The document discusses how school voucher savings are often miscalculated. It summarizes a new national study that found 10 school voucher programs saved $1.7 billion over 20 years by educating over 500,000 students for less than public school costs. However, some voucher recipients would have attended private school anyway, so the savings are overestimated by not accounting for these "free riders." The document then examines flaws in how Indiana calculates savings from its voucher program, finding the state overestimates the number of voucher students not diverted from public schools. Recalculating the numbers, the author estimates Indiana's program actually saved between $7-20 million per year, much higher than the state's official calculation.

1. Counting Correctly
How the Fiscal Effects of School Choice are
Often Miscalculated
Presented by Jeff Spalding

2. OUR FOUNDERS
“We have concluded that the
achievement of effective parental
choice requires an ongoing effort to
inform the public about the issues
and possible solutions, an effort that
is not episodic, linked to particular
legislative or ballot initiatives, but
that is educational. This Foundation
is our contribution to that objective.”
Rose D. Friedman
Noted Economist
1910-2009
Milton Friedman
Nobel Laureate
1912-2006

3. Today’s Agenda
• Overview of New National Study of School
Voucher Savings
• Results
• Lessons learned about school voucher savings
• Examination of Savings from Indiana’s Choice
Scholarship (Voucher) Program
• Flaws in the official savings calculation

4. Available at: http://www.edchoice.org/Research/Reports/The-School-Voucher-Audit--Do-Publicly-Funded-Private-School-
Choice-Programs-Save-Money-.aspx

5. What we found:
• 10 school voucher programs have saved $1.7 billion over 20 years (cautiously
estimated)
• Over 500,000 student FTEs awarded school vouchers
• Over 470,000 students FTEs diverted from public schools (94%)

6. Behind the overall net savings number:
• Average Public School Variable Cost per Student - $9,647
Range: $4,958 FL Opportunity Scholar to $22,359 OH Autism
• Average Voucher Cost - $5,637
Range: $2,257 Cleveland to $14,862 OH Autism
• Average Net Savings per Voucher Student - $3,375
Range: $1,018 FL Opportunity Scholar to $7,532 OH Autism
$9,647 - $5,637 = $4,010 not $3,375
WHY?
Some voucher students would have still attended a private school without the voucher’s
financial assistance….so, they are not diverted from public school!
The cost of vouchers for students not diverted is similar to the “free rider” or “deadweight
loss” problems in economics.
If you invested $5,637 each to educate students and 94% of the time you
saved $4,010 while 6% of the time you lost $5,637…what’s your ROI?

7. 20.9%
24.3%
25.8%
27.4%
50.8%
59.9%
78.1%
83.0%
99.5%
111.0%
167.1%
0% 20% 40% 60% 80% 100% 120% 140% 160% 180%
Milwaukee Parental Choice Program
UT - Carson Smith Special Needs Scholarships
FL - A+ Opportunity Scholarships
DC Opportunity Scholarships
Ohio Autsim Scholarships
Cumulative Weighted Average ROI
FL - McKay Scholarships for Students with Disabilties
LA - Student Scholarships for Educational Excellence
OH - Educational Choice Scholarships
Georgia Special Needs Scholarships
Cleveland Scholarship & Tutoring Program
Rate of Return
School Voucher Return on Investment (ROI)
Cumulative ROI from Inception through 2011

8. So what happened to the $1.7B in net savings?
Most of these savings were passively re-spent…typically rolled back into funding
public schools
• States’ school finance laws often protect public schools from a full funding loss as their enrollment declines
• Political pressure to annually raise per student funding is immense
Since public school spending is rarely cut, this gives credence to opponents’ claims
that no voucher savings actually occurred.
Just because the voucher savings were re-spent…
…does NOT mean the savings never happened!
State’s typically don’t annually track savings from school choice programs
• This needs to change!
• Indiana requires annual tracking and reporting, but its process is seriously flawed

9. Available at: http://www.doe.in.gov/sites/default/files/choice/choice-scholarship-program-annual-report-061614.pdf

10. Indiana’s school voucher program saw tremendous
growth of its first 3 years
Initially, eligibility was tightly restricted to: 1) students previously enrolled in
public school; and 2) students transferring from a tax credit scholarship program.
For 2013-14, eligibility expanded to include:
 students assigned to “failing” public school (even if they weren’t enrolled);
 students with special educational needs; and
 siblings
The 2013-14 expansion substantially raised the program’s “deadweight loss”
exposure.

