INWUTE OF GOVEWENTAL BTUDlES LIBRARY our 4 1m umvznsmor mm. POMCY ANALYSES for CAMIFORNJIA EDUCA'HW ”for PA CE Slog/OFGO‘, 53 5,9 PROPOSITION 174 00/. ‘eeqflfflsml QUESTIONS 8: ANSWERS FOR PARENTS AND TAXPAYERS Choosing a School How would Proposition 174 affect where I send my child to school? Could I choose to continue to use the local public school? Could I use the voucher at any private school? Funding Parents would decide whether they want to send their child to a public or private school and have the option of continuing to send their child to the same school as in the past. But parents must be aware that not all private schools will accept vouchers. Some schools may Opt not to redeem vouchers for a variety Of reasons, such as, fear of state regulation. Other private schools may have no additional space or may have admissions criteria which must be met. How would the voucher work? If your child is accepted for enrollment in a voucher-redeeming school of your choice, the state would pay your child’s voucher directly tO the school each month. What if a school charges more than $2,500 or less than $2,500? Schools may charge more than the state scholarship payment (about $2,500). They could raise their tuition at any time. Some private schools have financial aid for low income parents. No one can predict if tuition will go up. But, if private school supply does not expand at all, it is probable that the increased demand of scholarship holders confronting limited supply would result in tuition increases. On the other hand, an increase in new private schools could create more competition that would inhibit tuition increases. If a school charges less than $2,500, the surplus would become a credit, held in trust by the state for the student for later application toward charges at any scholarship redeeming school or any California institution of higher education which meets this initiative's requirements. What if my child switches from a public to a private school? The California Attorney General issued an opinion that students who switch from public to voucher-redeeming schools would be eligible for vouchers in fall 1994. What if my child is already in private school -- when would the money be available? The initiative states that students enrolled in private schools in October 1991 would not be eligible until fall 1995. Other students would be eligible in fall of 1994. Would vouchers be taxable? The Initiative exempts vouchers from California state tax, but there has been no ruling by the United States Internal Revenue Service regarding federal taxes. State Costs/Savings Would vouchers cost or save the state money? It is difficult to estimate the actual costs or savings as they would be heavily dependent on how state government decides to allocate funds and how many students take advantage of the voucher. Because there are 540,000 students already in private schools the initiative exposes the state to $1.35 billion in possible additional costs over the first two years. There are scenarios in which these costs could be covered, but they depend on spending decisions by state lawmakers and on the transfer of a high number of public school students to voucher-redeeming schools. At the same time there would be several side effects including widening the gap between rich and poor public school districts’ per student spending. Logistics/Admissions Are there enough private schools to meet future demand? Some private schools currently have vacant spaces and could fill them with state voucher students. Also, it is likely that the initiative would expand the current supply of private schools. However, there is Q guarantee that new private voucher-redeeming schools would be created in your area. How much new supply, where it would be located, and how it would be developed is impossible to predict. The initiative also permits public schools to convert to voucher- redeeming schools, but these schools would receive only one half of their current state subsidy. On the other hand, converted public schools would have fewer state regulations, thus encouraging conversion to voucher-redeeming status. Will my child be admitted to private school? There is _n_o guarantee that your child will be admitted to the private voucher-redeeming school which you prefer. Private schools may mt discriminate on the basis of race, ethnicity, color, or national origin. But private voucher-redeeming schools may refuse to admit students based on gender, religion, academic qualifications, physical or mental ability, or ability to speak English. Could I teach my child at home and qualify for a $2,500 voucher? No, schools with fewer than 25 students would not qualify to receive voucher payments. What if my child is handicapped? The initiative has no specific provisions concerning handicapped pupils. The legislature would be authorized, but not required, to award supplemental funds for pupils with "special needs.” What if my child is limited-English-speaking? The initiative has no specific provisions concerning limited-English- speaking pupils. What about transportation to voucher—redeeming schools? The initiative does not require or provide for transportation to private or public voucher-redeeming schools. The state legislature, however, may choose to provide transportation funds. Many California public school districts no longer provide pupil transportation because they have no money for this purpose. Could my child be dismissed from a voucher-redeeming school? On what basis? Students may be dismissed from private voucher-redeeming schools if the school determines that the student either is not benefitting from instruction, g has a discipline problem as defined by each school's own code of conduct and dismissal policies. Proposition 174 and the public schools What would be the initiative '5 impact on the public school my child now attends? It is difficult to know for sure. It partially depends on how many students leave your local public school and other public schools. For each student who leaves, most schools will lose the current state payment per pupil. Schools may be able to cut back expenses as they lose pupils, but a slight loss of 2 or 3 pupils per class may not make it possible to lay off a teacher or reduce operating expenses much. Didn't the state already approve a school choice law? How is this different from the public school choice bill passed in 1993 by the California legislature? The new state choice laws passed in 1993 only apply to public schools giving, for the first time, students the right to attend public schools outside their own school district. However, there must be space and the local school board must agree to accept the inter-district transfers. The voucher initiative differs in that it includes private schools which choose to redeem vouchers. If I am dissatisfied with my local public school is there a way to change it without choosing another school? California schools are governed by an 11,000 page state education code, and by 1,000 local school boards. Many local schools have innovations and different options that in the past were stimulated by parent participation. One newly available option for changing public schools in California is called "Charter Schools." "Charter Schools" allow for less regulation by the state and emphasize the development of alternative schools designed primarily by teachers. Information Where would I obtain information about private an_d public schools? The initiative permits the State Board of Education to publish test scores for all public and private schools. If the Board chooses to initiate a test, this test must be based on "national standards." The state legislature may choose to provide more information to help you compare schools, but this will cost more state money. Currently, the state does not compile private school profiles or data for parent use in evaluating or choosing private schools; so information is not available immediately. Government Would the Initiative lessen government bureaucracy? How? The state legislature would need to establish a system of accounting for each student who redeems a voucher until the student reaches the age of twenty-six. Also, The state would need to create a system for distributing monthly voucher payments to each voucher-redeeming school. On the other hand, for every student who switches to a voucher-redeeming school the state would not have to account for that student in the public school system. Other states Has any other state implemented a voucher system like this California initiative? There is no precedent anywhere in the US. for this initiative. A prior experiment in San Jose (Alum Rock, CA) did n_ot include private schools. A current experiment in Milwaukee Wisconsin with only nonreligious private schools involves fewer than 1,000 pupils. By comparison, there are 5.8 million pupils in California. Altering the Initiative If there are flaws in the initiative '5 provisions, how could they be fixed? The initiative is a proposed constitutional amendment so changes could only be made by a majority vote of the state's voters to amend the California Constitution. Legal What are the legal issues raised by the initiative? Would the initiative be challenged in the courts? The initiative raises a number of legal issues including: separation of church and state; public funding of single-sex schools; access for handicapped students; and equal and due process rights of students who are being dismissed from school. The initiative states that if any specific sections of the initiative are determined to be invalid, other components of the initiative would still apply. If the initiative passes it is highly likely that several legal challenges would be pursued immediately. POLICY ANALYSIS FOR CALIFORNIA EDUCATION Summary of the Research on School Choice in the United States September 1992 Introduction The purpose of this paper is to provide a synthesis of the research and analysis that exists in the literature about school choice. The primary focus of the paper is on research which has implications for the development and evaluation of public policy regarding school choice. This paper neither promotes nor discourages the provision of school choice, but rather provides information designed to assist policymakers, parents, educators, and interested members of the public with an objective source of information. The paper concludes with a summary of research questions about school choice which are either unaddressed or unresolved in the existing literature. The paper is divided into six sections: 1. Types of School Choice Programs 2. Efficacy of Choice Programs 3. Economic Theories of School Choice 4. Private Schools and Choice 5. Public Opinion about School Choice 6. Unknowns about School Choice Section One: Defining School Choice The purpose of this section is to define what is meant by school choice, place it in a historical context, and outline the types of programs which are usually encompassed under the term. This serves as background information for understanding the context of the existing research. What is meant by school choice? For some people, school choice entails giving parents the means to send their children to any school they choose, regardless of whether the school is public or private. For others, school choice means that there are supplementary programs within the existing public school system that give students more educational options. There is general consensus that, at the very least, school choice means that parents are allowed greater decision-making discretion regarding the selection of an educational program for their child. Is there a history of school choice in the United States? School choice is not a new phenomenon in education. There is a long tradition of private schools in the United States, many of which existed prior to the establishment of public schools. In 1926, the United States Supreme Court ruled that private schools fulfilled state compulsory school attendance laws (Pierce 12. Society of Sisters). The decision marked the legal acceptance of private schooling as an education alternative. A well-publicized campaign for a voucher system which included both public and private schools was advocated by economist Milton Friedman in the early 1960's. The policy debate at the time centered on whether public funds should be used to finance PACE Research summary on choice Page 1 private education. In 1972, the United States Office of Economic Opportunity awarded a grant to the Alum Rock School District in California to conduct a voucher demonstration project in six of the district's schools. During the 1970's, the United States Congress debated five different legislative proposals to offer tuition tax credits for parents who send their children to private schools. During the wave of education reform activity in the 1980's, choice within the public schools was a prominent issue, and choice plans were adopted by several school districts. The emphasis on choice has continued into the 1990's and now includes private schools. Choice is a prominent topic in education policy circles, in corporate boardrooms, and in political campaigns. What forms of school choice exist in today’s schools? A variety of programs are often referred to as school choice. Some choice programs are designed for increased choice within the public school system and other choice alternatives include private schools. Several school choice programs have been developed to meet the special needs of a targeted group of students, such as alternative schools or post-secondary options for school drop-outs or magnet schools emphasizing special areas of concentration such as art or science. Described below are some of the commonly occurring types of school choice programs. The first part of this description outlines types of school choice programs within the public sector. Next, choice designs which include private schools are described. Choice Programs Within the Public Sector Open Enrollment lntradistrict open enrollment Under this option, parents can elect to send their child to any school within the boundaries of the school district in which they reside. Students are enrolled on a space available basis. Some intradistrict choice programs are intended to improve racial integration. Such plans are frequently referred to as ”controlled choice” plans, since families’ choices are subject to other considerations, such as integration targets. Magnet schools may be adopted in conjunction with an open enrollment plan. lntradistrict open enrollment plans have been implemented in several school districts around the country. (See Appendix for a summary of choice programs throughout the US). Interdistrict open enrollment This type of open enrollment option allows parents to select from public schools outside the boundaries of their district. Under some interdistrict programs, parents must show that they either work or have child care arrangements in the district where they want to enroll their child. A growing number of states has adopted interdistrict open enrollment options. (See Appendix). Magnet Schools Magnet schools emphasize particular areas of focus and are designed to attract students whose interests match the theme of the school. Magnet schools are often employed to achieve racial integration goals. Examples of magnet focal areas include the performing arts, technology, mathematics, and foreign language. In most programs, the school district provides transportation to the magnet school if the school is located outside the student's neighborhood. Most states have magnet schools in some of their districts. (See Appendix). PACE Research summary on choice Page 2 Schools-within-Schools This alternative is usually available in schools with large student enrollments. In schools-within-schools, several distinct schools are located on the same school campus. Often the schools are organized around themes, as in magnet schools. Each school has its separate faculty and administration, but at times may share some of the campus facilities. Charter Schools The focus of charter schools is to encourage experimentation in publicly-supported schools by allowing the creation of alternative schools which are designed primarily by teachers. Typically, charter schools are granted waivers from restrictive state laws and regulations in order to allow for greater experimentation in school design. Charter school must achieve selected educational outcomes agreed on by the school and the sponsoring board. Charter schools were first enacted in Minnesota in 1991. (See Appendix). Postsecondary Enrollment Options This choice option enables high school juniors and seniors to attend classes and programs at postsecondary institutions and receive either high school or college credit, depending on student need. These options are designed to expand opportunities for students whose needs may not be best met within a traditional high school campus or course of study. (See Appendix). Second Chance Programs Second Chance programs are designed for students who are high school dropouts or are at risk of becoming drop-outs. The options under Second Chance programs include enrollment in courses offered by other school districts, alternative school settings, community service programs, and individual learning centers and tutorial programs. Home Schooling Some parents choose to teach their children at home. This option is available to parents who file applications with the responsible education agency (often the county office of education) and meet minimum established requirements. Home schooling is sometimes an option for parents who live in remote areas, but often home schooling allows parents to provide alternative education programs that are more consistent with the parents' religious or social beliefs. Choice Programs Which Include Private Schools Many of the above described choice programs are already in place in public school systems throughout the nation. These programs are not typically associated with great controversy or debate, as they represent choices which are available within public school systems. Many of the heated and unresolved controversies surrounding school choice plans center on the inclusion of private schools in publicly financed choice plans. There are two main types of choice programs which include private schools: vouchers and tuition tax credits. PACE Research summary on choice Page 3 Vouchers Under a voucher system, a specified amount of public education money is allotted to each student in the form of a voucher, which is then paid to the school of the parent's choice, public or private. Voucher plans vary in their specific design, especially regarding the size of the voucher, the types of schools included as ”voucher redeeming," regulation and accountability standards, dissemination of information about schools, and provisions for students' special needs and for transportation costs. An experimental school voucher system was conducted in Alum Rock, California, in the 1970’s. Presently, Milwaukee operates a voucher program for some of the district’s poorest students. (See Appendix). Tuition Tax Credits Tuition tax credit programs allow parents who send their children to private schools to deduct some of the expense from their state or federal income taxes. Although often discussed, this option has never been implemented. Tax deductions for educational expenses allow parents to deduct certain educational expenses from their taxable income. This option provides less of a financial advantage for the parent than the tuition tax credit. A tax deduction program has been implemented in the state of Minnesota. Several of the above-listed types of school choice programs have been the subject of research regarding their efficacy. These studies are summarized in the next section of this report. Section Two: Efficacy of Choice Programs What research exists regarding the efficacy of school choice programs? Only a small body of literature exists on the efficacy of school choice programs. The best known efficacy literature about vouchers is the studies of the Alum Rock Voucher Demonstration Project. There are also some initial evaluation findings from the Milwaukee Parental Choice Program. While intradistrict open enrollment programs are more widespread, few formal evaluations have been conducted. A small amount of research also exists about the effectiveness of the Minnesota tuition tax credit program, and about magnet school programs. Research results from these programs are briefly described below. Vouchers The Alum Rock Voucher Demonstration Project was funded in 1972 by the US. Office of Economic Opportunity for a three year period. The Alum Rock School District, located near San Jose, California, was the only Voucher Demonstration Site in the nation. As a federal demonstration program, the school district received financial and technical assistance to plan the program and to provide staff development and parent education. The project was evaluated by the Rand Corporation each year for three years. The basic conclusion reached by the evaluators after three years of implementation was that the primary changes envisioned by the voucher program had not occurred (Levinson, 1976). Parents did not participate in exercising choice anywhere near to the extent that had been anticipated. Only 15 percent of parents chose to send their children to schools outside their regular neighborhood. One private school participated in the program, but only after a long delay, resulting in a decrease in parent interest. A 35 percent transiency PACE Research summary on choice Page 4 rate in the district contributed to difficulties in providing parents with information about school options. Another conclusion was that since vouchers had been essentially untried, the mechanisms necessary to implement the complex changes required by the project had to be developed. A benefit of the project was that a large number of specialty programs and "mini-schools" were created within the public school district, and several experiments in the organization of schools were implemented. These changes, however, were not associated with improved student achievement. The results from the Alum Rock Demonstration Program should be considered with caution. Due to a number of fiscal and organizational constraints, the project offered only limited choice and was in place for a relatively short period of time. From this project, long term effects of choice programs cannot be determined. Initial research has been conducted on the Milwaukee Parental Choice Program (Witte, 1991; Witte, 1992). The program began in fall 1990. Under the provisions of the program, eligibility is limited to no more than 1,000 poor students who must be from the Milwaukee public school attendance area. Families receive a $2,500 voucher, which can be applied at public and private, non-religious schools. Participating private schools cannot charge tuition in excess of the voucher amount and must maintain a majority of their enrollment with students who are not participants in the choice plan. In the first year of the program, 550 students applied, but due to a shortage of available space in the participating schools, only 341 of the applicants actually were enrolled. 521 students enrolled for the second year, and 613 students were enrolled at the beginning of the third year of the program. More than half of the participating families were receiving welfare and approximately three-quarters of the students came from single- parent households. Parents who participated in the program were found to be generally better educated, more actively involved with their child's education, and more dissatisfied with their child's public school education than the average Milwaukee parent in the same income level. Demand for the program exceeded supply in each of the first three years of the program. In the second year of the program, 133 applicants were turned away due to lack of available space in participating private schools. Applications exceeded available slots by 143 in the second year and by 343 in the third year. This finding raises questions regarding the supply side of the choice question. No new private schools joined the program in the second year; in fact, the number of schools decreased by one, since the Juanita Virgil Academy went out of business. In the third year, five new private schools entered the program. In both years, no "creaming" of students, that is, selecting only the best prepared students for admission, was noted. In fact, most of the participating students were scoring below the average of children enrolled in Milwaukee public schools before joining the program. So far, achievment test results have been ambiguous, with no significant differences in test scores, but the research did show higher levels of parental satisfaction from participating parents who remained with the program as compared to Milwaukee parents who did not participate. An attrition rate of 35 percent existed between the first and second year of the program, and between the second and third years of the program. This was very close to the attrition rate of low-income students in the public schools. About half of the students who left participating schools enrolled in the Milwaukee public schools. PACE Research summary on choice Page 5 Intradistrict Open Enrollment Several public school districts have adopted intradistrict open enrollment. There have been few formal assessments of these programs to date, but several districts have received national attention. East Harlem East Harlem School District in New York City has operated an open enrollment plan for over a decade. The district introduced three alternative programs in its junior high schools in 1974. It subsequently expanded the programs until all of the district’s junior high schools had alternative programs organized around academic themes. The alternative schools were combined with an interdistrict enrollment plan in 1982. The school has been relatively successful at matching students with their schools of choice; 60 percent of parents get their first choice, 30 percent get their second, and 5 percent get their third. (Domanico, 1989). Schools may design their own admissions criteria, raising concerns that students from other districts are admitted to the selected schools instead of Harlem students. Schools are not supposed to admit more than 20 percent of their students from outside the district. Student achievement has improved dramatically in the first years following the inception of the program. Previously, East Harlem had performed at the bottom of the 32 districts in the city. By 1989, it had risen to 16th in the city. Student math scores have been unchanged, but student reading scores have increased. In 1974, 15 percent of district students were reading at grade level. In 1988, 62 percent were at grade level. Since 1988, scores have declined, however. In 1991-92, 38 percent of students were at grade level. It is difficult to separate the effects of the school choice plan from other factors, such as higher spending and curricular reform. East Harlem received $1.5 million in federal magnet school grants from 1984-1988. The district also received private funds. Cambridge The Cambridge public schools in Cambridge, Massachusetts, established a controlled choice plan in 1981 in order to integrate its elementary schools. There are 30 programs offered in 14 elementary schools. Each school has as many as four programs. Parents must choose which program they would like their child to attend. School assignments are made subject to racial balance, sibling assignments, and space availability. Achievement test scores have climbed considerably since the inception of the program. However, it is difficult to ascribe the improvement solely to the choice plan, since district spending rose steadily at the same time. Cambridge spends twice the state average on a per pupil basis. Additionally, the student population may have changed over time, as children in private schools returned to the public schools. From 1978 to 1987, the public school attendance rate rose from 80 to 85 percent among students in the ' district. Montclair The Montclair school district in Montclair, New Jersey, created two magnet schools in 1977 as part of a voluntary desegregation plan. In 1985, the plan was expanded to include all of the district's elementary and middle schools. All parents are required to choose from the district's elementary schools. None of the schools have academic admissions criteria. The primary criteria for school assignments are racial balance and space availability. Approximately 85-90% of students are assigned to their first choice school. PACE Research summary on choice Page 6 Average test scores in Montclair rose for white and minority students at all grade levels between 1984 and 1988. The improvement may be due in part to higher spending; the district estimates that its magnet schools cost 8 percent more than traditional schools would cost. Tuition Tax Deductions Some research has been conducted on the effects of a tax deduction for educational expenses on parents' school choices in the state of Minnesota (Darling-Hammond, et al, 1985). The authors collected and analyzed data from a telephone survey of 478 parents conducted in 1984. Survey results indicated that the existence of a tax deduction did not significantly affect parents' decisions to place their children in private schools. There were no significant numbers of parents whose children were enrolled in public school prior to the initiation of the tax deduction switching to private schools once the deduction was in place. Private school parents also overwhelming reported that their choice would remain unchanged in the absence of the tax deduction. Magnet Schools Magnet school programs have been a popular form of school choice within the public sector since the 19705. Approximately 20 percent of students in large urban settings attend magnet