Reason Foundation

http://www.reason.org
http://www.reason.org/news/show/school-choice-programs-tighten

Reason Foundation

School Reform News

School Choice Programs Tighten Accountability

Overregulation could hurt growth

Lisa Snell
February 1, 2004

Florida’s three school choice programs recently have been the subject of several negative reports in the Palm Beach Post and other local newspapers, pointing out the failure of state officials to provide oversight. The three programs--Opportunity Scholarships, the McKay Program for students with disabilities, and corporate tax credit scholarships--provide scholarships to more than 24,000 children to attend private schools. Of Florida’s 2,000 private schools, about 1,163 participate in at least one of the three programs.

The news reports highlighted the state’s lack of data to match up the amount of voucher and tax credit dollars spent with the students who actually received disbursements. An audit report issued by Florida’s chief financial officer, Tom Gallagher, found some voucher students were taking money from more than one choice program, and some private schools may have received funds for students they did not enroll. The audit made specific recommendations for improving the fiscal monitoring of the school choice programs.

The Florida Department of Education and state legislature have taken several steps to improve monitoring of the programs. The Department of Education has established a student database and instituted additional compliance measures for scholarship organizations and private schools in order to prevent fraud and help maintain the fiscal integrity of the programs.

The department also has required all participating private schools to file an online reporting form with basic data about financial viability of the school and criminal background checks of school employees. Most schools are expected to comply by a January deadline.

In December, a task force examining the McKay scholarships presented the Florida legislature with a bill that would require scholarship-accepting schools and the Department of Education to implement a host of accountability measures, including:

• criminal background checks on school employees;

• periodic state visits to assess the schools;

• periodic reviews of student performance and need;

• prohibitions on students receiving funds from multiple programs;

• cutting off funds to schools not meeting standards.

In light of the negative reports on the administration of the corporate tax credit program, the Florida legislature voted to rescind a $38 million increase in program funding.

Tightening Up

Other states also have acted recently to tighten reporting requirements for their school choice programs.

In Wisconsin, state lawmakers have drafted two bills that would significantly increase the Department of Public Instruction’s authority over the Milwaukee Parental Choice Program. Both proposals include three provisions:

• stricter requirements that participating schools demonstrate financial viability;

• an explicit provision allowing the department to remove schools from the program; and,

• background checks for employees at the schools.

Similarly, in Arizona a new law requires school tuition organizations to provide the state government with the total number and amount of contributions received, the total number of children awarded scholarships, the dollar amount of each scholarship, and the names of the schools that received those scholarships.

Arizona Tax Credit

A report from the Phoenix-based Goldwater Institute provides information on the success of Arizona’s tax credit program. Its recommendations offer insight into how best to monitor school choice programs in other states, too.

The study, The Arizona Scholarship Tax Credit: Providing Choice for Arizona Taxpayers and Students, found that since the program’s inception, taxpayers have donated $84 million to help send students to schools of choice. In 2002 alone, 50,000 Arizonans donated more than $26 million to fund scholarships for 19,000 students. More than 5,700 Arizona children are on waiting lists for additional scholarships.

In addition, the Goldwater study found:

• School tuition organizations overwhelmingly consider financial need when they allocate scholarships.

• Without the scholarships, approximately 4,000 recipients would have to transfer to public schools.

• The savings generated from having those students transfer from public to private school offset much of the cost of the tax credit to the state.

The Goldwater study also highlights the important role donors should play in monitoring charitable contributions for tax credits. “Donors are ultimately responsible for ensuring that their contributions are put to the best use,” notes study author Carrie Lukas, policy director with the Independent Women’s Forum.

“One of the strengths of the scholarship tax credit is that it puts power in the hands of individuals to allocate resources instead of giving all control to the state,” writes Lukas. “Mandated means-testing takes discretion away from school tuition organizations and donors.”

The Goldwater study suggests creating a Web site sponsored by the Arizona Department of Revenue that would post financial information about school tuition organizations and encourage best practices by rewarding organizations that follow them with greater publicity. A Web site would help empower donors to decide which scholarship organizations are worthy of their support. This Web site suggestion is one that is readily applicable to Florida.

Avoiding Over-Regulation

The publicity in Florida over the lack of oversight has led school choice critics to call for regulating the state’s choice programs far more tightly than needed to prevent fraud and ensure fiscal integrity. For example, the Palm Beach Post and other Florida newspapers have editorialized in favor of requiring testing of all school choice students, adding restrictions to special education vouchers, and imposing credentialing and accreditation regulations on private schools and their staff.

Research suggests there are dangers in over-regulation. A September 2003 study from the National Bureau of Economic Research examined differences in product market deregulation among OECD countries over the past three decades and found barriers to entry were associated with reduced investment and slower economic growth.

“The implications of the analysis are clear: Regulatory reforms--in particular those that liberalize entry--are very likely to spur investment,” conclude the researchers. By contrast, “tight regulation of product markets restricts investment.”

Over-regulation of educational choice markets could also slow growth and investment in Florida’s private schools. A December 2003 report from Florida State University’s Center for Education Innovation found the most cost-effective way to increase private school capacity in Florida was to avoid regulating private schools.

Governor Jeb Bush has argued that while it is important for private schools and scholarship organizations to maintain fiscal integrity, it is also important to avoid over-regulation and allow the parental choice mechanism to remain the main source of accountability. The proof of the effectiveness of vouchers, he told the Miami Herald in December, is that some 25,000 children are using them, and their parents are happy about it.

“This is a program based on a simple premise, which is that if a parent unilaterally believes their child’s individual education plan is not being fulfilled they can move to another option,’‘ Bush said.

For more information ...

The December 11, 2003 audit report from the Florida Department of Financial Services, “Audit, Corporate Tax Credit Program, Florida Department of Financial Services,” is available online at http://www.fldfs.com/aadir/report%5Fpackage.pdf.

The Goldwater Institute’s December 11, 2003 report by Carrie Lips Lukas, “The Arizona Scholarship Tax Credit: Providing Choice for Arizona Taxpayers and Students,” is available from the institute’s Web site at http://www.goldwaterinstitute.org/pdf/materials/380.pdf.

The Goldwater Institute’s December 11, 2003 companion report by Dan Lips, “The Impact of Tuition Scholarships on Low-Income Families: A Survey of Arizona School Choice Trust Parents,” is available from the institute’s Web site at http://www.goldwaterinstitute.org/pdf/materials/392.pdf.

The December 19, 2003 report from the Center for Education Innovation at Florida State University, “Increasing Private School Capacity for Voucher Students,” by Mary Goldsmith, is available at http://cei.coe.fsu.edu/Private%20School%20Capacity%20report.htm.

The September 2003 NBER Digest abstract by Andrew Balls, “How Deregulation Spurs Growth,” based on National Bureau of Economic Research Working Paper No. 9560, “Regulation and Investment,” by Alberto Alesina, Silvia Adragna, Giuseppe Nicoletti and Fabio Schiantarelli, is available online at http://www.nber.org/digest/sep03/w9560.html.

Lisa Snell is director of education and child welfare at Reason Foundation. She formerly taught speech courses at California State University, Fullerton.


Lisa Snell is Director of Education


Print This