CASE STUDY Live Free and Learn: NUMBER 19 February 2014 A Case Study of New Hampshire’s Scholarship Tax Credit Program By Jason Bedrick I. INTRODUCTION An STC program grants tax credits to individuals and/or corporations It has long been recognized that who contribute to approved, non- a democratic society requires an profit scholarship organizations educated citizenry. Education (SOs) that help low- and middle- not only confers benefits to the income families send their children individual, such as higher income to the schools of their choice. and greater life expectancy, but also There are currently more than to society. Education enhances civic 150,000 students participating 1 2 engagement, reduces crime, and in 14 STC programs operating 3 increases GDP. However, different in 11 states, including Arizona children have different educational (individual, corporate, and special needs and the international evidence needs), Florida, Georgia, Indiana, suggests that the superior education Iowa, Louisiana, New Hampshire, systems are those that provide choice Oklahoma, Pennsylvania (low- 4 and competition. For these reasons, income and failing schools), Rhode policymakers have sought innovative Island, and Virginia.5 methods of expanding educational opportunities, including scholarship In order to facilitate a better tax credit (STC) programs. understanding of how STC programs work in practice, this ADVANCING LIBERTY WITH RESPONSIBILITY BY PROMOTING MARKET SOLUTIONS FOR MISSOURI PUBLIC POLICY CASE STUDY I SHOW-ME INSTITUTE paper summarizes the available research schools, 68 percent noticed measurable on STC programs in general and presents academic improvement since receiving a case study on New Hampshire’s STC the scholarship, and 74 percent of program in particular. private school parents reported that they would have been unable to afford tuition As discussed in Section II, the without the scholarship. These findings overwhelming consensus of high-quality are consistent with previous research and research finds that educational choice demonstrate once again the promise of programs improve student outcomes for educational choice programs. both participants and those students who remain in their assigned district schools. II. RESEARCH ON There are This is one of many reasons that parents EDUCATIONAL CHOICE currently more give for their extraordinarily high levels of satisfaction with educational choice Educational Choice Leads to than 150,000 programs, along with teacher quality, Improved Student Outcomes students school responsiveness to parental needs, improvement in student behavior, and Few policies in the realm of education have participating in more. Moreover, fiscal impact studies have been studied as extensively as educational 14 scholarship consistently found that scholarship tax choice. The research literature provides credit programs produce these benefits strong evidence that educational choice tax credit while saving money for taxpayers. programs raise student performance.6 programs In 2012, the New Hampshire Legislature Eleven of 12 random-assignment stud- ies—the gold standard of social science passed the Opportunity Scholarship Act 7 operating in 11 (OSA), the first scholarship tax credit research —found that educational choice program to allow scholarships to cover programs had a positive impact on the states. academic performance of some or all certain homeschooling expenses. Section 8 III details the OSA’s program design and categories of participating students. Only outlines the legislative and legal challenges one study found no statistically significant to the program. positive impact. No gold standard study has found a negative impact. Other recent The OSA’s first-year implementation studies have found that educational choice is discussed in Section IV, including programs produce higher graduation rates,9 the results of a survey of the parents of higher college enrollment,10 and even scholarship recipients. Since the OSA went increased civic-mindedness.11 into effect, the Network for Educational Opportunity, New Hampshire’s first and Educational choice programs can also so far only active scholarship organization, benefit district school students because distributed $128,340 in scholarships to they create an incentive for schools to 103 students for the 2013-14 school year. compete for students. A recent study of Ninety-one percent of those recipients are Florida’s STC program found that it had from families with income low enough to a small but statistically significant positive qualify for the federal “National School impact on the academic performance of Lunch” program. district school students in response to the increased competition.12 The survey found that 97 percent of parents of scholarship recipients are A global literature review of studies satisfied with their chosen private or home comparing education systems that are 2 Number 18 I February 2014 more market-like (i.e., those with minimal • 76 percent were “very satisfied” with regulations that are at least partially the teacher quality in their chosen funded directly by the parents) against schools, compared to 7 percent in those with more centralized government public schools. control found that it is “the least regulated market school systems that show the • 76 percent were “very satisfied” with greatest margin of superiority over state their chosen schools’ responsiveness to schooling.”13 Among other outcomes, their needs, compared to 4 percent in the more market-like education systems public schools. produced higher student achievement, • 62 percent were “very satisfied” with greater parental satisfaction, and the student behavior in their chosen higher attainment levels than the more schools, compared to 3 percent in centralized education systems, on average. public schools.16 Families Are Highly Satisfied That such high levels of scholarship With Educational Choice recipients reported being more satisfied with their chosen schools than with their A chief measure of the success of educational assigned district schools does not mean choice programs is parental satisfaction. In that public school parents in general are a recent study of Georgia’s scholarship tax unsatisfied with their children’s school. credit program by the Friedman Foundation However, this clearly demonstrates that for Educational Choice, 98.6 percent of district schools are not meeting the needs respondents reported being “satisfied” or of a significant segment of the population. “very satisfied” with their chosen schools Educational choice programs allow such relative to their previous experience in an 14 families to select educational alternatives assigned district school. In 2010, a survey that do meet their children’s needs. commissioned by the Florida Department of Education found that 75.1 percent of families Even where survey data is not available, in their STC program said their schools the behavior of parents indicates a strong The survey found were “excellent” and 20.3 percent said they demand for educational choice. In were “good,” for a combined approval rating Pennsylvania, for example, demand far that 97 percent greater than 95 percent.15 A 2009 Friedman exceeds available scholarships. Just a single of parents of Foundation study went further, asking scholarship organization, the Children’s scholarship recipients about their satisfaction Scholarship Fund Philadelphia, had to scholarship regarding a variety of factors relative to their turn away more than 90 percent of the recipients are previous experience in the government more than 125,000 scholarship applicants district school system. The report found: over the last 12 years.17 satisfied with • 80 percent of the parents were “very The Friedman Foundation study of their chosen satisfied” with the academic progress Georgia’s STC program also sheds light on private or home their children are making in their chosen what parents value most about education. independent schools, compared to 4 Not surprisingly, different parents prioritized schools. percent in their previous public schools. different things. The study found: • 80 percent were “very satisfied” with The top five reasons why parents the individual attention their children chose a private school for their received at their chosen schools, children are all related to school compared to 4 percent in public schools. climate and classroom management, 3 CASE STUDY I SHOW-ME INSTITUTE The research including “better student discipline” a top priority. By contrast, parents who (50.9 percent), “better learning live in areas where safety can be taken for literature environment” (50.8 percent), “smaller granted are likely to place a higher priority class sizes” (48.9 percent), “improved on other matters. Educational choice provides strong student safety” (46.8 percent), and programs allow parents to select the evidence that “more individual attention for my schools that best meet their child’s needs. child” (39.3 percent).18 educational Scholarship Tax Credits Can Expand What parents value can depend on the Choices While Saving Money choice programs individual needs of their children or raise student the circumstances they would otherwise The existing scholarship tax credit face at their assigned district schools. programs were designed to save states performance. For example, the parent of a student money. Though the tax credits decrease with learning disabilities might seek out tax revenue, states save money for each a school that provides more individual