The Education Gadfly Weekly

Editor's note: This post is a submission to Fordham's 2017 Wonkathon. We asked assorted education policy experts to explain how President Trump should structure his highly anticipated $20 billion school choice proposal. Other entries can be found here.

Should the federal government get involved in school choice? The question pits support for federalism and a limited federal role in education against our desire to expand options for kids. It’s a close call. Could this be viewed as a Race to the Top for school choice? Will private school autonomy be appropriately respected? These concerns are real and should remain front of mind, but they can be appropriately addressed while expanding choice for the millions of U.S. students who are languishing in assigned schools that aren’t meeting their unique needs.

In this case, choice trumps.

To navigate the increasingly complex politics surrounding how—and if—such a significant federal investment in school choice should be made, we encourage the Administration to follow three guiding principles responsible for the growth of existing federal and state school choice programs:

• Focus on supporting and expanding the immense success of school choice in the states;
• Do no harm to existing state choice programs; and
• Extend access to high-quality education options as broadly as possible while prioritizing students with the greatest needs.

The combination of (1) creating a federal tax-credit scholarship program; (2) expanding the allowable uses of 529 college savings accounts—while sunsetting little-used Coverdell Education Savings Accounts; and (3) increasing funding for the federal Charter School Program (CSP) could embody these guiding principles.

Although school choice in its various forms has broad support among public and state legislators, any federal initiative supporting school choice faces great political obstacles including—regrettably—advocates’ in-fighting and a tight party-line vote. In other words, school choice legislation getting sixty votes in the U.S. Senate is about as likely as Donald J. Trump and Michael J. Petrilli both shutting down their Twitter accounts.

Thus, including school choice legislation in a tax reform bill passed through budget reconciliation—which would require fifty-one votes in the Senate—appears to be the clearest political path for Congress to create new lanes of educational opportunity for some of our neediest students.

A federal tax-credit scholarship program could provide federal tax credits to individuals and businesses that contribute to Scholarship Granting Organizations (SGOs), which in turn grant scholarships to low-income children. Scholarships would not necessarily have to be limited to private school tuition and could also help eligible children pay for transportation to another public school, tutoring, an industry certification, or summer enrichment activities. Such a program could expand the reach of existing state tax-credit scholarship programs and, depending on how it’s structured, could also provide students with scholarships in the thirty-three states currently without programs.

When creating a multi-billion-dollar federal tax-credit scholarship program focused on our key principles of supporting state programs while expanding options as broadly as possible, Congress and the Administration must address key questions including:

How are eligible SGOs defined and authorized, especially in states without existing state programs?

As school choice advocates know, the more that is left to the states, the more states can serve as laboratories of innovation. One solution could be for a state legislature to empower a state agency to authorize SGOs that could then receive federal tax-incentivized contributions and administer scholarships. This approach would have the dual benefit of allowing states to tailor programs to fit their unique educational landscapes while also providing an incentive for more states to enter the school choice arena. Since taxpayers could receive a credit for donations to SGOs nationwide, states would have plenty of motivation to approve SGOs for the program to keep their residents’ contributions in-state, and possibly even create their own state tax-credit scholarship programs. Uncle Sam need not compel states to act in their own self-interest.

How is student eligibility defined?

To expand school choice options to the greatest number of families, the income eligibility cap should include the middle class. At a minimum, student income eligibility requirements should include families at three times the poverty level ($72,900 for a family of four), as many means-tested state tax-credit scholarship programs—including Iowa, Nevada, New Hampshire, and Virginia—have established. Should a broader student income eligibility requirement be adopted, states and SGOs should have the freedom to prioritize serving lower-income students.

How are eligible education expenditures defined?

Advocates know most innovative reforms happen at the state level. As such, it is imprudent to lock in a federal regulatory system knowing the future in states is likely to change. For example, Arkansas and Missouri are considering tax credit-funded Education Scholarship Account (ESA) programs that allow for multiple education expenditures beyond private school tuition. To best support the success of school choice in the states, federal regulations should not preclude states from including broader eligible education expenditures.

Such a federal tax credit program is likely to consume much of the $20 billion federal school choice pie, but we would like to see it complemented by two additional reforms designed to expand options across the income spectrum and support the great work going on in states.

