How Tennessee’s ESA Spending Compares to Other States

Last month, the Tennessee Department of Education released the final expense report summary and enrollment data for the first full year of the state’s education savings account (ESA) program – known as the Individualized Education Account (IEA) program.

I was curious to see how proportional spending within this ESA program compared to ESA spending in other states—showcased in two reports on our website: Personalizing Education: How Florida Families Use Education Savings Accounts and The Education Debit Card II: What Arizona Parents Purchase with Education Savings Accounts.

Although eligibility requirements differ across the programs—Florida and Tennessee only allow children with specific special needs and diagnoses to participate while Arizona’s eligibility started with students with special needs but has expanded almost every year since then—I thought it would still be interesting to compare how funds were spent.

The biggest difference in spending clearly comes in the private school tuition category. There are two big factors I think might be driving that gap:

• 58 percent of Arizona ESA students participated through the special needs eligibility pathway in 2015–16; 100 percent of Tennessee and Florida recipients have special needs. ESA programs are often designed with families of students with special needs in mind because those students’ needs are often not met by traditional schooling models.
• Differences in number of students participating. Relative to the years of expenditures, there were 87 IEA students in 2017–18, compared to 4,946 Gardiner ESA students in 2015–16 and 1,334 Arizona ESA students in 2014–15.

One thing that stands out is the percentage of spending in Tennessee on ABLE TN. According to its website, “ABLE TN is a savings program designed to help Tennessee residents with disabilities put aside money to pay for qualified expenses. These accounts provide the opportunity to save and invest, with tax-free earnings, to help participants maintain independence and quality of life.”

This program, administered by the Tennessee Department of Treasury, is separate from the state’s college savings program—meaning ESA students in Tennessee are allocating 17.3 percent of their program expenditures toward investing in their own future. At the end of the day, I think that’s what education-related spending is truly about: investing in the future of the next generation.

One thing not captured in looking at funds spent is an analysis of unspent funds. Most ESA programs allow unspent funds to be rolled over at end of the year, which could easily lead us to a discussion about Milton Friedman’s thoughts on the four ways to spend money—and potentially a future blog post or research piece.