Saving Money and Improving Education: How School Choice Can Help States Reduce Education Costs

David Salisbury
Cato Institute
October 4, 2005

Proponents of school choice have, over the years, made any number of moral, political, and philosophical arguments to support choice. Is there a fiscal argument to be made? In theory, yes, and David Salisbury tests the idea in this report by examining how choice programs affected school funding in Arizona, Florida, Maine, Ohio, Pennsylvania, Vermont, and Wisconsin, among other states. The theoretical case for school choice is straightforward. Choice programs enacted to date, be they vouchers, charter schools, or tax credits, have always cost less per student than the cost of educating a child in a district school. When students shift to these programs, district schools benefit because more funding, per pupil, remains in their budgets, and they save money overall if they cut costs in response to reduced enrollments. Choice programs also encourage the private sector to invest in education - as philanthropic dollars supplement private and charter school costs, and families themselves pay portions of tuition. Of course, the financial realities of choice are more complicated. Not all public education costs are variable, so when a child departs, schools cannot necessarily reduce their costs by the average per-pupil spending. And politics always intrude - when public schools are threatened by competition, legislatures often allocate them more funds to protect against their potential losses. This report carefully considers the former concern, of fixed costs, and discusses one study which found that as much as 80 percent of education spending is truly variable (based on actual spending fluctuations). However, Salisbury stops short of predicting politics, so we're left to wonder whether all the theories and calculations will be rendered moot by sympathetic lawmakers rescuing public schools. It's a difficult question to answer, but one worth pondering by those who see choice as way to ease state budgets. Overall, this is a compelling analysis full of useful information. You can find it here.

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