Willful Ignorance? Underestimating The Costs of HB1/SB202 Will Hurt Public Schools

“HB1s fiscal analysis vastly underestimates the costs of this voucher expansion and if this isn’t corrected, public schools will bear the brunt of your budgeting error. We should learn from the experiences in both Arizona and New Hampshire where they underestimated the costs of their Universal ESAs. It is nonsensical to believe that half of the families currently paying to send their children to these private schools will NOT apply to get free money. 

Of course they will.”

-Sue Woltanski, public comment on HB1, House PreK-12 Appropriations subcommittee, 2/23/23

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New Hampshire’s Education Freedom Account program, an ESA program with income limits, passed in 2021. Since then, it has seen higher than predicted participation by its homeschoolers and those already enrolled in private school. Lawmakers budgeted $129,000 (enough to fund about 28 students) in the inaugural year. The program ended up enrolling 1,800 qualified students, at a cost of over $8 million, only 204 of which came from public schools. (That is more than a 6000% increase!) About 89% of New Hampshire students using the ESA program did not attend public school in the previous year and, therefore, were not already funded in their funding formula.

Arizona saw similar rises in enrollment numbers when it became the first state to enact Universal ESA’s by lifting all eligibility requirements last year. What had been originally sold as providing options to children with special needs or unique circumstances, like military families, became a “taxpayer funded coupon for the wealthy.” Enrollment in the program quadrupled, vastly exceeding predictions, and roughly 75% of the new applicants had never attended public school, meaning the program was primarily providing state-subsidized tuition for students who already attended private schools.

Less than a year after passing its Universal ESA expansion, Arizona is seeing suspect uses of its ESA funds, which can pay for more than just private school tuition, with public dollars purchasing kayaks, trampolines, cowboy roping lessons and tickets to SeaWorld. 

Also in Arizona, in the eight months since it passed its universal voucher expansion, parents of special education students say they are being pushed out of the marketplace they rely upon to serve their child’s special needs by the massive influx of new participants.

What ESA expansion in both Arizona and New Hampshire has shown is these bills defund public schools, but NOT because “the money follows the child” in mass exoduses from public school. By and large public school families remain at their public school. Public schools are defunded when legislatures vastly underestimate the willingness of homeschoolers and self-pay private school families to apply for “free money.” When New Hampshire and Arizona failed to account for massive participation by students new to their state’s funding formula, their budgeting error reduced funding that could have gone to public schools. 

Florida seems ready to make the same mistakes, and if they do, public schools will bear the brunt of their miscalculations.

When asked specifically about the experience in Arizona, neither HB1 sponsor, Kaylee Tuck, nor SB202 sponsor, Corey Simon, seemed aware nor particularly interested. Rep Tuck was unaware of the issues in Arizona but  she made it clear that the goal of HB1 was to allow families of all incomes, even millionaires, access to public education dollars. When Senator Osgood asked Senator Simon (at 43:30) if he had taken into consideration “the lessons learned in Arizona about the ballooning costs” associated with underestimating participation, Simon’s response was “I have not looked at Arizona’s bill extensively. I would like to think that we’re trailblazing the way in Florida, continuing to lead on education.” He admitted he didn’t know what the issues in Arizona were but believed that his bill was “a step in the right direction for our students and our families.”

Last Thursday, 2/23/23, the House PreK-12 Appropriations Subcommittee presented a proposed committee substitute (PCS) to HB1. Its Staff Analysis included a fiscal analysis estimating the fiscal impact of the universal private education voucher/ESA bill to be $209.6 million in year one ($112 million for the FES-EO and the rest for the special needs FES-UA) and suggesting that only a fraction of the students currently paying tuition at private schools would participate in the program. The experience from Arizona and New Hampshire suggest this is nonsense. The bill passed the subcommittee 11-3 and moves on to its final committee stop in the House Education & Employment Committee.

Florida’s current voucher programs cost well over $1 billion funded either directly from the state’s education funding formula (the FES, Family Empowerment Scholarship) or diverted away from the general fund via corporate tax credits (the FTCS, the Florida Tax Credit Scholarship). HB1 expands voucher eligibility to any student who is a resident of Florida and is eligible to enroll in kindergarten through grade 12 in a public school and it converts the tuition vouchers to Education Savings Accounts (ESAs) which can be used by homeschoolers. Such a massive expansion of eligibility should be expected to have an equally massive fiscal impact.

In stark contrast to the House Fiscal Analysis, a report by the Florida Policy Institute (FPI) and Education Law Center (ELC) estimated “Even under conservative estimates, Florida Empowerment Scholarship (FES) vouchers would cost the state about $4 billion in the initial year of HB 1 and SB 202 implementation.”