schools. However, the most prevalent reason for the development of many magnet school programs has not been to increase school choice but rather to respond to the need to accomplish racial desegregation objectives. Some research has been conducted regarding the effectiveness of magnet school programs. An early study of magnet schools (Blank, 1983) showed that students enrolled in magnet programs scored above the average score of the school district as a whole in mathematics and reading. However, many researchers believe that this type of investigation is biased by a possible selection factor (Blank, 1990). That is, it is difficult to determine from the existing research whether achievement differences exist because higher-performing students attend magnet schools or because the magnet programs themselves are responsible for the better student achievement. A review of studies of four urban school districts with magnet schools measured improvement in outcomes at the individual student level, controlling for student background and prior achievement. These comparisons of equivalent students found that magnet schools had positive effects on student outcomes. These effects were observed primarily in specific grades and subject areas. Do choice programs bring about better student achievement? There is no consistent, empirical evidence that relates school choice to improved student achievement (Elmore, 1987; Sosniak and Ethington, 1992). A significant amount of research addresses the question of whether students enrolled in private schools outperform students enrolled in public schools. However, this body of research is strongly contested. Much of the research relies on national datasets, such as the National Educational Longitudinal Study of 1988. Some researchers have challenged the appropriateness of these datasets for studying the effectiveness of choice, citing the difficulty of identify whether a school is a choice school and the inability to make local comparisons (Schiller, Plank, and Schneider, 1993). An outline of the research on private versus public school performance is included in Section Four of this paper. PACE Research summary on choice Page 7 Why is there so little research about the efficacy of choice programs? It is reasonable to wonder why so little efficacy research exists regarding school choice plans. Some of the factors which make efficacy research in this area difficult include small sample size, lack of existing mechanisms to operate choice programs, lack of comparability among programs, and absence of agreement regarding criteria for measuring program effectiveness. Very few experiments exist which contain a wide range of school choice options. Therefore, research on the subject remains limited by the number of states, school districts, or individual school sites which are currently implementing choice programs. Since several of the choice programs currently being proposed or initiated have not been implemented in the past, a significant amount of time must be spent in planning and initial implementation. Research on implementation of educational innovations suggests that full implementation of new programs takes between three to five years, before which it is difficult to draw conclusions about the programs. This has not yet transpired for many of the newer choice programs. Choice programs exist for a number of different reasons and consequently vary greatly in structure, incentives, requirements, and target population. This makes comparisons among choice programs highly problematic for researchers. Finally, there is no universal agreement on criteria against which the effectiveness of choice programs should be judged. For example, is an increase in parental satisfaction without change in student achievement ample evidence of a successful program? This type of policy and evaluation question remains open for debate, thereby increasing the difficulty of efficacy research on school choice. The existing efficacy research suggests some promising results from some of the choice programs, but the conclusions are more ambiguous in most cases. It is frequently difficult to separate the effects of choice from the influence of increased spending or curricular reform. In other instances, the limited scope and the brief duration of choice experiments make it difficult to draw efficacy conclusions. Section Three: Economic Theories of Choice Programs Much of the literature regarding economic theories of school choice is derived from the microeconomic theory of the market. Advocates of voucher programs frequently cite market theory as the underlying rationale. Consequently, it is important to address this theory and its underlying assumptions. How does market theory apply to school choice? Market theory assumes that the most efficient way to provide education is to allow for open competition among schools, both public and private, and to let consumers, in this case parents, select what they determine to be the best choice for their children. A recent and highly controversial book on the subject of school choice, Politics, Markets, and America ’s Schools (Chubb and Moe, 1990) provides a detailed description of open market theory applied to school choice. The authors analyze data from the High School and Beyond Study of the 19805 and divide the sample of schools included in that data set into high and low performing schools. From their data analysis the authors derive a definition of an effective school, and then offer the open market as the strategy to create better schools. Chubb and Moe cite centralized bureaucracy and the democratic governance of education as the primary sources of today's failures in education and View a market system as the way to promote individual school autonomy. The authors recommend a complete commitment to an unregulated market system of choice as the PACE Research summary on choice Page 8 solution to improving the existing public education system. They express confidence in the power of the market to provide educational services which meet the needs of the client while also being cost efficient. Market theory rests on a number of assumptions about producers and consumers. One major assumption of market theory is that there is equal information and equal access available to consumers. It is important to note that these assumptions are essentially untried in the case of market theory applied to school choice. Critics observe that parents may not have equal access to information (Boyer, 1992). Supporters of school choice plans (Nathan, 1989; Coons and Sugarman, 1992) often mention the need for a parent information system as a critical component of a choice plan. Advocates also often discuss the need for special provisions for transportation assistance as well as special assistance for low-income families in order for choice plans to be successful. These items significantly add to cost considerations for any choice plan. Levin discussed many of these assumptions in a recent article (Levin, 1991). He observed that information about curriculum features, school orientation or sponsorship, and athletic programs could probably be provided, but that qualitative factors would be more difficult to characterize and disseminate to parents. He emphasizes the importance of an information system to provide equal access to information for all parents. Such a system is likely to have high costs, however, because of the need to serve different communities and language groups. Levin also discusses the importance of transportation for providing equal access, and he notes the difficulty of providing transportation when students choose among many options in a decentralized system. What research exists regarding school choice and educational cost? A recent article by Levin (1991) examined the theory and research regarding school choice and educational cost. This paper compares the open market approach to school choice to choice operated within the public school system. The author uses an economic framework to weigh the efficiency of each approach in meeting both the private and social benefits to education. He concludes that a market approach is superior in meeting private benefits and the public choice approach is superior in meeting the social purposes of education. In terms of overall efficiency, Levin finds a slight advantage for the market system in terms of student achievement. However, he also concludes that the overall costs of a market system, such as providing minimal social protections and disseminating parent information, appear to be prohibitively high relative to a public choice system. Section Four: Private Schools and Choice What is the extent to which schooling is currently provided through the private sector? Approximately 26,800 private schools operate in the United States today. The enrollment of students in private schools is roughly one tenth of that in public schools. Traditionally, Catholic schools have comprised the majority (currently about 70%) of private school enrollment. In the last five years, this pattern has been changing as enrollments in Catholic schools are declining while enrollments in fundamentalist Christian schools are increasing. Private schools are more prevalent at the elementary grade levels than at secondary levels. White students attend private schools at twice the rate of blacks, and participation in private schooling is positively and highly dependent on family income. PACE Research summary on choice Page 9 What is known about differences in student achievement between public and private schools? The literature on the subject of student performance in private versus public education settings is among some of the most controversial in education research. The main source of data is the High School and Beyond study, sponsored by the National Center for Education Statistics. This ongoing study includes more than 58,000 students in over 1,000 high schools, including more than 80 Catholic and 25 other private schools. Coleman, Kilgore, and Hoffer conducted a number of analyses of this data in 1981, 1982, and 1987. Their general finding consistently has been that students in Catholic high schools perform better on standardized tests than similar students in public schools. A number of researchers have challenged this conclusion (Cain and Goldberger, 1982; Alexander and Pallas, 1987; Meyer, 1989; Witte, 1992b). The arguments raised by critics of the Coleman findings can be grouped into two types. One type argues that there is a "selection bias" in the sample of students studied, thereby calling any specific conclusions into question. A second argument recognizes that the differences in test scores between Catholic and public high schools may be statistically significant, but, say the Coleman critics, the differences are not large enough to draw any conclusions about superiority. Levin (1990) re-examined the analyses and translated them into standardized national percentages. He concluded that, based on national averages, a student in the average private school would score in the equivalent of the 52nd percentile, while the average public school student would score in the 50th percentile. This type of analysis represents some of the debate about whether or not noted differences in test performance represent real differences in educational outcomes. What research exists regarding the cost of private versus public education? A recent analysis by Genetski (1992) provides an estimation model for comparing public and private schooling in Chicago. The conclusion of the author was that, in theory, Chicago private schools could operate at a cost which is one-third less than the cost of public education in Chicago. However, other research findings conflict with this conclusion. Levin (1991) examined the available research on cost efficiency between public and private schools and concluded that presently, the evidence is not adequate to make direct comparisons between the two sectors. In a recent econometric study regarding school choice, Manski (1992) reiterates Levin's position that there is insufficient evidence to draw any conclusions regarding whether private or public schools are more cost efficient. Manski focused his analysis on the projected effects of a voucher system on low—income youths, and concluded that there is sufficient reason to believe that although a voucher system may provide incentives for public schools to operate more efficiently, a voucher system would not come close to equalizing educational opportunity. Section Five: Public Opinion about School Choice The annual Phi Delta Kappa/ Gallup Poll of the Public's Attitudes Towards the Public Schools is the most consistent source of information on public opinion about educational issues. During the past two decades, this annual poll has included a number of questions about educational choice. Parents have said they would be less likely to keep their child in their existing public school than before, given a choice among public schools. In 1979, the great majority of parents (78 percent for parents whose eldest child was 12 years old or younger, 85 percent for parents whose eldest child was older than 12) said they would not choose to send their child to a public school different from the one their child attended. By 1991, this had eroded to 68 percent of public school parents. PACE Research summary on choice Page 10 Public school parents express strong support for public school choice. In 1991, 62 percent of public school parents said they would like the right to choose among public schools. Most recent additional polls which inquire about the issues of parental choice within the public sector confirm this result and consistently demonstrate that the majority of parents (at least 60 percent) prefer increased choice within the public school system. Since 1971, the annual Gallup poll has also included questions regarding vouchers. The question was worded as follows: "In some nations, the government allots a certain amount of money for each child's education. The parents can then send the child to any pubic, parochial, or private school they choose. This is called the 'voucher system.‘ Would you like to see such an idea adopted in this country?" Those who favored vouchers ranged from 38 percent in 1971 to a high of 60 percent in 1989. In 1990, 50 percent favored vouchers. Support for vouchers is strongest among parents whose children attend nonpublic schools. In 1989, 68 percent of these parents favored vouchers, compared to 64 percent of public school parents and 58 percent of people who had no children in school. The Gallup question has been repeated in other polls, both national and state level, indicating roughly the same level of support. When the phrasing of the question changes, responses tend to vary. In 1990 the voucher question was followed by another question asking whether or not respondents believed vouchers would help or hurt the public schools. Overall, 42 percent believed vouchers would hurt the public schools, and 36 percent said that vouchers would help. Of those who favored vouchers, 73 percent thought vouchers would help the public schools. Of those who opposed vouchers, 81 percent thought vouchers would hurt the public schools. In 1989, the Gallup poll inquired about the possible effects of school choice. A majority of those polled (51%) thought choice would improve some schools and hurt others. Forty-two percent believed choice would not make much difference in student achievement, while 40 percent believed choice would improve achievement. While the Gallup poll series is the most consistent source of information over time, other organizations have also conducted public opinion polls regarding school choice. Many are sponsored by particular education organizations or special interest groups. These polls vary significantly in their structure and content. Some polls inquire only about vouchers while others only ask about choice within the public sector. A September 1992 poll conducted by the Associated Press suggests that public opinion regarding vouchers may vary depending on how the question is worded. For example, when inquiring about the use of public dollars to support enrollment of students in private schools, the Associated Press found a significantly more favorable response when the word "scholarship" appeared in the question as the descriptor as compared to when the word "voucher" was used in the question. To date, there has been no specific or comprehensive item analysis of this issue, so the extent to which the structure of the question affects the results of opinion about voucher programs and other school choice programs remains unknown. PACE Research summary on choice Page 11 Sectlon Slx: Unanswered Questions about School Choice This section outlines some of the questions about school choice which are either unanswered or unaddressed by the current research. Will choice programs result in a greater supply of schooling options? In any market system, analysis of both demand and supply is critical in order to understand system efficiency. At this time, it is not known whether increased school choice programs would result in either a greater supply of schooling or in a greater diversity of options. Evidence to date of the few experiments available suggests that a new supply of schooling does not automatically occur when choice is implemented (Levinson, 1976; Witte, 1991). However, as noted earlier, there are no examples of comprehensive school choice programs currently being implemented which would allow for direct study of the question. The Southwest Regional Laboratory examined the question of supply in the context of a proposed ballot initiative in California. The study asked principles at existing private schools throughout California whether their school would participate in a voucher program that provided $2,600 per child. Principals were also asked whether their schools were currently at capacity and whether they would expand to accommodate more voucher students. The study found that 75 percent of private schools were likely to participate overall, with over 80 percent of low tuition schools (those charging $2,600 or less) likely to participate. However, 70 percent of the schools that said they were likely to participate are presently operating at 85 percent or more of their capacity. The study calculated that if schools did not expand their capacity, 38,700 slots would be provided by existing private schools in the early years of a voucher plan, creating space for .8 percent of California’s public school students. The study did not include entrepreneurs or other people who might be likely to establish private schools under a voucher system, which has led some critics to conclude that it underestimates private school capacity. Another criticism of the study is that only 37 percent of the surveyed schools responded. What are the factors parents use to select a school for their child? This question addresses the demand side of the school choice issue. There is no precise understanding or agreement in the literature regarding how parents select a school for their child. One might suspect that the reasons may be highly variable, depending on the values, prior experience, religious beliefs, and socioeconomic circumstances of the family. This question also includes the issue of whether parents select a school for their child based on knowledge of their child's individual teacher. What is the relationship between cost and school choice? Currently, there is substantial disagreement even among supporters of school choice as to whether increased choice means additional cost or cost savings. The cost estimates are of course highly dependent on the type and extent of choice programs being offered, as well as the extent of participation, regulation, transportation, and information components of the choice program. What is the relationship between school choice and student achievement? So far no evidence exists which would allow one to conclude that choice by itself will result in improved student achievement. Choice programs currently operating or being proposed should be targeted by researchers for further study on this issue. PACE Research summary on choice Page 12 Which type or types of school choice programs are most favored by taxpayers? by parents? Little is known about public opinion regarding the variety of school choice programs currently operating or being proposed. A systematic investigation of public opinion regarding the specific features of various types of choice plans would provide added information for policymakers to assist them in designing choice programs. Would participation in choice programs vary by the income or the educational level of parents? Initial research on this subject indicates that families with higher income and education levels also have a higher levels of participation in choice programs. However, this research is neither comprehensive nor conclusive. Additional information on this subject could enlighten the design of consumer information systems regarding choice programs. Will choice programs increase or decrease disparities in educational outcomes for students? Significant concern is raised in the debate about school choice regarding differential, effects of various choice programs; specifically, whether or not choice programs would assist those students who have the greatest educational need. What are reasons why public schools are perceived as failing? Will choice programs address the reasons for perceived public school failure? For the past ten years, education policy discussions have often centered on the "crisis" in public education. Many recommendations have been made regarding the best way to "fix" the public schools with school choice being a prominent strategy in recent times. Factors such as poverty, unfamiliarity with the English language, lack of positive role models, sparsity of trained teachers, inadequate and unsafe facilities, and family mobility are all cited as possible reasons why public schools are not performing adequately. The question which remains unaddressed is whether or not choice programs can provide for reform in the areas in which public schools are most in need. By what criteria should the success or failure of school choice programs be judged? Criteria regarding program effectiveness should relate to the purposes and objectives of the program. At present, choice programs and choice proposals do not clearly state the anticipated outcomes of the programs, thereby making evaluation problematic. Additional research which could suggest appropriate evaluation frameworks, as well as appropriate duration of programs in order to achieve full implementation, would be useful in decision-making about school choice. PACE Research summary on choice Page 13 Appendix One Choice in the States Charter Schools Charter schools have existed since 1991 in Minnesota and since 1992 in California. In 1993, Colorado, Massachusetts, New Mexico, and Georgia passed charter school legislation. Few charter schools are in operation yet, however. As of Fall, 1992, three Minesota schools had been granted charters. Several states have chosen to limit the number of schools that may become charter schools. In Minnesota, the plan is limited to 20 schools. In California, up to 100 schools may become charter schools. In Georgia, there is no limit on the number of charter schools. Some state legislatures have limited the types of outcome measures that charter schools adopt as accountability standards. In California, charter schools must adopt performance-based student outcome measures. Intradistrict Open Enrollment Intradistrict open enrollment plans exist in at least 21 states. A limited number of districts in Alabama, Arizona, California, Connecticut, Indiana, Maryland, Michigan, Mississippi, Missouri, New Jersey, New York, Oregon, Texas, Utah and Wisconsin have intradistrict choice. Indiana and Illinois are developing intradistrict open enrollment plans in one or more districts. Intradistrict choice exists in many districts in Massachusetts, New Mexico, Oklahoma, Rhode Island, and Tennessee. Colorado, Ohio and Washington have adopted laws mandating that every district in the state adopt an intradistrict open enrollment plan. Traditional intradistrict choice plans assign students to their neighborhood school, then allows students to apply for transfers. Another form of intradistrict choice is controlled choice, in which neighborhood schools are eliminated. In a controlled choice system, parents must select the school they wish their child to attend. Parents must list their top school choices when they register for schools. If the parents do not make a selection, the child will be assigned to a school with enrollment space. Several states provide transportation for all students who transfer schools. Transportation is commonly provided in controlled choice plans, since there are no neighborhood schools. Transportation costs doubled in Cambridge with the adoption of controlled choice, as the number of students bused increased from 16% to 64%. Other states, such as Alabama, Colorado, and Washington, do not require districts to provide transportation for transferring students. Interdistrict Open Enrollment Interdistrict open enrollment exists in 21 states, but in many states district participation is optional and few students attend school outside of their districts. Interdistrict transfers are allowed in California, Maine, and Hawaii on an individual ”exception” basis. In California, students may transfer to the district in which their parents work. In New York and Missouri, interdistrict plans exist between two cities for integration purposes. Interdistrict enrollment plans are statewide in Alabama, Massaschusetts, Ohio, Oregon, Utah, Washington, Nebraska, Arkansas, Colorado, Minnesota, Montana, New Mexico, Arizona, Idaho, and West Virginia, but district participation is optional. In Iowa, all districts are required to participate. PACE Research summary on choice Page 14 While a relatively small percentage of students have transferred districts (less than 1 percent of Minnesota K—12 students and one-third of one percent of Iowa students in 1990-91), the transfer rate varies widely across districts. Some districts have much higher transfer rates. To protect districts from drastic enrollment losses, Iowa limits the number of students who may transfer from a district to 5 percent of enrollment. Ten percent of the transfer applications in Iowa were refused during the 1990-91 school year because they exceeded the 5 percent transfer limit. Interdistrict enrollment plans vary considerably from state to state, but policymakers in each state face many of the same decisions: who is responsible for the transportation of a transferring student; who pays for the cost of a transferring student’s education; how to resolve conflicts between racial balance goals and students’ transfer requests, and whether student athletes who transfer shall be allowed to compete. In most states, the student’s family is responsible for transportation costs to the boundary of the receiving district, then transportation is provided within district boundaries. Typically, the state portion of the student’s educational cost follows the student to the recipient school, but states differ as to whether they require the sending district to send local aid to the recipient district. Integration goals usually take priority over open enrollment; most plans bar transfers that violate desegregation orders. Several states place a one year ban on competition for student athletes who transfer to provide a disincentive for coaches to use open enrollment to recruit athletes. In states where there are large disparities in per pupil financing of schools, requiring the resident district to pay the full per pupil educational cost to the receiving district can place a large burden on poor districts. When Massachusetts passed such a plan, some districts were affected so severely that the Legislature provided supplemental funding to the affected districts. Thirteen percent of the transfers in the first year were from Brockton School District to its wealthier neighbor, Avon. As a result, $933,600 in state aid was transferred from Brockton to Avon. Magnet Schools At least 17 states have magnet schools. Magnet schools exist in Alabama, California, Connecticut, Florida, Illinois, Maryland, Minnesota, New York, Louisiana, Colorado, Massachusetts, Texas, Virginia, New Jersey, Ohio, Pennsylvania, and Missouri. In some states, such as Massachusetts, magnet schools operate as part of an intradistrict choice plan. Postsecondary Enrollment Options Postsecondary enrollment options exist in Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Indiana, Iowa, Kansas, Louisiana, Maine, Minnesota, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Virginia, Washington, and West Virginia. In Louisiana, the plan is limited to high- achieving students. Other states make postsecondary options available for all students; Maine prohibits districts from restricting participation to the gifted. Students may be limited in which type of institution they may attend. In Florida, eleventh- and twelfth- grade students may attend public universities for credit. In Colorado, students may attend community colleges. States differ in the extent to which they encourage students’ participation in postsecondary options. Some states, such as Nevada, require students to obtain permission from the state board of education in order to take a postsecondary course. Other states encourage student participation by allowing students to take college courses without paying tuition. PACE Research summary on choice Page 15 Vouchers There are two voucher plans in existence presently that allow students to attend private schools. In Milwaukee, 1,000 of the district’s poorest students receive vouchers to be redeemed at the public or participating, nonreligious private school of their choice. Indiana has a