Education Savings Accounts Can Give NC Families More School Choices

Public opinion polls clearly show that North Carolina parents want expanded educational opportunities for their children. Combine that with the growing influence of school choice advocates in the General Assembly and the election of a new Governor supportive of school reform efforts, and you boost the chances that North Carolina will pass significant school choice legislation next spring.

There is no shortage of ways to expand school choice in our state. Traditional options include encouraging alternative education options like charter schools, private schools, home schools and online education. In addition, school choice can also be expanded by using a range of financing instruments that allow students to attend schools of their choice. Financing instruments include: vouchers, individual and corporate tax credits, and tax credit scholarships. The best option for North Carolina, however, might be to offer families education savings accounts (ESAs). Whereas vouchers are state payments usually designated for a specific purpose, ESAs are not vouchers because parents can use them for a varaiety of educational  options.  Parents are in control of how the money is spent.

ESAs: What Are They?

Education Savings Accounts (ESAs) are state-funded bank accounts established to provide an education for qualified students. Arizona passed the first ESA law in 2011. The ESA, formally called the Empowerment Scholarship Account, is available to help special-needs students, students in failing schools, children in foster homes and children of active military personnel. Under the law, families can remove a child from an Arizona public school and use ESA funds to educate him or her in a private or online school, or in a home school setting. Scholarship accounts administered by the state will receive approximately 90 percent of the state per pupil funding. Accounts vary in size from $1,500 to $27,500, depending on the severity of the child’s disability. The Arizona Department of Education and the State Treasurer’s Office coordinate how the funds are deposited and also ensure compliance.

While the state oversees the deposit of state funds, parents have discretion over how the funds are spent. Money from ESA accounts can be spent on tuition, books, tutoring or other educational expenses. Moreover, money that isn’t spent in high school can be used for college expenses.

Are ESAs Legal?  

In 2005 legislation to establish Arizona’s Education Savings Accounts was passed. In 2006, the legislation, based primarily upon Florida’s McKay Scholarship program, was challenged in the courts (Cain v. Horne) and declared unconstitutional. The Arizona Supreme Court said ESAs violated Arizona’s Blaine Amendment, which prohibits state aid or support to religious schools. Thirty-seven states have similar provisions. North Carolina, however, does not have a “Blaine Amendment,” or anything similar.

While the court’s ruling was disappointing, supporters of school choice found hope. The Arizona Supreme Court ruled the ESA violated the constitution because the only purpose for which it could be used was private school tuition. However, the court seemed to leave open the possibility that it would support state assistance if: 1) vouchers could be used for a wide range of options and 2) the vouchers were ultimately controlled by parents.

After schooling for special aid students was disrupted by the Cain v. Horne decision, the Arizona legislature passed legislation that allows parents to use state funds for a range of educational services –not just tuition to private schools. A case to determine the constitutionality of the Arizona ESA program is now pending in the Arizona Court of Appeals.

Would ESAs be constitutional in North Carolina? North Carolina does not have a “Blaine Amendment.” Some experts believe that ESAs can be created to help students attend religious schools in such a way so as not to violate the First Amendment.[1]

ESA Advantages

Parent Power. ESAs shift the power from schools to parents. With ESAs, parents – not the schools — determine where a child will attend school. Parents also control educational funds. They have the power to spend money on a range of educational options, including tuition, tutoring, and books or even saving for college.

Savings. ESAs can save money for the state school system. The Arizona legislation states that only students who have been in the public schools the prior year are eligible for ESAs. That means students already in the private schools cannot benefit from the legislation. In addition, since the legislation provides ESA recipients with 90 percent of the state per pupil funding, the state will be spending less than it normally would be spending on education. The other 10 percent of state funding can be considered savings or be used for administrative expenses.

Competition. ESAs infuse competition into the public school system. Since dollars are attached to the child –not the school — ESAs provide incentives to the public schools to be more student- and parent-focused.

Overcoming ESA Criticisms  

Increased Bureaucracy. Some critics claim ESAs could necessitate creation of hundreds of new jobs to monitor parent spending habits. That isn’t necessarily so. While some staff will have to be added to ensure compliance, contracts with outside agencies can provide a more economical way of ensuring compliance.

Fraud and Abuse. Transferring thousands of dollars to parental bank accounts can be a potential source of fraud. However, fraud and abuse can be deterred through frequent effective monitoring and providing hotlines to encourage the public to expose wrongdoing.

Increased State Control. Acceptance of state funds will mean increased state control for private schools. While accountability is needed, the question is: Can accountability measures be developed that maintain the autonomy and authority structures of individual schools? I believe they can. By ensuring that representatives of private and religious schools are included from the very beginning of the policy process, there is a greater chance that all parties will find accountability mechanisms acceptable.

Conclusion

North Carolina parents want to decide where their children will attend school. Arizona’s Empowerment Scholarship Accounts offer one model for lawmakers who wish to expand school choice in North Carolina. ESAs offer the opportunity to return control of education to parents and also unleash competitive forces into a system in need of reform. ESAs offer parents control over the education of their children by giving them the authority to direct educational spending.

While the Arizona legislation initially ran afoul of the State’s Blaine Amendment and was declared unconstitutional, the state’s new Empowerment Scholarship Accounts are crafted in such a way to withstand constitutional challenge. It is important to note North Carolina does not have a Blaine Amendment. In addition, legislation can be crafted to meet the U.S. Supreme Court’s tests to allow public funds to flow through to private and religious schools without violating the First Amendment (see here[JT3] ).

ESAs offer parents the opportunity to regain control over their child’s education. States can target ESAs on specific populations or create broad categories of eligibility. Either way ESAs are effective ways to expand parental choice and access to quality educational opportunities and infuse competition and reform into the public schools.

ESA’s and Public Opinion

[2]

• 56 percent of NC voters support an “education savings account”.
• 65 percent of NC voters believe ESAs should be available to all families.
• 35 percent of NC voters believe ESAs should be available only to families with financial need.

Learn More:

Education Savings Accounts: Questions and Answers
Education Savings Accounts: A Promising Way Forward on School Choice
The Way of the Future: Education Savings Accounts for Every American Family