Benefit costs, not school choice programs, are the real drain on public education spending
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Benefit costs, not school choice programs, are the real drain on public education spending

Benefit costs, not school choice programs, are draining new funding from K-12 public schools.

A common misconception about school choice is that it drains funding from K-12 public education. While the fiscal effects of school choice programs are complex and student enrollment declines can pose challenges for school districts, this narrative runs counter to school finance data. The following analysis will evaluate education spending trends in school choice states while calling attention to the rising costs of benefits that threaten future generations of K-12 students.  

To begin, it’s important to evaluate claims that public education funding across the states has decreased over time. To do this, we used the latest inflation-adjusted revenue figures from the U.S. Census Bureau for states included in EdChoice’s School Choice Spending Share ranking.[I]

Between 2002 and 2019, all school choice states except North Carolina saw inflation-adjusted increases in public school per-pupil revenue as Chart 1 illustrates below. New Hampshire had the highest growth in funding at 51%, going from $12,738 per student in 2002 to spending $19,283 per student in 2019. Between 2002 and 2019, the vast majority of states had education funding bumps exceeding 10%. Even school choice bellwethers like Florida and Wisconsin increased public education funding by more than 5%. North Carolina’s school revenue was essentially flat with a decrease of less than 1%.

Chart 1: Per Pupil Revenue Growth in School Choice States Between 2002 to 2019

Some may wonder, but what about comparisons to 2009 levels—the pre-Great Recession level for U.S. education spending? After all, this is the baseline year that some cite as evidence that public education is ‘starved’ for resources. 

Using 2009 as a reference point, half of the states with school choice still increased real spending by 2019, and these data don’t include more recent revenue trends from the latest school year—including a massive injection of about $200 billion in federal COVID-19 relief funding for K-12 public education.[ii] Future Census data will likely show a significant funding boom across school choice states through at least the current school year, regardless of what baseline year is used.   

School choice states have indeed increased funding for public education over time, and as our Reason Foundation colleague Christian Barnard says, it’s not even debatable. If anything, it’s school choice programs—which research indicates leads to increases in parent satisfaction, educational attainment, and test scores—that are underfunded. Most debates around school choice funding focus on comparisons between the average amounts provided to school choice participants and public school students. To be sure, these comparisons are important—and school choice participants almost always receive less—but they fail to convey the degree to which states are actually investing in choice programs. Fortunately, EdChoice has data on each state’s school choice funding as a share of its total K-12 education expenditures. They find that school choice programs—education savings accounts, vouchers, and tax credit scholarships— account for less than 0.4% of total U.S. education expenditures. Florida comes in on top of that list at a paltry 3.25%.

Taking a page from Director of the Edunomics Lab Marguerite Roza’s playbook we put these figures into per-student terms, which allows for more robust comparisons with other spending data. Using data obtained from EdChoice and U.S. Census Bureau public school enrollment figures, we estimated the per-student dollar amounts that states allocated to school choice in 2019 as displayed Chart 2.[iii] For example, Pennsylvania spent approximately $81 per student on choice programs while Louisiana spent $77. Interestingly, all but six of the 26 states spent less than $100 per student, including eight that fall below $10 per student.

For all of the battles that rage in state legislatures, courthouses, and opinion pages across the country, Chart 2 shows that school choice programs consume a tiny sliver of the public education funding pie. This becomes even more apparent when comparing these amounts to total spending on public schools. Rhode Island, Pennsylvania, and Illinois all spend in the neighborhood of $20,000 per student with the District of Columbia topping out at an astounding $31,109 per student.

Chart 2: School Choice vs. Public School Funding in 2019

The question then is where have the new K-12 dollars that have been spent in the last two decades gone if they have not funded school choice programs?

