Full educational choice removes barriers that parents face when choosing among all schools, including private ones. The most significant barrier is usually tuition. All taxpaying parents must pay for government schools through their taxes, so parents who choose for their children tuition-charging private schools in effect must pay twice for education. This financial penalty prohibits many parents from being able to afford a private school-of-choice for their children.
Full educational choice programs seek to offset this financial penalty to parents in whole or in part. (The majority of full choice plans currently operating around the country provide only a fraction of the amount of money available to government schools, but parents clamor even for the opportunity to receive assistance as low as $500.)
The majority of full educational choice programs fit into one of four categories: vouchers, private scholarships, tax credits, and universal tuition tax credits.
Vouchers are simply direct payments from the government to individuals to enable them to purchase a particular good or servicein this case, educationin the open market. Food stamps are a well-known 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 a grocery store of their choice. 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.
In his influential book Capitalism and Freedom, 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 also would 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 regulationhealth and safety requirements, for exampleFriedman 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 satisfies 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.
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.
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 schools to raise additional funding). They also would require schools to set aside a certain percentage of their enrollment for low-income and minority students. On the other hand, Coons and Sugarman's plan 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.
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 also would 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.
The most notable voucher programs in the nation are in Vermont, Maine, Ohio (Cleveland), Wisconsin (Milwaukee), and Florida. These programs provide parents with greater educational opportunities; however, provisions that include private, religious school choice have been contested in the courts.
Vermont's voucher program evolved as a result of the state's sparse population, which could not financially support government schools in every community. To meet the demands of parents in small towns, the state pays the tuition expenses of approximately $6,000 for a child to attend any government or nonsectarian private school of his choice. Vermont's program even extends to students attending schools outside the state.
This voucher tradition dates back to 1869 and has ensured that both urban and rural Vermont school children face fewer financial barriers when choosing the safest and best secondary schools. Although the initial voucher statute did not distinguish between religious and secular schools, a court ruling in 1961 banned religious schools from receiving state-funded vouchers. Citizens and the school board of Chittenden Town School District in central Vermont challenged the 1961 decision and demanded that full parental choice be restored once again. In June 1999, the Vermont Supreme Court unanimously upheld the earlier decisions, ruling that the 130-year-old voucher statute excluded the use of public funds for religious schools. The case was appealed to the U.S. Supreme Court in October 1999, but the court declined to hear the case, thereby allowing the lower court's ruling to stand.
Maine's voucher system is similar to Vermont's, but it predates the nation's founding. In 1981, the state attorney general decided that the voucher program excluded religiously affiliated schools from receiving vouchers in towns that had government-operated high schools. In June 1999, the U.S. Court of Appeals for the First Circuit upheld an earlier Maine Supreme Court decision that ruled that the state's voucher law must discriminate against religious schools based on the First Amendment's Establishment Clause. The U.S. Supreme Court declined to review this case in October 1999.
In Cleveland, vouchers worth up to $2,500 allow 3,000 at-risk children to attend the secular or religious private schools of their parents' choosing. In May 1997, the state appeals court ruled that the voucher law violated federal and state constitutional bans on government aid to religious institutions. Nevertheless, the Ohio Legislature allocated the program $15 million for the next two years, expanding the program to 1,000 additional kindergartners and allowing third-graders in the program to continue attending private schools for the fourth grade.
The court's decision came in the wake of studies that demonstrated the academic accomplishment of students and increased satisfaction of parents in the Cleveland program. The Ohio Supreme Court then ruled favorably (for choice proponents) on five of six constitutional challenges, striking down the program on one technical issue. The court explicitly stated that the program did not breach the separation of church and state, so legislators went back to work and drafted a two-year, $17 million extension of the program in June 1999. But less than two months later, a federal judge ruled that the Cleveland program was unconstitutional. This ruling was upheld by the U.S. Court of Appeals in December 2000, setting the stage for a voucher case that the U.S. Supreme Court may finally review.
After Vermont and Maine, Milwaukee has the longest-running voucher program, but it also has faced similar court battles. In 1998, approximately 1,650 students used vouchers worth roughly $4,400 each (or about one-half of the state per-pupil expenditure for Milwaukee) to attend participating nonsectarian schools. Originally, the plan's proponents also included religious schools, but court injunctions kept eligible students from using vouchers to enroll in them. As a result of documented academic performance, Wisconsin legislators expanded the school choice budget, giving additional Milwaukee students the benefit of choosing alternative schools, including those that are religiously affiliated.