Why the difference? The FPI stands by their estimate and says the House’s fiscal analysis failed to consider a few key assumptions (you can read their full response here)  

1. The House analysis failed to consider the impact of lost state aid when FES recipients are funded through the state funding formula the FEFP. The House’s response would be “the dollars follow the child,” but, whether or not student enrollment drops, the resulting reduction of state aid wreaks havoc on local district budgets and disrupts the funding formula in general. The FPI estimates a $2 Billion price tag for the first year of funding current FES recipients and for current public school students who elect to take an FES voucher once income restrictions are eliminate.
2. The House analysis vastly underestimates the number of current private pay, private school students who will take advantage of the tax funded tuition discount offered in HB1. The House analysis estimates that only half of the families currently paying to send their children to private schools which currently accept vouchers will apply to get free money. The house also completely ignores the possibility that private schools, which currently do not accept vouchers, will apply to give their families access to the publicly funded tuition savings. The FPI calls this omission “short sighted.” I suspect it is really “willful ignorance.” The universal experience in other states who expanded to universal vouchers showed that 75-80% of those vouchers were utilized by current private school attendees and vastly exceeded the numbers predicted by their legislators. Given the recent skyrocketing costs of rent, groceries and insurance in Florida, it is difficult to imagine a scenario where a private school family WOULDN’T apply for the tuition break. 
3. The House analysis ignores (hides?) the cost of paying families to homeschool. The House hides the cost of vouchers for homeschoolers by funding them through the Florida Tax Credit scholarship (FTCS), which, like the FES-EO, is also under capacity. The FTCS is funded by corporate tax credits, primarily diverted alcohol beverage excise taxes. Corporations who donate money to Step Up For Students, the very profitable, non-profit scholarship funding organization, receive a dollar-for-dollar tax credit, diverting that tax revenue from the state coffers towards the private schools accepting the FTCS vouchers. The FPI assumes a 75% participation rate of homeschool students in the first year and expects that more families may choose to homeschool once they learn they can be compensated for doing so.
4. Both the House and the FPI calculate the cost of expanding the FES-UA, the former Gardiner/McKay programs for qualifying students with disabilities. The FES-UA is apparently the only voucher with a current wait list and the proposed expansion would eliminate that wait list. Students with disabilities who accept the FES-UA voucher must sign away their federal rights to a free and appropriate public education via the Individuals with Disabilities Education Act (IDEA). Private schools are under no obligation to provide special education services or admit students with disabilities. There are currently no guardrails in place to ensure that the current 26,500 FES-UA recipients will retain access to school placement or services once the marketplace is inundated with several hundred thousand new ESA recipients.

During the subcommittee meeting, Rep. Tuck admitted that both the FTC and the FES are significantly under enrolled, despite the current requirements making approximately 80% of Florida’s students eligible. This is likely because very few high quality private schools currently accept state vouchers (the elite ones almost uniformly do not) and the monetary value of the voucher is rarely enough for a low income family to cover the full tuition at a decent private school. Much like the subprime mortgage preyed on homeowners in low income neighborhoods, the current voucher system promises escape from chronically underfunded public schools but offers only low quality/subprime private schools in a church basement or a strip mall. Similar to the experience in other states with universal vouchers, the majority of Florida’s voucher students return to public schools within 2-3 years. In a followup to an Urban Institute study, “Are low-quality private schools on the rise in Florida?,“ researchers noted that poor quality, low impact private schools grew more rapidly in response to FTCS expansion than higher impact, better quality schools. Research also shows that students return to public schools academically behind and their academic outcomes improved once they returned to their public schools, adding additional costs (for necessary services) to the already cash-strapped public schools.

To learn more about the current research on vouchers, read MSU professor Josh Cowen’s excellent summary, “There is No Upside.” Follow the links to the research which he summarizes by saying:

“So there you have it: catastrophic academic harm. A revolving door of private school failures. High turnover rates among at-risk children. Avoiding oversight and transparency. Overt, systematic discrimination against vulnerable kids and families. Deep and sustained ties to anti-democratic forces working in the United States today.

That’s school vouchers in 2023.”

For 25 years, Florida has been expanding choice options with the goal of privatization- yet, the overwhelming number of families continue to choose public schools. Unlike the FES-EO and FTCS, there ARE currently wait lists for popular public school options. HB1/SB202, by ignoring the true costs of participation, will defund popular public school options in favor of non-public choices. By converting tuition vouchers into Education Savings Accounts (ESAs), these bills literally pay families who choose something other than public schools. Regardless of the fiscal analysis’ slight-of-hand, by funding the homeschool and private pay private school students who have currently opted out of the public school system, HB1 will divert tax dollars away from Florida’s first choice, public schools, to private options with little to no oversight or accountability.

If our Legislators fail to address the lessons learned in Arizona and New Hampshire, our public schools will bear the brunt of their budgeting error.