3 changes for DeVos's Education Freedom Scholarships proposal

3 changes for DeVos's Education Freedom Scholarships proposal
© Greg Nash

Last week, Sen. Ted CruzRafael (Ted) Edward CruzOn The Money: Conservative blocks disaster relief bill | Trade high on agenda as Trump heads to Japan | Boeing reportedly faces SEC probe over 737 Max | Study finds CEO pay rising twice as fast as worker pay Conservative blocks House passage of disaster relief bill The Hill's Morning Report — After contentious week, Trump heads for Japan MORE (R-Texas) joined Betsy DeVosElizabeth (Betsy) Dee DeVosThe Hill's Morning Report — After contentious week, Trump heads for Japan DeVos family of Michigan ends support for Amash The Hill's Morning Report - White House, Congress: Urgency of now around budget MORE at the 2019 Reagan Institute Summit on Education to campaign for her $5 billion proposal for Education Freedom Scholarships (EFS). EFS would expand private school choice with a dollar-for-dollar federal tax credit for donations to state-identified scholarship-granting organizations (SGOs). The proposal faces long odds in Congress after a quick dismissal by Democrats as “dead on arrival” and by typical allies who fear future federal overreach. There’s much to like about EFS, and relatively minor changes could shift the odds significantly and give EFS a fighting chance.

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As it stands, EFS’ solid foundation makes it more viable than most expect. The proposal is purposefully designed to back states’ identified K–12 choice priorities while limiting the role of the federal government. EFS is completely voluntary, and gives states the freedom, and responsibility, to decide which students, education providers, and expenses would be eligible for tax-credited scholarships. “The key element of the proposal is freedom for all involved,” explained DeVos when unveiling EFS.

But that freedom is still too constrained to build a broad enough coalition of support. DeVos’s proposal is aimed at expanding K–12 private school choice, but too few in Congress share that priority. Acknowledging this, Cruz repeatedly said he was working to “bring in new allies” (read: Democrats) by “changing the political calculus” around choice, in part by adding to the proposal politically popular workforce and apprenticeship training options. But that’s not a big enough priority either.

While in the early stages, changing EFS to include scholarships for pre-K — a stated priority for many Democrats who are unenthused about more traditional approaches to private school choice — could both “change the political calculus” around the proposal and “bring in new allies.” This added flexibility, along with two additional changes to shore up the proposal’s sustainability, could give EFS a real shot at passage.

EFS should allow states to give scholarships for pre-K. As it stands, EFS scholarships would support students’ “elementary and secondary education” — with no mention of pre-K. States could identify SGOs supporting pre-K only if the state includes pre-K in its definition of “elementary” schooling, which many states do not. Explicitly including pre-K could make allies among legislators — particularly those who lean left — that generally oppose private school choice.

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Consider California, where Governor Newsom is currently leading a push for universal pre-K. The state has still not recovered from over $1 billion in Recession-era pre-K cuts, and just a third of qualifying children under age five are enrolled in publicly funded programs. As the Department of Education proposes using Title II-A shares to determine states’ proportion of the $5 billion, California could limit its scholarship eligibility to pre-K, and bring in $550 million a year in scholarships. That could increase the state’s pre-K spending by a third and help serve more than 86,000 additional students who are currently without options.

Expanding EFS to pre-K could win supporters not just from California, but also from states like Connecticut, Maryland, and New Jersey, whose pushes to expand pre-K are similarly hindered by budget constraints. It may mean EFS would be used for school choice in ways DeVos and Cruz might not prefer, but also could create a viable route to passage that doesn’t currently exist. However, even if this move brought enough support to get real traction, as it currently stands, EFS has some sustainability problems warranting two further changes.

Participating states should be required to establish a state tax-credit scholarship program. EFS is designed not to interfere with the 18 existing state tax-credit scholarship programs, and to ensure donations could not receive a double tax benefit. But EFS doesn’t require states to set up their own complementary tax-credit scholarships, only that they lay down eligibility requirements for SGOs that qualify for federal tax credits. In other words, EFS does not make states put skin in the game. This is short-sighted because without their own resources on the line, states may jump at the EFS opportunity and give too little attention to eligibility rules and regulations on which the long-term success of these scholarships will depend. Requiring states to set up a state tax-credit scholarship before taking advantage of EFS would ensure vigorous debate in the short run, and appropriate governance in the long run.

The $5-billion tax credit cap should be allocated proportionally across all states. EFS proposes to allocate the $5 billion cap on eligible donations to participating states proportional to their Title II-A formula shares. To maximize the funding available for scholarships, the proposal would re-allocate non-participating states’ proportions to those participating using modified Title II-A shares. This arrangement maximizes expenditures, but at the cost of stability over time, especially for early adopters. If the $5 billion were allocated to participating states in the first year, and in the following year more states signed on, early adopters’ shares of the $5 billion would have to shrink or undergo a complicated reallocation, or the cap would need to be raised. Any of these options introduce sustainability problems. Allocating the $5 billion proportionately across all states, with only participating states drawing down their portion of the cap, would yield more modest investments in the short term, but the sustainability and certainty for states would be worth it.

To her credit, DeVos’s proposal is consistent with her efforts to promote private school choice. However, the determination to be narrow in targeting elementary and secondary students, and expansive in ensuring all $5 billion is allocated from the starting gate, makes EFS politically unpalatable and practically unsustainable.

If expanding K–12 private school choice is DeVos’s aim, the current proposal is on target, but unpassable.

However, if her aim is to help states use private options to meet their own educational priorities over the long term, these three changes could not only change the calculus around EFS — it could also give it a real chance of passing.

Nat Malkus is a resident scholar and the deputy director of education policy studies at the American Enterprise Institute (@AEI). Amy Cummings is a former high school teacher and research associate at AEI.