privately-operated voucher program. The Golden Rule Insurance Company provides poor Indianapolis children with $600 vouchers which they can use to attend private schools. PACE Research summary on choice Page 16 References Alexander, KL. and AM. Pallas. "School Sector and Cognitive Performance: When is a Little a Little?" Sociology of Education 58, April 1985, pp. 115-128 Blank, Rolf K. Educational Effects of Magnet High Schools. National Center on Effective Secondary Schools, University of Wisconsin-Madison. September, 1989. Blank, Rolf. "The Practice of Choice, Decentralization, and School Restructuring," in Choice and Control in American Education, William Clune and John Witte, eds. New York: The Falmer Press, 1990. Blank, Rolf, R.A. Dentler, D.C. Batzell, and K. Chabotar. "Survey of Magnet Schools: Analyzing a Model for Quality Integrated Education." Washington, DC: James H. Lowry and Associates, 1983. Cain, Glen and Arthur Goldberger. "The Casual Analysis of Cognitive Outcomes in the Coleman, Hoffer and Kilgore Report," Sociology of Education Vol. 55 (1982), pp. 103-122. Carnegie Foundation for the Advancement of Teaching. School Choice. Princeton, NJ: Carnegie Foundation, 1992. Chubb, John E. and Moe, Terry M. Politics, Markets, and America ’s Schools. The Brookings Institution: Washington, DC, 1990. Coleman, James S., Thomas Hoffer, and Sally Kilgore. High School Achievement. New York: Basic Books, 1982, Coons, John E. and Sugarman, Stephen D. Scholarships for Children. Berkeley, CA: Institute for Governmental Studies, University of California, 1992. Darling—Hammond, Linda, Nataraja Kirby, S. and Schlegel, P.M., Tuition Tax Deductions and Parent School Choice: A Case Study of Minnesota. Santa Monica, CA: The Rand Corporation, 1985. Dianda, Marcella R. and Corwin, Ronald G. What a Voucher Could Buy: A Survey of California '5 Private Schools. Southwest Regional Laboratory, February, 1993. *Domanico, R.J. Model for Choice: A Report on Manhattan’s District 4. New York: Center for Educational Innovation, Manhattan Institute for Policy Research, 1989. Elmore, Richard F. ”Choice in Public Education," in The Politics of Excellence and Choice in Education. (William Boyd and Charles Kerchner, eds.) New York: The Falmer Press, 1987. Fossey, Richard. School Choice Legislation: A Survey of the States. CPRE Occasional Paper. Friedman, Milton. "The Role of Government in Education," Capitalism and Freedom, Chapter IV, Chicago: University of Chicago Press, 1962. Levin, Henry M. "The Economics of Educational Choice," Economics of Education Review 10, No.2,1991, pp.137-158. PACE Research summary on choice Page 17 Levin, Henry M. "The Theory of Choice Applied to Education," in Choice and Control in American Education, William Clune and John Witte, (eds.) New York: The Falmer Press, 1990. Levinson, Eliot. The Alum Rock Voucher Demonstration: Three Years of Implementation. Santa Monica, CA: The Rand Corporation, 1976. Manski, Charles. Meyer, Robert H. "Applied versus Traditional Mathematics: New Econometric Models of the Contribution of High School Courses to Mathematics Proficiency," Washington, DC: National Assessment of Vocational Education, 1989. Nathan, Joe. Progress, Problems, and Prospects with State Choice Plans. Washington, DC: US. Department of Education, Office of Planning, Budget, and Evaluation, July 1989. Peterkin, Robert S. and Jones, Dorothy S. ”Schools of Choice in Cambridge, Massachusetts,” in Public Schools by Choice. Joe Nathan, ed. St. Paul, MN: Institute for Learning and Teaching, 1989. Schiller, Kathryn 5., Stephen Plank, and Barbara Schneider. ”Are They Schools of Choice? A Response to Sosniak and Ethington,” Educational Evaluation and Policy Analysis 15, No. 1, pp. 99-104 (Spring, 1993). Sosniak, Lauren A. and Corrina A. Ethington. "When Public School Choice is Not Academic: Findings from the National Education Longitudinal Study of 1988," Educational Evaluation and Policy Analysis 14, No. 1, pp. 35-52 (Spring, 1992). Witte, John F. Choice in American Education. Madison, WI: Robert M. LaFollette Institute of Public Affairs, 1990. Witte, John F. First Year Report: Milwaukee Parental Choice Program, Madison, WI: University of Wisconsin, November 1991. Witte, John F, Andrea B. Bailey, Christopher A. Thorn. Second Year Report: Milwaukee Parental Choice Program. Madison, WI: University of Wisconsin, December 1992. Witte, John F. ”Public Subsidies for Private Schools: What Do We Know and How Do We Proceed," in The Choice Controversy. Peter W. Cookson, Ed. Newbury Park, CA: Corwin Press, 1992. Young, Timothy W., and Clinchy, Evans. Choice in Public Education. New York, NY: Teachers College, 1992. PACE Research summary on choice Page 18 PARENTAL CHOICE IN EDUCATION INITIATIVE: FEDERAL INCOME TAX ANALYSIS Summary of Analysis By Donald E. Kelley, Jr., Teressa K. Lippert and Deborah Harrawood San Francisco Office of Folger & Levin All rights reserved. No part of this summary may be reproduced or transmitted in any form or by any means without the permission of the authors. PARENTAL CHOICE IN EDUCATION INITIATIVE: FEDERAL INCOME TAX ANALYSIS Donald E. Kelley, Jr., Teressa K. Lippert and Deborah Harrawoody SUMMARY OF ANALYSIS This summary addresses the Federal income tax treatment of payments authorized under Proposition 174, the Parental Choice in Education Initiative (the "Initiative"). If adopted, the Initiative will amend the California Constitution to establish a program of payments (referred to as "scholarships") to participating schools designated by the parents of California school children. V The Initiative’s statement that "scholarships shall not constitute taxable income" will make the payments non-taxable for purposes of California state income tax, but will not be binding for Federal income tax purposes. Federal law will control whether the payments are subject to Federal income tax. Existing precedents do not permit a clear prediction of the ultimate decision, which will be influenced by the theories advanced by taxpayers and by the Internal Revenue Service (IRS). In the absence of Congressional action, the ultimate arbiters are likely to be the Federal courts. 1’ The authors are attorneys in the San Francisco office of Folger & Levin, which has provided this summary and the accompanying analysis to Policy Analysis for California Education (PACE) as a public service. This summary presents only an abbreviated discussion of pertinent issues and is qualified in its entirety by the more detailed memorandum and notes that accompany it. Neither the authors nor the firm intend, in submitting these documents, to take any position on the merits of the Initiative. The date of these documents is September 21, 1993. Generally, income for Federal tax purposes includes any "accession to wealth" except those items that are specifically excluded by Federal statutes or judicial decisions. Unless the payments under the Initiative fall within a statutory or judicial exclusion, the economic benefit they confer will be considered income (most likely taxable to the parents of the child for whose benefit the amounts are disbursed) for Federal tax purposes. The most plausible argument for exclusion under existing law is that the payments are scholarships to California’s school- age children and are excludable from income under Internal Revenue Code Section 117. The IRS may argue, however, that the payments are not sufficiently similar to traditional scholarship programs to be excludable, or that the ability of parents to direct the application of the payments, and thereby to help discharge the parents’ legal support obligations, should cause the payments to be taxable. From existing law it is unclear whether an argument that the payments are excludable scholarships would prevail. If it does not, there is a substantial risk that the IRS will succeed in establishing that the payments are taxable to parents and are not eligible for exclusion as gifts, as welfare or public assistance subsidies, as charitable contributions, or on general tax policy grounds. 75055\0001\0004 Analysis of Proposition 174 THE SCHOOL VOUCHER INITIATIVE Policy Analysis for California Education (PACE) 3659 Tolman Hall School of Education University of California Berkeley, CA 94707 (510) 642-7223 On November 2, 1993 Californians will decide whether to amend the California Constitution according to the provisions of the ”Parental Choice in Education Initiative,” Proposition 174. Policy Analysis for California Education (PACE) has undertaken an analysis of the initiative’s provisions. This analysis is intended to provide policymakers, parents, educators, and mem- bers of the general public with objective information. PACE is not taking a position on the initiative. Rather, the PACE analysis reviews significant components of the initiative and raises the policy questions and issues for voters to consider. PACE has produced additional informational materials related to this initiative and to the general issue of school choice. These materials are described in the attached list of PACE reports on school choice. OFFICIAL WORDING OF THE PARENTAL CHOICE IN EDUCATION INITIATIVE The following Section, the ”Parental Choice in Education Amendment," is hereby added to Article IX of the Cali- fornia Constitution: Section 17. Purpose. The people of California, desiring to improve the quality of education avail- able to all children, adopt this Section to: (1) enable parents to determine which schools best meet their children’s needs; (2) empower parents to send their children to such schools; (3) estab- lish academic accountability based on national standards; (4) reduce bureau- cracy so that more educational dollars reach the classroom; (5) provide greater opportunities for teachers; and (6) mobilize the private sector to help ANALYSIS AND COMMENTARY BY POLICY ANALYSIS FOR CALIFORNIA EDUCATION Purpose Parents may request that their child be enrolled in any participating public or private school. The initiative is silent with regard to how applicants will be admitted to various schools, public or private. The extent to which the initiative can accomplish its goals depends in large measure on the extent to which the private sector will expand to accom- modate the vastly diverse California school age population. Estimates of SIDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION accommodate our burgeoning school- age population. Therefore: All parents are hereby empowered to choose any school, public or private, for the education of their children, as provided in this Section. (a) Empowerment of Parents; Granting of Scholarships. The State shall annually provide a scholarship to every resident school-age child. Scholarships may be redeemed by the child’s parent at any scholarship- redeeming school. (a)(l) The scholarship value for each child shall be at least fifty percent of the average amount of State and local gov- ernment spending per public school student for education in kindergarten and grades one through twelve during the preceding fiscal year, calculated on a statewide basis, including every cost to the State, school districts, and county offices of education of maintaining kindergarten and elementary and sec— ondary education, but excluding expen- ditures on scholarships granted pursu- ant to this Section and excluding any unfunded pension liability associated with the public school system. (a)(2) Scholarship value shall be equal for every child in any given grade. In case of student transfer, the scholarship shall be prorated. The Legislature may award supplemental funds for reason- able transportation needs for low- income children and special needs attributable to physical impairment or learning disability. Nothing in this the number of students who might enroll in scholarship-redeeming schools range from 10 percent to 40 percent. The number and types of scholarship-redeeming schools that might become available to accommo- date students who want to transfer is difficult to predict. (a) Empowerment of Parents; Grant- ing of Scholarships. (a)(l) Based on last year’s expendi- tures, the per-pupil amount of a schol- arship would be approximately $2600. This amount could vary from year to year and could be increased at the Legislature’s discretion. The initiative does not limit the amount of tuition and fees which can be charged by scholarship-redeeming schools. (a)(2) The amount of the scholarship provided to the student is not depen- dent on parental income. Scholarship amounts may vary grade-by-grade. Additional funds could be allocated by the Legislature for transportation costs for low income children and students with special needs The cost to the state of this possible additional SIDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION Section shall prevent the use in any school of supplemental assistance from any source, public or private. (a)(3) If the scholarship amount exceeds the charges imposed by a scholarship-‘ redeeming school for any year in which the student is in attendance, the surplus shall become a credit held in trust by the state for the student for later application toward charges at any scholarship- redeeming school or any institution of higher education in California, public or private, which meets the requirements imposed on scholarship-redeeming schools in Section 17(b)(1) and (3). Any surplus remaining on the student’ 5 twenty-sixth birthday shall revert to the state treasury. (a)(4) Scholarships provided hereunder are grants of aid to children through their parents and not to the schools in which the children are enrolled. Such scholarships shall not constitute taxable income. The parent shall be free to choose any scholarship-redeeming school, and such selection shall not constitute a decision or act of the State or any of its subdivisions. No other provision of this Constitution shall prevent the implementation of this Section. (a)(5) Children enrolled in private schools on October 1, 1991, shall receive scholarships, if otherwise eligible, begin- ning with the 1995-96 fiscal year. All other children shall receive scholarships beginning with the 1993-94 fiscal year. assistance is unknown. Scholarship- redeerning schools would be allowed to collect or accept ”supplemental assistance” from any source without restriction by the State. (a)(3)The initiative allows parents, through the state, to ”bank" the differ- ence, if any, between the scholarship amount and the school’s tuition charges, to be used at a later time for the child's education. Presumably, the state would need to establish individ- ual student records to track the schol- arship amounts to be held for later use. The cost for maintaining such individual student accounts is un- known. (a)(4) By stating that scholarships are grants made to students rather than schools, the initiative attempts to avoid the separation of church and state issue. It is likely, however, that this language will be subject to a constitutional challenge in the courts. With regard to the taxable status of the scholarship, the initiative, as an amendment to the state constitution, can specify the taxable status under state law. It is unclear whether schol- arships would be considered taxable income under federal law. (For more information, see the PACE legal analy- sis referenced on the attached list.) (a)(5) The initiative will be voted on after the beginning of the 1993-94 school year. The State Attorney Gen- eral has expressed, in an informal opinion, that all students enrolled in private schools after October 1, 1991 SIDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE 4 THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION (a)(6) The State Board of Education may require each public school and each scholarship-redeeming school to choose and administer tests reflecting national standards for the purpose of measuring individual academic improvement. Such tests shall be designed and scored by independent parties. Each school’s composite results for each grade level shall be released to the public. Indi- vidual results shall be released only to the school and the child’s parent. (a)(7) Governing boards of school dis- tricts shall establish a mechanism con- sistent with federal law to allocate enrollment capacity based primarily on parental choice. Any public school which chooses not to redeem scholar- ships shall, after district enrollment assignments based primarily on paren- tal choice are complete, open its remain- ing enrollment capacity to children regardless of residence. For fiscal pur- poses, children shall be deemed resi- dents of the school district in which they are enrolled. (a)(8) N 0 child shall receive any scholar- ship under this Section or any credit under Section 17 (a)(3) for any fiscal year in which the child enrolls in a non— scholarship-redeeming school, unless the Legislature provides otherwise. will be eligible for scholarships begin- ning with the 1994-95 school year. It is unclear whether children enrolled in private schools on October 1, 1991 would receive scholarships begimting with the 1995-96 or the 1996-97 fiscal year. (a)(6) Testing is allowed but not re- quired by the initiative. Tests are permissible that reflect ”national standards.” Currently, no agreed- upon set of national standards exists. (a)(7) This provision applies to public schools which are not scholarship— redeeming. Enrollment in public schools would be based primarily on parental choice, with priority given to students from within a school district. Parents could also choose to send their child to a public school in another school district if the district has avail- able slots. Responsibility for transpor- tation to a public school of choice is not provided, but is permitted. Two 1993 California statutes greatly ex- pand opportunity for public school choice. It is too early to determine the impact of these new statutes. (a)(8) Parents who send a child to a public school or a non-scholarship- redeeming private school cannot accumulate scholarship credit for later use. SlDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION (b) Empowerment of Schools; Redemp- tion of Scholarships. A private school may become a scholar- ship-redeeming school by filing with the State Board of Education a statement indicating satisfaction of the legal re- quirements which applied to private schools on October 1, 1991, and the requirements of this Section. (b)(1) No school which discriminates on the basis of race, ethnicity, color, or national origin may redeem scholar- ships. (b)(2) To the extent permitted by this Constitution and the Constitution of the United States, the State shall prevent from redeeming scholarships any school which advocates unlawful behavior; teaches hatred of any person or group on the basis of race, ethnicity, color, national origin, religion, or gender; or deliberately provides false or mislead- ing information respecting the school. (b)(3) No school with fewer than 25 students may redeem scholarships unless the Legislature provides other- wise. (b)(4) Private schools, regardless of their size, shall be accorded maximum flex- ibility to educate their students and shall be free from unnecessary, burden- some or onerous regulation. No regula- tion of private schools, scholarship- redeeming or not, beyond that required by this Section and that which applied to private schools on October 1, 1991, shall be issued or enacted, unless ap- proved by a three—fourths vote of the Legislature or, alternatively, as to any regulation pertaining to health, safety, (b) Empowerment of Schools; Re- demption of Scholarships. Currently, there is very little state or local regulation of private schools in California. (b)(1) The initiative is silent regarding discrimination on the basis of gender, religion, academic ability, physical ability, sexual orientation, and ability to speak English. (b)(2) Scholarship-redeeming schools will not be permitted to teach hatred or to provide false information about the school. No system is provided for monitoring and assessing false or misleading information or for provid- ing objective information about school options. (b)(3) Parents who choose to teach their children at home (home school- ing) will not be eligible for scholar- ships. (b)(4)This section seeks to severely restrict elected officials’ or the public’ 3 ability to impose new regulations on either private or scholarship-redeem- ing schools. The initiative is silent on the nature and extent of regulation for remaining public schools. Nothing in the initiative prohibits the Legislature from amending or eliminating current regulations for public schools. SIDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION or land use imposed by any county, city, district or other subdivision of the State, a two-thirds vote of the governmental body issuing or enacting the regulation and a majority vote of qualified electors within the affected jurisdiction. In any legal proceeding challenging such a regulation as inconsistent with this Section, the governmental body issuing or enacting it shall have the burden of establishing that the regulation: (A) is essential to assure the health, safety or education of students, or, as to any land use regulation, that the governmental body has a compelling interest in issu- ing or enacting it; (B) does not unduly burden or impede private schools or the parents of students therein; and (C) will not harass, injure, or suppress private schools. (b)(5) Notwithstanding Section 17(b)(4), the Legislature may (A) enact civil and criminal penalties for schools and per- sons who engage in fraudulent conduct in connection with the solicitation of students or the redemption of scholar- ships, and (B) restrict or prohibit indi- viduals convicted of (i) any felony, (ii) any offense involving lewd or lascivious conduct, or (iii) any offense involving molestation or abuse of a child, from owning, contracting with, or being employed by any school, public or private. (b)(6) Any school, public or private, may establish a code of conduct and disci- pline and enforce it with sanctions, including dismissal. A student who is deriving no substantial academic benefit or is responsible for serious or habitual misconduct related to the school may be dismissed. (b)(5) The Legislature may, but is not required, to prohibit individuals convicted of a felony or child abuse or molestation from owning or being employed by a public or private school. The initiative grants authority for the Legislature to impose legal penalties on scholarship-redeeming schools that engage in fraud. The intiative describes no process by which fraudulent conduct would be monitored or assessed nor is there any specified system for auditing the redemption of scholarships. (b)(6) This section grants to both public and private schools substantial discretion to determine grounds for dismissal of students. The initiative is silent regarding the due process rights of students and parents when dis- missal is considered. A student can be dismissed for serious or habitual misconduct. Students may also be SIDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION (b)(7) After the parent designates the enrolling school, the State shall disburse the student’ 5 scholarship funds, except- ing funds held in trust pursuant to Section 17(a)(3), in equal amounts monthly, directly to the school for credit to the parent’ 5 account. Monthly disbursals shall occur within 30 days of receipt of the school’s statement of current enrollment. (b)(8) Expenditures for scholarships issued under this Section and savings resulting from the implementation of this Section shall count toward the minimum funding requirements for education established by Sections 8 and 8.5 of Article XVI. Students enrolled in scholarship-redeeming schools shall not be counted toward enrollment in public schools and community colleges for purposes of Sections 8 and 8.5 of Article XVI. dismissed when the school determines that they are not benefitting academi- cally. How the ”academic benefit’ ’ standard applies to students who have difficulty learning due to a physical or mental handicap or lack of ability to speak English is unclear. The initiative is silent regarding proce- dures and options for students who are dismissed from a school. (b)(7) This section authorizes the State to send payments directly to the scholarship-redeeming school. A separate financial account for each student, examined monthly, would be necessary. Funding for this adminis- trative responsiblity is not addressed. Reimbursement to the school would be based on a student’ 5 enrollment rather than the student’s attendance. This provision raises the constitutional issue of separation of church and state. (b)(8) This section relates to Proposi- tion 98, the state constitutional amend- ment which guarantees that a set portion of the state general fund be set aside to fund K-12 schools and com- munity colleges. Thus, while the scholarship program is directed at students in grades kindergarten through twelve, the funding of com- munity colleges also may be affected. The extent to which this would impact community colleges depends on action taken by the Legislature. (For a more complete description of fiscal effects, see PACE's fiscal analysis of Proposition 174.) SIDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE 8 THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION (c) Empowerment of Teachers; Conver- sion of Schools. Within one year after the people adopt this Section, the Legislature shall estab— lish an expeditious process by which public schools may become independent scholarship-redeeming schools. Such schools shall be common schools under this Article, and Section 6 of this Article shall not limit their formation. (c)(1) Except as otherwise required by this Constitution and the Constitution of the United States, such schools shall operate under laws and regulations no more restrictive that those applicable to private schools under Section 17(b). (c)(2) Employees of such schools shall be permitted to continue and transfer their pension and health care programs on the same terms as other similarly situ- ated participants employed by their school district so long as they remain in the employ of any such school. (c) Empowerment of Teachers; Con- version of Schools. This section is titled "Empowerment of Teachers," though the initiative does not specify the nature of such empow- erment. However, nothing prohibits the Legislature from "empowering" teachers in both public and scholar- ship-redeeming schools. The Legislature is required to deter- mine how public schools could be— come scholarship-redeeming schools. It is unclear as to whether these ”inde- pendent scholarship-redeeming schools” would continue to be gov- erned in some way by a local school district. (c)(1) Public, scholarship-redeeming schools would be regulated only to the same extent to which private schools are now regulated [see item (b)(4)]. (c)(2) Teachers who transfer from existing public schools to public, scholarship-redeeming schools could continue in their same retirement and health care systems, but would not be required to do so. Teachers who transfer from existing public schools to private, scholarship-redeeming schools have no such protection. SIDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE 9 THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION (d) Definitions. (d)(l) ”Charges” include tuition and fees for books, supplies, and other educational costs. (d)(2) A ”child” is an individual eligible to attend kindergarten or grades one through twelve in the public school system. (d)(3) A ”parent" is any person having legal or effective custody of a child. (d)(4) ”Qualified electors” are persons registered to vote, whether or not they vote in any particular election. The alternative requirement in Section 17(b)(4) of approval by a majority vote of qualified electors within the affected jurisdiction shall be imposed only to the extent permitted by this Constitution and the Constitution of the United States. (d)(S) The Legislature may establish reasonable standards for determining the ”residency” of children. (d)(6) ”Savings resulting from the imple- mentation of this Section” in each fiscal year shall be the total amount disbursed for scholarships during that fiscal year subtracted from the product of (A) the average enrollment in scholarship- redeeming schools during that fiscal year multiplied by (B) the average amount of State and local government spending per public school student for education in kindergarten and grades one through twelve, calculated on a statewide basis, during that fiscal year. ((1) Definitions. (d)(4) Under this initiative, changing private school regulations would require a majority ”yes” vote, as determined by the number of regis- tered voters, not by the number of those voting in a given election. (d)(6) The fiscal effect of this provision is difficult to assess due to the com- plexity of determining a number of factors which are necessary compo- nents of the funding mechanism. Some of these unknowns are: (1) the number of existing private and public schools which would elect to become scholarship-redeeming schools, (2) the extent to which existing private schools would admit additional stu- dents from public schools, (3) the number, location, and enrollment capacity of new scholarship-redeem- ing schools which would become available, and (4) the extent to which SlDE-BY—SIDE PACE ANALYSIS OF VOUCHER INITIATIVE 'THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION (d)(7) A ”scholarship-redeeming school” is any school, public or private, located within California, which meets the requirements of this Section. N 0 school shall be compelled to become a scholar- ship-redeeming school. N 0 school which meets the requirements of this section shall be prevented from becom— ing a scholarship redeeming school. (d)(8) ”State and local government spending” in Section 17(a)(1) includes, but is not limited to, spending funded from all revenue