11. The money shot!
Spoiler Alert: Actual savings are MUCH higher!
Let’s see why

12. Don’t be fooled by a false premise!
Not Previously Enrolled ≠ Not Diverted
Pivotal Question: Would the student be attending a public school now if not for
the financial assistance provided by school choice when they first enrolled in a
private school?

13. So what’s everyone missing?
The vast majority of kindergarten students enrolling in a
private school, with school choice financial assistance, are
diverted from public school…even though they were never
enrolled in a public school!
Key Presumption for this Analysis: If a student is first
diverted from public school by using a tax credit scholarship,
they are still a diverted student when they switch to the
voucher program.
A crucial point that the official calculation
misses!

14. Estimating How Many Voucher Recipients were
Not Diverted from the Public School System
Starting Point: 7,779 Choice Scholarship recipients in 2013-14 never previously
enrolled in a public school in Indiana (39%)
Four (4) key cohorts of diverted students are buried in the 7,779 count:
Cohort #1 – Voucher recipients that previously entered Kindergarten under the tax credit scholarship program
Estimated Diverted Student Count in Cohort #1: 3,271
Cohort #2 – Voucher recipients now entering Kindergarten via the “Failing School” Pathway
Cohort #3 – Voucher recipients now entering Kindergarten via the “Sibling” Pathway
Cohort #4 – Voucher recipients new to Indiana and now entering grades 1-12 via the “Failing School” Pathway
Estimated Diverted Student Count in Cohorts #2, #3, and #4: 729
7,779 Students Not Previously Enrolled – 4,000 =
3,779 Students Not Diverted
Equals 19% of 2013-14 Choice Scholarship recipients!

15. $4.2
$4.9
($15.8)
$7.1
$17.4
$20.7
($20.0)
($15.0)
($10.0)
($5.0)
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
School Yr
2011-12
School Yr
2012-13
School Yr
2013-14
$millions CHOICE SCHOLARSHIP PROGRAM - NET SAVINGS
OFFICIAL VS CORRECTED CALCULATION
Net Savings - Official Calculation Net Savings - FFEC Corrected Calculation
The $36.5M swing, for 2013-14, exposes an even larger discrepancy
in categorizing voucher recipients than calculated above.
At $6,203 gained for every student flipped from not diverted to
diverted, the $36.5M swing reveals a 5,878 discrepancy in how
voucher recipients were categorized!

16. 3,911
9,139
19,811
24 192
3,779
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
School Yr
2011-12
School Yr
2012-13
School Yr
2013-14
ChoiceScholarshipRecipients
CHOICE SCHOLARSHIP PROGRAM - PARTICIPATION
SHARE NOT DIVERTED FROM PUBLIC SCHOOL
Choice Scholarship Recipients - Full Count Not Diverted from Public School
0.6% Not
Diverted
2.1% Not
Diverted
19.1% Not
Diverted
My count indicates 34% of the 2013-14 voucher program
growth was students not diverted from public school…hardly a
“friendly” assumption!
Eligibility expansion for 2013-14 spurred a doubling of
participation, but a 20x increase in “deadweight loss”.

17. 3,911
9,139
19,811
532
2,287
9,657
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
School Yr
2011-12
School Yr
2012-13
School Yr
2013-14
ChoiceScholarshipRecipients
CHOICE SCHOLARSHIP PROGRAM - PARTICIPATION
SHARE NOT PREVIOUSLY ENROLLED IN PUBLIC SCHOOL
Choice Scholarship Recipients - Full Count Not Previously Enrolled in Public School
13.6% Not
Previously
Enrolled
25.0% Not
Previously
Enrolled
48.7% Not
Previously
Enrolled
The official savings/loss calculation used a 49% “deadweight loss” share for
2013-14, not 39% as reported…without providing any explanation.
This data suggests that 69% of the 2013-14 growth was students not
previously enrolled in public school. Key drivers were: 1) eligibility
expansion; and 2) an accumulation former tax credit scholarship recipients
that have switched to the voucher program.
Larger 49% “deadweight loss” share is due to using a one year look-back
period (instead of the multi-year look back used to generate the 39% share
reported).

