Dan Lips

Education Savings Accounts: A Vehicle for School Choice

Posted on November 15, 2005 | Type: Policy Report | Author: Dan Lips
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Fifty years ago, Milton Friedman launched the modern school-choice movement with his essay "The Role of Government in Education," in which he proposed a parent-directed system of school vouchers. Friedman's idea is now becoming a reality with millions of Americans using charter schools, scholarship programs, and tuition tax credits.
This paper offers another vehicle to improve parents' control over their children's education: allowing them to open an Education Savings Account (ESA) for each of their children. ESAs begin with the idea that a successful primary education is the foundation of the American dream, and that parents are the best stewards of their children's education. Instead of channeling children's education funding through the public education system, the government would deposit those funds directly into each child's ESA. Parents could then choose a private, charter, or public-school education for their child or pay for other qualified education expenses such as tutoring.  Unspent money would accumulate and parents could eventually use those savings for college or job-training programs. Parents can also contribute to the accounts.

Arizona policymakers could create the nation's first statewide system of ESAs by allowing parents the option to use their child's portion of state equalized base funding-between $4,200 and $4,600 per traditional public-school student-to pay tuition at a school of their choice. Arizona's decade-old charter-school system provides a practical model for designing ESAs. Currently, an average of $4,900 in state equalized base funding follows each of nearly 82,000 Arizona students attending more than 500 charter schools.1 Federal policymakers could likewise use ESAs to give parents ownership of the approximately $57 billion currently spent on K-12 education programs.

Replacing the way states and the federal government allocate education resources with an ESA system of education finance is a revolutionary proposal. ESAs would provide greater opportunities for children of participating parents. And because unspent savings could be held in the accounts, parents would have an incentive to shop for the best schools, which would reduce inflationary pressure more effectively than traditional scholarship programs. ESAs would also help foster an "ownership society" by putting parents, not bureaucrats, in control of education resources.

Read Education Savings Accounts here.

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