New Report: NJ Could Save $950 Million a Year With This School Choice Program

Martin F. Lueken of EdChoice (with an assist from @stateaidguy) has a new paper out called “Fiscal Analysis of an Education Savings Account Program in New Jersey.” What’s the bottom line? If 10% of New Jersey K-12 students in district schools opted to use Education Savings Accounts to enroll in private, online, micro schools, or pods, savings to the State would exceed $100 million and districts would save more than $850 million.

Let’s start by defining Education Savings Accounts, or ESA’s. They’re not the same as vouchers or other tax-credit programs because their use is not limited to school tuition. According to Lueken, ESA’s allow parents “the widest possible range of choice” because they can be used for one-on-one tutoring and home-schooling, as well as private school tuition. And, contrary to popular belief, 49 out of 55 analyses of the cost impacts on school districts found that “the programs generated fiscal benefits for taxpayers.” (Four found the costs were “fiscally neutral and two found they generated additional cost.)

But this is New Jersey and we differ from other states because our cost per pupil is so high. From the report:

According to the most recent federal data, total revenue per-pupil for New Jersey’s public school system was $22,424 in FY 2018. Since 1987, total revenue per-student increased by 70 percent above inflation, or an annual increase of 2.3 percent over inflation. Even after adjusting for regional cost differences, the state sits near the top of state rankings in terms of how much it spends per student on its K-12 public school system.

Given our status as a high-spending state, Lueken drills down on the money. He writes, “if the cost of providing an ESA to a student is less than the taxpayer’s cost to educate the student, then that student will generate savings. A student eligible for an ESA program who would have enrolled in a nonpublic school without financial assistance from the ESA program would generate a cost for taxpayers. Students who would enroll in public schools without the existence of the school choice program (referred to as ‘switchers’ throughout this brief ) offset program costs.”

There’s much nuance here. Lueken uses the NJ Department of Education’s average target aid per student that each district would receive if NJ fully funded the School Funding Reform Act (SFRA) while recognizing that we don’t, in fact, fully fund SFRA. He also accounts for districts that are underaided (example: Newark) and overaided (example: Asbury Park); these distinctions affect calculations of cost savings or expenditures.

Lueken also takes on the oft-mentioned issue of “fixed costs” when districts (and/or lobbying groups) plead poverty during discussions of school choice, public (charter) or private. Here’s his take: 

Opponents and skeptics of educational choice often express concerns about policies that promote educational opportunity because public schools have high fixed costs, implicitly arguing that all or most educational costs are fixed. If this claim is true, then there is no need to base school funding on enrollment— the state would simply need to figure out the fixed costs and fund that fixed amount. Some of these individuals and groups, however, will also advocate for increasing public school funding by arguing that more resources are needed when enrollment increases, thus implicitly arguing that schools have high variable costs. Both scenarios cannot be concurrently true. In the short run, some educational costs are fixed and some educational costs are variable.In the long run, all costs are variable.

Politics aside, Lueken’s analysis finds that, among the 536 NJ school districts he examined (he didn’t look at charter schools or non-traditional school districts), 90% would have a net fiscal benefit if NJ had an ESA program. 


He also finds non-fiscal benefits to ESA programs:

Education savings accounts are a way to expand  educational opportunity for all families, particularly  those in need. For instance, they can help K-12 students  who suffer from learning disabilities, have under nurtured gifts and talents, or experience frequent  bullying to reach their full potential. 

And, finally,

Education savings accounts can help address some of New Jersey’s troubled finances with a plan that  improves one of its biggest and most costly service— public education—while preserving its unique and  time-honored character. For some, K-12 education  is a zero-sum game where supporting educational  choice and opportunity means opposing and harming  the public school system. The large body of research  on private school choice programs, however, suggests  otherwise. Rather than K-12 being a zero-sum game,  expanding educational opportunities for New Jersey  families would accrue benefits, both fiscal and non fiscal, across the state. These programs not only benefit  students participating in them, but they also accrue  benefits for parents, communities, and even public  schools.

What do you think?