What does it really cost?

PREVIEW:

School choice legislation consistently costs taxpayers more than projected. In states like Arizona, costs are approaching $1 billion, threatening to bankrupt the state.

School choice funding constitutes a NEW cost for states.

School choice costs consistently exceed budget expectations. Since Idaho’s Constitution mandates a balanced state budget, funding for these programs cannot exceed budget constraints.

School choice funding drives up the cost of homeschool goods and services and the cost of private school tuition.

School choice funding programs are rampant with fraud.

FULL FEATURE

School choice proponents are startlingly silent about the costs of school choice – and there are many. Not all of them are financial, but monetary metrics are a good barometer of the effects of legislation.

When Arizona’s universal school choice legislation passed in 2022, it became the Gold Standard for the nationwide school choice movement. Arizona enacted a limited school choice program in 2011, which specifically gave funds to students with disabilities. In the following years, Arizona’s program expanded to include students in foster care, those living on Indian reservations, those attending failing public schools, and a few other narrow categories. The cost for this limited program was approximately $188.7 million in 2021-2022.

Naturally, in the aftermath of its passage, there was debate across the political spectrum about what the bill would actually cost. Some estimated costs would rise as high as $900 million in 2024 since there was no spending cap on the program. Others estimated the cost to be closer to $700 million. (Note: both these numbers also include the cost of the existing program).

The numbers are in and it should come as no surprise that the costs have far exceeded expectations. A report by the nonpartisan think tank Grand Canyon Institute noted that the cost for Arizona’s ESA program in June 2024 was approaching $700 million. The Learning Policy Institute put the number at $708.5 million in 2024, and costs are still climbing. The result of the budget shortfall created by the explosive growth of Arizona’s school choice program required budget cuts in other programs: $333 million from water infrastructure, millions from highway expansions, and critical funding for community colleges.

Other states that have passed universal ESAs are also seeing costs for their programs exceeding budget projections. Utah’s program cost over $80 million per year for the last two years, but in 2024, they asked for $150 million to cover costs for the 2024-2025 school year. New Hampshire’s school choice program surpassed $24 million in 2023-24. Oklahoma’s recently passed $150 million tax credit program is already facing questions about sustainability; their entire budget was consumed within 90 minutes of opening online.

It is important to understand that in every single case, it is taxpayer dollars that are funding these programs. And whether these dollars are pulled from a state’s education budget or from their general funds, these programs represent a NEW state expenditure that must be accounted for in state budgets. Many simply carry the deficit created by their school choice program into the next fiscal year – and in Arizona’s case, their universal school choice program accounts for a huge portion of the state’s $1.3 billion budget deficit (see here). A deeper dive into the numbers indicates that school choice funding costs Arizona more per student than public school enrollment.

Looking at the financial pattern in other states, it is reasonable to conclude that if Idaho were to pass a school choice program, we would face similar fiscal challenges. Unlike states that can carry debt from one year to the next, Idaho has a balanced budget amendment that prevents the legislature from kicking the proverbial fiscal can down the road. No matter the proposed cost of any school choice legislation, history shows that the cost will exceed projections. Since Idaho’s Constitution mandates a balanced state budget, funding for these programs must be disbursed without exceeding budget constraints.

In fact, a study conducted in 2021 forecast the total economic impact of universal school choice and concluded that these programs would raise the cost of all education by as much as 33% (assuming estimated costs were accurate)! But because universal school choice programs consistently exceed expected costs, the actual increase in education costs is likely even higher. That cost increase is ultimately paid for by the taxpayers. These numbers make the current national inflation rate look mild.

Proponents like to argue that when people take advantage of school choice funding programs, less money will have to be spent on public education. But this is a sticky wicket since Idaho is also constitutionally required to fund a free and uniform system of public education. This suggests that if universal school choice or tax credits were passed in Idaho, it would need to be funded by appropriations other than those designated for public education. Another option would be to take money from non-education related programs, potentially underfunding or cutting other programs (Idaho is already dealing with a 2024 budget shortfall for some publicly funded programs) or pulling from the rainy-day fund Idaho has historically maintained. In other words, the program would require borrowing from Peter to pay Paul.

The final option would be for the state to simply raise everyone’s taxes to fund a new expenditure/entitlement program. School choice funding programs create a parallel educational system that has to be funded by the same taxpayer base that already struggles to fund the constitutionally mandated public schools. For example, in order to raise revenues to pay for school choice funding, the Indiana legislature increased sales tax from 6% to 7%, reduced funding to colleges and healthcare, and expanded gambling.

The influx of public funding into a new system, with massive amounts of money flowing between the state and private individuals, most likely through an approved provider system (public-private partnerships), brings widespread risk of mismanagement and fraud.

With the rapid growth of publicly funded school choice programs, states like Arizona are struggling to contain an epidemic of fraud. In early 2024, five people were indicted on fraud charges related to Arizona’s universal school choice program. Three of them are facing 25 separate charges. Further, public dollars are funding questionable purchases, many of which require mental gymnastics to consider educational expenses (water park passes, grand pianos, Netflix subscriptions, and the like). Arizona’s fraud problem isn’t unique. In Oklahoma, parents have been caught using their education tax credit to pay off tax debt, student loans and other debts unrelated to their child’s education costs. Even Idaho has faced fraudulent use of Empowering Parents Grant funds, to the tune of $180,000 so far.

As public dollars flood the market through school choice programs, another growing problem is exposed. Costs have been driven up for all educational goods and services as providers work to capture a new, government funded revenue stream. This is not an unforeseeable outcome. Every case in which the government has partnered with private industry to meet consumer demand has resulted in increased costs to the consumer. Society even has names for it: the Military Industrial Complex, the Pharmaceutical Industrial Complex, etc. School choice legislation is a huge step toward an Educational Industrial Complex and should ring alarm bells in everyone’s mind. Another area where an infusion of public money has raised costs is private school tuition (see here and here and here). This is antithetical to the stated goal of making education options more affordable for everyone. In Oklahoma, where a tax credit was passed in 2023, tuition rates are skyrocketing, some as much as 350%! This same thing happened when public dollars infused the college tuition market (and still does). Even with public dollars families can’t afford the jump from public to private school. Curriculum costs will rise (see here), and costs for associated extracurricular activities will also rise. Increased costs in extracurricular activities can be another result of school choice funding. Homeschool parents in Idaho are already being told by service providers that prices have gone up because parents “get government money” (EPG) for their education-related expenses.

It doesn’t take much to see that School Choice legislation costs more than most people realize – perhaps more than most people would be willing to pay if they knew the true price tag.

SAY NO TO PUBLIC FUNDING OF PRIVATE AND HOMESCHOOLS!