Milwaukee's voucher plan was launched in response to poorly performing city schools. In 1998, Superintendent of Milwaukee Public Schools Alan Brown suggested that contrary to public opinion, there was no crisis in his system. Yet results from statewide tests released just four days before both the Supreme Court hearing and Brown's proclamation revealed that fewer than 10 percent of Milwaukee's eighth- and tenth-graders ranked "proficient" in math and language. In June 1998, the Wisconsin Supreme Court ruled in favor of the inclusion of religious schools in Jackson v. Benson. On November 9, 1998, the U.S. Supreme Court voted 8-1 to let the Wisconsin court decision stand.
In mid-1999, Governor Jeb Bush of Florida signed into law a bill that will grade individual government schools on a traditional "A" to "F" scale. High-performing schools will receive from the state financial incentives of up to $100 per student, while students in failing schools would be provided with state vouchers worth up to $4,000 each to choose an alternative school. The program was ruled constitutional by the Florida 1st District Court of Appeals in October 2000, after being ruled unconstitutional earlier in the year.
Private scholarships offer parents the opportunity to choose the best school for their children through tuition assistance from private sources rather than from government. Most private scholarships offered around the nation cover only a portion of private school tuition costs. Nevertheless, parents are lining up to receive what some might consider meager tuition assistance.
In 1991, the privately funded Educational Choice Charitable Trust began to offer tuition assistance to low-income families in Indianapolis. In the 1998-99 school year, more than 30 programs affiliated with the Children's Educational Opportunity Foundation (also known as CEO America) offered private scholarships for over 13,000 low-income students to attend their schools of choice. More than $61 million was raised by CEO America to fund these scholarships, but the unfortunate fact is that over 4,000 students are on waiting lists in hopes of receiving one of the scholarships.
Philanthropist Virginia Gilder started a private scholarship program with $1 million to bail children out of Albany, New York's worst-performing school, Giffen Elementary. Over 100 of the 458 children at Giffen accepted Gilder's scholarships, which pay up to 90 percent (capped at $2,000 per year) of the cost of attending a private or parochial school for a minimum of three years and a maximum of six. Those who took advantage of Gilder's generosity included the child of Giffen's PTA president.
Albany school officials reacted to the exodus of students by making major changes in the Giffen school, including the replacement of the principal, two assistants, and more than 12 teachers. Gilder's private scholarship clearly demonstrated the ability of incentive reforms to improve government education.
In New York City, the privately funded School Choice Scholarship Fund invested $6 million in 2,500 student scholarships in 1997 (1,000 more than the previous year). Students from the city's 14 lowest-performing districts were permitted to attend their schools-of-choice, while 20,000 more awaited the opportunity. All of the students who were eligible to receive the $1,400 scholarship qualified for the federal free-lunch program. A study conducted by Paul Peterson of Harvard University and David Myers of Mathematica Policy Research reported that about 95 percent of the students being assisted by the scholarship are black or Hispanic and that the average income of the beneficiaries is just over $9,500.
Similarly, in 1998, the Washington, D.C.-based Washington Scholarship Fund provided 1,000 low-income students with scholarships to attend the schools of their choice. When the fund announced its scholarships, over 7,500 students10 percent of the children enrolled in Washington's government schoolsapplied for them.
By March 31, 1999, the nationally focused Children's Scholarship Fund (CSF) had received 1.25 million applications from over 22,000 communities from all 50 states for its $1,000, four-year scholarships. Though the average income of the applicant families was under $22,000 a year, they were willing to make significant financial sacrifices if they received only a partial scholarship. Ted Forstmann, co-chairman and CEO of CSF, remarked, "Think of it: 1.25 million applicants asking to pay $1,000 a year over four years. That's $5 billion that poor families were willing to spend simply to escape the schools where their children have been relegated and to secure a decent education."
Low-income families in Milwaukee have benefited from the largest private scholarship program to date. In 1998, approximately 4,500 scholarships were awarded by the city's most prominent businesses and foundations through Partners Advancing Values in Education (PAVE).
