Private School Scholarship Savings Claims Deserve Skepticism

State lawmakers are considering a big expansion of the private school scholarship tax credit program. House Bill 217 proposes to hike the program’s cap to $100 million from the current $58 million over the course of a few years. The program is a variation on traditional school vouchers, which are private school scholarships funded directly by the state. A key claim made by proponents is the program saves the state money as the loss of tax revenue is more than offset by a reduction in spending on students who switch from public schools to private ones. This assertion is based on an analysis done by EdChoice, a pro-voucher out-of-state group relying on dubious assumptions.

An EdChoice memo circulating among program proponents contends Georgia’s current scholarship tax credit program saves the state as much as $31 million a year. But these estimates appear to be built on shaky ground, in particular an unrealistically high student switch rate, or the rate at which scholarship recipients switch from public to private school.

The memo assumes nearly 99 percent of scholarship participants attend public school if not for the scholarship. That assumption swells the theoretical savings to the public school system and makes the tax credit program appear far less costly to the state treasury than is likely. A 2001 study of Arizona’s tax credit scholarship program, which is similar to Georgia’s, estimated the switch rate at between 15 and 30 percent for example.

Researchers at Georgia State University examined the program in 2014 and concluded it was not possible to determine the true cost to the state given the lack of data on the program, including whether recipients were switching from public schools as claimed, or if they would likely go to private school anyway. The program offers little transparency and few reporting requirements. In weighing whether the private school scholarships might save the state money overall, the Georgia State study authors wrote “That information is not available, nor do we have the data necessary to estimate it.”

Georgia students must attend a public school for only six weeks to become eligible for the program, a low benchmark that some students who intend to enroll in a private school could take advantage of to get a scholarship. Pre-kindergarten, kindergarten and first grade students can participate without attending a public school and some of these students would have enrolled in private schools without the scholarship. Homeschooled students are not typically headed to public school, but they are also eligible for the scholarships.

The Georgia Budget and Policy Institute’s internal analysis of the program’s first year under the expansion when the tax credit cap would rise to $65 million aligns with Georgia State’s findings. It shows a range of possible fiscal effects on the state budget. These effects can vary depending on the presumed number of participating students, the average scholarship award amount, state spending on public school students and the rate at which public school students switch to private schools through the program. The scholarship tax credit program carries a cost for the state under most of the scenarios GBPI examined, with an estimated price as high as $42 million and as low as about $56,000 in year one. Some scenarios can be teased out where the tax credit is shown to save the state money, as proponents claim. Those estimates require unrealistically high switch rates.

This uncertain cost to the state highlights the need for more and better data to gauge the program’s true effect on the treasury. Small shifts in each variable used to calculate the program’s effect matter a lot.

Lawmakers can take time to gather missing data and base a decision to expand the program on concrete evidence of its fiscal impact and, just as critically, its impact on student learning. Right now the evidence isn’t there.

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