There is perhaps no more polarizing hot-button topic in education finance than school choice. As charters, vouchers, education savings accounts (ESAs), and other alternative education options like microschools have expanded in recent years, the debates have intensified, leaving little room for nuanced opinions. With states like Arizona, Utah, Iowa, Arkansas, and others moving to fund universal voucher-access while public education enrollment is down by a million students (2%) since 2019, it’s clear that rapidly expanding schooling options for K-12 education will play a large role in education finance conversations over the next decade.
What strikes me most about this debate is that folks on both sides of school choice arguments are fiercely passionate about providing excellent education options for every student, even if their ideas about the means to that end vary dramatically. Education finance plays a significant role in this debate, although the financial challenges are rarely addressed head-on. While most school choice discussions center topics like parents’ rights, curricular options, religious freedom, and other social-political components, I believe that the current zero-sum financial scenario is a major culprit driving the undercurrent of vitriol and spite in this conversation. I also believe that school finance is precisely the arena where respective parties must ally themselves in order to achieve their vision of excellent education for all students.
There are a variety of brass-tacks questions that I wrestle with in terms of financial implications for schools and students. Most of these don’t go away when we expand school choice; instead, school choice, as it is practiced in many states today, only lengthens the list. At my most optimistic, I believe this unbundling of education will inevitably reveal just how severely underfunded some of our students and school districts really are, uniting education advocates of all kinds to address structural funding insufficiencies and inequities. I’ve invited several colleagues who are choice proponents to engage in a good old-fashioned discourse on this topic. I hope that collectively we can move the conversation about choice toward ensuring our system of education provides the resources each student needs to succeed.
Here are a few of the questions that keep me up at night. I invite my colleagues to respond to any or all of these prompts.
School Choice: Factors to Consider
5. Transparency & Accountability
Schools and districts have a huge number of fixed costs that are nearly impossible to adjust on short notice. School buildings take decades to fund and build; capital equipment like buses, furniture, hardware, and textbooks are purchased for use over several years or a decade; teachers and principals take many months or years to hire and train. Between these costs and other aforementioned obligations, that leaves less than 10% in an annual district budget for discretionary expenses, yet when a student leaves the system, they take 100% of the planned revenue that was associated with their enrollment. There are very few line items in a district or school budget where the unit economics are such that costs decrease proportionally for individual students. If you have hired a teacher in May with the expectation that they will teach 28 third graders, the teacher’s salary and benefits do not decrease by 7% if there are only 26 students in the class in September, and you cannot return 2 desks or get a refund on 2 textbooks.
Over time, if schools and districts continue to shrink, they have to cut entire programs because it is often fiscally impossible to trim costs piecemeal– so the school cuts art or music or AP classes in order to make up for the increasingly higher cost-per-pupil of other instructional programs. It is an unfortunate reality of school finance that the same principal is twice as expensive for half the students on a per-pupil basis; this is why many districts resort to sharing counselors, psychologists and librarians between several school buildings. How do we reimagine funding and budgeting for schools to make instructional programs more resilient to enrollment fluctuations over time?
Special Education is notoriously unfunded. In many districts, targeted special education funding covers only 10-20% of special education costs. Since these services are required by law, the other 80-90% is siphoned from general fund dollars, which chips away at funds for other instructional programs. Aside from the services themselves, IEP administration, reporting, and legal proceedings all contribute to outsize per-pupil costs. It’s not uncommon for a special education student to cost anywhere from 3-10x the average per-pupil expenditure. I worry about how this plays out as education revenue is fractured. In a school district of 50,000 students, a student whose special education services tally $50,000 represents a marginal cost of just $1 per student. If that same student wants to attend a 500-student private school, equipped with a $7,000 voucher, the marginal cost of their special education services is now $86 per student. It seems like a foregone conclusion to me that small schools will start looking for ways to screen-out, reject, or otherwise limit enrollment for students who show up with a hefty price-tag for their education costs.
