Hoosier State to a “buy all, sell all” system. Distributed generation customers would sell all their produced energy, not just the excess, to their utility provider at the wholesale rate and then buy back electricity at the retail rate. Distributed generation usually comes in the form of rooftop solar panels. Owners of rooftop solar panels should be paid for the electricity they sell back to the grid, Bensons says, but they should be paid at the same rate conventional sources are paid, reflecting the true wholesale cost of electricity. Because the costs of maintaining the electric grid are shifted to the owners of homes without solar panels, unfairly raising their monthly bills, Benson writes, state net-metering programs should be reduced and ultimately brought to an end.

From Our Free-Market Friends
The Pioneer Institute Releases Study on School Attrition Rates
The Pioneer Institute recently released a new study that gathers data from the state Department of Elementary and Secondary Education (DESE) showing charter public schools in Massachusetts have lower attrition rates than district schools.  According to author Dr. Cara Candal, “These data disprove the false argument that the charter schools only outperform their district counterparts because charters supposedly ‘push out’ students who are less likely to perform well academically and on state tests.” The study, titled “Attrition, Dropout and Student Mobility in District and Charter Schools: A Demographic Report,” shows charter public schools are recruiting an increasing number of diverse students and helping them achieve positive outcomes. Read More