First, to expand education options for the middle class, federal tax-credit scholarship programs could be coupled with expanding the allowable uses of 529 college savings accounts to encourage private savings for a designated beneficiary’s K–12 expenses. Currently, Coverdell Education Savings Accounts (ESAs) allow savings for a designated beneficiary’s higher education and K–12 expenses to grow tax-free until distributed. Unfortunately, Coverdell ESAs are only available to families below a specified income level and total contributions for a beneficiary are capped at $2,000 per year. These ill-advised limits have resulted in the underutilization of Coverdell ESAs.

On the other hand, 529 college savings accounts do not restrict account beneficiaries or contributors by income, and the annual federal gift tax exclusion encourages contributors not to exceed $14,000 in contributions to a beneficiary in a year. According to the Investment Company Institute, Americans own approximately 12.7 million 529 plan accounts totaling $266.2 billion in assets. This is a 5 percent increase in funds saved since last year and the popularity of these plans continues to grow. An expansion of 529 accounts to K–12 expenses coupled with sunsetting Coverdell ESAs makes practical sense and is an attractive option that fits Speaker Paul Ryan’s overarching goal of tax code simplification.

And finally, this Administration should consider increasing funding for the Charter School Program (CSP), which provides federal grants to start new charter schools and to replicate and expand high-performing existing charter schools nationwide. Increasing the CSP appropriation from $333.1 million to $700 million or even $1 billion would empower the charter community to expand its reach to more students, including the more than one million student names on waiting lists. (Note that although the CSP appropriation is mandatory spending, funding could be increased in tax reform through budget reconciliation should the additional cost be offset elsewhere in the bill and should the education committees be given instructions.)

Expanding options for as many kids as possible while respecting state-level school choice programs is no easy task, but it is certainly worth the risk. That’s why ExcelinEd recommends a judiciously structured combination of federal school choice reforms combining a federal tax-credit scholarship with expanding the allowable uses of 529 college savings accounts and increasing the CSP appropriation.

All authors work as part of the Foundation for Excellence in Education team. McKenzie Snow is a policy analyst in educational choice, Claire Voorhees is the director for K–12 reform, Adam Peshek is the director of education choice, and Patricia Levesque is the chief executive officer.

The views expressed herein represent the opinions of the author and not necessarily the Thomas B. Fordham Institute.

Editor's note: This post is a submission to Fordham's 2017 Wonkathon. We asked assorted education policy experts to explain how President Trump should structure his highly anticipated $20 billion school choice proposal. Other entries can be found here.

School choice advocates have a window of opportunity today that we have never had before in the history of our movement. Moments like this, where it is possible to advance bold education reform, are not to be wasted.

Curiously, some school choice advocates are less enthused about congressional action citing the big, bad "feds" getting involved in a state and local issue. Some say there should be no federal role in education, as if the $60 billion currently invested by the federal government in K–12 education would suddenly disappear or would simply be turned over to state education agencies. We like the latter, though we recognize the reality that the ensuing battle would be a seismic shift akin to the battle over welfare reform in the 1990's. That requires time to properly make the case to skeptical policymakers. Some believe things are percolating along nicely in the states and adding money to state choice programs is unnecessary. For those in the trenches making that progress happen, we know that scholarship amounts for most of these programs are not high enough. They're not high enough for most high schools in America, or to accelerate enrollment, or to encourage high quality private schools to expand in current states or open in new states. And we know that millions of kids remain trapped in schools that are failing them, and they need help right now.

There are many great ideas for congressional action to expand parental choice, most of which we support and will continue to fight for. But there is only one proposal that could truly have immediate impact across the country, utilize private money to fund scholarships, and come with a minimal federal footprint. That is a federal tax credit to encourage charitable contributions to local non-profits who provide scholarships to eligible children.

There are seventeen states that already have such a program. A well-designed program is the key to sustainability, growth, and quality. This includes ensuring a federal tax credit does not come with a host of regulations to burden private schools and suppress participation.