PAVE provides scholarships equivalent to half of the tuition at any K-12 private or parochial school in Milwaukee. As affluent parents have been for years, low-income parents in Milwaukee are now empowered to choose the school best suited for their children's needs. PAVE scholarships are awarded on a first-come, first-served basis to low-income families in search of educational choice.
Students using PAVE scholarships, collectively worth over $4.1 million, attend more than 112 private elementary and secondary schools in the Milwaukee area as of the 1997-98 school year. Parents are satisfied with the opportunity to choose alternative schools for their children, and a survey revealed that 75 percent of PAVE's scholarship graduatesall low-income studentscontinued with post-secondary education.
Tax credits are designed to provide parents with tax relief linked to expenses incurred in selecting an alternative government or private school for their children. A tax credit is a dollar-for-dollar reduction in taxes owed, whereas a tax deduction is merely a reduction in taxable income. For example, if a taxpayer has a pre-credit tax liability of $2,000 and a tuition tax credit of $1,500, the taxpayer would pay a tax of only $500.
Tax credits are typically applied against only state and/or federal income taxes, but property tax credits have been proposed as well. For the purposes of school choice, tax credits might be allowed for any or all out-of-pocket educational expenses incurred by an individual, from tuition to textbooks to transportation to extracurricular feesthough tuition is the most common expense allowed in practice. Private schools usually charge tuition and/or fees, and government schools often charge tuition to nonresident students and fees for extracurricular activities. These expenditures are also creditable items under many tax credit proposals.
Many proponents of educational tax credits prefer them to vouchers on the grounds that they entail less government regulation of private schools and less risk of entanglement between church and state because of their indirect nature. (Credits, unlike vouchers, do not transfer any money from the state to a school or taxpayer.) A strong case can be made that tax credits limit governmental interference in education by allowing families to retain enough of their personal income to afford to choose safer and better schools for their children.
The popularity of tax credits among parents has exploded throughout the country in recent years. K-12 tuition tax credits have passed state legislatures including Arizona, Minnesota, Iowa, and Illinois.
Arizona expanded parental school choice in 1998 to include tax credits for donations to both private scholarship programs and government schools. Former Gov. Fife Symington signed into law a bill in April 1997 granting an income tax credit of up to $500 for people who donate to nonprofit groups that distribute private scholarships to needy students. The law also offers taxpayers a credit of up to $200 for money given to government schools to support extracurricular activities. The Arizona Education Association, Arizona School Boards Association, and the American Federation of Teachers filed lawsuits against the law with the Arizona State Supreme Court. In January 1999, the court upheld the constitutionality of the credit.
Arizona currently has 31 organizations that distribute scholarships; some of them distribute scholarships based on income, while others let donors earmark funds for particular children (taxpayers, however, cannot contribute to their own children). In 1999, more than 30,000 people contributed nearly $14 million, which helped nearly 7,000 low-income students attend private schools.
Also in 1997, former Minnesota Gov. Arne Carlson fought hard to expand his state's tax credit program. Families with an income of $33,500 and below now can claim a tax credit for any educational purpose (such as tuition, transportation, books, etc.) up to $1,000 per child, but limited to $2,000 per family. The plan also eliminates the state's 40-charter-school cap and mandates that the $350 million in compensatory aid contained in the bill follow students to schools, rather than being spent at the district level. Gov. Carlson projected that over 900,000 children would benefit under his plan.
Opponents of educational tax credits, including some egalitarian-inclined supporters of vouchers, argue that they do not help low-income families who pay little if any income tax. In light of this criticism, a tax credit plan could be crafted to provide low-income families with the same opportunity that vouchers offer, while giving back to parents the primary responsibility for the education of their children. One way this can be accomplished is by making tuition payments refundable for those with a tax liability that is less than their education expenditures. Another way to overcome this objection to tax credits is the universal tuition tax credit.
