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January 2013 Brief: Volume 20, Number 1

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Education Savings Accounts: A Path to Give All Children an Effective Education and Prepare Them for Life

 

by Jonathan Butcher, Education Director, Goldwater Institute

 

 

All parents want an effective school for their child. But no parent should have to take the drastic steps that Yolanda Miranda took to give her children a chance at a good education: Yolanda went to jail and was charged with grand larceny for sending her children to better schools in their grandmother’s district instead of their assigned schools. “If I had to do it again ten times over, I would,” Yolanda says.[1]

 

The most innovative solution to provide all America’s children with better opportunities is education savings accounts, state-funded bank accounts that families use for education expenses.[2] Parents operate the accounts, and they have discretion over different services and materials. The state’s Department of Education and Treasurer’s office coordinate to deposit student funds from the school funding formula into the accounts. Conceived by the Goldwater Institute in 2005 and passed into law in Arizona in 2011, the accounts offer parents and children more choices in a child’s education and allow children to access options either online, across states, or through new devices such as iPads.[3]

 

Like health savings accounts (HSAs), which allow patients to buy prescription medicine, pay co-pays after a doctor’s visit, and pay hospital fees, education savings accounts also give individuals discretion over how money is spent on different products and services. With education savings accounts, the state department provides parents an account number and a check or debit card, and parents use the card or online programs such as PayPal to make purchases or to pay school tuition. In Arizona, approved expenses include private-school tuition, textbooks, online classes, tutoring, 529 college savings plans, college tuition, and individual public school classes and extracurricular programs.

 

Arizona Governor Jan Brewer signed the accounts into law in 2011 for students with special needs, and the accounts were expanded in 2012 to include children in failing schools, children of active-duty military families, and adopted children. Now, nearly one out of every five Arizona public school students — more than 200,000 children — is eligible for an account.[4]

 

Families apply by filling out an application on the Arizona Department of Education’s web site and returning it by the due date. Once the application is approved, the department of education and the treasurer’s office notify the state’s vendor (Bank of America) to send the parents an account number and a check card. As parents make purchases, they must keep all receipts and submit a report along with the receipts to the department of education at the end of each fiscal quarter. The department reviews the receipts to make sure all purchases are for educational expenses, and then the department signals the treasurer to make the next disbursement. Quarterly disbursements are withheld if any expense did not qualify.

 

Arizona’s experience can inform other states as they consider enacting education savings accounts. State leaders considering the program will need to address four critical areas:

 

Eligibility. All students should be eligible for a savings account, just as all children can attend public schools.

 

Funding. State funding policies must be updated to accommodate real-time student transfers and funding models where education dollars follow the child.

 

Allowable expenses. State leaders must carefully define the list of expenses for which parents can use savings-account funds.

 

Preventing fraud and abuse. Every state and federal program that offers public assistance is subject to fraud and abuse. Education savings account programs should be designed with fraud protections that use the experience of other benefit systems, such as Medicare and food stamps.

 

In the years between A Nation at Risk, released in 1983, and the Council on Foreign Relations’ U.S. Education Reform and National Security, published in 2012, the conventional wisdom about U.S. public education has not changed. The council’s report opens with “It will come as no surprise to most readers that America’s primary and secondary schools are widely seen as failing,” which is eerily similar to A Nation at Risk’s now-iconic words from three decades earlier: “If an unfriendly foreign power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war.”[5]

 

In the years between the two reports, lawmakers have paid schools more tax money, have attempted to lower class sizes by hiring more teachers, and have enacted various other institutional reforms. Those top-down reforms have not changed the trajectory of student achievement. What is more, advances in technology are changing the way we consider education. Online and hybrid schools, along with free educational content through YouTube and iTunes, have helped shift the focus of a child’s experience from the schoolhouse to, well, any house. Parents and children need to be able to pursue education wherever it is found. Education savings accounts allow them to do just that. The accounts are a model for what education in the 21st century should look like: flexible, innovative, and child-centered.

 

Endnotes:
[1] Mike Ross, “Education or Bust,” The Daily, March 11, 2012, <http://www.thedaily.com/page/2012/03/11/031112-news-school-moms-arrested-1-5/>. See also Yahoo! News, “Should parents do jail time for ‘stealing’ an education?,” March 13, 2012, <http://news.yahoo.com/parents-jail-time-stealing-education-140500276.html>.
[2] Under Arizona law, the accounts are called “Empowerment Scholarship Accounts.” See Arizona State Legislature, Fiftieth Legislature, First Regular Session, S.B. 1553, <http://www.azleg.gov/legtext/50leg/1r/bills/sb1553h.pdf>.
[3] Dan Lips, “Education Savings Accounts: A Vehicle for School Choice,” Goldwater Institute Policy Report No. 207, November 15, 2005, <http://goldwaterinstitute.org/sites/default/files/Education%20Savings%20Accounts.pdf>.
[4] In addition, this legislation created a protective measure for home-school families that are not using an account that exempts such families from current and future rules for any families that have education savings accounts.
[5] The National Commission on Excellence in Education, A Nation at Risk, April 1983, <http://datacenter.spps.org/uploads/SOTW_A_Nation_at_Risk_1983.pdf>; Council on Foreign Relations, U.S. Education Reform and National Security, March 2012, p. ix, <http://www.cfr.org/united-states/us-education-reform-national-security/p27618?co=C007301>.

 

Public Interest Institute’s POLICY STUDY, Education Savings Accounts: A Path to Give All Children an Effective Education and Prepare Them for Life, by Jonathan Butcher of the Goldwater Institute, can be viewed at http://www.LimitedGovernment.org/ps-12-13.html.

 

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