sources, including the General Fund, federal funds, local property taxers, lottery funds, and local miscellaneous income such as developer fees, but excluding bond proceeds and charitable donations. Notwithstanding the inclusion of federal funds in the calculation of ”state and local govern- ment spending,” federal funds shall constitute no part of any scholarship provided under this Section. (d)(9) A ”student” is a child attending school. (e) Implementation. The Legislature shall implement this Section through legislation consistent with the purposes and provisions of this Section. (f) Limitation of actions. Any action or proceeding contesting the validity of (1) this Section, (2) any provision of this Section, or (3) the adoption of this Sec- tion, shall be commenced within six parents would select a different public or private school for their child other than the school the child currently attends. (For a detailed description of possible fiscal effects, see the PACE report on the attached list.) (d)(7) No public school would be required to become nor be prohibited from becoming a scholarship-redeem- ing school. Since the process by which public schools would become scholar- ship-redeeming schools is yet to be determined, the number of public schools which could, or would, re- deem scholarships is unknown. SIDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE THE PARENTAL CHOICE IN EDUCATION INITIATIVE POLICY ANALYSIS FOR CALIFORNIA EDUCATION months from the date of the election at which this Section is approved; other- wise this Section and all of its provisions shall be held valid, legal and uncontestable. However, this limitation shall not of itself preclude and action or proceeding to challenge the application of this Section or any of its provisions to a particular person or circumstance. (g) Severability. If any provision of this Section or the application thereof to any person or circumstance is held invalid, the remain- ing provisions or applications shall remain in force. To this end the provi- sions of this section are severable. (g) Severability. If any one section or sections of this initiative is determined to be invalid, other components of the initiative would remain. Fiscal effects of the initiative and participation in the scholarship program would in part depend on the outcome of any chal- lenges to any portion of the initiative. SIDE-BY-SIDE PACE ANALYSIS OF VOUCHER INITIATIVE 12 Wmmnwmvwmmmnnm WM“ WvaMu POLIICY ANALYSIS FOR CALIHFORNIIA EDUCATION PACE CALIFORNIANS’ ATTITUDES TOWARD EDUCATION ANQ SCHOOL VOUCHERS September 30, 1993 msnrurso “ FGOVE - STUDIES LIBREgyENTAL ”CT 41993 ' UNIVERSITY OF CALIFORNIA imbwz‘goed W :oOA/N. 9/30/61 we“ I. BACKGROUND To help Californians and policymakers gain a better understanding of what the public thinks about education and school vouchers, PACE earlier this month conducted a poll of more than 1,400 adult Californians (including an oversample of more than 500 African-Americans, Hispanics, and Asians). The poll provides a comprehensive snapshot of public opinion that can help voters, parents, taxpayers, educators, and policymakers understand more about potential new directions for improving education. Conducted for PACE by Penn & Schoen Associates from September 4-18, the poll attempts to understand the landscape for change in education policy among the general public. PACE explored what Californians want in their schools, their readiness to change and willingness to move in new directions, and underlying attitudes toward education and vouchers that could affect future policy decisions. The poll examrnes: where education stands as a public priority; satisfaction with public and private schools; attitudes toward vouchers in general and Proposition 174 in particular, public acceptance of possible trade-offs Proposition 174 could trigger: differences and similarities of Californians by race, socio-economic status, religion, region, etc. 0 O O O O PACE is an independent, non-partisan think tank based at the University of California- -Berkeley and Stanford. PACE seeks to help the public and decisionmakers understand more about the implications of public policy actions in order to better inform their decrsronmakrn g 11. MAJOR FINDINGS 1. Education is a High Priority in California and the Public Believes Schools Must Be Overhauled Californians rate education just below the economy and crime as the most important problem facing the state. Californians express substantial dissatisfaction with public schools: 0 Virtually all citizens (87 percent) believe public schools should be changed and a majority of Californians (61 percent) would like to see a major overhaul. Some 72 percent of African-Americans would like to see a major overhaul compared with 58 percent of Hispanics, 57 percent of Asians and 63 percent of whites. Nearly three-fourths ( 73 percent) believe California student achievement ranks somewhere in the middle or at the bottom among the 50 states. Only 13 percent of citizens believe California students perform at the same level as the highest achieving students nationwide. Seven in ten (71 percent) Californians believe private and parochial schools are better than public schools, and 39 percent say private and parochial schools are much better than public schools. These views are shared in roughly the same percentages among all racial and ethnic groups. A solid majority of Californians (63 percent) grade their local private/ parochial school "A" or "B" compared to only 34 percent who would give high marks to public schools. Meanwhile 21 percent would give public schools a "D" or "F" grade compared with only 2 percent who would give low marks to private schools. African-Americans are more likely to give their local public schools low marks than are other racial and ethnic groups. Twenty-two percent of whites would give their schools a "D" or "F" compared to some 29 percent of African-Americans, 18 percent of Hispanics, and 13 percent of Asians. What does the public want from their public schools? They want a safe learning environment for their children, high quality teaching and curricula, smaller class sizes, and more instruction focused on "values." To make schools better, more than one half (56 percent) of Californians would be willing to spend more money for teacher training and nearly half (43 percent) would be willing to spend more for smaller classes. But few Californians would be willing to pay more for a longer school year (10 percent). A majority of Californians (53 percent) say they do not believe teachers are paid enough. . The Public is Receptive to Vouchers as 3 Concept - By a margin of two to one, Californians support the concept of school vouchers. Sixty-three percent of Californians are in favor of the concept, while 33 percent oppose the idea. 0 If given an option between a state policy that guarantees a choice only among all public schools or among both public and private schools, three-fourths (75 percent) of Californians prefer a school choice plan that includes private schools. 0 Support for the voucher concept cuts across demographic, ideological and political lines. Certain groups support or oppose the concept with greater intensity than others. For example: 0 Republicans are more likely to support the concept (70 percent) than are independents (59 percent) or Democrats (57 percent). Self-described conservatives support the voucher concept (71 percent) more than self- described liberals (53 percent). 0 Support is greatest among Californians in an age group likely to have children living at home. About seven in ten (70 percent) 25- to 34—year-olds strongly favor a voucher system Better than two-thirds (68 percent) of those 35 to 49 years old, and 53 percent of 50 to 64-year olds favor vouchers. 0 Senior citizens are split on the voucher concept (47 to 45 percent) 0 African-Americans (32 percent) and Hispanics (28 percent) are more likely to oppose the concept than are Asians (26 percent). - Most Californians (59 percent) say vouchers will expand options for children. However, about one in three (32 percent) say vouchers will primarily help those who already have children in private school. This question strongly divides those favorable to vouchers from those who are not. Around three quarters of those who favor vouchers say such a system will give children choices they do not now have. Sixty-five percent of those who strongly oppose vouchers say it principally helps those with children in private schools. (NOTE: The fact that the public believes the plan provides options does not mean they believe this will result in a dramatic turnaround for disadvantaged students. Some 42 percent of Californians believe the underprivileged will benefit least from vouchers.) - Despite their support for the concept, Californians have reservations about vouchers. A majority (51 percent) believe a voucher plan would mean students who need additional help will be left behind. Also, better than six in ten (62 percent) of Californians believe the initiative will raise the cost of education. More than half (54 percent) say vouchers will not save the state money. In addition, a majority of Californians (54 percent) agree or strongly agree that a voucher plan would allow many religious or belief groups to open schools dedicated to their teachings. o The majority of Californians do not believe that a voucher plan would lead to discrimination in admissions or jeopardize the separation of church and state by providing state funds to parochial or religious schools. The public also rejects the notion that school vouchers would free public schools from the current dominance of special interest groups or reduce public school bureaucracy. 3 . Californians Are Strong Minded About What They Want in a Voucher Plan - Californians believe that if the state helps finance private schools, those schools should be required to meet state regulations. For example: 0 The vast majority (87 percent) believe that under a voucher plan, private schools should be required to meet state academic, fiscal, and safety requirements. 0 More than 8 out of 10 Californians (82 percent) believe that under a voucher plan, both public and private schools should be required to provide additional support for students with special needs. 0 Nearly three-fourths (74 percent) say voucher schools should be required to publish test scores. 0 A majority (60 percent) say if a voucher plan is adopted, voucher schools should be required to hire certified teachers. 0 Two—thirds (67 percent) want the state to "cap" the amount of tuition participating private schools can charge. - A majority of Californians (55 percent) say a voucher plan should be tested in a few school districts before full state-wide implementation. Some Californians (25 percent) believe it should be implemented only in areas where schools are failing. Californians believe parents (70 percent)—-not taxpayers--should be responsible for providing extra costs for transportation. The public is somewhat divided on the fairest way to ensure access to voucher schools-- whether to allow schools to set their own admissions standards (35 percent), or offer spaces on a lottery (28 percent) or first come first served basis (21 percent). - Californians do not want to see public school funding reduced if a voucher system is adopted. Fifty-six percent say they would oppose a voucher system if public school funding is reduced. Those who are somewhat favorable to a school voucher system oppose it if public school funding is cut (55 percent to 33 percent). - Nearly two-thirds of parents (64 percent) say they would choose to send their child to the same school if the voucher initiative is approved. All racial and ethnic groups expressed roughly the same tendency to keep their children at the same school. However, of those parents who would keep their child enrolled in the same school, one in four (23 percent) would change schools if a voucher covered the full cost of tuition at private school. And 16 percent of those who say they would not change schools would send their child to a different school if the state picked up the tab for transportation. III. METHODOLOGY The attached results are from a poll of California residents taken September 4— 18, 1993 by Penn & Schoen Associates, Inc., a national survey research firm based in Washington, DC. and New York. Altogether the polling firm interviewed 1404 California residents, including an oversample of Hispanic, Asian, and African-American Interviews. Respondents for the survey of 902 Californians as a whole were selected using a random-digit dial (RDD) procedure that ensures that every adult Californian over the age of 18 in a telephone household has a theoretically equal chance of being chosen to participate. Respondents for the oversample of Hispanics, Asians, and African-Americans were also selected using a random-digit dial (RDD) procedure. Telephone exchanges that were identified as having a high incidence of minorities were random-di git dialed while conducting the survey of California as a whole. A11 interviews were conducted from our Computer-Aided Telephone Interviewing facilities in New York City. The overall results of the Primary survey are representative of the responses of all Californians to plus or minus 3.3 percentage points at the 95% confidence level. The oversample results of Hispanics, Asians, and African-Americans only have an overall margin of error of 3.8% at the‘95% confidence level. SUMMARY A PACE Policy Analysis for California Education Attitudes of Californians Towards Education and Vouchers 1. WHAT DO YOU SAY IS THE MOST IMPORTANT PROBLEM FACING CALIFORNIA THAT YOU WOULD LIKE THE STATE TO DO SOMETHING ABOUT? Budget Deficit .................................................................. 5 Recession ............................................................................. 3 Cut Taxes ........................................................................... 4 Government Spending ...................................................... 1 Healthcare ............................................................................ 2 Race Relations ...................................................................... 0 Homelessness ..................................................................... 1 Jobs .................................................................................. l 7 Economic Development ........................................................ 4 Housing .............................................................................. 1 Improve Roads ..................................................................... 0 Environment ...................................................................... 2 Education ............................................................................. 1 I School Vouchers ................................................................. 1 Poverty .............................................................................. 1 Reduce Welfare .................................................................... 1 Crime ............................................................................... 1 7 Drugs ................................................................................. 3 Abortion ............................................................................ 0 AIDS .................................................................................. 0 Politicians ............................................................................ 1 Illegal Aliens ...................................................................... 6 Other ................................................................................. 1 6 Don’t Know ........................................................................ 2 2. WHICH OF THE FOLLOWING ISSUES SHOULD BE THE HIGHEST PRIORITY IN CALIFORNIA? Education ...................... . ..................................................... 40 Health Care ...................................................................... l 2 Economy ............................................................................ 39 Environment ....................................................................... 8 Don ’t Know ....................................................................... l 3. WHICH COMES CLOSER TO YOUR VIEW? THE CUR- RENT SYSTEM OF PUBLIC EDUCATION IN CALIFORNIA: Provide Quality Education ............................................ 9 With Minor Changes ......................................................... 26 A Major Overhaul ......................................................... 61 Don’tknow ............................................................................ 4 4. (THOSE WHO WANT CHANGE ONLY) WHY DO YOU FEEL THIS WAY? Quality Teaching ............................................................. 2 5 Class Size ......................................................................... 14 Student Safety ..................................................................... 5 Values/Religion ..................................................................... 4 Parental Involvement .......................................................... 9 Discipline ......................................................................... 1 2 Technology ........................................................................ 2 Choice of Schools .............................................................. 2 Funding/Tuition ................................................................ 13 Job Preparation ................................................................... 5 College Preparation ............................................................. 4 Bureaucracy ....................................................................... 9 Bilingual Education ........................................................... 2 Other ................................................................................ 3 5 6. WHICH COMES CLOSER TO YOUR VIEW? THE QUALITY OF EDUCATION PROVIDED BY PRIVATE/PAROCHIAL SCHOOLS IN CALIFORNIA: No Diflerent ........................................................................ 9 Better Than Public .......................................................... 39 Somewhat Better .............................................. 32 Somewhat Worse ................................................................ 4 Much Worse ...................................................................... 1 Don’t Know ...................................................................... l 5 6. (THOSE WHO THINK PRIVATE SCHOOLS ARE BETTER ONLY) WHY DO YOU FEEL THIS WAY? Quality Teaching .............................. ._. ............................ .19 Class Size ............................................................................ 17 Student Safety ................................................................... 2 Values/Religion ................................................................... 5 Parental Involvement .................................................. 6 Discipline .................................................................. 1 7 Technology ....................................................................... 1 Choice of Schools .............................................................. l Funding/1‘ uition ........................................................... 7 Job Preparation .............................................................. 4 College Preparation .......................................................... 4 Bureaucracy ...................................................................... 2 Bilingual Education ............................................................ 0 Other ............................................................................... 24 7. WHERE DO YOU GET MOST OF YOUR INFORMATION ABOUT SCHOOLS IN CALIFORNIA? News Media .................................................................... 41 Children ............................................................................ 1 8 Friends ............................................................................ 1 6 Educators ............................................................................ 1 5 Other .................................................................................. 9 Don’t Know ...................................................................... 0 8. WHAT DO YOU THINK CALIFORNIA NOW SPENDS ANNUALLY ON AVERAGE PER STUDENT IN THE PUBLIC SCHOOLS? < $1,000/Pupil .................................................................. 8 $1k - 2k ............................................................................ 7 $2k - 3k ............................................................................ 8 $3k - 4k ............................................................................ 6 $4k - 5k ............................................................................ 7 $5,000 + ............................................................................ 13 Don’t Know ....................................................................... 51 9. HOW DOES CALIFORNIA COMPARE WITH OTHER STATES ON THE AMOUNT OF MONEY SPENT ON PUBLIC EDUCATION? Amongthe Top .................................................................... 23 In the Middle .................................................................. 32 In the Bottom ................................................................. 20 Don’t Know ..................................................................... 24 10. HOW DOES CALIFORNIA COMPARE WITH OTHER STATES IN TERMS OF PUBLIC SCHOOL STUDENT ACHIEVEMENT? Among the Top ................................................................. 1 3 In the Middle .................................................................... 46 In the Bottom .................................................................... 2 7 Don’t Know ....................................................................... 15 11. HOW MUCH DO YOU BELIEVE CALIFORNIA PUBLIC SCHOOL TEACHERS ARE PAID ANNUALLY, ON AVERAGE? < $20k ................................................................................ 5 $20k - $30k ..................................................................... 35 $30k — $40k ..................................................................... 36 $40k - $50k ........................................................................ 6 $50,000 + ............................................................................ 2 Don’t Know ....................................................................... 17 12. IS THIS FIGURE TOO LOW, TOO HIGH, OR ABOUT RIGHT? Too Low ...................... , .................................................... 5 3 Too High ............................................................................ 4 AboutRight ..................................................................... 29 Don ’t Know ..................................................................... 14 13. WHAT DO YOU THINK IS THE MAJOR SOURCE OF REVENUE FOR PUBLIC SCHOOLS IN CALIFORNIA? Lottery Funds ...................................................................... 6 Property Tax ..................................................................... 4 5 Income/ S ales Tax .......................................................... 3 0 Federal Grants .................................................................... 9 Don’t Know ......................................................................... 9 14. WHAT DO YOU THINK THE AVERAGE YEARLY TUITION IS FOR PAROCHIAL AND OTHER RELIGIOUS-AFFILIATE SCHOOLS IN CALIFORNIA < $1,000/Pupil ................................................................... 4 $lk- 2k .............................................................................. 15 $2k- 3k ............................................................................ 14 $3k - 4k ............................................................................. 7 $4k - 5k ............................................................................. 4 $5,000 + ......................................................................... 19 Don’t Know ....................................................................... 37 15. WHAT DO YOU THINK THE AVERAGE YEARLY TUITION IS FOR PRIVATE, INDEPENDENT SCHOOLS IN CALIFORNIA? < $1,000/Pupil .................................................................... 3 $1k- 2k ............................................................................ 10 $2k - 3k ............................................................................. 9 $3k-4k .............................................................................. 9 $4k- 5k ............................................................................ 19 $5,000 + ........................................................................... 11 Don’t Know ....................................................................... 39 Continued on the next page ,DREN ARE OFTEN GIVEN THE GRADES A,B,C,D, FOR FAIL TO DENOTE THE QUALITY OF THEIR AK. WHAT GRADE WOULD YOU GIVE THE PUBLIC 1HOOLS IN THE COMMUNITY WHERE YOU LIVE - - A, B, .:, D, OR F FOR FAIL? A ......................................................................................... 5 B ....................................................................................... 29 C ....................................................................................... 39 D .......................................................................................... 16 Fail ..................................................................................... 5 Don’t Know ..................................................................... 5 17. WHAT GRADE WOULD YOU GIVE THE PRIVATE! PAROCHIAL SCHOOLS IN THE COMMUNITYWHERE YOU LIVE — A, B, C, D, OR FAIL? A ...................................................................................... 17 B ....................................................................................... 46 C ....................................................................................... I 1 D ............................................................................................ 2 Fail ...................................................................................... 0 Don’t Know ........................................................................ 24 18. TUITION COST. IS THAT A VERY IMPORTANT, SOME- WHAT IMPORTANT, NOT VERY IMPORTANT, OR NOT AT ALL IMPORTANT FACTOR IN CHOOSING WHERE TO ENROLL YOUR CHILD? VeryImportant .................................................................... 45 Somewhat ......................................................................... 3 8 Not Very ............................................................................. 9 Not at All ............................................................................. 4 Don’t Know ........................................................................ 3 19. CLOSE TO YOUR HOME VeryImportant .................................................................... 48 Somewhat ......................................................................... 38 Not Very ............................................................................ 12 Not at All ........................................................................... 3 Don’t Know ......................................................................... 1 20. THE SCHOOL IS SAFE Very Important .................................................................... 93 Somewhat ........................................................................... 5 Not Very ............................................................................... 1 Not at All ........................................................................... 0 Don’t Know ........................................................................ 0 21. RACIAL OR ETHNIC BACKGROUND OF STUDENTS ARE SIMILAR TO MY CHILD'S Very Important .................................................................... 1 3 Somewhat .......................................................................... 24 Not Very .............................................................................. 3 4 Not at All ........................................................................... 2 8 Don’t Know ......................................................................... 1 22. CLASS SIZE Very Important .................................................................... 7 1 Somewhat ....................................................................... 23 Not Very ............................................................................... 4 Not at All ............................................................................. 1 Don ’t Know ......................................................................... l 23. CURRICULUM OR THE COURSES OFFERED VeryImportant .................................................................... 85 Somewhat ......................................................................... l 2 Not Very ............................................................................... 2 Not at All ............................................................................ 0 Don’t Know ......................................................................... 1 24. LEVEL OF TEACHER TRAINING OR LICENSING Very Important .................................................................... 82 Somewhat ............................................................................ 1 5 Not Very ............................................................................. 2 Not at All ............................................................................... 0 Don ’t Know ......................................................................... l 25. TEST SCORES OF STUDENTS WHO GO THERE VeryImportant ...... 48 Somewhat . ......... ..36 NotVery ............................................................................ l 1 Not at All ............................................................................. 4 Don’t Know ........................................................................ 2 26. SCHOOL HAS A GOOD REPUTATION Very Important .................................................................... 64 Somewhat ........................................................................ 29 Not Very ................................................................................ 6 Not atAIl ............................................................................... 1 Don’t Know ......................................................................... 1 27. VALUES THE SCHOOL TEACHES VeryImportant .................................................................... 80 Somewhat ........................................................................ 15 NotVery .............................................................................. 2 Not at All ............................................................................. 1 Don’t Know .......................................................................... 1 28. THE STUDENT POPULATION IS DIVERSE - MANY DIFFERENT ETHNIC GROUPS VeryImportant .................................................................. 37 Somewhat ....................................................................... 30 Not Very .......................................................................... 20 Not at All ........................................................................... 12 Don’tKnow ........................................................................... 1 29. DISCIPLINE .. Very Important .................................................................... 74 Somewhat ......................................................................... 21 Not Very ............................................................................ 4 Not at All ............................................................................. 1 Don’t Know .......................................................................... 1 30. PARENTS INVOLVED IN DECISION-MAKING VeryImportant .................................................................... 72 Somewhat ........................................................................ 22 Not Very ............................................................................ 4 Not at A11 ............................................................................. 1 Don’t Know ........................................................................ 1 31. OF THE FACTORS WE JUST READ IN CHOOSING A SCHOOL, WHICH IS MOST IMPORTANT? Tuition .............................................................................. 2 Closeto Home .................................................................... 3 School Safety .................................................................... l 8 Homogeneous Students ........................................................ 2 Class Size ........................................................................... 4 Curriculum .................................................................... 2 1 Teacher Training ............................................................. 20 Test Scores ................................................................... 2 Reputation ........................................................................ 7 Teacher Values .................................................................... 8 Discipline ..................................................................... 6 Decision Making ........................................................... 4 Don’t Know .......................................................................... 4 32. WHICH OF THE FOLLOWING WOULD YOU BE WILLING TO PAY MORE FOR? Smaller Classes ................................................................ 43 Year Round Child Care .................................................... 10 A Longer School Year ..................................................... 10 Better Teacher Training ................................................... 56 None ofThem ...................................................................... 7 33. UNDER A VOUCHER SYSTEM, PARENTS WITH SCHOOL AGE CHILDREN RECEIVE A CREDIT OR VOUCHER FROM THE STATE. THEY CAN EITHER SEND THEIR CHILD TO ANY PUBLIC SCHOOL OR USE THE VOUCHER TO HELP PAY FOR THEIR CHILD'S EDUCATION AT A PRIVATE OR PAROCHIAL SCHOOL OF THEIR CHOICE. Strongly Favor .................................................................... 32 Somewhat Favor ................................................................ 3 1 Somewhat Oppose ........................................................ 13 Strongly Oppose ............................................................. 20 Don’t Know ....................................................................... 5 34. IF CALIFORNIA HAD A SCHOOL VOUCHER PLAN, HOW MUCH FUNDING PER STUDENT SHOULD THE STATE PROVIDE TO SEND A CHILD TO THE SCHOOL OF THEIR PARENTS CHOICE? < 1/4 .................................................................................. 9 About 1/3 ........................................................................ 12 About l~/2 ....................................................................... 24 About3/4 ........................................................................... 8 All ........................................................................................ 20 No Funding ....................................................................... 14 Don’t Know ....................................................................... 13 36. IF A SCHOOL VOUCHER PLAN MEANS PUBLIC SCHOOL FUNDING WILL BE REDUCED, DOES THAT MEAN YOU ARE MORE LIKELY TO SUPPORT A SCHOOL VOUCHERPLANORMORELIKELYTOOPPOSEASCHOOL VOUCHER PLAN? Support ............................................................................. 35 Oppose ............................................................................... 56 Don’t Know ........................................................................ 9 36. THE SCHOOL VOUCHER PLAN WILL MAKE MOST PUBLIC AND PRIVATE SCHOOLS MORE EFFECTIVE. Strongly Agree .................................................................... 26 Somewhat Agree ............................................................. 33 Somewhat Disagree ............................................................ l6 Strongly Disagree ............................................................... 2 1 Don’t Know ................... .. 5 37. A SCHOOL VOUCHER PLAN WILL JEOPARDIZE THE SEPARATION OF CHURCH AND STATE BY PROVIDING .STATE FUNDS TO PAROCHIAURELIGIOUS SCHOOLS. Strongly Agree .................................................................... l 8 Somewhat Agree ............................................................ 1 8 Somewhat Disagree ........................................................... 28 Strongly Disagree .............................................................. 29 Don’t Know ........................................................................ 6 38. A SCHOOL VOUCHER PLAN WILL REDUCE THE BUREAUCRACY IN THE PUBLIC SCHOOLS. Strongly Agree .................................................................... l6 Somewhat Agee ............................................................... 26 Somewhat Disagree ............................................................ 20 Strongly Disagree ............................................................... 29 Don’t Know ....................................................................... 9 39. A SCHOOL VOUCHER PLAN WILL MEAN DISCRIMINA- TION IN ADMISSIONS AGAINST SOME STUDENTS. Strongly Agree ............................ 2 1 Somewhat Agree ................................................................ 2 1 Somewhat Disagree ........................................................... 24 Strongly Disagree ............................................................... 27 Don’t Know ....................................................................... 7 Continued on the next page iI'IOOL VOUCHER PLAN WILL MAKE IT POSSIBLE ,I'ARENTS WITH LOW INCOMES TO SEND THEIR .DREN TO PRIVATE SCHOOLS /ongly Agree .................................................................... 3 2 .a'omewhat Agree ............................................................ 3 3 Somewhat Disagree ........................................................... 14 Strongly Disagree ............................................................... 17 Don’tKnow ........................................................................ 5 41. A SCHOOL VOUCHER PLAN WILL MEAN SOME STUDENTS WHO NEED ADDITIONAL HELP WILL BE LEFT BEHIND AS BETTER STUDENTS GO ELSEWHERE. Strongly Agree ................................................................ 29 Somewhat Agree .............................................................. 22 Somewhat Disagree ............................................................ 21 Strongly Disagree ............................................................... 22 Don’t Know ........................................................................ 6 42. A SCHOOL VOUCHER PLAN WILL INCREASE THE OVERALL COSTS OF EDUCATION. Strongly Agree .................................................................... 32 Somewhat Agree ............................................................. 30 Somewhat Disagree ........................................................... 15 Strongly Disagree ............................................................ 1 5 Don ’t Know ........................................................................ 8 43. A SCHOOL VOUCHER PLAN WILL FREE PUBLIC SCHOOLS FROM THE CURRENT DOMINANCE OF SPECIAL INTERESTS StronglyAgree .................................................................... 18 Somewhat Agree .............................................................. 23 Somewhat Disagree .......................................................... 24 Strongly Disagree ............................................................... 22 Don ’t Know ....................................................................... 1 3 44. A SCHOOL VOUCHER PLAN WILL LEAD MANY RELI- GIOUS OR BELIEF GROUPS, PERHAPS EVEN CULTS, TO OPEN SCHOOLS DEDICATED TO THEIR TEACHINGS. Strongly Agree .................................................................... 2 8 Somewhat Agree ................................................................ 26 Somewhat Disagree ............................................................ 18 Strongly Disagree .............................................................. 21 Don’t Know ......................................................................... 8 45. A SCHOOL VOUCHER PLAN WILL SAVE TAXPAYER MONEY. Strongly Agree .................................................................... l 6 Somewhat Agree .............................................................. l9 Somewhat Disagree ............................................................ 24 Strongly Disagree .............................................................. 3 0 Don’t Know ....................................................................... 1 1 46. THERE IS A PROPOSED CALIFORNIA STATE CONSTITUTIONAL AMENDMENT ON THE BALLOT TO ENABLE PARENTS TO CHOOSE A CHILD'S SCHOOL BY PROVIDINGAVOUCHER FOR EVERYSCHOOLAGECHILD. THE AMOUNT OF THE VOUCHER WOULD BE EQUAL TO AT LEAST 50% OF THE AMOUNT SPENT PER PUPIL IN THE PUBLIC SCHOOLS. Strongly Agree .................................................................... 28 Somewhat Agree ................................................................ 2 8 Somewhat Disagree .......................................................... 13 Strongly Disagree .............................................................. 26 Don ’t Know ........................................................................ 5 47. IF A SCHOOL VOUCHER PLAN IS ADOPTED, SOME STUDENTS MAYTRAVEL FARTHER TO GET TO SCHOOLS OUTSIDE THEIR NEIGHBORHOODS. WHO DO YOU THINK SHOULD BE RESPONSIBLE FOR THESE ADDITIONAL TRANSPORTATION COSTS? Parents .............................................................................. 70 Taxpayers ....................................................................... 1 1 Taxpayers, but Only for Poor Students ............................. 6 Other .................................................................................. 9 Don ’t Know ........................................................................ 3 48. IF A SCHOOL VOUCHER PLAN IS ADOPTED, SHOULD STUDENTS IN BOTH PUBLIC AND PRIVATE SCHOOLS WHO ARE DISABLED OR HAVE OTHER SPECIAL NEEDS GET ADDITIONAL HELP? Yes ..................................................................................... 82 No .................................................................................... 14 Don’t Know .......................................................................... 4 49. CURRENTLY PRIVATE SCHOOLS ARE NOT REQUIRED TO HIRE TEACHERS WHOARE CERTIFIED BYTHE STATE. PUBLIC SCHOOLS MUST. IF A VOUCHER PLAN IS ADOPTED, DO YOU THINK: HireCertified .................................................................... 60 Hire Not Certified ............................................................... 7 Certification Rules Stay ................................................... 28 Don’t Know ......................................................................... 4 50. IF A VOUCHER PLAN IS ADOPTED, SHOULD THE STATE REQUIRE ALL SCHOOLS TO PUBLICIZE THEIR TEST SCORES TO HELP PARENTS CHOOSE SCHOOLS? Yes .................................................................................... 74 No ..................................................................................... 21 Don’t Know ......................................................................... 5 51. PUBLIC SCHOOLS MUST CURRENTLY COMPLYWITH MANY STATE AND FEDERAL REGULATIONS THAT PRIVATE SCHOOLS DO NOT. IF A VOUCHER PLAN PASSES, SHOULD PUBLIC SCHOOLS BE DEREGULATED TO MAKE THEM MORE LIKE PRIVATE SCHOOLS? Yes ..................................................... .4 ............................... 38 No ......................................................................................... 52 Don’t Know ....................................................................... 10 52. IF A VOUCHER PLAN PASSES, SHOULD PRIVATE SCHOOLS BE REQUIRED TO MEET STATE ACADEMIC, FISCAL, AND SAFETY REQUIREMENTS? Yes ....................................................................................... 87 No 11 Don’t Know ........................................................................ 2 53. IF A VOUCHER PLAN IS ADOPTED, THERE MAY NOT BE ENOUGH ROOM FOR STUDENTS TO ATTEND CERTAIN PUBLIC AND PRIVATE SCHOOLS. WHAT IS THE FAIREST WAY TO PROVIDE ACCESS TO SCHOOLS THAT HAS MORE STUDENTS THAN SPACES? Lottery ............................................................................. 28 First Come, First Serve ....................................................... 21 Preferred States .................................................................... 6 Own Admissions ................................................................ 3 5 Don ’t Know ....................... ~ ............................................... 1 0 54. SOME PEOPLE SAY THAT AVOUCHER SYSTEM WILL PRIMARILY HELP THOSE WHO ALREADY HAVE CHILDREN IN PRIVATE SCHOOLS. OTHER PEOPLE SAY THAT A VOUCHER SYSTEM WILL GIVE CHOICES TO THOSE WHO DO NOT NOW HAVE THEM. WHICH COMES CLOSER TO YOUR VIEW? Children Helped ................................................................ 32 Voucher Choice ................................................................ 59 Don’t Know .................................................................... 10 55. WHO DO YOU THINK WOULD BENEFIT LEAST FROM A SCHOOL VOUCHER PLAN — UNDERPRIVILEGED, MIDDLE CLASS, OR UPPER CLASS CHILDREN? Underprivileged ............................................................. 42 Middle Class .................................................................... 16 Upper Class .................................................................... 30 All Children ....................................................................... 4 No Children .......................................................................... 2 Don’t Know ........................................................................ 6 56. IF A VOUCHER PLAN IS APPROVED, SHOULD IT BE: Tested First ....................................................................... 55 Effect All Over .................................................................... 1 5 Failing Areas .................................................................... 2 5 Don ’t Know ........................................................................ 5 57. IF A SCHOOL VOUCHER PLAN IS ADOPTED, SHOULD THERE BE A MAXIMUM SET ON THE AMOUNT OF TUITION WHICH PARTICIPATING PRIVATE SCHOOLS CAN CHARGE? Yes .................................................................................. 67 No ..................................................................................... 26 Don't Know ........................................................................ 6 58. ARE YOU A PARENT? Yes .................................................................................. 69 No ..................................................................................... 3 1 59. IF YES: WHAT ARE THE AGES OF YOUR CHILDREN? 0-5YearsOld ................................................................... 15 6-10Years01d ................................................................. 17 11-16Years01d ................................................................. 16 16- 18 Years Old ............................................................... 9 19orOlder ........................................................................ 34 60. IF YES: DO (OR DID) YOUR CHILDREN GO TO PUBLIC OR PRIVATE/PAROCHIAL SCHOOL? Public ................................................................................. 66 Private/Parochial ............................................................... 12 Both .................................................................................. 13 Neither ................................................................................... 1 Neither ................................................................................... 7 Don’t know ......................................................................... l 61. PARENTS ONLY: UNDER A SCHOOL CHOICE VOUCHERSYSTEM, DOYOU THINKYOUWOULD CHOOSE A DIFFERENT SCHOOL FORYOUR CHILDREN ORWOULD YOU STILL GO TO THE SAME SCHOOL? Same ................................................................................ 64 Difiermt ........................................................................... 28 Don’t Know ....................................................................... 9 62. PARENTS ONLY: IF STILL GO TO SAME SCHOOL: IF THE STATE PAID FOR TRANSPORTATION TO YOUR SCHOOL OF CHOICE,WOULDYOU BE LIKELYTO CHANGE TO ANOTHER SCHOOL? Yes .................................................................................... 16 No ......................................................................................... 81 Don’t Know ......................................................................... 3 63. PARENTS ONLY: IF STILL GO TO SAME SCHOOL: IF THE VOUCHER AMOUNT COVERED THE FULL COST OF TUITION ATA PRIVATE SCHOOL, WOULD YOU BE LIKELY TO CHANGE TO ANOTHER SCHOOL? Yes ...................................................................................... 23 No .......................................................................................... 69 Don’t Know .................................................................... 8 64. WOULD YOU PREFER A STATE PROGRAM THAT PROVIDES PARENTS WITH CHOICE ONLY AMONG PUBLIC SCHOOLS OR A PROGRAM THAT PROVIDES PARENTS WITH CHOICE AMONG PUBLIC, PRIVATE, AND PAROCHIAL SCHOOLS? Public Only .................................................................... 19 Public and Private ............................................................. 75 Don’t Know ........................................................................ 6 65. TAXPAYER SUPPORT FOR SCHOOLS HISTORICALLY HAS BEEN JUSTIFIED AS CONTRIBUTING TO ACOMMON CULTURE. PUBLIC FUNDING OF PRIVATE SCHOOLS THROUGH THE USE OF VOUCHERS WILL: Improve It .......................................................................... 25 Harm 1t ............................................................................. 17 Have No Effect .............................................................. 43 Don’t Know ....................................................................... l4 Continued on the next page .1 YOU REGISTERED TO VOTE IN CALIFORNIA? ................................................................................... 88 ....................................................................................... l l .yon’t Know ........................................................................ l 67. HAVE YOU VOTED IN A RECENT SCHOOL BOARD ELECTION? Yes ..................................................................................... 5 1 No ....................................................................................... 46 Don’t Know ...................................................................... 3 68. WHAT IS THE LAST LEVEL OF SCHOOL YOU COMPLETED? Some High School ............................................................... 6 High School Graduate ...................................................... 24 Some College .................................................................... 28 College Grad .................................................................... 29 Post Graduate .................................................................... 1 2 Don’t Know ......................................................................... l 69. DID YOU/DO YOU ATTEND PRIVATE OR PUBLIC SCHOOL? Public ................................................................................ 75 Private ................................................................................... 9 Both ................................................................................. l 5 Don’t Know ........................................................................ 2 70. WHAT IS YOUR OCCUPATION? High Level Pro ................................................................ 9 Mid Level Professor ......................................................... 15 Executive ......................................................................... 7 Sale .................................................................................. 7 Other White Collar ............................................................. 8 Skilled Labor .................................................................... 10 Semi/Unskilled .................................................................... 5 Student .......................................................................... 6 Housewife .......................................................................... 9 Retired ............................................................................ l4 Farming ........................................................................... O Teacher3 Other ................................................................................... 7 Don’tKnow ........................................................................ l 71. ARE YOU, OR ANY MEMBER OF YOUR HOUSEHOLD, A PUBLIC EMPLOYEE? (IF YES:) IS THIS PERSON A MEMBER OF A UNION OR NOT? Not Public Fanloyee ........................................................ 75 Union ............................................................................... 12 Not Union ....................................................................... 12 Don’t Know ........................................................................... l 72. DO YOU CONSIDER YOURSELF DEMOCRATIC, INDEPENDENT, OR REPUBLICAN? Democratic ....................................................................... 43 Independent .................................................................... l 5 Republican .................................................................... 37 Don’t Know ........................................................................ 5 73. DO YOU CONSIDER YOURSELF TO BE LIBERAL, MODERATE, OR CONSERVATIVE? Liberal ............................................................................... 32 Moderate ............................................................................. 26 Conservative .................................................................... 3 8 Don’t Know ..................................................................... 3 74. WHAT IS YOUR RELIGION? Protestant ...................................................................... 3 8 Catholic ......................................................................... 2 8 Jewish ............................................................................... 2 Mormon/DDS ..................................................................... 2 Other .................................................................................. 14 None ................................................................................. 12 Don’t Know ........................................................................ 3 76. ARE YOU A BORN-AGAIN OR EVANGELICAL CHRISTIAN? Yes ..................................................................................... 26 No .................................................................................... 69 Don’t Know ...................................................................... 4 76. WHAT IS YOUR AGE? 18-24 ................................................................................ 12 25 - 34 ............................................................................. 23 35 ~49 .................................................................................. 32 50 - 64 ............................................................................ 18 65 + ................................................................................... 14 Don’t Know .................................................................... 1 77. DO YOU LIVE IN AN URBAN, SUBURBAN, OR RURAL AREA? Urban ............................................................................... 33 Suburban ........................................................................ 46 Rural ................................................................................ 1 8 Don’t Know ....................................................................... 4 78. IN ORDER TO MAKE SURE OUR STATISTICS ARE ACCURATE, COULD YOU PLEASE TELL MEYOUR RACE? WOULD YOU DESCRIBE YOURSELF AS: Hispanic ............................................................................ 13 Black .................................................................................. 7 White ............................................................................... 68 Asian ................................................................................. 8 American Indian .................................................................... 1 Other ................................................. ; ................................. 1 Don ’t Know ....................................................................... 1 79. FOR STATISTICAL PURPOSES ONLY, WE NEED TO KNOW YOUR TOTAL FAMILY INCOME FOR 1992. WILL YOU PLEASE TELL ME WHICH OF THE FOLLOWING CATEGORIES BEST REPRESENTS YOUR TOTAL FAMILY INCOME? <$lOk .................................................................................. 6 $10 - $20k ...................................................................... 11 $20 — $50k ...................................................................... 41 $50 - $75k ...................................................................... 18 $75 - $100k ..................................................................... 8 $100k + ........................................................................... 6 Don’tKnow ..................................................................... 10 80. HOW LONG HAVE YOU LIVED IN CALIFORNIA? < 2 yrs ................................................................................... 2 2 - 5 ...................................................................................... 4 5 - 8 .................................................................................. 4 8 - 10 ................................................................................... 2 10 - 25 .............................................................................. 21 2 5 yrs + ............................................................................... 39 All My Life ....................................................................... 28 81. SEX Male .................................................................................. 48 Female ................................................................................. 52 82. MEDIA MARKET Eur/Medf/Chic .................................................................... 2 Scrm/Stck/Rno .................................................................... 10 San Fran .............................................................................. 20 Salins/Montxy ................................................................. 2 Bakersfield ....................................................................... 8 Barb/Mar/SLO .................................................................... 2 LA .................................................................................. 48 S.Diego/Yuma ................................................................... 