Texas Bill Aims to Create State’s First Two School Choice Programs

UPDATE March 31, 2017

Before the Texas Senate passed SB 3, formerly a universal education savings account (ESA) bill, on March 30, the bill was amended in seven key ways.

1.  The bill now limits ESA eligibility only to students who have attended a Texas public school for one year prior to applying.

2.  Legislators also instituted a cap on eligibility for the ESA program at 175 percent of the income guidelines necessary to qualify for the national free or reduced-price lunch program, meaning fewer students will be eligible to participate in the program. Eligibility for students with disabilities remains at 90 percent regardless of income.

3.  The bill now limits eligibility for the ESA and tax-credit scholarship programs to counties with more than 285,000 residents. Legislators also added a provision that empowers school boards to allow parents to opt into both programs.

4.  The cap on the tax-credit scholarship program spend decreased from $100 million to $25 million.

5.  For both the ESA and tax-credit scholarship program, now 75 percent of total program funds must be dedicated to scholarships that pay for private school tuition, and 15 percent must be dedicated to other education expense assistance.

6.  The new version of the bill now allows parents up to $500 per year to pay for transportation costs.

7.  Under the amended ESA program, the costs of breakfast and lunch at students’ private schools would be approved expenses.

SB 3 now heads to the House Education Committee.

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Last week, Texas legislators introduced in the Senate a bill that could create the state’s first two school choice programs: education savings accounts (ESAs) and tax-credit scholarships.

This bill, if passed, would set up a tax-credit scholarship program for students with special needs, students in foster care or institutional care, children of active-duty military members and students from families whose household incomes are at or below 200 percent of the federal free and reduced-price lunch (FRL) program. More important, it would establish an ESA program that is open to all public K–12 students in The Lone Star State.

Yes, Texas is on its way to a nearly universal educational choice program!

The potential ESA program would operate in a similar fashion to ESAs in other states. Here’s how it would work:

Student Eligibility

Students must be residents of the state who attended a public school during the entire preceding school year or were born on or after September 1, 2012.

Student Funding

For students whose household incomes are up to 200 percent of the FRL program ($89,910 for a family of four in 2016–17), annual account payments may be worth 75 percent of the state average maintenance and operations expenditures per pupil in average daily attendance for the preceding fiscal year ($7,346 in 2014–15). Annual account payments for students with special needs may be worth 90 percent of the state average maintenance and operations expenditures per pupil in average daily attendance for the preceding fiscal year ($8,815 in 2014–15). For all other students, annual account payments may be worth 60 percent of the same state average amount per pupil in average daily attendance ($5,877 in 2014–15).

Students who receive an ESA may also receive a tax-credit scholarship if they are students with special needs, students in foster care or institutional care, children of active-duty military members or students from families whose household incomes are at or below 175 percent of the FRL program ($78,671 for a family of four in 2016–17). The scholarship may be worth the difference of the ESA and the full tuition amount for a private school, plus a $500 or less transportation allowance.

Allowable Uses

Funds may be used to pay for:

• Tuition and fees at an eligible private school
• Online learning programs
• Public school classes or educational services (as long as the student does not attend full-time)
• Textbooks, curriculum and other instructional materials
• Tutoring services
• Community college costs
• Higher education expenses
• Fees for testing, including nationally norm-referenced tests, AP exams and college placement exams
• Services for special needs students

Any unused funds still left in an account at the end of the school year may be rolled over to the next school year, which can continue until three months after a student graduates from high school.

Regulations

Parents must agree to spend funds only for allowable expenses, notify the comptroller within 30 days if their child enrolls in a public school and notify the comptroller if their child graduates from high school.

Participating providers must be licensed or accredited by a regional or national accrediting organization, and schools must be accredited by an organization that is recognized by the Texas Private School Accreditation Commission.

What the Research Says

In collaboration with the Texas Catholic Conference and the Texas Private Schools Association, I surveyed Texas private schools in 2015–16. The EdChoice Brief Exploring Texas’s Private Education Sector focuses on the aggregated survey responses of 368 accredited private schools around the state.

Nearly two-thirds of Texas private schools (63%) said they would or probably would participate in a universal ESA program if it was enacted, even though closer to one-quarter (27%) were previously familiar with the concept of ESAs for K–12 education.

In that same survey brief, I projected that there were approximately 127,000 open seats for K–12 students in Texas’s accredited private schools in 2015–16. That’s not the best news for the more than 5 million Texas public school children that would be able to apply for an ESA if the legislature enacts the program. However, it’s also highly improbable that all of the open seats would be filled in the program’s first year based on participation rate data for other programs across the country—typically somewhere around 1 percent of eligible students participate in a program’s first year and closer to 2 percent participate in the second year.

Texas has an opportunity to plant its educational choice flag and allow nearly all K–12 students in the state to have personalized learning options, and we here at EdChoice think the legislators who are paving the way for Texas, their Texas, to become the next leader in educational choice are taking a stupendous leap in the right direction.