One substantial cost-driver is spending on instructional and support staff benefits, a Census expenditure category that includes teacher pensions, health care insurance, retiree health care insurance, and other expenses. Disaggregated figures aren’t available, but research suggests that teacher pension costs are responsible for a substantial share of the growth observed in the last two decades. As Chart 3 illustrates, inflation-adjusted instructional benefits—which doesn’t even include all district and school staff—have risen dramatically in school choice states. For example, Pennsylvania increased spending on instructional benefits by $2,414 per student from $1,358 in 2002 to $3,772 in 2019. This means that for every class of 20 students in Pennsylvania about $75,000 is now spent on instructional benefits alone—$48,000 more than was spent in 2002.  

Chart 3: Instructional Benefit Growth in States With School Choice Programs From 2002 to 2019

As a result, instructional benefits consumed substantial portions of public education’s revenue growth during this time period. For example, Virginia increased funding by $1,717 per student but benefits grew by $900 per student. Ohio’s benefits spending consumed $574 of its $1,749 revenue increase. For some states, spending on instructional benefits actually outpaced revenue growth. This was the case for Arizona where funding increased by $122 per student while benefits grew by $393 per student—a net loss of $270 per student. These comparisons are shown in Chart 4.  

Chart 4: Per Pupil Revenue vs. Instructional Benefit Exependiture Growth

Finally, it’s helpful to make direct comparisons between school choice spending and benefit cost growth. For almost every state, growth in per pupil instructional benefits between 2002 and 2019 exceeded spending on school choice, and in many cases, this gap is large. In Chart 5 you can see that in Georgia, benefits grew by $471 per student and school choice spending in 2019 was only $62 per student. Even in Indiana, a school choice heavyweight that experienced relatively moderate growth, the increase in benefit costs is still on par with school choice spending.

Chart 5: School Choice Funding vs. Additional Spending on Instructional Benefits Between 2002 and 2019

This raises an interesting question: how much would school choice states have saved if they maintained benefit spending at 2002 per pupil levels adjusted for inflation? In 2019, these 26 states combined would’ve spent about $17.8 billion less on instructional benefits, compared to the $2.6 billion they spent on school choice programs. In other words, growth in benefit spending is diverting over six times more from classrooms than what’s spent on school choice programs. Clearly, the notion that school choice drains funds from public education is not just unfounded, but it’s also a distraction from an actual fiscal crisis that’s consuming education budgets in virtually every state.

Chart 6: National School Choice Spending vs. Additional Spending on Benefits Compared to 2002 Levels

These education spending findings have a number of implications for state policymakers. For starters, it’s evident that school choice doesn’t drain funding from public education and lawmakers should dismiss claims to the contrary. It is also clear that more must be done to address ballooning pension debt that is crowding dollars out of public school classrooms. This problem is only worsening and poses a serious threat to future generations of K-12 students.

Reason Foundation’s K-12 Education Spending Spotlight provides school finance data for every state and breaks down important trends for education stakeholders. You can find the full interactive dashboard and data set here.

[i]We’re primarily interested in evaluating states with state-administered school choice programs and therefore excluded Vermont and Maine from our analysis. Additionally, Montana was also excluded since they didn’t spend anything on school choice in 2019 according to a dataset obtained from researchers at EdChoice. It’s also important to note that 2002 is used as a baseline year for public education revenue and expenditures since this is the starting point for continuous U.S. Census Bureau state-level summary figures.

[ii] For ease of explanation we include D.C. with the 25 states analyzed in our data for a total of 26.

[iii] EdChoice’s State Share rankings use the most recent school choice budget figures available, which vary among programs and states. To estimate per-pupil spending on school choice we obtained a more detailed dataset from Edchoice and combined 2019 school choice expenditures with 2019 enrollment figures from the U.S. Census Bureau.

Correction 10/7/2021 – This analysis previously stated that seven states spent less than $10 on school choice per student. That number has been updated to eight. Three calculations were updated to reflect underlying non-rounded figures: instructional benefit growth in Virginia is $900 (previously $901); instructional benefit growth in Ohio is $574 (previously $573), and the difference between per pupil revenue growth and instructional benefit growth in Arizona is $270 ($271).