Monday, May 1, 2017

ESAs and the Vibrant Marketplace

Nat Malkus (American Enterprise Institute) is in US News touting Education Savings Accounts in an article that the page editor has entitled "Building an Education Marketplace" but the url names "The Perils and Promise of Education Savings Accounts for School Choice." The latter is less poetic, but more accurate. But if you want to see what one of the long games being played in education reform is, this lays it out pretty well.

Scrooge McDuck's Education Savings Account

We've met Malkus before. Last summer he scribed a piece about charters vs. public schools, and I looked into his background. From 2009 to 2015, this senior K-12 researcher at AEI worked with American Institutes for Research, the outfit that sounds like a research organization but is in the test manufacturing business. He graduated in 1997 from Covenant College, a liberal arts Christian college in Tennessee, with a degree in historical studies and later earned a Ph.D. in educational policy and leadership from the University of Maryland. His AEI bio lists four years as a teacher.

Noting that we have choice fans in DC and that the Supremes could be on the verge of declaring the Blaine Amendments, which cement the separation of church and state, to be unconstitutional, Malkus recaps the recent history of ESAs, which mostly means Arizona, though Florida, Tennessee, Mississippi and Nevada are all giving it a shot.

Malkus has been studying up on this stuff because he has a book coming out, and he's pretty frank about some of the virtues of ESAs--

ESAs circumvent Blaine Amendments because the state does not transfer the funds to schools or education service providers; parents do.

And that leads him to a clear, concise statement of how ESAs change the choice game:

ESAs promise more than vouchers because they provide educational choice rather than school choice. Whereas vouchers work like coupons that families can use on tuition at private schools, ESAs provide funds parents can use to customize education for their child. Parents might spend their ESA on private school tuition or on a blend of education services including college courses, tutoring and special education services, to name a few. 

Malkus is excited at the prospect of what vouchers couldn't quite deliver-- "a fully-functioning education marketplace."

I'm not sure that's so exciting for anyone except the vendors who want to cash in on that "vibrant marketplace." Malkus recognizes some key questions, but he overlooks a few more keyer questions along the way. Let's take his questions first.

A key question is whether ESA funding can provide choice for all students. ESAs are state programs and thus only transfer the state's share of per-pupil public school funding to parents, but not funds from local or federal sources.

In other words, ESA funding will not get a poor student with no other resources into a fancy private school, nor allow them to assemble a piece-by-piece education program that would rank with what wealthy families could purchase from top vendors. But that is really only half of this key question, because one thing free and vibrant markets are really lousy at is providing services or goods for ALL customers. The most fundamental task of any responsible vendor of anything is to sort potential customers into two basic piles-- worth the bother, and not worth the bother. My go-to example-- FedEx and other private package delivery services do not compete for customers in isolated rural expensive-to-serve areas-- they just hand the package off to the United States Postal Service.

In short, a fully-functioning free-market education marketplace will not serve all students. Furthermore, vendors will choose which customers they wish to serve, and not vice versa. In a free market, somebody is always left behind, and that would mean a complete change of the philosophy behind American public education. It's absolutely true that some public schools have not always met this particular ideal, but to shift to pure choice means we give up even trying-- unless you want to regulate the choice system in such a way as to insure coverage of everyone, which seems to run counter to the ideal of a vibrant marketplace. And that's my point-- vibrant marketplace and education for everyone are buildings sitting on two entirely different foundations.

Another open question is whether ESA programs will be big enough to build a vibrant marketplace of education services.

No. See above. What Malkus is really questioning whether or not states will allow vendors access to enough students to really build the market, which kind of makes my previous point. 

A final question is how the state will know whether ESAs are working. 

Malkus suggests that parent satisfaction might be one measure, but that's a problem. A system like this would disenfranchise all taxpayers who don't have children, and we lose the whole democratic piece of public education. Choice systems repeatedly go back to the idea that parents are the only real stakeholders in education, and that's simply untrue-- neighbors, employers, other voters, and future customers and clients of today's students are all stakeholders in the educational system, and a choice system like this gives them no say. To his credit, Malkus seems to recognize this as an issue (both in his article and in the twitter conversation we're having even as I'm writing this piece, because the internet is a freakin' magical thing).

But this brings us back to the same old accountability debate. Either you believe that parents should be able to use their ESAs for anything from school tuition to an assortment of online courses to a pile of good books to an educational cruise to some educational games for the child's X-Box or you believe that tax dollars extracted from citizens for the express purpose of educating children should be accounted for and spent in ways that are responsible and in accordance with certain educational standards.

Critics of public education have always been quick to criticize teachers and schools that said, "Hey, we know what we're doing. Trust us," and they have a valid point. But I'm not sure, "Hey, trust the invisible hand. It would never let anything Really bad happen" is any better.

Malkus reports that Arizona has played with some exit exams, but he correctly notes that ultimately "without some mechanism for evaluating participating students' outcomes, determining whether the program is successful may be left in the eye of the beholder."

Malkus is hopeful about "the promise of school choice," and at the end of the day, I am not, particularly because choice these days is not really bothering to promise excellent education any more. The promise of school choice is now that there will be school choice. More varied and detailed and broken-up-into-bits choicier choice, which is really about lots of cool ways that vendors can finally gain access to that sweet sweet mountain of public education tax dollars.

Oh, and one other ESA question-- these are always computed based on current cost-per-pupil in a state. In ten years, what will they be? How will the amount of ESAs be adjusted, recomputed, altered, made to not simply shrink with inflation? Who will conduct those negotiations-- because I'm betting that will be part of some state-managed budget battles, and I can imagine a million ways that can end badly.

I appreciate that Malkus is asking some questions and not simply engaging in thoughtless boosterism, but I think the biggest central questions remain unanswered: "How does a choice system exist without eroding fundamental democracy and local control?" or "How does a choice system reconcile the desire for freedom from any constraints with a need for taxpayer accountability? or the biggest one of all being, "How would this system provide a better education for all students?"


  1. I have to wonder how similar ESAs would be to HSAs. If they are similar, we're all doomed.

    My daughters were both born when I had an HMO - not the greatest health care plan in the world, but decent. I had a ton of complications with the older one (including emergency c-section) and between us we were in the hospital for twelve nights. Total out of pocket was $1500.

    Two years ago I had same-day outpatient gall bladder surgery with an HSA. I was in the hospital for a total of six hours. Total out of pocket cost was $6,000. I had just over $6,000 in the account. I now have some health issues I'd like to get checked out, but I simply can't afford to do much follow up should they find anything - account is only up to about $12,000 by now. An HSA is the embodiment of the Republican health care plan - "Don't get sick. If you do get sick, die quickly."

    Assuming ESAs are anything similar, the average American family could probably afford to educate one kid for a year every three or four years.

  2. Could those of us who donate to public school foundations also get the same tax break as those who donate to these? I am going to guess no since the idea is to rig the money flow in one direction.