Fiscal Effects of Vouchers and Educational Savings Accounts

The Friedman Foundation for Educational Choice, among other choice proponents, argue that vouchers save state taxpayers money. Because voucher awards are often equal to or less than the portion of per-pupil funding states send to local districts, the state theoretically saves money for every student that leaves a public school to learn in a non-public environment.

Despite awarding voucher amounts worth as little as half of the state subsidy sent to local school districts, some states are experiencing program budget deficits due to private school students enrolling in their choice programs. The Indiana Choice Program (ICP) saw small surpluses (less than $5 million) in 2011-12 and 2012-13 but operated at a loss of almost $16 million in 2013-14 and over $40 million in 2014-15. Although 3 in 10 participating students only received voucher amounts of 50 percent of the state per-pupil subsidy and the rest received only 90 percent of that amount, over half of the students participating in the program had never enrolled in a public school, creating new costs for state taxpayers (Indiana Department of Education: Office of School Finance, 2015). 

While North Carolina’s Opportunity Scholarship Program ran a small surplus of around $2 million during the 2013-14 school year, it is expected to run annual deficits of approximately $2 million from the 2014-15 school year through the 2017-18 school year. However, this deficit is restrained by the program’s structure – only 35 percent of the scholarship funds are available to kindergarteners and first graders, the only group eligible for the scholarship without prior public school attendance (HB 944, 2013). 

Arizona’s Empowerment Scholarship Program is also not expected to produce any long-term savings for the state (SB 1363 2013). If 75 percent of existing private school parents participate in the Nevada’s ESA program during its first academic year, the state will need to find approximately $85 million in additional revenue to continue providing universal access (SB 302, 2015).