18. Choice Scholarship Savings Overview
Official Calculation
Per Student Savings Analysis:
Average School Formula Regular $ per Student (for Choice Scholarship recipients) $5,828 $5,976 $6,203
Average Choice Scholarship $ per Recipient $3,967 $3,944 $3,976
Per Student Savings from Choice Scholarships (for students diverted from public school) $1,862 $2,032 $2,227
Participation Data:
Choice Scholarship Recipients - Full Count 3,911 9,139 19,811
Choice Scholarship Recipients - New Cohort Count 3,911 5,228 10,672
Prior SGO Recipients/Students Not Previously Enrolled in Public Schools - Full Count 532 2,287 9,657
Prior SGO Recipients/Students Not Previously Enrolled in Public School - New Cohort Count 532 1,755 7,370
Net Change in Public School Enrollment - Full Count (3,379) (6,852) (10,154)
Net Change in Public School Enrollment - New Cohort Count (3,379) (3,473) (3,302)
Overall Savings Calculations:
Change in State Allocations to Public Schools (for students diverted from public school) ($6,290,704) ($13,924,101) ($22,610,352)
Year-over-Year Change in State Allocations to Public Schools - New Cohort Change ($6,290,704) ($7,633,398) ($8,686,250)
Cost of Choice Scholarships to Students Not Previously Enrolled in Public School $2,110,320 $9,019,604 $38,396,094
Year-over-Year Change in Cost of Choice Scholarships to Not Prior Public School Students - New Cohort Cost $2,110,320 $6,909,285 $29,376,489
Net Impact on State Tuition Support Cost Burden (negative = savings) ($4,180,384) ($4,904,497) $15,785,742
Year-over-Year Change in Net Impact on State Tuition Support - New Cohort Impact ($4,180,384) ($724,113) $20,690,239
Comparative Calculations:
Minimum Ratio of Choice Scholarship Awards to Prior Public School Students vs Students Not
Previously Enrolled in Public School
2.13 1.94 1.79
Actual Ratio of Choice Scholarship Awards to Prior Public School Students vs Students Not
Previously Enrolled in Public School
6.35 3.00 1.05
School Yr
2011-12
School Yr
2012-13
School Yr
2013-14

19. Choice Scholarship Savings Overview
FFEC Corrected Calculation
"Diverted vs Not Diverted" Replaces "Previously Enrolled vs Not Previously Enrolled"
Per Student Savings Analysis:
Average School Formula Regular $ per Student (for Choice Scholarship recipients) $5,828 $5,976 $6,203
Average Choice Scholarship $ per Recipient $3,967 $3,944 $3,976
Per Student Savings from Choice Scholarships (for students diverted from public school) $1,862 $2,032 $2,227
Participation Data:
Choice Scholarship Recipients - Full Count 3,911 9,139 19,811
Choice Scholarship Recipients - New Cohort Count 3,911 5,228 10,672
Students Not Diverted from Public Schools - Full Count 24 192 3,779
Prior SGO Recipients/Students Not Previously Enrolled in Public School - New Cohort Count 24 168 3,587
Net Change in Public School Enrollment - Full Count (3,887) (8,947) (16,032)
Net Change in Public School Enrollment - New Cohort Count (3,887) (5,060) (7,085)
Overall Savings Calculations:
Change in State Allocations to Public Schools (for students diverted from public school) ($7,236,450) ($18,181,397) ($35,699,149)
Year-over-Year Change in State Allocations to Public Schools - New Cohort Change ($7,236,450) ($10,944,947) ($17,517,752)
Cost of Choice Scholarships to Students Not Diverted from Public School $95,202 $757,221 $15,025,250
Year-over-Year Change in Cost of Choice Scholarships to Not Diverted Students - New Cohort Cost $95,202 $662,018 $14,268,029
Net Impact on State Tuition Support Cost Burden (negative = savings) ($7,141,248) ($17,424,177) ($20,673,899)
Year-over-Year Change in Net Impact on State Tuition Support - New Cohort Impact ($7,141,248) ($10,282,929) ($3,249,723)
Comparative Calculations:
Minimum Ratio of Choice Scholarship Awards to Students Diverted from Public School vs
Students Not Diverted
2.13 1.94 1.79
Actual Ratio of Choice Scholarship Awards to Students Diverted from Public School vs Students
Not Diverted
161.96 46.60 4.24
School Yr
2011-12
School Yr
2012-13
School Yr
2013-14

20. Jeff Spalding
Director, Fiscal Policy & Analysis
317-681-0745 | email@edchoice.org