If a voucher, ESA, or state education formula sets its value at the “average cost” including special education services, traditional districts lose out on an inflated cost per pupil that does not reflect the needs of students without Individualized Education Plans (IEPs). It doesn’t take cynical motives, just an understanding that some schools are unequipped to provide the services some students require. Private schools already routinely engage in this practice, including those eligible to receive money from ESAs or vouchers. Public school districts don’t have that option; since the passage of IDEA, they are required to find a way to meet the needs of any student. How can education leaders unite to increase funding for special education and ensure that schools receive fundings commensurate with the costs of services for enrolled students with IEPs?
Funding all students commensurate with their cost to educate seems like an area where common ground could be reached to benefit all students wherever they attend school. The average taxpayer is probably familiar with the concept of ‘special education’, and even if they don’t spend their days analyzing special education budgets, they could reasonably surmise that a child who qualifies for special education services might cost more to educate than a child who does not require special services. I would wager that same average taxpayer is completely unaware of the long list of other services (most also required by law) that school districts are responsible for providing, including: private transportation for students who face housing instability (McKinney Vento), removing language barriers for English language learners (The Equal Educational Opportunities Act), providing instruction for students who are homebound or hospitalized due to temporary or chronic illness (Home and Hospital laws, vary by state). These are legal responsibilities that fall on “local education agencies” often with meager additional funding that fails to cover the full cost of these services.
Most choice programs and choice advocates include the resources required for these services when comparing spending and outcomes, but these responsibilities do not transfer (in whole) to private schools. In some states, charter schools are or have argued to be exempt from these as well. When we talk about resource equity, this is at the crux of it: certain student groups cost more to educate in order to comply with basic regulations. Will alternative education programs be willing and able to provide these services? Will they be held to the same standards under the law? If not, will we ensure that these programs remain fully funded so that concentrating these costs in traditional public schools does not require that we “rob Peter to pay Paul” and ensure inadequate resources for core educational programming in traditional public districts? This cost imbalance is at the heart of resource inequity and complaints of underfunding.
A hefty portion of school district revenue comes right off the top for pension liabilities and capital debt repayment. In some districts, these obligations may consume 20-30% of the district’s budget. These liabilities were incurred to compensate teachers and build or upgrade school buildings to educate more than 90% of US students for the past several decades. School districts ask their communities to issue debt to build schools that will serve the community for decades. If an increasing number of students leave the public education system, will the system be left holding the bag on these obligations with decreasing revenue to cover future costs?
These are public liabilities that were approved by local taxpayers to invest in their communities. If we pursue structural changes to education, we must consider how we cover the liabilities of our existing system. Is a new system of choice cost-effective, or even effective, if all we’ve done is leave concentrated liabilities behind in traditional schools we’ve starved of resources? We know what this looks like in the corporate world– shady business practices allow the use of bankruptcy protection to leave behind liabilities and fail to pay creditors while someone else profits. Choice advocates cannot avoid this question, otherwise they doom traditional school districts to the same fate.
Public sector agencies are required to demonstrate fiscal transparency. But what counts as public versus private starts getting very blurry under many school choice programs. If an organization is receiving public funds in the form of direct funding to charter LEAs or indirect funding through vouchers or ESAs, at what point are they responsible for making (any? most? all?) of their financials public? This has become a major issue with charter schools who contract with management organizations, whether non-profit or not. Is it actually transparent if a school gives most of its resources to a management organization without clear, detailed contracted services and prices while that organization is not required to disclose any of its financials? This is an especially tricky question given the financial scrutiny that school districts endure today– wouldn’t it be hypocritical to suggest that it’s suddenly an irrelevant indicator of education management because of the legal standing of school operators?
