The goal of educational savings accounts, or ESAs, is to maximize the benefits K-12 students receive from education by giving parents a broader range of educational resources from which to choose.
However, onerous regulations may decrease the extent to which these new policies achieves their ends. Legal issues, even absurd ones, may also block the implementation of the concept altogether. A solution to these problems may exist just over the policy horizon.
Since 2011, five states have adopted some form of ESA program. The idea is now emerging in Colorado. Put simply, ESAs are designed to give parents the flexibility to “tailor” their children’s education to their specific needs by directly providing them with a certain amount of money that can be spent on a wide variety of education-related goods and services — books, materials and non-public school tuition, to name a few.
In Colorado and many other states, certain constitutional requirements known as Blaine Clauses are used to block the use of publicly funded scholarships at “sectarian” non-public K-12 schools. The high-profile Douglas County Choice Scholarship case has this issue at its core, particularly following a 2015 ruling against the program by the Colorado Supreme Court under the state’s Blaine clause.
The U.S. Supreme Court recently remanded the Douglas County case back to the state court following the recent Trinity Lutheran v. Comer decision on the inclusion of religious organizations in public benefit programs. It is unclear how that case will ultimately be resolved, yet the fact remains that Colorado’s highest court has demonstrated an aversion to private school tuition assistance. Since some parents would undoubtedly use funds from an ESA to pay for tuition or courses at a “sectarian” school, the presence of this clause may create a barrier for advocates of ESAs in Colorado.
One should note, however, that ESAs have survived constitutional challenges elsewhere. The Arizona Supreme Court, which had previously ruled against school vouchers as well, concluded in Niehaus vs. Huppenthal that the state’s ESA program was governmentally neutral toward religion — and was, therefore, constitutional. And although it did not address any school choice programs directly, the U.S. Supreme Court’s reasoning in Trinity Lutheran may have positive implications for future court decisions on private school choice programs. That said, these promising signals give no assurance that an ESA would be upheld in Colorado.
ESA programs may also face challenges associated with burdensome overregulation. Some advocate for heavy regulations of private schools in such programs in a supposed effort to maintain quality. Yet recent research has shown that regulations may cause higher-performing private schools not to participate, thereby limiting the number of high-quality educational options for children.
A new and largely untested idea may hold a potential answer to both the legal and regulatory problems. Some analysts have proposed an ESA program funded solely by private philanthropy. Under such a system, donors would receive a tax credit for contributions to organizations that provide ESAs to families. Dozens of tax credits already exist in Colorado, but none could currently be used to incentivize giving to a privately funded ESA program.
Blaine Clauses typically only apply to public money. Since the monetary resources for a tax-credit ESA would come from private gifts, Colorado’s courts would likely not view it as a distribution of public funds. To date, education scholarship tax credit programs, which provide private school scholarships using tax-credit-eligible private donations, have withstood every Blaine-based legal attack. Perhaps a tax-credit ESA could enjoy similar legal safety.
Additionally, multiple studies have shown that because education tax-credit scholarships come from private funds, the “regulatory impact” for these programs is considerably lower than in programs funded from public coffers. Thus, tax-credit ESAs may reduce the regulatory burden on these programs and avoid the problem of scaring away high-quality providers.
The concept of a tax-credit ESA is certainly creative. However, several questions remain. What would be the financial impact? What other education laws would have to be adjusted to accommodate this new system? Would there be an adequate number of philanthropists to make such a program feasible? Could parents effectively navigate such a system? These questions have not yet been answered.
Despite lingering questions, a tax credit ESA could help furnish children with the education that best fits their needs and interests. As the debate over educational savings accounts continues in Colorado, allies of school choice should remember that instituting a tax credit to encourage the creation of private ESAs could be an innovative and positive solution for Colorado students.
— Gregory Mill attends the University of Colorado, Colorado Springs and is an education policy researcher in the Future Leaders program at the Independence Institute, a free market think tank in Denver.
This article originally appeared in the Greeley Tribune on September 27, 2017.