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How are school choice programs funded?
As we said, a well-designed school choice program allows funding the state already allocates for an individual student’s K–12 education to follow that student to the schools and service providers that best meet their needs— whether that’s a public school, a school in another district, a charter school, a private school, online learning, learning at home or a customized learning experience.
In practice, states have funded their school choice programs in many different ways. If you’re interested, our School Choice in America Dashboard allows you to navigate to all of the individual programs to see exactly how each of them is funded. If you prefer a quick overview of how each of the four types of school choice programs are funded generally, check out our explainers below.
Education Savings Accounts (ESAs)
Residents in each state—and communities within that state—pay income taxes, sales taxes or both. Those funds become the revenue the state uses to pay for education. Under an ESA, the state funds students’ savings accounts with the money already set aside for their public education for the family to use to pay for approved educational expenses. These programs typically do not include the federal and local tax dollars set aside for a child’s education—only state funds and often only a portion of those state funds.
School Vouchers
Residents in each state—and communities within that state—pay income taxes, sales taxes or both. Those funds become the revenue the state uses to pay for education. Under a voucher program, the state distributes the money the state already allocates for an individual student’s public education to that student’s family. From there, they can use those funds to pay for private school tuition and fees. These programs typically do not include the federal and local tax dollars set aside for a child’s education—only state funds and often only a portion of those state funds.
Tax-Credit Scholarships and Tax-Credit Education Savings Accounts (ESAs)
It starts with a non-profit that relies on charitable donations to fund scholarships or ESAs for kids. Taxpayers who want to support those non-profits donate to them. To inspire people to donate more, the government offers them tax credits for their donations. Then, when donors file their income taxes, they receive a tax credit—the percentage varies by state—for their donation.
Individual Tax-Credit and Deductions
Parents must pay out-of-pocket for their children’s private schooling and keep all receipts. When they file income taxes each year, they either claim a credit for educational expenses, which subtracts from the total taxes they owe OR claim a deduction, which reduces their total taxable income. These programs are only useful for parents who can already afford private tuition. The state can limit the sizes of tax credits and deductions, which can influence how much taxpaying parents can get back.