School choice has saved $444 million
Article from the Friedman Foundation
May 09, 2007

New study analyzes fiscal impact of the nation's school choice
programs

INDIANAPOLIS—A landmark new study finds that school choice programs
throughout the country generated nearly $444 million in net savings
to state and local budgets from 1990 to 2006. Contrary to opponents'
predictions, the analysis also finds that instructional spending per
student has consistently gone up in all affected public school
districts and states.

"School choice saves. It saves children, and now we have empirical
evidence that it saves money," said Robert Enlow, executive director
and COO of the Milton and Rose D. Friedman Foundation. "In the face
of $444 million in savings, another excuse to deny children a
quality education has vanished before our eyes."

Released by the Friedman Foundation, "Education by the Numbers: The
Fiscal Effect of School Choice Programs, 1990-2006" provides the
first comprehensive analysis of how the nation's school choice
programs have affected state and public school districts. Of the 12
voucher and tax-credit scholarship programs that began operations
before 2006, every program is at least fiscally neutral, and most
produce substantial savings. Seven more programs have been created
since 2006.

"Programs giving parents freedom to choose in their child's
education are growing rapidly in number and size," said Dr. Susan
Aud, author of the study and a Friedman Foundation senior
fellow. "And a program's fiscal impact has become an important
political issue. This brings empirical evidence to that debate."

For years, opponents have claimed that school choice reduces
spending in public schools. Yet the study's analysis of the states
and school districts where school choice is available finds that
this is not the case. Instructional spending in areas affected by
school choice has uniformly increased.

"Opponents of educational freedom will find it tougher to bend the
truth. Our research adheres to the highest standards of scientific
rigor," said Enlow. "We've seen seven school choice programs start
in just the last year because evidence of the benefits are growing
just as rapidly."

The Friedman Foundation has provided analysis to many states on the
fiscal effect of proposed school choice measures. Consistently, the
studies – for states like Arizona, New Hampshire, Utah, Virginia,
Minnesota and Kentucky – point to substantial savings.

The study can be downloaded at
http://www.friedmanfoundation.org/friedman/research/ShowResearchItem.
do?id=10079.

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FLORIDA (excerpt)

Like Arizona, Florida was an early entrant to the school choice
movement. The school choice programs that it has offered
to date target particular types of students. The McKay Scholarship
Program is a voucher program for students
with disabilities, the A+ Opportunity Scholarship Program is a
voucher program for students in chronically failing
schools, and the state also has a corporate tax-credit scholarship
program for low-income students. In the 2005-06 school
year more than 31,500 students in Florida received vouchers and
scholarships from these three programs. Although this
represents only 1.2 percent of Florida's 2.5 million students, the
state has been a school choice leader.

Florida's public education funding system is known as the Florida
Education Finance Program (FEFP).10 The FEFP
uses a foundation funding amount per student, the Base Student
Allocation (BSA), and multiplies this by the weighted
number of full-time equivalent students in each district.11 The
weights are mainly based on student grade levels, with
add-on weights for severe special needs, English language learners
and vocational students. In addition to the BSA there
are several categorical programs, the funding of which is determined
according to separate formulas. The total FEFP
amount for each district is then divided between the state and the
district according to the district's ability to pay, as
determined by property values and legislatively determined tax
rates. So the total FEFP amount represents both state
and local funding. The state's FEFP spending rose from 76 percent of
total state spending in 1999-2000 to 85 percent in
2003-04.

1. A+ Opportunity Scholarship Program

The A+ Opportunity Scholarship Program was established in 1999 and
offered students in chronically failing schools the
opportunity to attend a private school of their choice with school
vouchers. To be considered chronically failing, a school
had to have received a state rating of "F" for two consecutive
years, based on its scores on the Florida Comprehensive
Assessment Test. In 2006, the Florida Supreme Court struck down the
A+ program. Since then, students who were previously
receiving A+ vouchers have been made eligible to receive
scholarships through Florida's tax-credit scholarship
program (see below).

During the seven years that this program was in existence, students
received vouchers that averaged between $3,000 and
$4,100 each. In each year, the average voucher amount exceeded state
formula spending per student, and the growth in
the average voucher amount was greater than the growth in the state
FEFP spending per student. However, districts
had the total voucher amounts for their students deducted from their
state aid. Therefore, the program resulted in a
total savings to the state of about $2 million (see Table 3). This
represents the difference between what the state paid for
vouchers and what it would have paid for the same students in FEFP
aid to public schools.

Although the A+ program reduced state aid to local public school
districts, the average instructional spending per student
in Florida was greater than this amount for each year of the
program's existence. This created a net fiscal savings
for school districts. Over seven years, their total net savings was
about $1 million (see Table 3).

2. McKay Scholarship Program

The McKay program is slightly more complicated to analyze than most
other voucher programs. Its participants are
disabled students, and these students require additional educational
resources. Thus, in addition to state FEFP spending, the state's
portion of funding for Exceptional Student Education (ESE) and ESE
transportation programs must be
considered. There is substantial variation in the amount of funding
associated with each disabled student, so we cannot
calculate the effect on state fi nances without more data than we
possess. However, the amount of the voucher is limited
to actual spending that the student would have generated in public
school, so the worst possible case is that the program
is revenue neutral for the state. If students do not use the full
amount of the voucher because their private school tuition
is less than this amount, then the program would generate a savings
for the state.

However, we can calculate the fi scal impact on local public school
districts. Florida's average instructional expenditures
for exceptional students are known to have exceeded the average
McKay voucher amount for each year.12 As the program
has grown, the annual cost savings to school districts have grown to
more than $40 million per year, totaling $139
million over seven years (see Table 4). It is likely that, as more
parents choose to exercise choice through this program,
the savings will grow.

3. Corporate Tax-Credit Scholarships

Finally, Florida's corporate tax-credit scholarship program has
provided scholarships of up to $3,500 to eligible students
since 2002. Students must have family incomes of no more than 185
percent of federal poverty guidelines to participate.
While $3,500, the scholarship limit set by the legislation creating
the program, is more than the state portion of FEFP
spending per student, the dollar amount of the scholarships has been
constant over the four years of the program's existence
while the state's FEFP spending per student has increased. By 2005-
06 the two amounts were virtually even, and
by 2006-07 the program is probably resulting in a savings to the
state (see Table 5).

As with Florida's other school choice programs, the state formula
revenue lost by districts through the corporate taxcredit
scholarship program is less than the amount that local districts
would have had to spend for the basic instructional
needs of the participating students had they remained in public
schools. The total savings to local public districts over
the four years of the program is more than $53 million (see Table 5).
The combined fi scal impact of the three Florida school choice
programs indicates an increase in state education costs of
$10 million. However, this increase is dwarfed by a total savings to
local public school districts of $194 million. This net
savings of nearly $184 million occurred even as parents' options and
overall satisfaction increased.13