New School Choice Plan Could Cost State More Than $12,000 A Student

Early estimates show the new tax scholarship program, while limited, could cost the state two to five times more a student than what it now spends on general aid for the state’s public schools students.

This story was published with Crain's Chicago Business.

As Illinois embarks on a controversial experiment to use state resources to indirectly underwrite private schools, one key argument advocates make is that the program will save the cash-starved state money in the long run.

Private and parochial schools, the argument goes, typically cost less to run than public ones. By that theory, any tax dollars allotted for the program will be spurring more cost-efficient education.

But there’s another calculation to consider when analyzing the potential $75 million in state costs behind the tax-scholarship program that Gov. Bruce Rauner recently signed into law. State taxpayers don’t bear the brunt of education expense; local property taxpayers do.

Early estimates show the new program, while limited to what will likely be a small set of youngsters from lower income families, could cost the state two to five times more a student than what it now spends on general aid for the state’s 1.85 million public schools pupils.

The math works out like this: $2,725 is now spent directly by the state on average for public school students. But projections for participation in the scholarship program indicate its cost to the state could average between $6,250 and $12,500 per private and parochial student.

One reason for that disparity can be found deep in the weeds of the state’s new Invest in Kids Act, which authorized the scholarship initiative as part of a broader deal to redirect a greater share of state school aid to needier public schools.

Language in the law caps the scholarships not at the average cost of private schools but at the average cost of public schools.

It remains unclear exactly how this will play out once the five-year pilot program goes into effect next year. When posed with the question of what direct impact the plan will have on the state budget, advocates, the governor’s office and even experts said they couldn’t give definitive answers.

Prominent among supporters of the program is the Catholic Conference of Illinois. Its director, Robert Gilligan, contends the program will save money by opening doors at private schools where tuition tabs fall below the average cost of public education to students whose families could not otherwise afford to make that choice.

“That dollar amount is less than what the local taxpayer is providing through their property taxes and their state taxes,” said Gilligan.

But the average cost on which the scholarship cap is based includes local and federal resources in addition to state contributions. On average in Illinois, local property taxes cover more than two-thirds of the financial resources of public schools.

Many of those devil-in-the-details questions cannot be determined until the state identifies how many students and schools will participate, how much donors will contribute, how scholarships will be divvied up among high school and grade school recipients and at which schools in which parts of the state.

“In six to nine months we’ll know a little bit more,” Gilligan said. "A lot of this is going to be played out in implementation.”

The program for the first time sets up a roundabout mechanism to use state money for private and parochial schools.

To skirt legal concerns that have tripped up traditional voucher programs in some states, the law allows taxpayers to receive a tax credit for donations to state-approved nonprofit organizations that will then provide students from lower-income families with private school scholarships.

Contributors will be eligible for a state tax credit worth 75 cents on the dollar, with donations capped at $1 million per taxpayer per year, pegging the maximum annual tax credit at $750,000.

Bottom line: Illinois avoids directly spending tax money on tuition for non-public schools but foregoes up to $75 million annually in tax revenue to help compensate those who do give for such purposes.

While the value of the tax credit is generous, it’s not as generous as that offered in some of the 17 other states that have set up tax-credit scholarship programs, according to data from EdChoice, a national school advocacy group. Some state offer 100 percent tax credits, essentially making “donations” free to the donor.

Advocates predict between 6,000 and 12,000 students will participate in Illinois’ program. On the low end of that estimate, the $75 million in indirect state money would translate into an average $12,500 per student.

By contrast, the bill for general state aid to public schools last year came to $5 billion, dwarfing the potential cost of the scholarship program. On a per student basis, that aid to public schools translates to $2,725 a pupil.

That’s a fraction of total per pupil public school costs, which average out to $12,973.

Loading graphic...

The reason is that Illinois has historically foisted the lion’s share of school costs on to local property taxpayers.

Josh Cunningham, who follows school choice programs for the National Conference of State Legislatures, said it’s difficult to measure the fiscal impact in part because scholarship programs benefit only indirectly from state tax dollars.

“The savings are mostly at the state level,” he said. “And that's only if you have enough students enrolling in the scholarship program to offset the loss in revenue from the tax credit.”

Assessing the financial impact in Illinois could prove especially challenging because the state is now struggling to close a worst-in-the-nation spending gap between low and high wealth public school districts.

Emily Bastedo, the recently appointed senior education policy advisor to Gov. Bruce Rauner, said the governor sees the scholarship program as an “important tool” in extending choice to more families.

But she declined to comment on the potential fiscal impact to the state.

Under the Illinois program, expected to begin operating next year, students currently enrolled in private and parochial schools are eligible for the scholarships as well as those who switch from public schools.

There are income restrictions, however. Students’ families must earn less than 185 percent of the federal poverty level, currently $45,510 for a family of four, to qualify for a full scholarship. Reduced scholarships will be available for those with family income up to 300 percent of the poverty level, with the cap rising in subsequent year for repeat recipients.

The program also gives preference to applicants who live in school districts with low-performing public schools. But students need not be enrolled in public school when they apply in order to qualify, meaning current private school enrollees could benefit.

Advocates say providing these scholarships is a matter of fairness, expanding school choice for low- and middle-income families.

Opponents, on the other hand, lambast the scholarships as part of a backdoor voucher scheme that siphons scarce public resources.

"[Private schools] want public dollars, they want public resources, but they don't want the same public accountability,” said Dan Montgomery, president of the Illinois Federation of Teachers. “That seems to me to be the height of hypocrisy."

Arizona launched the nation’s first tax-credit scholarship program in 1997 after legal challenges to a traditional voucher plan, according to EdChoice.

The U.S. Supreme Court upheld the constitutionality of an Ohio voucher program in 2002, but such plans have continued to face significant political and legal pushback, according to Hillel Levin, a law professor at the University of Georgia with a focus in education policy.

The constitutions of most states prohibit public funds from being directed toward religious institutions.

Tax-credit scholarship programs, however, have withstood legal challenges. That’s because they run on private funds donated by private individuals to independent, though state-sanctioned, scholarship-granting organizations.

But Levin, who examined existing tax-credit scholarship programs in a 2013 paper, believes they raise questions of accountability even while passing legal muster.

“Public schools have to serve everybody. They can't turn down people who are disabled. They can't turn down people who aren’t as smart or achieve less at school,” he said. “Once we've given [private schools] dollars that would otherwise go to public schools, it raises the question, what about the students who are going to be underserved? What about disabled students? Will they have their needs met?"

About the Author

Kiannah Sepeda-Miller

Kiannah Sepeda-Miller is a reporter with the Better Government Association's investigative team. Prior to joining the BGA, she covered state government for The Associated Press while earning her master's in public affairs reporting from the University of Illinois at Springfield in 2017. She also holds a B.A. in sociology from Knox College in Galesburg, Illinois.