The financial consequences of increased competition for student enrollment cannot be ignored by anyone who is invested in creating quality school options for all students. Charters, vouchers, ESAs, and other emerging consumer options for education have been slowly gaining traction in K-12 for decades. The Supreme Court’s recent decision requiring states to allow religious institutions to participate whenever the state funds private schools has further emboldened many choice advocates. Recent state legislation focused on expanding and funding school choice programs indicates that non-traditional school options are not only here to stay but will expand more rapidly over the next decade than the previous decade. While this may sound like a “win” for school choice proponents, the very options they have advocated for will quickly reach their own state of fiscal peril if they do not align their financial interests with traditional public schools.
How do we allocate and manage public education resources to truly ensure choice for all?
The responses below are published in full (with only minor typographical edits) in the spirit of intellectual curiosity and discussion; the authors speak for themselves and/or their organizations and should not be interpreted as an endorsement by Allovue.
Reflections on School Choice
1. Aligning interests with family expectations (by Derrell Bradford, 50CAN)
2. Transportation policy reforms (by Emily Anne Gullickson, A for Arizona)
3. More money, more opportunity (by Marc Magee, 50CAN)
4. Fundamental transformations (by Andrew Clark, yes. every kid.)
Derrell Bradford, President | 50CAN
Commentary on Inflexible Unit Economics: This, to me, is not a problem of school choice, and it is not one problem but two. First this is a problem of every increase in school enrollment resulting in a variable cost and every decrease in enrollment being described as fixed. That’s an inflexible and unworkable paradigm. The second problem is that we have a public education model whose finances are predicated on consistent student growth in a time of flat-to-decreasing student populations across the nation, both in states with school choice and in states without it. Whether or not there are any options outside of district-lead public schools there will be fewer kids in schools in coming years so the issue must be addressed. Given this reality, schools probably should close. Teacher head count probably should decrease. But these will be political questions instead of practical ones so who knows what will happen? If New York City has anything to tell us we’ll keep everyone in place, despite hemorrhaging students, and hope no one notices.
Commentary on Special Education: This is the one policy area where we already see significant funds follow students to private schools so I often use it as an example when discussing extending this opportunity to more students. But the point is a good one and I would address it with a few suggestions. The first is a matter of program design, and that is simply that all the funds to which a special education student is entitled should follow the student. It is politically easier to avoid adding local tax revenue etc., but the money is there for the student and should follow the student to the school they choose. Secondly, though, is that we’d all benefit from a more nuanced discussion about private school participation in an ESA/voucher program that acknowledged a few things. First, parents do choose school environment (academic rigor, community, etc.) over available services at schools from time to time because parents value many things. Second, public school districts may have a comprehensive set of special education services (all of which a student may not need) but often fail to deliver on the terms of IEPs (hence consistent litigation in the area). Third, that any universe of schools (public, private, charter) is not comprised of schools that do all things well. I believe an environment where all schools are honest about what they can offer, and parents can make informed decisions about what tradeoffs they are or are not willing to make, is preferable.
Commentary on Special Programs: To embrace a pluralistic approach is to embrace difference, not uniformity. That said, if the problem is that LEA’s don’t (or believe they don’t) have sufficient funding to address these rules/mandates I think many school choice advocates would join hands with those who would like to see a fairer funding arrangement for these students.
Commentary on Debt: Whether there are choice systems in place or not, many states have made pension commitments (as a debt example) that they cannot meet and that, sadly, crowd out the ability of states and municipalities to fund essential services in the present because of obligations in the future. In a world of declining enrollment and fewer students, this is perhaps not an issue choice advocates can avoid, but it is one that public school districts that have overbuilt and overcommitted must solve regardless. Additionally, and to my knowledge, there are few if any charter or private school choice programs that fund facilities (New York City charters being an outlier).