How would it work? A federal tax credit scholarship program would allow individual and corporate taxpayers a tax credit for charitable contributions to a scholarship granting organization (SGO). The proposal would provide a 100 percent credit for individual and corporation contributions to a state-approved SGO—with giving limits high enough to attract donors. The scholarships would be awarded to qualified families, with an income threshold in the neighborhood of 400 percent of poverty. All fifty states would be eligible to participate. Eligibility would not be limited to particular geographic regions or to students assigned to failing public schools. It would include common sense financial and academic accountability, ensuring that the program is responsible to taxpayers and working for students. It would be parent-centered, where scholarship recipients have the freedom to take their scholarship to any participating private school and low-income families are assured of entry. It would have an income threshold that allows working- and middle-class families to participate.

The federal tax credit proposal is the most viable, least disruptive or intrusive, and most impactful proposal out there. It could be considered as part of tax reform and included in the fiscal year 2018 budget reconciliation process. The budget reconciliation process requires a simple majority vote, which would prevent a Senate filibuster. For Republicans who control the majority, parental choice is good policy and good politics.

Any piece of legislation in Congress that offers full educational choice for parents will be viciously attacked by the teachers' unions, members who support the unions' adults-first agenda, and other defenders of the status quo in education. Remember the backlash when the House was considering public school portability? Remember the DeVos confirmation battle? Peel back the nonsense and character assassination and you’ll find that Betsy DeVos was opposed by the education establishment because she supports all options for kids.

As education reformers, we fight every day to improve a system that is antiquated, out of touch with twenty-first-century realities, failing millions of kids every year, and suppressing the massive economic potential that better educational outcomes would yield for our country. Now is not the time to be timid or purist. Now is the time to suit up for battle, double down in the fight against the education establishment to give every child access to a great education, and improve outcomes across the board. Now is the time for school choice advocates to band together and put our foot on gas to dramatically accelerate parental choice in America.

John Schilling is the Chief Operating Officer of the American Federation for Children.

The views expressed herein represent the opinions of the author and not necessarily the Thomas B. Fordham Institute.

On this week's podcast, special guest Sandi Jacobs, principal at EducationCounsel and former vice president for state and district policy at the National Council on Teacher Quality (NCTQ), joins Mike Petrilli and Alyssa Schwenk to discuss the problems and risks associated with teacher pension systems. During the Research Minute, David Griffith examines the hidden costs of school discipline in California.

David’s Research Minute

Russell W. Rumberger and Daniel J. Losen, “The hidden cost of California's harsh school discipline: And the localized economic benefits from suspending fewer high school students,” The California Dropout Research Project and the Civil Rights Project at the Center for Civil Rights Remedies (March 2017).

Research into non-cognitive aspects of human development is all the rage, and this study marries it with our fascination with birth order. It examines how birth order impacts non-cognitive skills, personality traits, and career paths. Analysts use a trove of longitudinal data to address these questions in Sweden, starting with population registry data that include every person born in that country since 1932, specifically data on their birth year, biological or adoptive parents, and biological or adoptive siblings. These data are combined with military enlistment data (until 2010, all Swedish men had to enlist), which include information on non-cognitive as well as cognitive abilities gleaned from a battery of physical, psychological, and intellectual evaluations. They also have data on employment and occupation from 1996 to 2009 for individuals between the ages of 16 and 74 in the labor market and they employ data from the Occupational Information Network (ONET) to generate measures of personality traits (such as conscientiousness, emotional stability, and extraversion) based on their importance to particular jobs. Finally, they include data from a survey of children at age 13 to examine how parental behavior affects kids’ study habits. The final sample includes children whose mothers were born between 1917 and 1964 and who come from families with at least two children but not more than five. Because the military data are limited to males, most of the analysis focuses on men; in total, they observe roughly 560,000 boys from over 260,000 families.

Trust me: these analyses are complicated and must control for a host of variables. Yet the main analysis depends on the simple notion that each child receives a random half of each parent’s genes, which makes parent and child share, on average, half their genes. So it follows, analysts say, that “genetic makeup is not expected to differ systematically between siblings in general or by birth order in particular” and the “effect of birth order can thus be identified by simply comparing personalities of siblings within the same family”—which is what they do.

