New report shows that, were Nebraska to adopt a tax-credit scholarship program, the state could save $51 million over a ten year period.
Omaha, NE-IA (1888PressRelease) July 01, 2010 - A tax-credit scholarship program would produce net fiscal savings for the State of Nebraska as high as $51 million, over a ten-year period, according to projections in a new report released today by The Foundation for Educational Choice. The comprehensive study projects the fiscal impact to Nebraska if a tax-credit scholarship program was adopted.
The report, entitled Tax-Credit Scholarships in Nebraska: Forecasting the Fiscal Impact, found that in addition to providing greater educational freedom, a tax-credit scholarship program would also increase the available resources for students who remain in public schools. "Since local school districts experience reductions in expenses that are greater than the reduction in state aid, there is a net gain equal to $7,775 for each public school student that is awarded a scholarship," says Brian Gottlob, the study's author and a senior fellow at The Foundation for Educational Choice.
In addition to leaving more money in the classroom for students who remain in public schools, the report also projects robust savings to the state.
"After reviewing various program and implementation scenarios, I estimate substantial savings within the first few years. Moreover, savings as high as $51 million could be realized over a ten-year period," says Gottlob.
The report also analyzes Nebraska's current education spending model and finds that each additional dollar of education spending by the state results in just 47 cents of increased aid to schools.
According to Gottlob, "Increases in state education aid do not necessarily result in corresponding increases in educational expenditures by school districts…Our results offer a cautionary note regarding the inefficiencies associated with efforts to increase local education spending by increasing state aid to local school districts."
"Almost every state is projecting a significant budget deficit over the next few years," said Robert Enlow, President and CEO of The Foundation for Educational Choice. "In this challenging economic climate, it would be irresponsible of state legislators not to consider a program that could save them over $50 million and provide a better dollar-for-dollar value to taxpayers. In this case, everyone wins," added Enlow. "The state wins, taxpayers win, K-12 education wins, and most importantly--parents and students win."
The report's key findings include:
• Public school districts are likely to see growth in per-student funding, if a tax-credit scholarship program is adopted in Nebraska. Because expenses decline more than revenues, there is a net gain of resources available to students who remain in the public schools equal to $7,765. When students leave Nebraska public schools in significant numbers, local school districts experience reductions in expenses that are greater than the overall reduction in state aid. School district revenues from local sources also tend not to decline when enrollments decline.
• Depending on the average scholarship value, and the percentage of private school scholarships awarded to public school students, the policy's net fiscal benefits range between $1 million and $51 million, over a 10-year period.
o If 80 percent of private school scholarships are awarded to current public school students, then fiscal benefits to the state can be maximized, resulting in savings of $51 million, depending on the scholarship value.
o If scholarship eligibility is capped at 300 percent of federal poverty guidelines and at least 67 percent of scholarships are awarded to public school students, the program will yield net fiscal savings to Nebraska of between $2.4 and $37 million, depending on the average value of scholarships.
o A scholarship program for current public school students that costs Nebraska $3 million in tax-credits at 65 percent of the value of contributions to scholarship granting organizations (SGOs) will generate more than $4.15 million in available scholarship funds.
o The higher the percentage of scholarships awarded to public school students that transfer to private schools, the larger the benefits to the state and local school districts. In the first year of the program, just 951 public school students will be needed to participate in the program for it to break even, or have no cost to the state.
• Expanding the income eligibility for scholarships increases the fiscal benefits of the program under all scenarios.
• A tax-credit scholarship program is a more efficient way to direct dollars to education than simply increasing state aid. Nebraska data show that every dollar of increased state aid to schools produces only an additional 47 cents of school spending because school districts respond to the state spending increase by reducing local spending on education. By contrast, every dollar spent on a tax-credit scholarship program is a full dollar that goes to education.
To read the full study, or to learn more about The Foundation for Educational Choice, visit www.EdChoice.org/NEFiscal.
About The Foundation for Educational Choice
The Foundation for Educational Choice is a 501(c)(3) nonprofit/nonpartisan organization, solely dedicated to advancing Milton and Rose Friedman's vision of school choice for all children. First established as the Milton and Rose D. Friedman Foundation in 1996, the foundation continues to promote school choice as the most effective and equitable way to improve the quality of K-12 education in America. The foundation is dedicated to research, education, and promotion of the vital issues and implications related to choice in K-12 education.
New report shows that, were Nebraska to adopt a tax-credit scholarship program, the state could save $51 million over a ten year period. 
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