Vouchers80 are simply direct payments from the government to individuals to enable individuals to purchase a particular good or service—in this case, education—in the open market. Food stamps are an example of vouchers.

Vouchers have been proposed as a means of advancing parental school choice in several states, but those states and cities that have successfully implemented government-funded scholarships have encountered legal challenges from opponents. Many of these battles have been settled favorably for school choice advocates.

Payment of a government-funded voucher may be accomplished in any number of ways: directly to the parent, who then pays the school; pre-payment in advance of services rendered; redeemable certificates distributed to parents and "cashed" by the school; or in the form of a two-party check to be endorsed by both the parent and the school.

Vouchers can be issued to cover all educational expenses or one or more categories thereof, such as tuition, transportation, special education, etc. The value of the voucher may be adjusted according to such criteria as household income, student grade level, or educational considerations. The revenue source for vouchers may be the existing tax bases for government schools or a new or reconfigured tax base. Most existing voucher plans entail a shift toward a single statewide revenue source to create greater equity.

Common examples of voucher plans operating today include scholarships for higher education, such as Pell grants, and food stamps, which enable recipients to use government funds to purchase food at any grocery store. Vouchers are distinguished from direct government provision of services because voucher recipients choose which service to patronize.

Voucher proposals may differ both in philosophy and method, but generally fall into one of three broad subcategories: free-market (universal unregulated) vouchers, egalitarian (regulated compensatory) vouchers, and mixed (hybrid) vouchers. Implicit and explicit in each of these three major voucher systems is the idea that private schools would or could participate in the plans, but would not be required to do so.

(A) Free-Market (Universal Unregulated) Voucher

In his influential book Capitalism and Freedom,81 Nobel laureate economist Milton Friedman argues that education is best left to the private sector because private education is better organized, more efficient, of higher quality, and more likely to be consistent with the preferences of consumers rather than with the prejudices of providers. He recognizes, however, that not all families can afford private education, and he does not deny the government a role in financing educational opportunity. Accordingly, Friedman argues that government should maximize all citizens' access to quality private education by providing free-market, or universal unregulated, vouchers of minimal but equal value to all parents of school-aged children. Under this plan, current government-run schools would also be converted to privately run schools.

Friedman explains that competition and consumer choice, not bureaucratic control, are the best way to assure quality education. While allowing for some minimal regulation—health and safety requirements, for example—Friedman would permit schools to accept or reject whomever they like, hire and fire freely, offer the curriculum they think best, select the textbooks they think most sensible, and charge whatever amount they think appropriate (or that the market will bear) without governmental interference.

According to Friedman's model, any child who could provide evidence of enrollment in a school that satisfied state compulsory attendance laws would be eligible for a government voucher. Other proposed forms of universal unregulated vouchers would abolish state compulsory attendance laws altogether and would pay the voucher upon evidence of satisfactory educational performance as measured by test results.

(B) Egalitarian (Regulated Compensatory) Voucher

The egalitarian, or regulated compensatory, voucher system differs from the free-market variety in that it accepts regulation as a positive good that helps meet the needs of disadvantaged students.

For example, this type of voucher does not permit open enrollment: If a school is popular and overenrolled, seats are assigned by lot. Participating schools would not be permitted to charge more than the value of the voucher. Insofar as poor children participate, they would be awarded a "compensatory" voucher in addition to the basic voucher that is issued to cover the cost of core education. Compensatory vouchers have two objectives: (1) to provide more resources for children in need, and (2) to make poor children more attractive to schools and teachers by providing them with greater funds.

(C) Mixed (Hybrid) Voucher

The broad category of mixed, or hybrid, vouchers includes all models that combine various elements of the "free-market" and "egalitarian" voucher systems. In the interests of political compromise, most voucher proponents in the United States have settled on some variation of the "mixed" voucher model. Typically, a mixed model preserves the current distinction between government and private schools, accepts a moderate amount of regulation of private schools, and builds in regulatory safeguards against socioeconomic discrimination.

Researchers John Coons and Stephen Sugarman propose a "mixed" voucher plan that includes many components of the egalitarian model. For example, Coons and Sugarman would not allow participating schools to charge tuition in addition to the voucher (though they would allow them to raise additional funding) and they would require them to set aside a certain percentage of their enrollment for low-income and minority students. On the other hand, they would limit regulation of private schools to that level currently deemed sufficient and would establish a new category of deregulated government schools in addition to the current regulated government schools.82

By contrast, a plan proposed by two other researchers, John Chubb and Terry Moe, favors many components of the free-market model. While preserving the distinction between government and private schools, Chubb and Moe's model would substantially deregulate all existing government schools, allowing them to function as autonomously as do private schools. Chubb and Moe would also eliminate government schools' current guaranteed funding base, making them solely dependent on voucher revenues. All schools would make their own admissions decisions, subject only to nondiscrimination requirements, and government would refrain from imposing any strictures or rules that specify how authority is to be exercised within the school. On the egalitarian side, Chubb and Moe's proposal would not allow families to supplement their voucher payment with personal funds, and they would establish tax-funded "parent information centers" to assure equal access to consumer information about schools.83