Commentary on Transparency & Accountability: An important question of definitions and incentives. Scholarship Granting Organizations in many school choice programs, for instance, have historically had to have an annual audit and produce a report on the program’s participants and results in a given year. Some have had to give state assessments and some have had the option to give a normed assessment. Others are required to report on parental satisfaction. This is all transparency (financial and otherwise), but it also isn’t what I think many would describe as the onerous reporting that is required of LEAs. The programs should not be a black box financially, but their reporting should also not be so unwieldy as to be unworkable at smaller scales. This is to say I am more persuaded by an improved approach that is less onerous for all schools than exporting the expansive regime of current LEA reporting to all schools that may participate in a choice program.
I think existing options should align their interests with family expectations, desires, and demands, and that is the best way to ensure we have a responsive environment where many providers, including traditional public schools, help the nation’s children learn and grow into the best versions of themselves.
Emily Anne Gullickson, Chief Executive Officer & Founder | A for Arizona
“How do we allocate and manage public education resources to truly ensure choice for all?”
This is a critical question for advocates to answer as education options expand. Let’s look at a specific example for an often-overlooked component of school choice: transportation.
The nation’s K-12 transportation system is largely in the same form as when it was established nearly 80 years ago. State funding formulas operate as if students and families are all still attending their assigned school within neatly designed and restricted attendance zones. We’re still calibrating our transportation funding around the yellow school bus.
The time for a refresh is long overdue.
We in the Grand Canyon State have long bragged about our leadership in school choice, with nearly one out of every two students attending a public school other than the neighborhood district school to which they were assigned and we’re the first state in the nation to adopt universal ESAs. But a choice is not a choice if you can’t get there.
So, Arizona is changing things by helping more kids get to their school of choice by adopting first-in-the-nation K-12 transportation policy reforms, making transportation an allowable expense for ESA families, and by awarding $40 million in modernization grants to entrepreneurial leaders ready to rethink public school transit.
As a result, Arizona’s approach to K-12 transportation is driving down costs, enhancing safety and efficiency, improving student attendance, and providing more students with equitable access to more educational options. Many public schools, especially in rural and remote communities, are utilizing the In Lieu of Transportation Grant option for families to pay for carpools, K-12-friendly ridesharing options, public transit, and even gas.
There’s a new generation of school leaders who see technology, a more diverse set of vehicles and drivers, community partnerships and collaborations, circuit loops, and on-demand options as tools to be leveraged for better access and more affordable rides to and from school. Changes aren’t just occurring in the cities and suburbs. Leaders in rural and remote communities are leading with creative, safe, and cost-effective ways to get kids to and from school. From the international border up to the Grand Canyon, more than 74,000 students have been served to date from these innovative grant solutions, with a focus on families utilizing open enrollment and public charter kids.
The Transportation Modernization Grants and In Lieu of Transportation programs underway are a great start. But these funding models and innovative transportation practices have also made it apparent that Arizona can do more to achieve a truly student-centered transportation funding system.
State Senate Education Committee Chairman Ken Bennett of Prescott championed a bill this year to model out a revolutionary approach where every K-12 student would generate transportation funding.
For illustration, let’s say base funding for every student starts at $400. Recognizing that transportation barriers are real for many kids and families, a universal flat rate is an inequitable way to give every child a real choice. Just like with academic weights based on students’ unique traits, there would be additional student transportation weights, modeled off the best practices underway, to generate extra dollars to eliminate the biggest transit barriers:
Yes, this approach is bold. It’s audacious. It requires the school choice community to collaborate with the traditional school associations, the business community, parent organizations, local governments, tech start-ups, and local nonprofits to work together to design the appropriate funding model. Flexible student-centered funding is essential to ensure school choices are accessible for every student in every community, not just those who can catch the yellow school bus every morning.
Marc Magee, CEO & Founder | 50CAN
For much of the past two decades, when discussing the financial impact of expanding school choice, the debate focused on the growing market share of charter schools in big cities. That conversation has widened considerably in recent years as a wider variety of forms of school choice and funding mechanisms has taken center stage. This raises new questions about the financial impact of expanding school choice but the starting point in these discussions should be the same: what are the educational experiences and opportunities we want for our kids?
