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Monday, October 29, 2007
The Rich, the Poor, and Utah School Vouchers

Someone asked me the other day, Won't vouchers benefit only the rich? Another related question is, Aren't the vouchers too small to help ordinary families? I'm not sure which family among the many I know is ordinary, but I do take up the arguments here, looking carefully at the bill itself and the opponents' reasoning.

Two related criticisms of Utah school voucher legislation are making the rounds. Because the average tuition at private schools is several thousand dollars per year, we are told that

  • vouchers worth $3000 or less will not help many Utah families; and
  • vouchers will only help the rich, or only families on the Wasatch Front, or both.

These claims illustrate poor reasoning, a misunderstanding of the market, and an unwillingness to read the actual legislation (or perhaps an assumption that most of us won't read it, and therefore can easily be fooled).

The Legislation

Lines 75-77 of H.B. 148 (the final, "enrolled" version) define something called the "income eligibility guideline." This number is used later in the bill to calculate eligibility for scholarships (vouchers). Its definition is "the maximum annual income allowed to qualify for reduced price meals for the applicable household size as published by the U.S. Department of Agriculture by notice in the Federal Register." In other words, it's a poverty line. We could debate whether it's too low or too high as a definition of poverty, but that's a separate question. For school year 2007-08 in the 48 contiguous states, here are the USDA values for a selection of family sizes:

family of 3: $31,765 (annual income)
family of 4: $38,203
family of 5: $44,641
family of 6: $51,079

Lines 250-66 of H.B. 148 define the full-year scholarship (voucher) amount per student as $3000 for families with annual income less than or equal to the eligibility guideline. The amount decreases gradually, to a low point of $500 per year for families with income greater than or equal to 250 percent of the guideline (2.5 times the guideline).

H.B. 174, a sort of cleanup bill which passed the Legislature and was signed by the Governor, but is not subject to the November 6 referendum, will automatically apply its modifications to H.B. 148 if the latter survives the referendum. It is worth noting that this second bill does not modify the income-based scale for determining the size of vouchers.

So we are left to conclude that the voucher monies will be directed principally at poor and middle-class families, not the rich. Some have complained that the voucher amount doesn't fall all the way to zero for wealther families. This is highly debatable. Wealthier taxpayers pay a wildly disproportionate percentage of all taxes; is it right to exclude them from the benefits funded by those taxes? This is a debate for another day.

The Question of Affordability

There is one other way to make the argument that vouchers only help the rich: To claim that even the larger vouchers won't help poor or middle-class families enough to make any difference for them.

A large mailer that arrived in my mailbox yesterday says, "Even with a voucher, many Utah families cannot afford the average $8,000 tuition for private schools. Middle class families with four children might qualify for a $2,000 voucher per child, but they would still have to pay an additional $24,000 in tuition."

There are at least six major flaws here.

1. Abusing the Average

Even if the average private school tuition now -- or three years from now -- really is $8000 per year, this says nothing about the affordability of private schools which are less expensive than average. For example, it doesn't tell us whether there are now private schools with annual tuition in the $3000-$4000 range, where a $2000 voucher might pay half or more of the costs. And it certainly doesn't tell us whether new schools in that range would open in a market which included vouchers. (The current market is suppressed and quite distorted by a state-enforced near-monopoly). In fact, it assumes that new schools will not open, and that existing schools will not adjust their prices to complete.

This argument badly misuses an average. Admittedly, this is a mistake to which people are very prone, if they are not accustomed to thinking about numbers. Isn't it scary that we can't rely on the public education establishment to be good with numbers?

There is a necessary question here as to how the average was calculated. Did they make a list of all private schools and their tuition rates, and average the numbers such that all schools' costs have identical impact? Or did the weight the average according to the number of students in each school, so that the average really tells us how much the average student's parents pay in tuition? We cannot know what the average means without knowing this answer, but the flyer does not say.

2. "With Me It's All or Nuthin'"

The argument that a voucher is meaningless if it does not pay the entire cost of tuition is absurd. The same reasoning applied elsewhere in my own life would have turned up its nose at some substantial college scholarship money, because it wasn't a full ride; would have turned away the generous grandmother who helped my wife and me with a down payment on our first home, because she wasn't paying the entire cost of the home; and would have sneered at the 60-percent-off sale at J. C. Penney, where I recently bought some clothing I needed, because they weren't simply giving the clothing away. In each of these three cases, partial relief from normal costs enabled me to do things I could not otherwise have afforded, or at least to do them much sooner. I respectfully suggest that this applies to education, too: Most families don't need or want everything handed to them; they just need things to be a little more affordable.

3. My Children Are Not Identical Members of a Herd

When the flyer totals the cost of sending all four of a family's children to an average-priced private school, it makes an important assumption: Every family with four students will insist on sending all of them to private schools simultaneously. In reality, some may do this, but many will not and do not want to. I have heard from a number of parents with medium-to-large families who say that all their children except one thrived in public schools. They either sacrificed mightily to put, or earnestly wished they could have put, that one student in a private school that would have met his or her needs. This changes the home budget calculus radically.

4. Static Is Easy; Dynamic Is Realistic

The argument I quoted above from the flyer, along with other arguments in the same flyer, shows a typical bureaucratic fondness for a static model of markets. A dynamic model is far more realistic.

A more common application of static models is in Washington, DC. There it is commonly assumed that changing tax rates or other essential features of the market will not affect human behavior in any way. If this were true, then every tax rate cut would decrease government revenue by the precise percentage of the cut. But the Kennedy, Reagan, and Bush II tax cuts, among others, have clearly shown us that reducing the tax burden on a particular sort of activity increases incentives to engage in that activity. Increased activity often leads to substantial tax revenue increases, despite lower rates.

