Research shows education savings accounts are being used precisely as intended

Recently, reimaginED executive editor Matt Ladner noted the 10th anniversary of education savings accounts, which debuted in Arizona in the form of the  Empowerment Scholarship Account. In the past decade, research has demonstrated a refreshing truth about the accounts.

In an age of fake news, they have proved authentic, empowering parents to customize their child’s education, and families are, in fact, doing exactly that.

Data from North Carolina’s two education savings accounts programs find that a larger share of families are using their child’s account to purchase more than one education product or service than those who are only paying for one item, such as private school tuition.

Sixty-four percent of account holders used an account to customize their child’s learning experience in North Carolina’s accounts’ first two years — approximately double the share of Arizona families that customized a student’s experience in the first two years of account availability in that state.

K-12 private school scholarships and vouchers have offered students around the country the opportunity to attend a school of their choice for more than 20 years, bringing hope to children assigned to failing schools. During this period, though, teacher unions and other interest groups have filed lawsuits to force children back into assigned schools, delaying and in some cases erasing these options.

Education savings accounts are not vouchers, and courts have recognized the accounts’ distinguishing feature of allowing parents to choose how and where their children learn, making unions’ charges that the accounts violate state constitutions inaccurate.

(Recent court decisions in favor of scholarships in cases such as Espinoza v. Montana Department of Revenue also have  given parents hope against union lawsuits trying to crush student learning options.)

Thus, the accounts’ flexible provisions and research findings that parents are using these options are significant – both because they allow parents to design a learning experience that meets a child’s needs and because the accounts’ versatility makes them more likely to withstand legal challenges.

North Carolina’s accounts have notable similarities and differences with other account programs, such as the education savings accounts in Florida and Arizona. As with the account laws in other states (Arizona, Florida, Mississippi, Tennessee, and now Indiana, New Hampshire, and West Virginia), North Carolina state officials deposit a portion of a child’s funds from the state education formula into a private account that parents use to buy education products and services for their children.

Similar to Florida’s accounts, North Carolina’s accounts are available to certain children with special needs. Arizona’s accounts, the oldest accounts in the U.S., are available to children assigned to failing schools, children living on tribal lands, adopted children, as well as children with special needs and other students from disadvantaged backgrounds.

Another important similarity that North Carolina’s accounts share with both these state account options is that state officials contracted with private entities to oversee parent transactions. In Florida, most account operations are overseen by private-school scholarship organizations, while in Arizona, lawmakers have hired a payment-processing firm that works in other sectors of public education called ClassWallet.

ClassWallet also is managing much of the account activity in North Carolina, including parent purchases.

State departments of education are not equipped to manage individual family transactions, and state education agencies such as Arizona’s often restricted parent options, resulting in groups such as the Goldwater Institute stepping in to defend families’ rights under the law.

Outsourcing account operations from the inception of North Carolina’s education savings accounts programs saved Tar Heel families the frustration of discovering just how bureaucratic state education agencies can be.

A unique feature of North Carolina’s accounts is that families can combine two private scholarship options, Disabilities Grants and Opportunity Scholarships, with their child’s education savings account. My report for the John Locke Foundation finds that most — 225 out of 277 account holders in 2018-2019, and 216 out of 304 account holders in 2019-2020 — used a Disabilities Grant (a voucher worth up to $8,000 for private school tuition, textbooks, and other qualified items) and an account.

Even with access to both the Disabilities Grant and the account, though, 138 participants still used an account to purchase more than one education item or service.

This research on North Carolina’s accounts offers families and policymakers a glimpse at the future of learning. In just the last year, lawmakers in Indiana, Kentucky, Missouri, New Hampshire and West Virginia have enacted new account laws.

How will parents use the accounts, legislators may ask? If data are any guide, they will use them exactly as intended: to meet the unique needs of their children.

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BY Jonathan Butcher

Jonathan Butcher is senior policy analyst in the Center for Education Policy's Institute for Family, Community and Opportunity at The Heritage Foundation.