9 A PACE Policy Analysis for California Education Attitudes of Specific Groups Towards Education and Vouchers THE HIGHEST PRIORITY IN CALIFORNIA: THE CURRENT SYSTEM OF PUBLIC EDUCATION IN CALIFORNIA: Education Health Care Economy Environment Don't Know Provides An Needs Minor Needs A Maior D_or11 VOUCHER SYSTEM VOUCHER SYSTEM Equal Education Chanqes Overhaul Km! Strongly Favor 39 11 43 5 1 Strongly Favor 8 18 70 4 Somewhat Favor 37 10 40 12 1 Somewhat Favor 8 31 59 3 Somewhat Oppose 41 15 37 5 1 Somewhat Oppose 11 30 54 5 Strongly Oppose 43 15 34 7 1 Strongly Oppose 10 31 56 3 AGE AGE 18-24 53 7 27 14 0 18-24 14 38 46 1 25 - 34 50 11 32 5 2 25 - 34 8 33 54 5 35 - 49 37 11 42 10 1 35 - 49 11 27 58 3 50-64 31 13 48 8 1 50-64 4 17 76 3 65 + 32 21 41 4 2 65 + 7 16 70 7 AREA AREA Eur/Medf/Chic 19 22 39 21 0 Eur/Medf/Chic I 12 22 56 0 Scrm/Stck/Rno 52 10 30 7 1 Scrm/Stck/Rno 11 26 61 2 San Fran 38 12 42 7 1 San Fran 12 27 57 4 Salins/Montry 43 23 23 7 4 Salins/Montry 9 20 63 8 Bakersfield 39 14 35 7 4 Bakersfield 6 30 57 7 Barb/Mar/SLO 55 2 22 21 0 Barb/Mar/SLO 5 31 64 0 LA. 41 10 39 8 1 LA. 8 25 64 3 S.Diego/Yuma 29 17 46 5 3 S.Diego/Yuma 8 32 55 5 INCOME INCOME <$10K 48 22 2 8 0 <$10K 19 17 58 7 $10 - $20k 41 18 29 9 3 $10 - $20k 9 26 63 2 $20 — $50k 38 13 39 9 2 $20 - $50k 7 26 64 3 $50 - $75k 46 7 40 7 0 $50 - $75k 8 31 56 4 $75 - $100k 40 10 41 7 2 $75 - $100k 8 28 62 2 $100k + 24 4 64 8 0 ' $100k + 7 25 66 2 *RACE *RACE Hispanic 50 15 25 9 2 Hispanic 12 25 53 3 African-American 55 14 27 3 2 African-American 7 18 72 3 White 37 12 42 8 1 White 8 26 53 3 Asian 37 12 39 10 2 Asian 11 24 57 7 SEX SEX Male 35 9 43 11 2 Male 10 25 52 2 Female 45 15 35 5 1 Female 3 27 50 5 ‘ Results for African-Americans. Hispanics and Asians were derived from an oversample. PACE Policy Analysis for California Education Attitudes of Specific Groups Towards Education and Vouchers THE QUALITY OF EDUCATION PROVIDED BY PRIVATE/PAROCHIAL SCHOOLS IN CALIFORNIA pip Better than Somewhat Somewhat Much Don't VOUCHER SYSTEM Different Public Better Worse Worse Know Strongly Favor 5 61 25 1 1 7 Somewhat Favor 8 35 41 3 0 12 Somewhat Oppose 10 21 33 7 2 28 Strongly Oppose 15 24 29 8 4 21 AGE 18 - 24 8 30 37 5 2 17 25 - 34 11 40 34 3 2 11 35 - 49 9 39 31 4 2 16 50 - 64 7 47 28 5 1 13 65 + 12 37 32 2 1 16 AREA Eur/Medf/Chic 11 41 27 3 5 14 Scrm/Stck/Rno 13 41 30 0 0 17 San Fran 8 39 32 4 1 17 Salins/Montry 0 31 38 11 4 16 Bakersfield 8 32 35 7 3 16 Barb/Mar/SLO 7 42 31 0 12 7 LA. 9 41 31 4 1 13 S.Diego/Yuma 11 37 34 4 0 14 INCOME <$10K 10 44 20 10 2 13 $10 — $20k 8 46 26 5 1 14 $20 - $50k 9 36 34 4 1 17 $50 - $75k 12 37 32 5 3 12 $75 - $100k 8 43 33 1 1 13 $100k + 9 43 33 2 0 13 *RACE Hispanic 11 42 31 5 0 11 African-American 15 43 30 3 2 7 White 8 39 34 3 1 15 Asian 16 39 29 3 1 12 SE38“? 8 37 34 4 2 14 10 41 30 4 0 15 Female IF A SCHOOL VOUCHER PLAN MEANS PUBLIC SCHOOL FUNDING WILL BE REDUCED: Support Oppose Don't Know VOUCHER SYSTEM Strongly Favor 61 30 9 Somewhat Favor 33 55 12 Somewhat Oppose 20 75 5 Strongly Oppose 10 86 4 AGE 18 - 24 35 62 3 25 - 34 36 59 6 35 - 49 37 53 10 50 - 64 31 55 14 65 + 33 55 12 AREA Eur/Medf/Chic . 36 59 5 Scrm/Stck/Rno 38 52 9 San Fran 30 58 12 Salins/Montry 39 52 9 Bakersfield 32 62 5 Barb/Mar/SLO 47 41 12 LA. 38 54 8 S.Diego/Yuma 27 61 12 INCOME <$10K 29 55 16 $10 - $20k 43 48 9 $20 - $50k 35 57 8 $50 — $75k 31 59 11 $75 - $100k 34 59 7 ’ $100k + 47 50 3 *RACE Hispanic 37 57 6 African-American 41 53 7 White ‘ 35 55 10 Asian 36 57 7 SEX Male 37 55 8 Female 33 57 11 ' Results for African-Americans. Hispanics and Asians were derived from an oversample. A PACE Policy Analysis for California Education GRADES GIVEN TO CALIFORNIA PUBLIC SCHOOLS: VOUCHER SYSTEM Strongly favor Somewhat favor Somewhat oppose Strongly oppose AGE 18 -24 25 - 34 35 -49 50 -64 65 + INCOME <$10K $10 - $20k $20 - $50k $50 - $75k $75 - $100k $100k + *RACE Hispanic African-American White Asian SEX Male Female (3)0100) bwmxroooo Whmmk) (Db E 25 37 27 26 36 31 32 25 22 27 28 27 34 32 37 33 20 29 40 28 30 Q 37 4o 46 38 42 36 37 42 43 47 44 4o 37 39 35 4O 41 39 39 42 37 Q 23 11 14 15 13 18 16 16 15 14 17 18 19 13 13 21 17 12 18 15 ©5AA$® 03‘1me 401000: 03A Mm—xmxri; 01-5030) 03-h Attitudes of Specific Groups Towards Education and Vouchers 2. GRADES GIVEN TO CALIFORNIA PRIVATE/PAROCHIAL SCHOOLS: VOUCHER SYSTEM Strongly favor Somewhat favor Somewhat oppose Strongly oppose AGE 18 — 24 25 - 34 35 - 49 50 — 64 65 + INCOME <$10K $10 - $20k $20 — $50k $50 — $75k $75 - $100k $100k + *RACE Hispanic African—American White Asian SEX Male . Female A 24 16 10 10 12 15 19 21 11 20 15 16 22 27 17 16 16 17 13 20 E 49 53 29 40 56 45 45 42 46 42 35 47 53 52 41 49 52 45 50 51 41 Q 8 11 17 13 10 10 12 8 12 20 12 9 13 4 9 13 13 10 7 11 11 Q ##NNOOM ANOONN CDMNA ION-hm (A) FAIL OO—‘OOO 00000 4000 OO-‘O OO Dani m 17 18 42 30 19 27 21 26 29 31 30 27 14 18 18 17 16 26 24 22 26 ' Results for African-Americans. Hispanics and Asians were derived from an oversample. Wei A PACE Policy Analysis for California Education THOSE WHO WOULD BENEFIT LEAST FROM A SCHOOL VOUCHER SYSTEM Attitudes of Specific Groups Towards Education and Vouchers UNDER A SCHOOL CHOICE VOUCHER SYSTEM, PARENTS WOULD: Under- Middle Upper Afl bl_o M Keep the Choose A M privileged Class Class Children Children Know Same School Different School Know VOUCHER SYSTEM VOUCHER SYSTEM Strongly Favor 29 15 38 10 3 5 Strongly Favor 54 41 5 Somewhat Favor 37 18 36 1 0 8 Somewhat Favor 61 28 12 Somewhat Oppose 53 20 22 1 1 3 Somewhat Oppose 80 12 8 Strongly Oppose 64 12 13 3 4 Strongly Oppose 75 16 10 lDEOLOGY PARTY Liberal 48 11 32 2 1 5 Democratic 63 28 9 Moderate 42 17 30 4 2 4 Independent 68 23 9 Conservative 35 18 29 6 2 9 Republican 66 27 7 AREA AREA Eur/Medf/Chic 50 5 33 5 7 0 Eur/Medf/Chic 66 24 10 Scrm/Stck/Rno 39 14 34 7 0 7 Scrm/Stck/Rno i 62 33 5 San Fran 50 9 28 3 1 8 San Fran 70 22 7 Salins/Montry 48 0 47 0 0 4 Salins/Montry 43 46 1o Bakersfield 45 15 22 7 3 7 Bakersfield 71 23 5 Barb/Mar/SLO 47 14 17 7 7 7 Barb/Mar/SLO 66 20 14 LA. 38 20 30 5 2 6 LA. 63 27 10 S.Diego/Yuma 37 19 37 2 1 4 S.Diego/Yuma 54 36 10 INCOME INCOME <$10K 40 19 30 6 1 3 <$10K 62 21 16 $10 - $20k 46 17 24 6 1 7 $10 - $20k 70 1 22 8 $20 — $50k 41 16 31 4 3 6 $20 - $50k 61 31 8 $50 - $75k 43 20 28 4 1 4 $50 - $75k 70 26 4 $75 - $100k 39 5 41 5 0 10 $75 - $100k 56 31 13 $100k + 47 12 24 1 4 11 $100k + 69 31 0 *RACE *RACE Hispanic 37 21 29 4 2 6 Hispanic 58 34 8 African-American 45 11 34 4 1 6 Africa n-American 63 27 10 White 41 16 30 5 2 7 White 65 26 8 Asian 38 22 33 2 0 5 Asian 57 28 15 SEX SEX Male 40 17 32 4 2 6 Male 66 25 9 Female 43 15 28 5 2 7 Female 62 30 9 4 ' Results for African-Americans, Hispanics and Asians were derived from an oversample. Stronqlv Somewhat Somewhat Stronqlv MINOR/MAJOR CHANGES Favor Favor Oppose Oppose Provide Quality Education 30 27 16 23 With Minor Changes 22 36 14 23 A Major Overhaul 36 29 11 18 REGISTERED TO VOTE Yes 32 29 13 21 No 30 41 12 9 VOTE IN SCHOOL ELECTIONS Yes 31 24 13 27 N0 32 38 13 12 PUBLIC EMPLOYEE/UNION Not public Employee 33 32 12 18 Union 27 29 12 30 Not union 29 27 17 23 PARTY Democratic 28 29 13 26 Independent 27 32 11 23 IDEOLOGY Liberal 23 30 15 25 Moderate 30 31 13 25 Conservative 39 32 12 13 RELIGION Protestant 35 27 15 19 BORN AGAIN Yes 41 28 13 16 N0 28 33 12 21 01070) hMU‘I O'I GINO) Ah- AGE 18 - 24 25 - 34 35 - 49 50 - 64 65 + REGION Urban Suburban Rural AREA Eur/Medf/Chic Scrm/Stck/Rno 1 San Fran Saiins/Montry Bakersfield Barb/Mar/SLO L.A. S.Diego/Yuma INCOME <$10K $10 - $20k $20 - $50k $50 - $75k $75 - $100k $100k + *RACE Hispanic African-American White Asian SEX Male Female A PACE Policy Analysis for California Education Attitudes of Specific Groups Towards Education and Vouchers CALIFORNIA ATTITUDES TOWARDS SCHOOL VOUCHERS AS A CONCEPT: Stronqlv Somewhat Somewhat Stronqlv Favor Favor Oppose Oppose 20 46 16 13 31 39 12 14 37 31 10 17 35 18 16 28 24 21 15 32 31 31 12 19 32 32 12 22 32 28 15 18 53 25 0 23 31 37 13 16 29 30 11 26 23 16 18 38 27 32 22 15 35 24 7 26 33 30 13 18 31 33 11 18 31 24 11 22 29 41 14 13 31 30 13 22 29 33 16 19 32 35 9 18 43 25 9 19 30 38 10 18 34 30 10 22 33 27 14 21 33 33 13 13 32 34 12 16 31 27 13 23 \INN 000142-01 bmhmwa‘, NQVwA-bwo 0101 ' Results for African-Americans, Hispanics and Asians were derived from an oversample. 3‘ r .ng ‘ $3?” New I PACE Policy Analysis for California Education INST/TUT 5 FG . Directors STUD/Es gsfigMEA/TAL James W. Guthrie 0C Y 'niversirv 0 011' ornia gerkeley‘ f C f T 4 1993 era . HI ward U gacrrrinfmo/ laniversin of California NIVEHSITYOF CALIFORN Michael W. Kirst S’W’d U"""’””y EMBARGOED FOR RELEASE CONTACT: Sheppard Ranbom/ Julia E. Koppich September 30, 1993 Anne Marie Roberts 3‘7“” .Df'ec‘o'. . 10 A.M. PST 510/642-7223 mversrty of California Berkeley Statewide Poll Indicates Public Support for Voucher Concept But Californians Do Not Want Unregulated Private "Voucher" Schools Most Californians Want Voucher Schools to Be Required to Meet State Standards Hire C ertified Teachers, Publish Test Scores, and Care for Students With Special Needs PACE Poll Says 6 in 10 Californians Want Major Overhaul of Public Schools But Public Does Not Want Changes That Could Hurt Public Education BERKELEY--September 30, 1993—A new statewide poll on public attitudes toward education and vouchers indicates that while Californians favor the concept of allowing choice among all public and private schools by a wide margin, they feel as strongly that they do not want unregulated private schools. According to the findings of a statewide poll released today by Policy Analysis for California Education (PACE), 63 percent of adult Californians are in favor of the school voucher concept, while 33 percent oppose the idea. Support for the concept is strong from virtually every racial and ethnic group and socio—economic category, except the elderly. But Californians are equally adamant that a voucher initiative should closely monitor and control voucher-redeem ing schools that receive state funds. For example: 0 A vast majority (87 percent) believe that if a voucher plan is enacted, private schools should be required to meet state academic, fiscal, and safety requirements. 0 A majority (60 percent) say if a voucher plan is adopted, voucher schools should be required to hire certified teachers. 0 More than 8 out of 10 Californians (82 percent) believe that under a voucher plan, both public and private schools should be required to provide additional support for students with special needs. School of Education, University of California, Berkeley, CA 94720 (510) 642-7223 Fax (510) 642-9148 0 Nearly three-fourths (74 percent) say voucher schools should be required to publish test scores. "Californians are thoroughly dissatisfied with public education and would like to see it dramatically overhauled. But while the public wants a choice plan to include private as well as public schools, they don't want a voucher plan that could damage public schools or that would allow voucher redeeming schools to go unregulated," says James Guthrie, a co-director of PACE and a professor of education at the University of California at Berkeley. According to the PACE findings, Californians are leery of some of the fiscal implications of a choice plan. They would not support a voucher plan if it would result in drawing money away from public schools. Fifty-six percent say they would oppose a voucher system if public school funding is reduced. Those who are somewhat favorable to a school voucher system would oppose it if public school funding is cut. “ PACEuan independent, non-partisan think tank based at the University of Califomia-Berkeley and Stanford—conducted the poll to help the public and decisonmakers understand more about the implications of public policy actions in order to better inform their decisionmaking. "The poll is designed to explore what Californians want in their schools, their readiness-and willingness-~to change, and underlying attitudes toward education that could affect policy decisions," according to Julia Koppich, deputy director of PACE and a faculty member at the University of Califomia-Berkeley. The poll indicates that Californians express substantial dissatisfaction with public schools today. Some 87 percent of Californians believe public schools should be changed and a majority of Californians (61 percent) would like to see a major overhaul. African-Americans are more likely to want a major overhaul than Hispanics (58 percent) Asians (57 percent) or whites (63 percent). According to the poll, conducted for PACE by Penn & Schoen Associates from September 4-11, nearly three-fourths (73 percent) believe California student achievement ranks somewhere in the middle or at the bottom among the 50 states. Seven in 10 Californians (71 percent) believe private and parochial schools are much better than public schools. Nearly two thirds (63 percent) would grade local private and parochial schools "A" or "B" compared to only 34 percent who would give high marks to public schools. These views are shared in roughly the same percentages among all racialand ethnic groups. C What Californians want in education are safe schools, high quality teaching and curricula, smaller class sizes, and more instruction focused on "values." A majority of Californians (56 percent) would be willing to spend more money for teacher training, while nearly half (43 percent) would be willing to pay for a longer school year. But few Californians (10 percent) would pay for longer school year. A majority of Californians (53 percent) say teachers are not paid enough. Most Californians (59 percent) say vouchers will expand options for children, while one in three (32 percent) say vouchers will primarily help those who already have children in private school The fact that the public believes the concept of vouchers provides options does not mean Californians believe vouchers would result in a level playing field for disadvantaged students, however. Some 42 percent of Californians believe the underprivleged will benefit least from vouchers. A majority of Californians (55 percent) say a voucher plan should be tested in a few school districts before full state-wide implementation. Some Californians (25 percent) say that vouchers should be implemented only in areas where schools are failing. The public is divided on the fairest way to ensure access to voucher schools-~whetether to allow schools to set their own admissions standards (35 percent) or offer spaces on a lottery (28 percent) or first come-first served basis (21 percent.) Funding for PACE’s analyses of the school voucher initiative is from The Stuart Foundations, The Walter and Elise Haas Foundation, The Miriam and Peter Haas Foundation, The Ahmanson Foundation, The San Francisco Foundation, The Wallace Alexander Gerbode Foundation, The Walter S. Johnson Foundation, ARCO, Columbia Foundation, The David and Lucile Packard Foundation, and The William and Flora Hewlett Foundation. Copies of the report ane available from Policy Analysis for California Education. Department of Education. 3659 Tolman Hall. University of California at Berkeley. Berkeley. CA 94720 (510) 642-7223. POLICY ANALYSIS FOR CALIFORNIA EDUCATION Proposition 174 (Voucher Initiative) Financial Analysis INSTITUTE OF GOVERNMENTAL STUDIES LIBRARY OCT 4 1993 UNIVERSITY OF CALIFORNIA TABLE OF CONTENTS Summary Conclusions ............................................................................................................ 3 Introduction ................................................................................................................................ 4 A Primer on School Finance ................................................................................................... 5 Voucher Financing ................................................................................................................... 7 Will The Voucher Plan Cost or Save Money ....................................................................... 8 Proposition 174 Costs Worksheet #1 .................................................................................... 1 1 Proposition 174 Costs Worksheet #2 .................................................................................... 1 2 What Happens in a Local School District if Proposition 174 is Enacted? ................................................................................................................................ 13 Financial Interactions with Proposition 98 ........................................................................... 15 Financial Consequences for Individual Schools ................................................................ 18 Tradeoiis Involved in State Intervention ............................................................................... 17 Glossary of California School Finance Terminology ......................................................... 18 Financial Analysis of Proposition 174 Page 2 Summary Conclusions - Fiscal consequences of Proposition 174 are characterized by uncertainty. Financial projections are heavily dependent upon assumptions regarding the number of students who redeem vouchers and a variety of decisions which must be made by the legislature and the governor. . Proposition 174 exposes the state to $1.35 billion in potential added costs. These costs are attributable to the possible need to pay for all currently enrolled private school students. . in order forthe state to realize savings from Proposition 174, (1) approximately 1 million students would have to transfer from public schools to "scholarship" schools, and (2) policymakers would need to choose not to reinvest the "savings" in education. - lf "savings" from Proposition 174 are not reinvested in education, then per pupil revenues for public school students would drop and the value of the voucher would decline. ° Substantial annual taxpayer savings could result if "savings" from Proposition 174 were not reinvested in schools or not transferred to other government-funded services. . Proposition 174 saves public costs of school construction, depending upon how many current and future public school students utilize "scholarship" schools. - Per pupil revenue differences among public school districts will increase proportionate to the number of public school student transfers to "scholarship" schools. - Proposition 174 dilutes the public school minimum per pupil revenue guarantee voted by the electorate in 1989. (This is the Proposition 98 guarantee.) Financial Analysis of Proposition 174 Page 3 Introduction On November 2, 1993, Californians will face their most important education decision since the state's formation. Ballot Proposition 174, if enacted, will amend the state constitution and establish "scholarships" redeemable by parents for their children's kindergarten through twelfth grade schooling. If this ballot measure passes, public schools will continue to exist, as will today's many kinds of private schools. However, alongside of these two conventional schooling alternatives will be a third choice, "Scholarship Redeeming Schools." These new schools will be paid for, or at least financially subsidized, by public funds. However, these scholarship schools may well have privately selected governing boards. They may be religiously oriented. Does this make them public or private schools? We do not know the answer to this question. Ultimately such a determination may be a matter for the courts, the legislature, or simply a matter of no consequence. There are many additional unknowns regarding the operation of the" proposed voucher plan and its possible effects, both good and bad. However, in this paper we make an effort to reduce some of the uncertainty on at least one dimension, by addressing questions about public costs and possible public cost savings. Our principal question here is, "What are the financial consequences of the proposed voucher plan?" We divide this concern into several subquestions: 0 Will the voucher plan save or cost money for the state of California? 0 How will the voucher plan interact with the complicated public school financing provisions of the currently controlling constitutional provision, Proposition 98,1 and will any of these interactions reduce (1) the dollar value of the voucher or (2) total funding conventionally available to public schools? 0 What will be the financial consequences for local public school districts? 0 What will be the financial effect on an individual public school if a student leaves to attend a "scholarship redeeming school?" 0 What are the possible interactions of the voucher plan with issues of public school per pupil revenue disparity raised in the California Supreme Court's 1976 decision in Serrano v. Priest? 1 Enacted as a ballot initiative in 1989. Financial Analysis of Proposition 174 Page 4 A Primer on California School Finance Before addressing the questions PACE attempts to answer in this paper, the reader needs a basic understanding of the manner in which California now finances its public and private schools. California Public School Finance Two significant decisions, one by the judiciary and one by the electorate, have provided California with what, for all practical purposes, is a state system of public school finance. In the 1976 court case, Serrano v. Priest, the California Supreme Court decreed that there could be no significant link between the local property wealth of a school district and its per pupil expenditures. This decision, coupled with the 1978 enactment of Proposition 13, the constitution-amending property tax limitation, guided the formation of a public school funding system in which the legislature and governor, through the state budget, annually determine local district per pupil revenue levels. The per pupil revenue amount allowed by law for a specific school district is a function of that district's historic spending level. In effect, whatever per pupil revenue amount a school district was raising in 1976 was the level at which it was legislatively "frozen" in order to comply with the Serrano decision. Districts in which the "base revenue limit" was below the state average have been permitted to increase their per pupil amounts at a faster rate than districts with revenues above the state average. The general effect has been to compress per pupil revenues in California into a far narrower range than in most other states. In fact, approximately 95% of California's school children are within a relatively narrow per pupil revenue range of about $300. Local property tax proceeds contribute to a specific district's per pupil revenue ceiling. However, if they are insufficient to reach the state specified overall per pupil revenue minimum, then state general funds are allocated to the local district to make up the difference. State lottery revenues are a portion of this state aid. Federal financing, and selected state special funds, are provided to local school school districts for the education of children with expensive special needs.2 These funds are provided in addition to local property tax revenues and state funding. Local school district governing boards, except in the instance of a few unusually property wealthy school districts, have little say in determining their per pupil revenues. In effect, they have no property taxing authority. This is a far different system than most states in which local school district governing boards determine per pupil revenues by establishing property tax rates. 2 These are known as "categorical aids" because a local school district can only spend the revenues for the purposes categorized by the higher level of government in granting the special revenues. Financial Analysis of Proposition 174 Page 5 California Private School Finance It is difficult to provide a comprehensive description of private school finance in California because there is no private school "system." Most private and parochial schools operate independently. Even religiously affiliated schools are generally only loosely aligned with each other. Despite sharing a common denomination or ideology, they generally are responsible for generating their own resources school- by-school. Regardless of such complexity, the principal avenue through which private schools generate resources is- through the imposition of user fees, tuition. This ranges from a small amount, say $1,000 in some schools, to an annual fee of $10,000 or more in some elite schools. In addition, most private schools charge separately for transportation, after school childcare, books, food, recreational activities, science laboratory supplies, and similar items. Also, private schools typically engage in a variety of fund raising efforts through activities such as bake sales, car washes, and second hand clothing stores. The following box contains current facts regarding several basic school finance components related to the voucher measure. Financial Analysis of Proposition 174 Page 6 Voucher Financing Proposition 174 specifies that the average amount of the voucher, to be established specifically by the legislature, cannot be‘ less than one-half the amount currently spent on public school students. In today's terms, the per pupil value of the voucher would approximate $2,500.3 The legislature has the discretion to adjust this average amount by grade level. Thus, for example, vouchers for high schools could be higher than for elementary grades. Keep in mind that the legislature may increase the value of the voucher; the amount is not fixed, and, in fact, may vary from year to year. For example, if state elected officials decided to spend more than $5,000 per public school pupil, then the per pupil value of the "scholarship" would increase by half the elevated amount. The amount the legislature and governor might decide to spend on public school students is itself subject to a constitutional provision, Proposition 98.4 The voucher initiative also specifies that the amount of an annual "scholarship" in excess of what is paid for tuition can be "credited" to a student's account, established by the state. The excess, the difference between tuition and the voucher amount, can be used subsequently to pay for secondary school or college tuition. The legislature also has the discretion to pay for transportation in keeping with rules it devises. The voucher initiative makes no provision for additional public funds to flow to private schools exclusively for school construction or facilities leases. However, there is nothing which prohibits a private school from utilizing all or part of the $2,500 "scholarship" to construct or lease facilities. 3 State agencies disagree regarding current public school per pupil revenues. However, estimates range only from $5,000 to $5,200 per pupil. Differences result principally from using Average Daily Attendance (ADA) or Average Daily Membership (ADM) as a divisor, once having summed spending components. This analysis utilizes the $5,000 per public school pupil figure because we believe it to be the most accurate computation of the voucher amount according to Proposition 174 provisions. (The proposition speaks of enrollment, not ADA.) Remember, however, that Proposition 174 authorizes state government to increase the amount of the voucher. $2,500 is only a minimum. 