This might seem counter-intuitive to a third-grader, but it's not terribly complex in principle. Here's a simplified example of the dynamic model. If you're taxing one million dollars' worth of income or other activity at the rate of 15 percent, your revenue will be $150,000. Let's say you then impose a 40 percent rate cut for the next year, from 15 to 9 percent. This stimulates the market to the point that there is two million dollars' worth of activity to tax at the lower rate, and your revenue is $180,000. Thus, in this simple example, a 40 percent decrease in tax rate leads to a 20 percent increase in revenue. A static model would have predicted a 40 percent decrease in revenue, too.

The static model in the voucher debate is visible in arguments that there are no private schools in many Utah communities -- yesterday's flyer says this, too -- as if that meant that no new schools would open, in a market with vouchers. We also see the static model in the use of averages, such as the average tuition cost, which tacitly assumes that the same average will persist after vouchers are introduced to the market. A more likely outcome is that less expensive private schools will proliferate to meet the voucher-enhanced demand. Among other effects, this will dramatically lower the average.

5. Is That the Big Half or the Very, Very Little Half?

Fifth, the latest flyer complains that "more than half of Utah's counties" don't even have private schools, so families in those counties will not benefit. Besides coming out of the same flawed static model I described above, this argument has another serious weakness. Even if we accept the statistic's truth, which I will do for the sake of argument, it is a lot less illuminating than it first appears. The percentage of Utah's population living in its least populous counties is surprisingly small, so this argument is making a mountain out of a molehill or two. It also ignores the positive effect of vouchers on public schools statewide; even very small communities with no private schools should see some of this effect. (See below.)

I Didn't Number This One

No more convincing is the common objection that private schools are not forced to accept vouchers, and some therefore will not. (Yesterday's flyer rehashes this, too.) That's called freedom, and we're supposed to be in favor of freedom generally. There are auto mechanics out there who only work on expensive European cars, but that doesn't affect me at all, and I don't get uptight about it. I simply take my Honda to one of the many mechanics who will work on it.

6. The Flaw You See in Your Rear-View Mirror is Larger than It Appears

There is a more subtle problem in voucher opponents' calculations: They are not considering the costs of the radical growth the Utah public schools must absorb in the coming years, as student populations soar even higher. The estimates I've heard batted around suggest a 30 percent growth in the student population over the next decade or two. The cost of accommodating such a growth rate will be enormous, and it will fall squarely on the shoulders of taxpayers. This is actually a principal motivation for vouchers, according to some of the legislators who voted for it. If enough students go to private schools with vouchers, at a much lower expense to the state -- and with parents themselves voluntarily bearing much of the cost -- then public school growth can be slower, and there will be more funds available to apply to it before we have to worry about tax increases.

We're told that Utahans are already bear the sixth-highest tax burdens in the United States. If vouchers can slow the required growth rate even a little bit over the next decade or two, the required revenue increases will be less massive. This will substantially reduce the added tax burden on the "many Utah families" who supposedly cannot afford private schools, even with vouchers.

In fact, as we watch future rapid growth play out, it may turn out to be true that, in the long run, those families cannot afford not to have HB 148 pass on November 6.

Extra Credit

On the other hand, if you've been thinking especially carefully, the discussion here of dynamic revenue models might cause you to wonder: Could Utah lower its income tax rates in such a way as to increase revenues radically enough to fund the rapid growth without major tax increases?

My answer: Good thinking! We can hope so. But I guarantee you that, if the Legislature tries this, the teachers' unions and the educational bureaucracy will oppose it with all the subtlety and measured restraint of a parent who discovers that his child is being strangled by a pervert on the front lawn. They may appreciate well enough the significance of graphs with straight lines on them (like a static model), but they either cannot or will not grasp the meaning of graphs with the curved lines which come from more complex equations. Recent history and basic economics to the contrary, all they will see in lower rates is lower revenue -- the static model -- as in less money going to the public schools.

Vouchers Will Even Help Students Who Stay in Public Schools

For me, as a parent of four children, three of whom are in public schools (the fourth is too young), the most persuasive argument for vouchers is that they will improve the public schools. I think it unlikely that I would ever take advantage of vouchers for my own children. The local public schools are generally excellent in American Fork, and there is just enough choice available to us through open enrollment that we do fairly well. We can live with some supplementing the curriculum at home, in areas such as math, where the Alpine School District is notoriously -- how can I put this gently? -- daft and politicized.

Perhaps this point, that vouchers will improve public schools, is even more subtle than the static/dynamic distinction. But there is a serious advantage for all students if voucher-induced competition improves the public schools. We are talking about introducing a substantial dose of competition into a government-funded near-monopoly. The expected effects in public schools are better student and teacher performance; higher teacher pay; better coping with massive future growth, in terms of class sizes and other factors; better responsiveness to individual students and their parents; and perhaps even improved teacher preparation in colleges and universities.

All of these would be good things for students, parents, schools, and society.

A Final Note

Once again, a look at the voucher opponents' reasoning and use of data inspires the question, Do the voucher opponents originating these arguments actually believe their own flawed reasoning, or do they more cynically assume that we voters won't be able to see the gaping holes?

Shall we give them the benefit of the doubt and assume they don't see the flaws in their own arguments? It seems plausible. Dr. Matthew Ladner points to long-term, serious problems in the quality of research at colleges of education and in the PhDs and doctoral candidates who are doing it.

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