Our public investment in education often follows a path of providing to all families the educational opportunities that were previously reserved for the wealthiest among us. In the 19th century, that meant making a basic education a right and a responsibility rather than a privilege. In the 20th century, we expanded this commitment to high school, transforming something that had served just 2 percent of kids into a cultural expectation and norm for everyone.
Now we are in the midst of another expansion: to provide to all families the school choices wealthy families enjoy while also providing all families with access to the educational opportunities, experiences and support that have long been the norm among the elite: a range of choice for tutoring, summer camps, connectivity, mental health, after school enrichment and more to create a personalized educational journey for their children. This is particularly important as the growth in education spending beyond schooling is one of the biggest drivers of inequality in American education today.
The most straightforward way to provide all families with these opportunities is through funding systems that enable choices both between schools and across a wide range of services, programs and providers. That means putting more education resources directly in the hands of families.
It's important to spell out this goal—and decide that it's worth fighting for—because as with any change, there will be a lot of work to do to make this transition to a better system possible. Most of these challenges grow out of a shrinking role for the “default” educational provider of the local school district. Because of a lower birth rate and lower levels of immigration, school districts were already on track to have to manage a downsizing of enrollment and with an expansion of school choices this will likely accelerate.
A further consolidation of districts in this new era can help maintain the economies of scale districts now enjoy. This is somewhat akin to what happened after the Cold War when we had to find a way to shrink the number of military bases and defense contractors while minimizing the damage to communities. Or perhaps closer to home, we could look to the school district consolidation that took place during the last great expansion of educational services in the 20th century when the number of districts dropped from 119,000 school districts in 1937 to 18,000 by 1970. In both cases, we didn’t let the challenges of consolidation stand in the way of progress but instead developed a way to do so that made room for community input, transition periods and new forms of investment in areas that would have the greatest challenges.
This may also mean reforming pensions, expanding the federal and state role in paying for special education, providing additional weights for student need in funding formulas and other state policy changes while also making room for experimentation (and hopefully new technologies) that can upgrade transparency and accountability systems to work in this more unbundled environment. This is likely to be a 10 to 20 year-long project, where states can learn from each other as they have in the past and make adjustments along the way. For example, Arizona is piloting new approaches to transportation that can work in a world with more educational options, including microschooling. This approach deserves additional attention and study as a possible model that can be adapted in more states.
It would be a mistake to try and figure out all of these transition questions all at once or create one national playbook every state and community will follow but we could be doing much more to highlight what is working in one community and what we are learning when experiments fall short. One important role for the federal government in this effort is to provide funds both for this experimentation and knowledge sharing as well as paying for transition costs that help bridge districts into their new roles.
As with the original push to provide basic education for all in the 19th century and high school for all in the 20th century, this effort to provide a more complete set of educational opportunities inside and outside of the school day will likely require an additional public commitment to support education which will allow us to do more for kids. This will require new bipartisan coalitions for change that move beyond an approach to education focused on more money for the same basic educational opportunities to an approach where more money delivers dramatically more opportunities for all kids.
Andrew Clark, President | yes. every kid.
Education in America is undergoing a fundamental transformation. This transformation promises to replace the current top-down, centralized system designed to meet the needs of the average kid with a new bottom-up, decentralized approach that promises to meet the needs of every kid. For the promise of this new approach to be realized, we must transform the ways we approach transparency and accountability in education.
That approach necessitates that we fundamentally flip accountability away from educators and families being accountable to the government through standardized tests and reporting and towards the government being accountable to families through choice and pricing.
For too long politicians have promised that standardized testing and other forms of government oversight would ensure that our education system provides a quality education to all students. However, the evidence is clear: today’s approach to accountability is not working.