4Enacted by ballot initiative in 1989, Proposition 98 specifies the minimum which must be spent on public school students. However, under certain interpretations of the voucher initiative, Proposition 98 formula elements might be altered and the result would be a reduced spending on both public and private school students. We explain these complicated Proposition 98 interactions in a subsequent section of this paper. Financial Analysis of Proposition 174 Page 7 Will the Voucher Plan Cost or Save Money? A prominent question in the discussion surrounding Proposition 174 is, "Will the voucher plan cost or save money for California?" The answer is "Yes." In large measure, it depends heavily upon the assumptions that are made about (1) "consumer" behavior, in other words, how many students will choose "scholarship" schools, (2) implementing steps to be taken by the legislature, and (3) state government's priorities, in other words, whether or not to return "savings" to taxpayers or reinvest them in government services. Let us examine first the more straightforward question of capital outlay, funding for school facilities construction. Then we will address the more complicated issue of operating costs, the funding of recurring day-to-day school activities. Capital Outlay Costs California currently has no state financing provisions for public or private school construction. Over the past fifteen years, state financial contributions to school construction have resulted from the sale of voter approved, state backed bonds. The supply of these funds is now exhausted and no statewide ballot measures to sell more bonds are scheduled to come before the public in the immediate future. In addition, the state currently is bonded to capacity. The current state school aid building program is due to expire and no replacement mechanism is yet in place. By a complicated set of procedures, local school districts can seek voter approval for constructing new buildings. Also, local school boards can impose fees on home construction, proceeds of which can be used to construct school buildings. However, California's depressed economy has dampened new home construction, and builder fees are not currently a major source of school construction revenue. Despite such complexity and uncertainty, the voucher plan, if enacted, almost assuredly saves California school construction money. Currently, the state faces an approximate $10 billion classroom construction backlog. This has been triggered by massive public school enrollment increases that have occurred over the past decade. California's school systems simply do not now have adequate room to accommodate the large influx of new students. If enrollments continue to increase, as projected currently, then the cost of facilities might be higher yet. Consequently, the voucher plan is likely to reduce the state's and local school districts‘ construction expense exposure. Private providers, voucher-redeeming schools, will simply have to obtain facilities from among the existing building stocks or otherwise arrange for facilities to be built. As mentioned above, they could cover or defray these costs from the per pupil $2,500 vouchers. However under such a scenario, the public almost assuredly saves money that otherwise would have to be generated to construct public schools. The difficulty is that there is virtually no way to estimate how much. The amount of cost savings is extremely difficult to project because of all the uncertainties. The number of student transfers to private schools, the locations of expanded or new private schools, and the existing capacity of public schools all impact the amount of cost savings which may be realized. Financial Analysis of Proposition 174 Page 8 Operating Costs The answer to whether or not the voucher plan saves or costs California state government money depends crucially upon the assumptions made about parent responses to the availability of school choice and state government's implementing decisions. PACE's assumptions for purposes of analysis are as follows: . Initial dollar value of individual vouchers will average $2,500. (The legislature will not opt for a higher voucher amount or separately to fund added services (e.g., transport) or construction costs for scholarship redeeming schools.) - Virtually all eligible private school students will choose eventually to attend scholarship redeeming schools. - Administrative costs of a voucher plan, relative to the approximate $26 billion total amount now spent by the state on public education services, will be minimal. - Total enrollments (for the total of public and private school students) will grow an average of four percent a year.. . Inflation will increase at three percent a year. - State overall economic conditions will not change dramatically. Principal variables which will establish the range of possible voucher plan financial costs or savings to the state are: . Proportions of public and private school students choosing to attend scholarship redeeming schools. . State government decisions regarding public school per pupil base revenues State Exposure to Added Costs: Absorbing Existing Private School Enrollees Assume, for analytic purposes only, that no currently enrolled public school students choose to transfer to scholarship redeeming schools. Under this scenario, the state would be exposed to a range of added costs for whatever proportion of currently enrolled private school students chooses to transfer to scholarship redeeming schools. This portion of the analysis focuses on the prospect of added costs to the state. A subsequent section will examine prospective "savings" to the state from public school transfers. Financial Analysis of Proposition 174 ‘ Page 9 California private schools currently enroll slightly more than a half million students (540,000)5. The bulk of these, approximately 80 percent, are not eligible under the voucher plan for a state-financed "scholarship" until 1995. Thus, they pose no immediate financial burden to the state if the voucher plan is enacted in November. However, approximately 124,000 of today‘s private school students would be immediately eligible for state—financed "scholarships," or would be eligible as soon as the legislature forges an implementation plan. (These are students who enrolled in private schools after October 1991.) Their schooling currently is paid for privately. Thus, to give these students a voucher would be an added expense to the state. How much? Assume that there are 120,00 immediate voucher eligible students. If all of them chose to enter "scholarship" schools, an unlikely scenario, then the added cost to the state would be $310 million. More realistically, if 100,000 (81 percent) of them chose to attend a scholarship redeeming school, added state costs would be $250 million. By 1995, all remaining private school students become eligible for "scholarships." This is an additional 416,000 enrollees. If all of them chose to redeem vouchers, the state's added cost exposure would be $1.04 billion. If, more realistically, we assume 80 percent (332,000) of these choose scholarship redeeming schools, then the potential added costs to the state, at $2,500 each, is $830 million. Adding $830 million to the $250 million (for 80% of private, immediately eligible school students), places the state's prospective expense exposure at $1.08 billion. A reader should keep in mind, however, that Proposition 174 is effectively an entitlement plan whereby all current and future private school students are eligible for public subsidy. Should all 540,000 current private school students eventually take advantage of this entitlement, the state's potential cost exposure in current dollars is $ 1.35 billion. Obviously, if lower percentages transfer, the state's prospective exposure is lower. 5This figure is the State Department of Education's estimate of the number of students currently enrolled in private schools which exceed the Proposition 174 limit of at least 25 enrollees. Financial Analysis of Proposition 174 Page 10 Proposition 174 Costs Worksheet # 1 Private and Parochial School Estimated State Absorption Costs Total California Private and Parochial School Enrollments 540,000 Students immediately eligible for "Scholarships" 124,000 PACE assumed number of students who will transfer 100,000 State annual voucher costs per transferee $2,500 Total estimated state costs for immediately eligible transfers $250,000,000 Private and parochial school enrollees eligible in 1995 416,000 PACE assumed number of 1995 transfer students 332,000 State annual voucher costs per transferee $2,500 Total estimated state costs for 1995 eligible transfers $830,000,000 Total estimated state costs for immediate and 1996 transfers $1.08 billion Prospective State Savings: Public School Transfers to Scholarship Schools There is a potential savings to the state for every public school student who transfers to a scholarship redeeming school. Assuming that the voucher is $2,500 per pupil, the state will save the difference between this amount and what it will constitutionally be required to allocate for each public school pupil. PACE estimates the potential computational saving as $1,250 per transfer from public schools. This "saving" is computed in the following manner. For each public school pupil transferring to a "scholarship" school, the state assumes the specified $2,500 costs of the voucher. Thereafter, there is M an automatic $2,500 savings from the remainder of the Proposition 174 specified computation of $5,000 per public school pupil. Why not? Because $400 of the $2,500 amount is contributed by the federal government and is not available as a savings to the state. An additional $450 is state categorical aid which is not distributed on a per capita pupil basis to school districts. Rather, it is distributed in keeping with the characteristics of specified categories of students, such as those who are handicapped. (Proposition 174 leaves to the legislature's discretion whether or not these state funds for special purposes will be added to the value of the voucher.) Another $400 is generated by local school districts themselves through foundation grants, parents' contributions, and the Financial Analysis of Proposition 174 Page 11 rental or sale of property. These funds do not automatically revert to the state as savings. One way of examining potential savings is to look at the current breakdown of funds. This analysis is one of several possible scenarios. The result of this analysis is that there is a potential state "savings" of $1,250 for each public school student transferring to "scholarship" schools. The ultimate disposition of such "savings" is left to the discretion of the legislature and governor. Proposition 174 Cost Worksheet #2 Estimating State Government "Savings" From Public School Transfers to "Scholarship" Schools Total current spending from Proposition 174 specified sources $26 billion Current number of public school enrollees 5.2 million Total spending per public school enrollee $5,000 Proposition 174 voucher value (1994) $2,500 (Specified as half per public school pupil spending amount) Net computational savings per transferring public pupil $1,250 ($5,000 minus $2,500 voucher: $2,500 minus $400 in local school district contributions (e.g., foundation grants and parents contributions), minus $450 in state categorical aid, minus $400 in federal funds, equals a state potential savings remainder of $1,250 ) Number of public school transfers needed for state to save $1.08 billion. (($1.08 billion divided by $1,250.) 864,000 Percent of current public school enrollees (864,000 divided by 5.2 million) 16.6% Financial Analysis of Proposition 174 Page 12 What Happens in a Local School District if Proposition 174 is Enacted? Determining prospective savings or added costs to the state treasury does not adequately explain revenue dynamics in a local school district. This is because what a California public school district receives and is permitted to spend per pupil is a function of a crazy quilt pattern of intertwined statutes and constitutional provisions which are difficult to disentangle. This section attempts to dissect these interrelated features and arrive at a conclusion regarding the possible effects of Proposition 174 upon local school district financing. As a consequence of the previously-mentioned Serrano decision, Proposition 13, and state school financing statutes, the average California public school pupil has a state- specified revenue limit of $3,2006. Local school districts, on average, are restricted and cannot spend more per pupil in local property tax monies and state equalization aid than this amount.7 Thus, if (1) local property tax proceeds continue to flow to school districts as is now the case, and (2) a local public school district has fewer students because of transfers out to scholarship redeeming schools, then local property tax proceeds continue to be available in the school district to subsidize a larger and larger portion of the revenue limit amount for each remaining public school student. If public school transfers increase, assessed value of property escalates, or if both occur, then locally generated property tax revenues become an increasing proportion of state basic aid. Under these scenarios, and assuming the legislature does not elevate the "base revenue limit" per public school pupil, then the state begins to save additional money because the state's required "match" declines as the local share increases. The following hypothetical example illustrates the dynamic by which local property tax proceeds can come to c0ver a growing amount of the costs of public schooling. Imagine an average spending ($3,200 per pupil base revenue limit amount) public school district of 10,000 enrolled pupils. Funds from its revenue limit calculations would total $32 million. Approximately 40 percent of this total ($12.8 million) would be derived from taxes on local property. The remaining $19.2 million would be a subsidy of state funds. This equals a state equalization aid subsidy of $1920 per local student. If this district lost half its pupils (5,000) to scholarship redeeming schools, its total revenue limit calculation would now be $16 million (5,000 multiplied by $3200). However, it would continue to collect $12.8 million in locally generated property 6 This is less than the $5.000 per pupil used as a base for calculating Proposition 174 vouchers because the latter amount contains federal funds, state categorical aid funds, child care monies and a host of other revenues that Proposition 174 specifies are to be calculated in the voucher base. 7 Specified funds can be spent on top of this "Base Revenue Limit". These include monies for handicapped children, federal aid, etc. Financial Analysis of Proposition 174 Page 13 taxes. The total state subsidy to the district would now be only $3.2 million. This equates to a state subsidy of $640 per student, or $1280 less than what the district received in per pupil state aid prior to the student transfers. Public School Revenues Could Become Uneven If a school district had high local property wealth (assessed valuation per pupil substantially in excess of the state average), and if a high number of its students transferred to scholarship redeeming schools, property tax revenues would soon cover or exceed the state specified "base revenue limit" for each student. At this point, under current law, the district's revenue limit ceases to be controlled by state statutes. The district, in other words, begins to control its own per pupil spending destiny. It could continue to rely upon its local property taxes and begin to spend more money per pupil than the base revenue limit specified. Under the above scenario, if large numbers of districts became basic aid districts, California would revert to a pre—Serrano condition in which local property wealth was a major determinant of the amount per pupil a school district had available to spend. This link between local property wealth and available per pupil revenue was declared unconstitutional by the California Supreme Court in 1976. Since that time, California has been obligated to ensure that 95 percent of public school pupils fall within a relatively narrow revenue band.8 8 This initial trial court decision in Serrano v. Priest decreed that property related revenue differences could not exceed $100 per pupil. Subsequent legal decisions have interpreted this amount to be subject to inflation. Hence, it is assumed that a per pupil revenue distribution of $300 would probably be found constitutional today. Ninety five percent of California's public school pupils now fall within this revenue constraint. Financial Analysis of Proposition 174 Page 14 Financial Interactions with Proposition 98 Proposition 98 was a ballot initiative enacted by voters in 1989. It was intended by its professional educator sponsors to establish a spending floor for California public education. The constitutional provision specifies revenues per pupil and total state budget revenue amounts, which must be allocated for the support of public education, K-14.9 Proposition 174 specifies the voucher amount, $2,500 per pupil, as a credit against Proposition 98 mandated state school spending and simultaneously specifies that the state's pupil obligation be reduced by one for each scholarship student. Proposition 174 also specifies that the "savings" of $2,500 per pupil, the difference between what is allocated to a scholarship student and the amount presumably spent on public school students, be credited as fulfilling Proposition 98 public school spending mandates. The total computational loss to the Proposition 98 specified public school fund from these interactions is $5,000 per each scholarship pupil. Each time the state pays $2,500 for a scholarship, the public school fund, computed under Proposition 98, is reduced by that amount plus an additional $2,500.10 It does not take long to see that, under such an arrangement, the revenue amount provided by Proposition 98 would soon reduce the state obligation to fund public schools. The larger the number of transfers to "scholarship" schools, the faster this Proposition 98 obligation to public school funding declines. A reader should keep in mind that Proposition 98 is a spending minimum and the legislature and the governor not only are free to allocate larger amounts but in at least the two past years actually have done so. If state officials chose strictly to adhere to interacting provisions of Propositions 174 and 98, one of the eventual consequences could be to reduce the scholarship's dollar value. This would happen if substantial numbers, say 40 percent, of public school students transfer to scholarship redeeming schools. In that the voucher is calculated as being at least half of what is allocated per pupil for public schools, as this latter amount declines, unless the state intervenes, scholarship amounts also decline. 9 Proposition 98 involves three fiscal"tests" by which the amount to be spent on public education is determined. Test one prescribes that a historically determined proportion of the state's general fund budget allocated to public education must be maintained. Test two asserts that a historically determined per pupil revenue figure, plus enrollment increases and inflation, must be maintained. Test three is a variant of test two and is applied under adverse state financial conditions. 10 A reader should keep in mind that the Proposition 98 calculations are not necessarily state spending reality. Proposition 174 specified per public school pupil spending ($5,000), the amount of the voucher ($2,500), the state statutorily specified average Base Revenue Limit per pupil ($3,200) and the per pupil amounts computed under Proposition 98 are all different items. Financial Analysis of Proposition 174 Page 15 Our analyses suggest that, assuming an approximate 20 percent shift of public school students to scholarship-redeeming schools, by the year 2000 the voucher will have dropped in value by about ten percent.11 11 This projection assumes 1993 dollars. No adjustments are made in these analyses for inflation. Financial Analysis of Proposition 174 Page 16 Tradeoffs Involved in State Intervention The legislature and the governor have four fundamental choices, if public school student transfers to scholarship schools generate per pupil "savings." They can choose to (1) return "savings" to the education fund, thus sustaining or elevating the value of public and private school spending, (2) allocate added revenues to other public services, (3) rebate savings to taxpayers, or (4) some combination of all of these. If the legislature and the governor chose to (1) enhance the falling scholarship amount, or (2) boost the base revenue limit for public school students (and thus boost the scholarship amount also), then savings generated by transferring students would be proportionally reduced as well. Alternatively, the state can utilize transfer "savings" for other sectors of public activity, e.g., increased spending on prisons, transportation, welfare, etc. Thus, the state can completely capture prospective financial savings possible under Proposition 174. This action would result in a resource erosion for public schools, andscholarship redeeming schools. Of course, the legislature and the governor can also select a middle ground or blend between these three policy objectives. Financial Consequences for Individual Schools What will happen to a public school if some or all of its pupils transfer to scholarship schools? The answer to this question will depend upon the legislature and the district's decision makers. However, the most reasonable scenario would seem to be that for each "lost" student, the district of which the public school is a part would lose $3,200 and whatever additional categorical aid revenue (both state and federal) for which a particular student was entitled. How much of this loss will be transmitted to the particular school by the district will depend upon district policies. However, it is difficult to imagine that individual schools will not be hit hard under such circumstances. Districts have few if any reserves with which to insulate their local schools from revenue losses. What will happen to a private school which becomes a scholarship redeeming school? It will become eligible to redeem vouchers which will average $2,500 per pupil. It is also free, under Proposition 174, to charge tuition in excess of this amount. What will happen to a public school which becomes a scholarship redeeming school? It will experience a reduction in its funding to the per pupil voucher amount. What will happen to a private school which chooses not to redeem scholarships? It will continue to operate as it does now. Financial Analysis of Proposition 174 Page 17 Glossary of California School Finance Terminology Assessed Valuation: The dollar value of land, homes, and businesses for property tax purposes. This dollar value is set by the county assessor. Average Daily Attendance (ADA): The average number of students who actually are present during the school year. Students who are absent from school without an excuse are not counted in this calculation. State funding for school districts is currently based on this ADA figure. Base Revenue Limit: The dollar amount a school district may receive per pupil from state and local sources for the purpose of operating its general education program. This amount is determined annually by the Legislature. Additional state revenue for special purposes (categorical aid) is not included in this base revenue limit. Basic Aid: All public school districts receive Basic Aid. Basic Aid is the minimum amount per pupil ($120) for every public schoolstudent in grades K-12. This amount is guaranteed by the State Constitution. Basic Aid counts towards a school district's base revenue limit. Capital Outlay: Money spent on the construction of new school facilities or for major remodeling of existing school facilities. Categorical Aid: Money received by a school district from state or federal sources for special purposes. Examples of categorical aid include allocations for special education programs, bilingual education, and the School Improvement Program. Categorical aid which is restricted to its specific purpose, is granted in addition to the base revenue limit. Lottery Revenue: A dollar amount per pupil provided to public school districts which is generated by proceeds from the California State Lottery. This currently amounts to three cents out of every public school per pupil revenue dollar. Operating Costs: Per pupil costs which are associated with the general daily operation of schools. Costs for school construction or remodeling are M included as operating costs. Proposition 98 A California constitutional amendment approved by the voters in 1989 intended to establish a minimum state spending level for K-14 public education. Serrano v. Priest: A California Supreme Court decision which requires that local plus state spending per pupil for public education must be "equalized" (within a $100 band) for school districts throughout the state. Financial Analysis of Proposition 174 Page 18 £17- 2.: 30 V ‘ , M’fi 3m " m) £12933me abs; _ ‘ "5.573.333, ' ' um I’m. 513;? «19253 33‘; 33333;; School Choice Fact Sheet Policy Analysis for California Education Public Schools - Number of public elementary and secondary schools: 7,666 0 Number of students enrolled in public schools, 1992-93: 5.2 million - Change in public school enrollment since 1983: 1.2 million additional students - Projected public school enrollment growth rate, 1992-2002: 4% per year . Percent of public school students who are linuted-English-proflcient: 21 - Percent of public school students who are handicapped: 10 - Distribution of public school students by race-ethnicity, 1991—92: White 45% Latino 35% African-American 9% Asian 8% Other 4% Private Schools . Number of private schools: 3,839 0 Number of private schools with 25 or more students: 2,707 0 Percent of private schools that are religious: 49 0 Total number of students enrolled in private schools, 1992-93: 554,000 0 Number of students enrolled in private schools that have 25 students or more: 538,000 0 Percent change in private school enrollment, 1986-92: 3 0 Projected private school enrollment growth rate, 1992-2002: 2% per year - Distribution of private school students by race-ethnicity, 1991-92: White 43% Latino 36% African-American 9% Asian 8% Other 4% School Finance - California total education budget, 1992-93: $25.94 billion (est.) 0 California total education revenue per ADA: $4,988 (est) - Ranking for California in US, Expenditure per K-12 pupil (ADA), 1991-92: 36 0 California K-12 Education revenues by source, 1992-93: State 60% Local Property Tax 26% Federal 8% Other 6% Sources: California Department of Education, California Legislative Analyst, National Education Association, PACE: Conditions of Education in California, 1992-93 ‘ i, ff. ix *4 ‘3 fo 11”? I PACE Policy Analysis for California Education Directors James W. Guthrie University of California Berkeley Gerald C. Hayward Sacramento/ University of California Michael W. Kirst Stanford University Julia E. Koppich Deputy Director University of California Berkeley James W. Guthrie is a professor in the Graduate School of Education at the University of California at Berkeley and a director of PACE. He has served as a teacher, school administrator, Education Specialist for the United States Senate, and as the president of the Berkeley Unified School District Board of Directors. Guthrie has written extensively on matters of educational policy, school finance, strategic planning, educational evaluation, the governance of education, and the reform of educational systems. In addition, he has authored widely used textbooks on school finance, educational administration, and strategic planning. Michael W. Kirst is a Professor of Education at Stanford University and a director of PACE. He has held several positions with the federal government, including: Staff Director of the US Senate Subcommittee on Manpower, Employment and Poverty, and Director of Program Planning and Evaluation for the Bureau of Elementary and Secondary Education in the US. Office of Education (now the US Department of Education). Kirst was a Budget Examiner in the Office of Management and Budget and an Associate Director of the White House Fellows. He was a member of the California State Board of Education (1975-1981) and its president from 1977 to 1981. Kirst has authored and co—authored ten books, including W1 Political Ill .3 . El '.I]El"llfllfl . S] l. and Wm. Gerald C. Hayward is currently a director of PACE, and serves as Deputy Director of the National Center for Research in Vocational Education at the University of California, Berkeley. From 1980-1985 he served as Chancellor of the California Community Colleges and prior to that served for a decade as Principal Consultant to the California State Senate Committees on Education and Finance. Formerly, he was a teacher and administrator in California's ’ public schools. Julia E. Koppich is a Lecturer in the Graduate School of Education at the University of California at Berkeley, and Deputy Director of PACE. In addition to her classroom teaching experience, she has worked for the California Legislature, served as an educational issues consultant for the American Federation of Teachers, was the Assistant Editor for Educational Evaluation and Policy Analysis, (a journal published by the American Education Research Association), and staff director for the San Francisco Federation of Teachers. She has written extensively on matters of educational policy, public sector labor relations, integrated children’s services, and the reform of educational systems. Margaret L. Plecki presently is a Project Director for the school choice study being conducted by PACE. She also serves as a member of the Technical Planning Panel for the National Center for Education Statistics. Previously, she served as a classroom teacher, a school administrator for the Napa Valley Unified School District, and a consultant for the California Assembly Office of Research. School of Education, University of California, Berkeley, CA 94720 (510) 642-7223 Fax (510) 642-9148 1mm mm mid .~ , . ‘ J V m WWwWMMm up CE Policy Analysis for California Education Directors James W. Guthrie University of California Berkeley Gerald C. Hayward Sacramento / University of California Michael W. Kirst Stanford University Julia E. Koppich Deputy Director University of California Berkeley An independent education policy research center... Founded as a cooperative effort in the Schools of Education at the University of California, Berkeley and Stanford University, PACE provides analysis and assistance to California policymakers, education leaders, and others. PACE is co-directed by James W. Guthrie (University of California at Berkeley), Gerald C. Hayward (Sacramento/University of California), and Michael W. Kirst (Stanford University). Julia E. Koppich (University of California at Berkeley) serves as deputy director of the organization. PACE conducts basic policy research to address the short-run requests of policymakers. Increasingly, PACE is also assisting in shaping Califomia’s education policy agenda. Chronicling the conditions of education in California... PACE’s annual report entitled Conditions of Education in California provides information necessary to build a continuing picture of Califomia’s educational performance. Topics include student enrollment, student performance, curriculum, human resources, fiscal resources, and school reform. In addition to narrative, the report contains numerous tables and figures uniquely organized and previously unavailable in one place. Conditions of Education is disseminated to policymakers, educators, business and professional leaders, executive and legislative staff, and others. Facilitating discussion of educational issues... Beyond research and publications, PACE facilitates discussion about the ideas, information, evaluations, and analyses it produces through activities such as policy conferences, forums for decision-makers and researchers to discuss specific analyses and their implications for state policy; the Sacramento Seminar, which brings together education interest group leaders to discuss current issues; personal briefings for state policymakers on the range and results of PACE research; testimony before numerous state executive and legislative committees, boards, and commissions; addresses before California state and local civic, education, and government organizations; campus visits for state policymakers to explore policy ideas with academics; and brokering information from educational research sources nationwide. School of Education, University of California, Berkeley, CA 94720 (510) 642-7223 Fax (510) 642-9148 I PACE Policy Analysis for California Education Revenue Disparities Under Proposition 174 I State Minn-n Aid I Lee-l Preperty Tu I em. luau-eon m I Lead Preperty Tu DISTRICT 1 $3,500 T Base Revenue lelt“ $3,000 - $2,500 - $2,000 - $1,500 -- $1,000 $500 -~ 30 _ Revenue per Pupll Before After Transfers Transfers (10,000 Students) (5,000 Students) “ DISTRICT 2 ' $4.500 " $120 $4,000 . $3,500 ~r $3,000 ~- 52500 « $2,000 ~~ $1,500 $1,000 ~ $500 « $0 - Revenue per Pupll Before After Transfers Transfers (10,000 Students) (5,000 Students) ' The state guarantees each district 3 minimum of $3,200 per pupil. if a district cannot raise the full amount through property tax, the state pays the difference with equalization aid. Every district is guaranteed a minimum of $120 in state aid, regardless of how much it raises in property taxes. NOTE: $3,200 is the state guarantee for each district. in addition, districts may receive federal categorical state, non-property tax, local and lottery funds. PACE Policy Analysis for California Education Where the Money Goes ORIGINAL NEW SAVINGS SCHOOL SCHOOL TO STATE FEDERAL LOCAL PROPERTY TAX SENHE I PACE Policy Analysis for California Education Knowns and Unknowns Of Proposition 174 OSome private schools will become voucher- redeeming. OSome students will transfer from public to private schools and be eligible for vouchers. ODisparities in funding among districts will be increased. OMinimum guarantee for per pupil funding diluted. 