Thursday, October 18, 2007

Vouchers -- Humble Pie

I have been swamped at work still finishing off returns from the 2006 filing season. (I have two days left thanks to an underhanded trick of the trade) :) As the month begins to progress work has continued to pile and I'm doubting that I will have the time to complete the earth shattering, in-depth analysis I was hoping to be able to present before the November vote.

I have been reviewing the LFA report again and again, and I have hit a paradigm shifting roadblock in my support of vouchers. I do still believe vouchers would produce a fairly decent net savings for the first few years (savings ranging somewhere near4-6.2 millon or in a worse case scenario a loss) , but there will come an equilibrium within 5 to 6 years where the savings break even, and when vouchers fully implement in the 13th year and onward vouchers will inevitiably begin to net annual losses. One might argue about the ambiguities of savings from private school student who would have gone to private schools with or without vouchers and the students who may attend private schools because vouchers make the difference, however it is impossible to get around the fact as time goes by (especially after year thirteen) all students in private schools will be receiving voucher money (whether or not they wanted or needed vouchers to incentivize them out of the public school system).

Judging from the Legislative Fiscal Analyst's Report, from year 13 (and I assume from then on) vouchers will net annual losses between $43,088,978 and $59,492,020. There may have been some options that could have alleviated this undesirable effect of subsidizing students who were "no-matter-what-the-cost" private school bound such as requiring a 1 or 2 year period of public school attendance for voucher eligibility. However, with the exception to the eligibility of current Utah-residing, school-aged students no such requirements were included in HB148 or 174.

Idealogically, I do agree with the philosophy of allowing taxpayers a say in how their tax dollars are used to fund the education of their children. The one size fits approach to public education needs innovation and options. Charter schools are a great menu item in our education mix, and I believe providing more accessibility to private schools would also provide another great option for students who need a non-traditional approach to their education needs if it could be done without creating an additional drain from Utah's taxpayers and from the already underfunded public schools system. However, referendum 1 doesn't succeed in this point. After the 13th year and beyond it would be a drain on the public coffers, and I'm afraid it would be viewed as nothing more than another entitlement program.

If HB148 or 174 would have had a provision forcing voucher recipients to enter public school for at least a year or more before being voucher eligible, the thirteen year savings to loss issue may have been solved. This is not the case, HB148 would have its beneficial savings for a season but in the long-run would become a drain of Utah's tax dollars. I hope that if and when Ref 1 is voted down the Legislature reconsiders the issue, and looks at how to resolve the 13 year crunch.

Regretfully, I think I will be dropping my support of referendum 1 with the forlorned hope that the idea doesn't die permanently in this state. If this damages my credibility -- so be it. The idea is good, but the plan's execution has that 1 major flaw for me. This paradigm shift has not been an easy one for me to embrace.

I blog for myself. I find clarity in writing and verbalizing my opinion, and often I find out through my writing that I am wrong.

Have fun everyone!!

16 comments:

Cameron said...

That took some guts.

I've been following the debate from a distance, and this cost/savings issue has intrigued me. Frankly, the anti-voucher bloggers seemed to be making a pretty clear case that there would be no savings, and I hadn't seen a decent rebuttal anywhere. I was looking forward to your analysis here. I wonder if the pro-voucher folks have put too many of their eggs into the savings basket, for it seems that there are other arguably good reasons for a voucher system.

Jesse Harris said...

I'm with you on reforms. The minimum enrollment period is probably a good way to encourage switching and reduce our baseline costs substantially. I'd also be in favor of eliminating the $500 voucher to cut a bit more fat from the program.

I just ran down the numbers last night (and some big corrections this morning) to see where it leads, and the big problem is that we need the 5-year pilot to collect data on switchers. There's too many assumptions we have to make about switchers and, in my opinion, the assumptions are VERY low. I think it'll be harder to push a new corrected bill through than it will be to tweak and correct the current bill as it exists. For these reasons, I simply cannot vote down the voucher program even though you make a good case for it.

Jeremy said...

"...If this damages my credibility -- so be it. The idea is good, but the plan's execution has that 1 major flaw for me. This paradigm shift has not been an easy one for me to embrace."

If anything I think this post enhances your credibility in a big way.

Bloggers who look at issues with open minds and intellectual honesty are a lot more readable and valuable than ideolgues who can't stand looking at data that doesn't support their pre-conceived notions. I wish I was not guilty of being the latter as often as I am.

Don said...

I absolutely agree with jeremy. If anything, the ability to realize the weakness of this bill, and to actually shift away from supporting it, independent of your philosophical support for vouchers, should only enhance your credibility.

It certainly has with me . . . :)

David said...

I echo the sentiments of Jeremy and Don.

I have been struggling with the voucher issue myself. I like the concept and have been a vocal supporter, but I have been so disgusted with the politics and the poor defense offered by PCE that it has been tempting to drop my support of Referendum 1 in protest.

I may decide that this fact of the drain on the system that we will see in later years is reason to drop my support of Referendum 1. I still like the idea of vouchers and I think that you and Jesse are right that a minimum enrollment period would make this much more attractive.

CR said...

Ditto: if somebody changes their mind in politics, it is unfortunate that people too often use the word, "flip-flop".

You have always been credible. I now see is that you are also, reasonable.

Thanks for your post.

CraigJ said...

As mentioned before, long live Green Jello!

I applaud you and David for your courageous posts. I hope I can follow your examples when the shoe is on the other foot (and feel free to call me on the carpet if I don't!!!).

pramahaphil said...

thanks all...

Matt said...

I can appreciate open-mindedness, but you've got to reconsider. The less than ideal parts of this bill were necessary concessions to get it passed. This bill is the closest anyone in the country has gotten to the ideal school choice bill. Rather than vote against it and start over again (not going to happen, by the way once there is a popular referendum against school choice), it is a million times over a better strategy to take the THIRTEEN YEARS to work on improving the bill. Seriously, it kills me that this is what has you changing your mind. You should also consider that markets are not static and the 13-year projection does not consider the effects a more open and competitive market will have on the cost of education. Look at the existing school choice programs; it's no mystery they have saved money.

pramahaphil said...

I do see your point Matt, and I agree with you, unfortunately, that the Legislature will likely never reconsider the idea if it is voted down by popular referendum.

As I state near the end of the post following this one, I have a hard time saying well lets adopt this flawed bill (just because it is our only chance) with the faith that our elected officials will see its flaws and correct the flaws before the minor flaws turn into major problems. I don't have that much faith in politicians.

I do this with the (forlorned) hope that the Governor and legislators don't abandon the idea completely. A few changes and we would have a voucher plan that could do what the Eyre's and their Oreo's claim voucher's will do.

If voucher's pass despite my reservations than I hope the legislature take these suggestions to heart quickly.

Daniel said...

I've looked over the Legislative Fiscal Analysts report and it's obvious you understand it better than I. Where does the report net out the money from the voucher students that would have attended public schools?

As I understand your problems with the program, it is that it costs too much after year 13. As I understand it, the only reason the bill has positive net costs at all is because of the transfer payments to local school districts. These were necessary to get a few anti-voucher votes for the bill. In other words, your concern is that because they incresed the payments from the state to local districts, they killed the bill in your eyes. Maybe I'm misreading your arguments.

Also, if there are more switchers (I define them as people who would be in public school but for the program), then the program would be more fiscally sound because the state doesn't bear the complete cost of educating these students. Isn't that the real issue--the number of switchers 13 years down the road.

I'm skeptical of calculating the number of switchers 13 years down the road. I believe the Legislative Fiscal Analysts probably underestimates the number of switchers. But any such calculation is very difficult because markets are not static, they are very dynamic. If there is additional demand for private schools in light of the vouchers, additional private school supply will be created.

There will also likely be more switchers because vouchers have proven to be beneficial for students.

Professor Patrick Wolf of the University of Arkansas’ Department of Educational Reform examined the 10 random-assignment studies of voucher programs and he found some interesting results. A summary spreadsheet is available here. http://spreadsheets.google.com/pub?key=pcyEJ-sIC0Aid8nYzKPU7Pg

Wolf found that students and families tend to benefit from exercising school choice. He found that in 9 out of 10 random assignment studies children benefited from school choice. Wolf also found that 80 percent of parents of students using scholarships in Washington, DC graded schools A or B, compared to 50 percent of the public school group.

It should be noted that school choice isn’t magic. The results aren’t always startling the first year, but the gains become clear within a few years. Also not all of the studies showed test score improvements in the all of the children, but even when there weren’t improvements in the overall population there were improvements in important subgroups (usually African Americans). For example, in New York a private scholarship program closed the black-white test score gap by half in three years (Howell et. al. 2002).

Lastly, even when there weren’t significant test score improvements, parents were more satisfied with the schools and with the safety of the school when they had some school choice.

As Wolf states, “school choice programs tend to produce a variety of positive outcomes, but not necessarily immediately or under all conditions.”

The children who do not participate in the voucher program also tend to benefit from the increased competition. Belfield and Levin (2005) found that the “evidence shows reasonably consistent evidence of a link between competition (choice) and education quality. Increased competition and higher educational quality are positively correlated.”

In summary, the evidence shows school choice programs tend to provide benefits for children and their parents. These benefits aren’t always dramatic, but the overwhelming majority of studies indeed show benefits. Furthermore, public schools also tends to improve apparently as a result of competition with children in voucher programs.

You could support vouchers because of the benefits they provide, even if there are additional costs because there are benefits to students in voucher program and benefits to student in public schools.

Jeremy said...

Daniel,

The studies you cite are from school systems where voucher programs were adopted due to the absolute failure of public schools for significant chunks of the population. Utah's schools aren't anywhere near as bad as schools in districts that have previously experimented with vouchers...in fact...most data indicate that Utah's schools are doing better than many others in the U.S. and are improving. I just don't see how you can use studies on those other voucher experiments to argue for vouchers in Utah.

steve u. said...

The switch rate is variable and unknown. However, the math is fairly straight forward. If 1% of school-eligible children switch, the program nets out. Less than than that, and savings would not be generated (though it isn't quite accurate to call that a "loss," since the funds are all from the general fund, not the education fund). If 2 or 3% switch, lots of savings are generated. If we look at the demand for other choice items that families have been provided, that suggests that a 2 or 3% rate is quite reasonable.

And, for the record, I agree that it is a sign of political maturity and self-confidence when someone is willing to switch a position in light of new information. In this case, though, (intending to completely respect your ability to draw different conclusions) I'd argue that savings are more likely than losses.

CraigJ said...

Steve,

What you're saying is that the legislative fiscal analyst is off by hundreds of millions of dollars, or, in your assessment, off by as much as 500%. A 10% or even a 25% discrepancy rate I'll grant. But these wild speculations contrary to the LFA's findings are tough to swallow.

The price elasticity of demand seems to be fairly clear. The opportunity cost to obtain those switchers (e.g., paying for those who never intended to go to public school) is massive. The switch rates necessary just to break even require a suspension of disbelief difficult to sustain.

steve u. said...

Craig,

Cleary, numbers are made for disagreement, but a 1% switch rate, instead of a .4% switch rate should hardly suspend anyone's sense of reason.

steve u. said...

Clearly I can't type.