Unleashing Educational Opportunity
If a family is dissatisfied with their child’s residentially assigned public school, they usually only have five costly or limited options. They can move to a residence that is assigned to a better district-run public school, pay for a private school out of pocket while still paying for the district-run public school through property taxes, incur the costs of homeschooling while still paying for the district-run public school through property taxes, or negotiate with school leaders and teachers to try to improve the education their child receives (DeAngelis, 2019a). Families could also try to influence their schools’ policies and practices through school board elections, which could require significant time and resources. However, it’s essentially guaranteed that many families will not be represented by the will of the majority, and it’s not certain that the desired policies will actually be implemented or that they will work as intended. It is also possible that the outcome of the election would mostly reflect the desires of concentrated interest groups rather than families with children in schools (Lovenheim & Willén, 2019; Moe, 2011; Olson, 1971).
Some economists and education researchers argue that the high costs associated with choosing an alternative to the residentially assigned district-run school leads to a high degree of monopoly power in the K-12 education system in the United States (Friedman, 1955; Hanushek et al., 2007; Hoxby, 2007). Because it is costly to exit the residentially assigned school, district-run schools arguably have weak financial incentives to cater to the needs of families (Chubb & Moe, 1988; Chubb & Moe, 1990; Friedman, 1997). Private school choice programs–and public charter schools–decrease the financial costs associated with exiting the residentially assigned school by allowing education dollars to follow children to the schools that their families select without requiring families to change residence. This reduction in switching costs, and dampening monopoly power, theoretically gives district-run schools stronger incentives to provide educational services that satisfy the needs of families (DeAngelis & Barnard, 2020; DeAngelis & Flanders, 2019; Egalite, 2013; Jabbar et al., 2019; Hoxby, 2000).
Some scholars argue that private schools have stronger financial incentives than district schools to provide meaningful educational services because dissatisfied families are free to send their children – and money – elsewhere. In other words, the competitive pressures introduced by private school choice programs could improve the educational outcomes valued by families (Egalite, 2013). Private schools might also have a competitive advantage since they generally face fewer government regulations than district schools (Shakeel & DeAngelis, 2017). Private school choice programs could also improve educational outcomes by facilitating a better match between students and their educational settings (DeAngelis & Holmes Erickson, 2018).
Pennsylvania has two private school choice programs that allow low- and middle-income students to access scholarships to attend private schools. The Pennsylvania Legislature enacted and launched the Educational Improvement Tax Credit Program (EITC) in 2001. This program offers tax credits for contributions to non-profit organizations that provide private school scholarships to students in the state. The EITC awarded 37,725 scholarships, with an average value of $1,816, in the 2017-18 school year. In 2012, the state legislature enacted and launched a second program, the Opportunity Scholarship Tax Credit Program (OSTC), which is open to students in the lowest-performing schools in the state. The OSTC awarded 14,419 scholarships, with an average value of $2,490, in the 2017-18 school year. Students from households with incomes less than $90,000 plus $15,842 for each child in the family are eligible for scholarships from either program. Students with special needs are eligible if they come from households that earn up to 150 percent of the baseline income eligibility level. Students with severe special needs are eligible if they come from households that earn up to 299 percent of the baseline income eligibility level.
Although Pennsylvania’s two private school choice programs awarded a total of 52,144 scholarships for K-12 students in the 2017-18 school year, 49,356 scholarships were denied to applicants because of arbitrary funding caps. House Bill 800, passed by the Pennsylvania House and Senate with bipartisan support, would have increased scholarship funding by $100 million in the 2019-20 school year. The bill also allowed the annual cap to increase by 10 percent if at least 90 percent of credits were utilized the previous year. However, Governor Tom Wolf vetoed the bill on June 18, 2019.
What effects do the EITC and OSTC have on the Pennsylvania economy? And what economic impacts would expansions of these programs have on the state? The preponderance of the most rigorous evidence suggests that access to private school choice programs could lead to better academic and behavioral outcomes, which could translate to higher lifetime earnings, higher high school graduation rates, and reductions in crime (e.g. DeAngelis & Wolf, 2019c; EdChoice, 2020; Foreman, 2017). Recent research also suggests that these kinds of academic and non-academic benefits of school choice could have substantial positive effects on state economies over time (e.g., DeAngelis, 2020; DeAngelis & Flanders, 2018; Flanders & DeAngelis, 2018). Using the preponderance of evidence linking school choice to academic achievement, educational attainment, and crime reduction, this study forecasts the economic impacts of the two private school choice programs in Pennsylvania.
Applying cautious estimates from each outcome to the 52,144 participating students, this study finds that the two private school choice programs in Pennsylvania are expected to provide the following long-run economic benefits:
- $1.6 billion in economic benefits from higher lifetime earnings associated with increases in academic achievement
- $531 million from additional high school graduates
- $59 million from reductions in the social costs associated with crimes
A $100 million increase in scholarship funding could allow 102,085 students (including 49,941 new scholarship students) to use the programs in the 2020-21 school year, which could provide the following long-run economic benefits:
- $3 billion in economic benefits from higher lifetime earnings associated with increases in academic achievement
- $1 billion from additional high school graduates
- $115 million from reductions in the social costs associated with crimes
A 10 percent annual increase in scholarship funding could allow 201,416 students to use the programs by the 2029-30 school year, which could provide the following long-run economic benefits:
- $6 billion in economic benefits from higher lifetime earnings associated with increases in academic achievement
- $2.1 billion from additional high school graduates
- $228 million from reductions in the social costs associated with crimes
These potential economic benefits should not be combined and should be assessed separately because of overlap. For example, higher academic achievement increases the likelihood of high school graduation, and receiving a high school diploma reduces the likelihood of incarceration. It is also possible that Pennsylvania’s private school choice results will differ based on context, geographic location, time, and implementation. As such, readers should exercise considerable caution when assessing these types of forecasts of economic impacts because they are based on evaluations from other locations.
The next section reviews the evidence linking school choice to academic achievement and estimates the possible effects of expanding Pennsylvania’s choice programs on lifetime earnings. The sections after that estimate the possible effects of expanding Pennsylvania’s choice programs on high school graduation rates and crime reduction by reviewing the relevant literature from the United States. Next, the evidence linking private school choice to civic outcomes, satisfaction, and fiscal effects are reviewed. Finally, implications for private school choice in Pennsylvania are discussed.
 School Choice – Pennsylvania. EdChoice. Retrieved from https://www.edchoice.org/school-choice/state/pennsylvania/
LeBlond, M. (2019). Opportunity Denied Again: Despite Recent Increase, Thousands of Scholarships Still Denied. Commonwealth Foundation. Retrieved from https://www.commonwealthfoundation.org/policyblog/detail/opportunity-denied-again-despite-recent-increase-thousands-of-scholarships-still-denied
House Bill 800; Regular Session 2019-2020. Pennsylvania General Assembly. Retrieved from https://www.legis.state.pa.us/cfdocs/billinfo/bill_history.cfm?syear=2019&sind=0&body=H&type=B&bn=800
Finnerty, J. (2019). Wolf vetoes school choice bill. The Tribune-Democrat. Retrieved from https://www.tribdem.com/news/wolf-vetoes-school-choice-bill/article_dfc05f76-91df-11e9-aaed-8f86b6cd3f72.html