There are three key findings. First, non-cognitive abilities decline with birth order such that earlier-born men are more outgoing, emotionally stable, persistent, willing to assume responsibility, and able to take initiative than are later-born men. (Those were all of the non-cognitive abilities they were able to measure in the military enlistment data.) Specifically, after controlling for cognitive ability, they find that a move from first born to third born results in 0.11 standard deviations decline in non-cognitive ability.

Second, birth order also tends to impact one’s occupation such that first borns are likelier to be managers. (“Management” here ranges from top-level managers to middle- and lower-level managers, though first borns are also likelier than third borns to be “top managers.”) Earlier borns are also more likely to be in occupations that require leadership ability, social ability, and other personality traits like agreeableness and openness. On the other hand, later borns are more likely to be self-employed which tends to be associated with “risk-loving individuals”.

Finally, adolescent behaviors also vary by birth order. First-born teens are more likely to read books, spend more time on homework, and spend less time watching TV. “Parental investments” decline by birth order in that parents report spending less time discussing school work with later born children. Whether this could explain the fact that certain non-cognitive abilities decline with birth order is an open question. 

Unfortunately, this is not a paper about education policy nor does this study have apparent implications for those of us who play in that sandbox. As for parents, the implications are not entirely clear. Should they be encouraging their older sons to teach their younger brothers to be more outgoing and responsible? Or encouraging their younger sons to tell their older siblings to lighten up and take a risk? In the end, we tend to be intrigued by birth order research, if for no other reason than to prove what we’ve known all along: I’m smart as a whip but that brother of mine is a nincompoop.

SOURCE: Sandra E. Black et al., “Born to lead? The effect of birth order on non-cognitive abilities,” Institute of Labor Economics (February 2017).

Local property taxes provide $180 billion for education nationally (29 percent of all funding), which makes the administration’s $20 billion promise seem cheap. A new study by EdBuild looks into the fairness of the local property taxes that raise those funds.

Discussing taxes can be opaque, so let’s start with the end goal: funding schools. Imagine two nearly identical school districts; one, a wealthy suburb, the other, a community with modest homes and incomes. The authors were concerned that the more modest district would have to tax itself more heavily (i.e. at a higher rate) to sufficiently fund its schools. In other words, they were worried that local property taxes are regressive in ways that “overburden low-income households or low-wealth homeowners.”

So they did some digging. They used district-level taxation, income, and property value data from eighteen states and the 2014 American Community Survey to investigate the relationship between a school district’s affluence and local property tax rates. They also closely examined three states (South Dakota, New Jersey, and Pennsylvania) to write a case study on the interplay between state policy and local taxation. The state-local funding dynamic is critical because, nationally, 90 percent of education money is sourced on these levels (the remainder comes from national funds).

The clearest trend they found was that local taxation is indeed regressive, but generally not in a way that overburdens less well-off homeowners. Rather, they point out that properties such as factories, businesses, and farms pay disproportionately low tax rates. They argue that while homeowners generally pay fairly for schools, local governments could fund their schools in a more equitable way by further taxing these non-residential properties. Doing so would better fund schools in low-income areas.

Their more politically palatable recommendations emerge from the case studies. South Dakota set a “maximum” tax rate that localities apply by default, but allowed voters to change their local rate easily. Of 150 school districts, only one lowered its rate, while 67 voted to tax themselves more heavily than the state maximum. The result was a landscape of local taxes that are “mixed to progressive.” Conversely, Pennsylvania provided no tax guidance to localities, and consequently, district tax rates vary haphazardly from one town to the next.

These local taxation issues matter because states pay the rest of the education bill. Fair taxation at the local level frees states to direct limited resources to schools in proportion to need or to accomplish other objectives. The authors endorse, among other policies, state-level guidance on local taxes as a good way to ensure fairness between districts.

While the authors rarely mention students, their emphasis on fairness arises from the value that all children should be given equal chances to raise themselves up, regardless of zip code. Makes sense to us.

SOURCE: Zahava Stadler, Yi Li, Kailey Spencer, and Sara Hodges, “Building Equity: Fairness in Property Tax Effort for Education,” EdBuild (February 2017).