The examples of this failure are legion. A 2023 lawsuit in Baltimore provides an all-too-common example of the problem. By a government definition of success, basic proficiency in math, 2,000 students took the state math class. In 23 schools, zero were proficient at grade level in math. Not zero percent. Zero. Not a single student. The promise of politicians is that if these students and schools are just accountable to government-imposed standards and tests that students will thrive. Look at the facts around the country. The evidence is clear: the status quo is not working. We must do something radically different.
Making the current accountability system better is an inadequate approach. No child left behind, race to the top, read by three, it doesn’t matter which failed idea from the past politicians want to double down on. Standardized testing and systems, like Carnegie units, are outdated methods of measuring educational success. These metrics were designed for a different era, one in which students were all expected to follow the same path through the education system. But today's students are more diverse than ever before, and they need an education system that can adapt to their individual needs. Standardized tests simply cannot provide the kind of nuanced information that parents need to make informed decisions about their children's education.
Instead of relying on government oversight, we should be transforming our education system into one that is accountable to families. This means that education entrepreneurs, including public, private, and charter schools along with education savings account vendors, should be held accountable to the families they serve. They should be transparent about their goals, outcomes and pricing, and they should be open to feedback from parents and students.
Many in the education market, including many self-professed education reformers, have conceded the need to move towards a system that is accountable to families but argue that such a transition must be slow, highly regulated, and carefully controlled for quality assurance. However well-intentioned, these arguments miss the fundamental point of empowering families. There is nothing magical about choice itself. A choice between three red apples is not inherently better than being given one red apple, it’s just wasting two apples. Creating real value for the customer requires far more than choice, it requires real freedom to explore an unlimited range of products and services and to depend on the insights that price points bring along with customer feedback to serve as accountability.
To make this vision a reality, states have begun passing education savings accounts (ESAs) that are empowering families with thousands of dollars to choose the education products and services that work best for them. While not a utopian policy, this idea opens the doors to new products and services to education without the regulatory burden or the status quo system. Empowering families to make financial decisions also forces educators of all stripes to answer questions we should have known long ago: how much does it cost for a student to learn how to read? If this approach to reading doesn’t work for my kid, what other alternative options are available that might work?
As these policies mature, we need an education culture of openness and tolerance. One that is like social security. Social security is a program that is designed to provide a safety net for people who need it. It is funded by the government, but it is ultimately accountable to the people who benefit from it. If grandma goes to target and buys a big screen, there’s no political cry of social security fraud. We trust that grandma has her best interests at heart and will consider the ways she can spend her social security check and make the best decision for her unique situation. This is the kind of accountability that we need in our education system. A system with fraud prevention, but a system that believes in people and has tolerance that they will choose the products and services that create the most value for them.
We need to confront some ugly truths about the promises of politicians. Government oversight is often more about control than it is about accountability. It is about making sure that everyone is following the same rules and that everyone is on the same page. But this kind of top-down approach is simply not effective in a system that includes school choice.
When families can freely choose the kind of education that works best for their kids, the educators are held to the right kind of accountability: creating value for the kid. If you’re an educator who isn’t collaborating effectively with families, the families will stop coming. This critical feedback loop encourages education entrepreneurs to innovate and improve, knowing that they are accountable to the families they serve.
In such an environment, prices are critical to the process of gathering information and innovating. Knowing costs allow the customer to have real power. Empowering them to tradeoff against the things they actually value and sending market signals to the educator. Giving the educator feedback beyond whether their offerings are valuable and towards better understanding of just how valuable the product or service they’re offering is.
Education is changing rapidly. This modernization is long overdue. But it won’t meet the moment if we still believe there’s an average kid and that all of our systems should produce that average. Instead, toleration is required. Every kid is unique. Every journey is different. That’s a feature, not a bug. We should embrace the plurality of outcomes as the right kind of accountability and send the one-size-fits all system to the scrapheap of history where it belongs.
This article is the ninth in a series that reviews “10 Predictions for the Next 10 Years of Education Finance.” Read other topics in the series now:
Special thanks to our guests for their contributions to this piece!
Reflections from: