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Education Savings Accounts: Fiscal Analysis of a Proposed Universal ESA in Oregon

By Eric Fruits, Ph.D.

Executive Summary

Education Savings Accounts deposit a percentage of the funds that the state would otherwise spend to educate a student in a public school into accounts associated with the student’s family. The family may use the funds to spend on private school tuition or other educational expenses. Funds remaining in the account after expenses may be “rolled over” for use in subsequent years.

Empirical research on private school choice finds evidence that private school choice delivers benefits to participating students—particularly educational attainment.

Currently, Arizona, Florida, Mississippi, North Carolina, and Tennessee have active ESA programs that are limited to particular groups of students such as those with special needs. The proposed Oregon ESA bill would introduce a universal ESA program for all K–12 students.

ESAs are frequently designed so the amount of funding provided to families is less than the amount the state would otherwise pay for a student to attend public school, with the state recouping the difference. In this way, ESAs can be designed to produce a net fiscal benefit (i.e., cost savings) to state and local government budgets.

A fiscal analysis of the proposed Oregon ESA bill finds that it would cost the state approximately $128 million a year but would lead to savings of about $130 million a year to local school districts, for a net state and local impact of approximately $2.2 million in reduced costs. There is virtually no net impact on per-student spending for students who choose public K–12 education. ♦

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Eric Fruits, Ph.D. is president and chief economist at Economics International Corp., an Oregon-based consulting firm specializing in economics, finance, and statistics. He is also an adjunct professor at Portland State University, where he teaches in the economics department and edits the university’s quarterly real estate report. His economic analysis has been widely cited and has been published in The Economist, the Wall Street Journal, and USA Today. 

Dr. Fruits has been invited to provide analysis to the Oregon legislature regarding the state’s tax and spending policies. He has been involved in numerous projects involving natural resources and Oregon forest products such as analysis for Ross-Simmons v. Weyerhaeuser, an antitrust case that was ultimately decided by the United States Supreme Court. His testimony regarding the economics of Oregon public employee pension reforms was heard by a special session of the Oregon Supreme Court.

Dr. Fruits has produced numerous research papers in real estate and financial economics, with results published in the Journal of Real Estate Research, Advances in Financial Economics, and theMunicipal Finance Journal.

 

One Comment

  • Donna Bleiler

    I question that there is no fiscal impact on public schools. SB 668 provides an ESA account to age 25. That means a drain to the K-12 School Funds for 4 years of college. I also questions that it will save school districts. Some rural schools need all the students they have to fill their classrooms to pay their teachers. If a private school drew away more than a couple of students it would put their classes in jeopardy having to combine grades. How can you justify school choice when it reduces the quality of education for others.

    • 11:12 pm - February 22, 2019

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