Universal Tuition Tax Credits
Although both vouchers and traditional tuition tax credits could be used to eliminate the problem of forcing parents of private school students to bear the full cost of both tuition and school taxes, both proposals have disadvantages. Vouchers, for example, are subject to allegations that they drain funds from government schools, permit state funds to be used to support religious schools, will spawn a new type of entitlement program, and invite over-regulation of private schools. Traditional tuition tax creditswhereby only parents are allowed to receive a tax creditaddress some of the problems with vouchers, but fail to help low-income and many middle-income families who lack enough tax liability to benefit from a tax credit.
To address these problems, the Mackinac Center for Public Policy developed a new approach to expand parental choice in Michigan by formulating and proposing in 1997 the universal tuition tax credit (UTTC).
The UTTC proposal allows any taxpayerindividual or corporate, parent or grandparent, friend, neighbor, or businessto contribute to the education of any Michigan elementary or secondary child and receive a dollar-for-dollar tax credit against taxes owed.
The UTTC saves the state money and provides more per-pupil funding for government education. This is accomplished by limiting the credit to one-half the amount that the government allots each school per-pupil. For example, in the 1998-99 school year, the average state per-pupil allocation in Michigan was approximately $5,800. The maximum tax credit allowed under the UTTC proposal therefore would be $2,900. If a student transfers from a government school to a private alternative, the state need no longer spend the $5,800 to educate the child, but instead forgoes at most only $2,900 through the tax credit, producing a net savings for the state of $2,900.
Since the average tuition cost at private schools is roughly half of the government school per-pupil allocation, the amount of the tax credit provides enough incentive for parents to consider sending their children to an alternative school.
The UTTC avoids many of the problems associated with both vouchers and traditional tax credits and was designed to have wide political appeal and practical application. School choice advocacy groups and state legislatures around the nation are adapting the UTTC concept for ballot initiatives and legislative proposals in their own states.
 Joseph Bast and Robert Wittman, "Educational Choice Design Guidelines," Heartland Policy Study No. 39, The Heartland Institute, May 1991, pp. 6-18; and Bierlein, Controversial Issues in Educational Policy, p. 92.
 Milton Friedman, Capitalism and Freedom (Chicago, IL: The University of Chicago Press, 1962).
 John E. Coons and Stephen D. Sugarman, Family Choice in Education: A Model State System for Vouchers (Berkley, CA: University of California, Institute of Governmental Studies, 1971).
 John E. Chubb and Terry M. Moe, "Politics, Markets, and the Organization of Schools," American Political Science Review, vol. 82 no. 4, December 1988, pp. 1084-1085.
 See the following web sites for up-to-date school choice legislation and court decisions: Children First America, at www.childrenfirstamerica.org/legislation.html, and The Heritage Foundation, at https://www.heritage.org/schools/.
 Jackson v Benson, 213 Wis.2d 1, 570 N.W.2d 407 (1998).
 Jessica L. Sandham, "Florida House Approves Bush's Voucher Plan; Senate Action Likely," Education Week, 7 April 1999, p. 22.
 Children's Educational Opportunity Foundation; available on the Internet at http://www.childrenfirstamerica.org. Accessed on 13 July 1999.
 Jeff Archer, "Voucher Proponents Claim Victory in Albany," Education Week, 11 February 1998, p. 5.
 Nina Shokraii, "School Choice 1998: A Progress Report," The Heritage Foundation No. 172, 30 January 1998, p. 5.
 Editorial, "School Choice Showdown," The Wall Street Journal, 10 March 1998, p. A22.
 Ted Forstmann, "School Choice, by Popular Demand," The Wall Street Journal, April 21, 1999, p. A22.
 Partners Advancing Values in Education; available on the Internet at http://www.pave.org. Accessed on 15 January 2001.
 Nina Shokraii and Sarah Youssef, School Choice Programs: What's Happening in the States, 1998 edition, The Heritage Foundation, pp. 18-20.
 Karina Bland, "Mom's prayers answered with tuition for school," The Arizona Republic, 9 April 2000.
 Arizona Department of Revenue, 28 August 2000.
 Dave A. DeShryver, "What's Working Around the Country," The Center for Education Reform, April 1999.
 Patrick L. Anderson, Richard McLellan, Joseph P. Overton, and Gary Wolfram, The Universal Tuition Tax Credit: A Proposal to Advance Parental Choice in Education, Mackinac Center for Public Policy, November 1997. Available on the Internet at https://www.mackinac.org/article.asp?ID=362.