0 How many existing private schools will become voucher- redeeming. . How many students will opt to transfer from public to private schools. 0 Amount of savings for construction costs. 0 How many new pri- vate schools will form. 0 How government will use potential savings - - tax relief - reinvestment in education - social spending or provide for transportation and ' special needs. 7": .9 . ~. _ ‘ .4 k V .. ; a ‘ ‘fi .- x g , ‘ ' ; m m Wm W8H 0 mm? {iiw 83885338 8381 um WWW on 0 ' » - 831888 38888888 888 ”“9"! X3: ‘ mi VWMWim 88mm WWW 83988 ~ 18? 83mm 38 ' m nomoqenmj ' Mama .P‘fl'”, “ "u‘u V, 'NSTlTUTE OF G . 71 P ' C E R, 00 T 41993 Policy Analysis for California Edema-419mm A Directors EMBARGOED FOR RELEASE CONTACT: Sheppard Ranbom/ James w. Guthrie September 27, 1993 Anne Marie Roberts 32335;” ”f C""f°'"‘“ 510/642-7223 Gerald C. Hayward Sacramento / University of California giichaeldvz’] kirst Exploring the Tradeoffs and Uncertainties: a 7 "IV ’1' . . . . . ’70 _”y Fiscal Analysrs of Voucher Initiative Reveals 22:53:33? Substantial Cost, Unequal Effects, Potential for Tax Relief University of California Berkeley Study Says Vouchers Could Cost $1.35 Billion Over First Two Years, Initial Costs Could Be Offset By Large Number of Transfers to Private Schools Voucher Plan Would Dilute Minimum School Spending Guarantee, Give Lawmakers Expanded Discretion Over State Education Dollars SAN FRANCISCO-September 27, l993--The state school voucher initiative could lead to added costs to taxpayers or new savings, depending on a variety of choices by state policy makers and parents. In fact, because so many issues related to funding are unspecified in the voucher initiative, the overall financial effects will depend as much on actions in Sacramento as on the number of students who choose to use vouchers to attend would-be "scholarship" schools, according to a new study by Policy Analysis for California Education (PACE), the non-partisan think tank that studies the effects of state policy on schools, citizens, and young people. The report says that money saved from the initiative could be reinvested in public education, but also could be used to pay for other areas of social need or returned to Californians in tax relief. If these funds are diverted from education, support for local school districts-~and the value of the voucher itself-- would decline significantly, the PACE report says. [EDITOR’S NOTE: PACE researchers include some of the nation's top school finance experts who regularly advise California-and other state--leaders and litigators on school funding issues] While the report underscores many of the uncertainties in determining how the voucher initiative will affect taxpayers, school districts, and the state budgets, it notes that several fiscal effects can be School of Education, University of California, Berkeley, CA 94720 (510) 642-7223 Fax (510) 642-9148 predicted. According to the report, the voucher initiative exposes the state to a cost of $1.35 billion in the first two years to cover the cost of the half million private school students (540,000) who might choose to enter "scholarship" schools and redeem a $2,500 voucher. This cost could be offset, however, if a large number of students transfer from public to private schools. According to PACE, under one scenario there is a "two-for-one effect" in recovering the cost of students leaving public education. It will take two public school students to attend "scholarship" schools to equal the cost of each private school student immediately benefitting from the voucher. PACE estimates that if 80 percent of current private school students (432,000) attend "scholarship" schools, about 17 percent of public school students (864,000) would have to transfer to private schools to offset the costs. This would mean virtually tripling the number of private school enrollments over the next two years. Another cost savings is likely to result from savings on school construction costs, the report says. The voucher plan would reduce state and local school district capital outlay costs as "scholarship" schools obtain facilities from among existing building stock or build new schools to meet market demand. The report notes that the initiative will magnify inequities in funding among school districts by increasing the reliance on property tax funding for schools. Districts such as Malibu, Santa Monica, and Palo Alto could offset losses by virtue of their wealthy tax base. Property poor districts, however, would be unable to take advantage of these property tax revenues. Another key change would be the dilution of the public school minimum per pupil revenue guarantee approved by the electorate in 1989 as part of Proposition 98. In effect, Proposition 174 would replace the minimum funding guarantee for public schools with a much smaller, constitutionally guaranteed entitlement for students attending private schools,according to PACE. Funding for PACE’s analyses of the school voucher initiative is from The Stuart Foundations, The Walter and Elise Haas Foundation, The Miriam and Peter Haas Foundation, The Ahmanson Foundation, The San Francisco Foundation, The Wallace Alexander Gerbode Foundation, Walter S. Johnson Foundation, ARCO, The David and Lucile Packard Foundation, and The William and Flora Hewlett Foundation. Copies of the report are available from Policy Analysis for California Education, Department of Education, 3659 Tolrnan Hall, University of California at Berkeley, Berkeley, CA 94720 (510) 642-7223. #### PARENTAL CHOICE IN EDUCATION INITIATIVE: FEDERAL INCOME TAX ANALYSIS By Donald E. Kelley, Jr., Teressa K. Lippert and Deborah Harrawood San Francisco Office of Fol ger & Levin All rights reserved. No part of this analysis may be reproduced or transmitted in any form or by any means without the permission of the authors. PARENTAL CHOICE IN EDUCATION INITIATIVE: FEDERAL INCOME TAX ANALYSIS Donald E. Kelley, Jr., Teressa K. Lippert and Deborah Harrawoody I. Introduction This analysis discusses the Federal income tax treatment of payments authorized under Proposition 174, the Parental Choice in Education Initiative (the "Initiative"). If adopted, the Initiative will amend the California Constitution to establish a program of payments to participating schools designated by the parents of California school children. The payments, referred to in the Initiative as "scholarships," will be credited against tuition and other charges incurred by the children at such schools. The Initiative states that "scholarships shall not constitute taxable income" (Section l7(a)(4)). This statement will make the payments non-taxable for purposes of California state income tax, but will not be binding for Federal income tax purposes. Federal law will control whether the payments are subject to Federal income tax.y Existing precedents do not permit a clear prediction of the ultimate decision, which will be influenced by the theories advanced by taxpayers and by the Internal Revenue Service (the "IRS“). In the absence of Congressional action, the ultimate arbiters are likely to be the Federal courts.y Generally, income for Federal tax purposes includes any "accession to wealth" except those items that are specifically excluded by the Internal Revenue Code (the "IRC") or other Federal statutes or by judicial decision. An economic benefit can be income even if the taxpayer does not receive a payment directly, or if the taxpayer’s use of the benefit is limited to specific purposes. If the Initiative is adopted, parents who choose to participate in the program and their children will undeniably receive an economic benefit: they will be entitled to have funds disbursed by the State to participating schools, to be applied towards payment of tuition and other educational expenses. Unless the amounts thus disbursed fall within a statutory or judicial exclusion, they will be considered income (most likely taxable to the parents of the child for whose benefit the amounts are disbursed) for Federal tax purposes.y This memorandum considers the extent to which various exclusions from taxable income may be applicable to the payments authorized under the Initiative. We conclude that the Federal income tax treatment of the payments will depend primarily on whether the payments can properly be characterized as "qualified scholarships" under the IRC, an issue analyzed in Section II of this memorandum. Section III considers an alternative argument focusing on the Initiative’s benefits to parents. Finally, Section IV discusses the applicability of several other potential arguments for exclusion of the payments from income. II. Payments as "Scholarships" Section 17(a) of the Initiative provides that "[t]he State shall annually provide a scholarship to every resident school-age child." We assume that at least part of the purpose in consistently using "scholarship" terminology is to improve -2— taxpayers’ chances of establishing a Federal income tax exclusion for the payments. To establish such an exclusion, a taxpayer would have to show first that the payment is in fact a "scholarship," and second that it is a "qualified scholarship" received by the child and used for specific education-related expenditures. A. Scholarship. Section 117 of the IRC does not define "scholarship," but the related Regulations define a scholarship as "an amount paid or allowed to, or for the benefit of, a student, . . . to aid such individual in pursuing his studies." The IRC and the Regulations do not require that a scholarship be based on need, academic achievement, diversity of students or any other eligibility criterion. Proposed Regulations under IRC Section 117 specify that a scholarship may be funded by a governmental agency, so the fact that payments authorized under the Initiative will come from the State and not from a private source should not prevent the payments from being viewed as scholarships. We are not aware, however, of any program recognized as a "scholarship" program under IRC Section 117 that has such broad application, or so few eligibility criteria, as the program established under the Initiative. The IRS may argue that these payments, because of their availability to all primary and secondary students in California, do not resemble traditional types of scholarship aid and should instead be characterized as subsidies not excludable from income as scholarships. B. Qualified Scholarship. Even if the payments are determined to be "scholarships" for purposes of IRC Section 117, _3_ they will be excludable from income only to the extent they are "qualified scholarships" (emphasis added) under Sections 117(b) and 117(c) and are "received . . . by an individual who is a candidate for a degree at an educational organization" meeting specified criteria, including a student attending a primary or secondary school. Moreover, payments are excludable only to the extent they are applied to tuition, fees, books, supplies and equipment required by the educational institution. Most of these criteria should not be difficult for most children and schools to meet. A possible area of ambiguity, however, is in the requirement that the qualified scholarship payments be "received by" the student. The IRS may argue (for reasons developed more fully in Section III below) that payments under the Initiative are, in a practical sense, "received by" the parents rather than their children, that the parents are not an eligible "recipient" under Section 117 (because they are not candidates for a degree) and that the payments thus are not excludable under Section 117.? Given the lack of Federal income tax precedents involving programs of the scope and nature contemplated in the Initiative, we cannot predict whether this argument, or an argument over whether the Initiative payments constitute a "scholarship" at all, would be resolved in favor of the taxpayers or the IRS. Moreover, the IRS and the courts would not necessarily be required to reach the same result for each taxpayer; given the ambiguity of the term "scholarship" for Federal income tax purposes, they could conceivably find the _4_ "scholarship" exclusion available to taxpayers whose children would satisfy a "need" standard or some other traditional eligibility requirement, but not to taxpayers whose children do not meet such a requirement. III. Payments as Income to Parents The IRS may argue that payments under the Initiative are income to the parents, based on (a) the fact that the parents, not the children, control the selection of schools and thus the disposition of funds, and (b) the fact that the payments help to discharge the parents’ legal obligation to educate their children. As a general rule, a third party’s payment of a taxpayer’s legal obligation is considered to be taxable income to the taxpayer, even if the payment does not pass through the taxpayer’s hands. The California Civil Code imposes an obligation on parents to support and educate their children, with limited exceptions, at least through high school (or until the children reach age 19). Payments under the Initiative can be described as payments by a third party, the State of California, that discharge or reduce the parents’ legal obligation to educate their children. This interpretation is supported by the Initiative’s provisions specifying that parents are free to choose whether their children will attend participating schools and which schools the children will attend.y At least two Tax Court decisions have found parents liable for income tax on trust income that would not ordinarily have been taxable to them, based on the fact that the income was used _5_ to pay a child’s private school tuition.y In both cases, the trust income would ordinarily have been taxable to the children as trust beneficiaries, but the use of the funds as tuition payments, reducing the parents' legal obligations, was treated as a basis for taxing that portion of the income to the parents.y The IRS has similarly ruled that where gifts are made to a custodian for the benefit of a child under so-called "gifts to minors" laws and the income from these assets is used by the custodian to pay expenses that would otherwise fall within the legal obligation of a parent or other person to support the child, the income from the assets will be taxed to the parent or other person whose support obligation is alleviated by the payments.” The IRS may try to extend this approach to the payment program under the Initiative, in order to establish that the payments are taxable to parents. We do not believe that such an attempted extension would be an easy one. There are various technical respects in which the cases and rulings discussed above can be distinguished from the program established under the Initiative. Moreover, to the extent payments under the Initiative otherwise qualify as scholarships as discussed in Section II above (an argument not available to the taxpayers in the trust income or "gifts to minors" cases), taxpayers may be able to argue successfully that the somewhat nebulous "parental obligation" argument should not cause the payments to lose their excludabilityum/ In any event, given the lack of any precedents involving programs similar to the one established under the Initiative, we cannot predict whether the "parental obligation" argument would be resolved in favor of the taxpayers or the IRS. Moreover, as noted at the end of Section II above, it is possible that the IRS or the courts could use this argument as a basis for finding payments under the Initiative to be taxable to some parents and not to others, depending upon their (and their children’s) particular circumstances. IV. Other Possible Exclusions A. gift. An argument that has sometimes been successfully advanced to exclude from income an amount that does not qualify for the scholarship exclusion is that the amount received by the taxpayer is a gift.fl/ Gifts are excluded from income under IRC Section 102(a). Parents might try to establish that payments under the Initiative are gifts made to them or their children by the State of California, and therefore excludable from income. The main problem with this line of argument is that under Federal case law, the category of "gifts" excludes transfers made in order to satisfy a legal or moral obligation or in order to influence the recipient to take a particular action, and includes only transfers made out of a "detached and disinterested generosity . . . out of affection, respect, admiration, charity or like impulses.“3/ The IRS would likely argue that no such motives are present in the Initiative (particularly in light of the absence of any need-based criteria _7_ for eligibility), and that the true purposes of the Initiative are (1) to satisfy California’s constitutional obligation to provide free public schools for its residentsffl/ (2) to reduce the economic burden of the California educational system on taxpayersu/ and/or (3) to encourage the parents of school-age children and the private sector in general to explore alternatives to traditional public schools.§/ On balance, we believe it is unlikely that taxpayers would prevail with an argument that the Initiative payments constitute gifts by California to its school-age children or their parents.fi/ B. Public Assistance/Welfare. Some amounts distributed by state governments or by the Federal government have traditionally escaped taxation either because the IRC or another Federal statute excludes these amounts from income or because the IRS or a court has determined that the amounts are disbursements from a "general welfare fund in the interest of the general public.“fl/ Taxpayers might argue that the Initiative payments are non— taxable public assistance or welfare payments made in the interest of the general public because the general public benefits from a well—educated population. The IRS is likely to oppose this argument. Although prior rulings by the IRS do not attempt to develop explicit parameters for the general welfare exclusion, several cases in this area have expressly imposed a "need" standard and most of the payments ruled excludable in the past have involved assistance to the poor, the unemployed, the disabled, victims of _8_ natural disasters, veterans or other groups that can be viewed as disadvantaged when compared to the general populationrml In light of these precedents, it appears that the underlying theory behind the public assistance/welfare exclusion is that the "general welfare" funds of the government provide a kind of security net for citizens who are subject to unavoidable hardships. It would be difficult to reconcile this rationale with educational payments that (1) come not from any general fund but from funds already earmarked for education, (2) are not awarded based on need or hardship and (3) are designed to provide an alternative to a benefit already being provided in the form of a free public education. C. Tax Equity. Taxpayers might also try to make a policy- based argument that parents who benefit from the payments provided by the State should not be taxed on those amounts when parents who decide not to use the program but to accept the benefits of a free public education for their children are not taxed on the value of those educational benefits. This view is based not on any specific provision of the IRC, but on equitable considerations aimed at equalizing the tax burden borne by all parents.1y Taxpayers might further argue that it is particularly inequitable to tax parents who send their children to State-subsidized participating schools when such parents will arguably receive only half the economic benefit received by the parents of public school students.@/ It is unclear what success this argument would have with the IRS or the courts. A likely counterargument would be _9... that the IRS is not authorized to change the scope of taxable income identified in the IRC, and that any policy decisions expanding the universe of recognized exclusions should be made not by the IRS or the courts but by Congress.§/ It is possible, however, that in a borderline case, the tax equity argument would influence the IRS or a court to find that the Initiative payments fall within one of the existing exclusions discussed above.Q/ V. Conclusion The payments authorized under the Initiative will constitute taxable income to the parents or students benefited by them, unless the payments fall within one of the exclusions provided by the IRC or by existing case law, or unless Congress enacts legislation to create a new exclusion. The most plausible argument for exclusion under existing law is that the payments are scholarships to California’s school-age children. If this argument is successful, the payments should not be taxed to parents and should be excluded from the children’s taxable income as "qualified scholarships," to the extent the funds are spent for categories of charges specified in IRC Section 117(b)(2). If the "scholarship" argument does not prevail, however, there is a substantial risk that the IRS will succeed in establishing that the payments are taxable to parents and are not eligible for exclusion as gifts, as welfare or public assistance subsidies, or on general tax policy grounds. _10_ NOTES _/ The authors are attorneys in the San Francisco office of Folger & Levin, which has provided this analysis to Policy Analysis for California Education (PACE) as a public service. Neither the authors nor the firm intend, in submitting this analysis, to take any position on the merits of the Initiative. The date of this analysis is September 21,1993. g/ For example, the Tax Court recently held that Alaska’s decision to treat the forgiveness of a student loan as a non— taxable grant could not prevent the Federal government from taxing as income the amount of the student loan that was forgiven. 1993- 73 T. C. M. (Lexis). ;/ In this memorandum, we discuss various arguments that might be advanced by taxpayers in favor of non- taxability of payments under the Initiative, or by the IRS in favor of taxability. The IRS has the authority to issue rulings and make administrative determinations on such matters, but if taxpayers disagree with the IRS position and pursue the dispute through the administrative and judicial review process, the Federal courts will decide as to taxability of the payments under existing law. Congress, of course, may also change existing law in order to clarify these issues or to prescribe a specific result. 3/ It is also possible that the mere opportunity to participate in the Initiative’ 5 program could be characterized as a valuable right that constitutes a taxable benefit, even for parents who elect not to send their children to participating schools. Because such non- participants have no ability to derive any other, non- educational benefit from the program and will simply forfeit the benefit of their unused scholarship right, however, we believe that the only substantial Federal income tax risk is to parents and children on whose behalf payments are actually made under the program. A related area of greater uncertainty is the proper Federal income tax treatment of the "banking" of unused portions of a scholarship for possible use in later years up to the student’s 26th birthday, as authorized in Section 17(a)(3) of the Initiative. To the extent the Initiative payments qualify for the scholarship exclusion discussed in Section II, it seems logical that "banked" payments under the Initiative would be excludable both in the year in which they originally become available and in the year, if any, in which they are ultimately used. To the extent the scholarship exclusion is not available, however, there is a risk that the entire amount available under the Initiative, including the "banked" amount, would be taxable to the parents in the year initially available, based on Federal income tax principles such as the constructive receipt doctrine. —11_ We are not aware of any precedents involving a comparable program, and are therefore unable to predict the likely resolution of this issue. Q/ We doubt that the "recipient" concept in Section 117 is intended to be construed literally. At its most extreme, such an interpretation would make taxable virtually every scholarship grant to a primary or secondary school student, since such grants would typically be paid to the parents or the school. 6/ See the statement of purpose at the beginning of the Initiative, stating that one purpose is to "enable parents to determine which schools best meet their children’s needs"; the statement in Section 17(a) that "[s]cholarships may be redeemed by the child’s parent at any scholarship-redeeming school"; and the statement in Section 17(a)(4) that "[t]he parent shall be free to choose any scholarship-redeeming school . . . ." 1/ 1987-454 T.C.M. (CCH) (California taxpayers); 1984-285 T.C.M. (CCH) (New Jersey taxpayers). g/ The technical basis for this result was IRC Section 677(b), which makes the person who establishes a trust (the "grantor") taxable on income from the trust to the extent that income is actually used for the support or maintenance of someone whom the grantor is legally obligated to support or maintain. Relying on the Civil Code obligation of California parents to support and educate their minor children, the Tax Court in the California case found the payment of private school education expenses to be a type of use falling within this statutory test. 2/ See Rev. Rul. 59-357; Rev. Rul. 56-484. lg/ If carried to its logical extreme, the "parental obligation" argument outlined above would potentially convert every educational grant or scholarship ever awarded to a California minor child into taxable income to the parents. 14/ See, e. ., Rev. Rul. 57-233 (concerning relocation and vocational training grants to Native Americans); Rev. Rul. 61-66 (concerning amounts paid for the benefit of a scholar who was not a degree candidate to allow the scholar to continue research). 12/ Greisen by and through Greisen v. U.S., 831 F.2d 916, 919 (9th Cir. 1987), citing Commissioner v. Duberstein, 363 U.S. 278, 285 (1960). 13/ Cal. Const., art. IX, Sections 5 and 6. 13/ See Sections 17(b)(8) and 17(d)(6) of the Initiative, reflecting the Initiative sponsors’ intention that the implementation of the payment system will reduce the amounts necessary to satisfy the minimum school funding requirement now contained in Article XVI of the California Constitution. _12_ 15/ See the statement of purpose at the beginning of the Initiative. 16/ This potential argument by taxpayers is weakened by a judicial decision denying a gift exclusion for amounts distributed to Alaska taxpayers from the Alaska Permanent Fund, a fund financed in part by the state’s oil and mineral proceeds. Greisen, supra note 12. Under this program, each Alaska resident received an annual cash payment out of the Permanent Fund, with no restrictions on use of the payment. Alaska taxpayers argued that these payments were gifts from Alaska to its residents. The IRS and the U.S. Court of Appeals for the Ninth Circuit disagreed, finding that the payments were motivated not by generosity and similar impulses, but by much more specific, practical objectives. 17/ See, e.g., Rev. Rul. 76-144, holding that grants of State and Federal funds under the Disaster Relief Act Amendments of 1974 were excluded from the recipients’ income. 18/ See, for example, Rev. Rul. 76-144, supra note 17; Rev. Rul. 63-136 (payments to persons in redevelopment areas undergoing on- the-job training under the Manpower Development and Training Act of 1962); Rev. Rul. 71-425 (payments to participants in work experience projects under the Economic Opportunity Act of 1964); Rev. Rul. 74-153 (payments to needy parents to assist them in supporting children adopted from a state agency); Rev. Rul. 78- 170 (Ohio payments to reduce costs for low income elderly or disabled heads of households); Rev. Rul. 57-60, amended by Rev. Rul. 60-377 (reimbursements under a state law to parents transporting kindergarten children to school, where the local school board was obligated but unable to provide bus service for those children). In a decision involving a program of the Urban Redevelopment Authority of Pittsburgh, the Tax Court ruled that the general welfare theory was inapplicable in the absence of any showing of need by the taxpayer who received economic benefits under the program. 88 T.C. 1293 (1987). See also Graff v. Comm’r of Internal Revenue, 673 F.2d 784 (5th Cir. 1982), involving a HUD program that imposed no need criteria. 19/ Commentators have pointed out that the Federal government does not tax parents on the value of free public education provided by the State, and implicitly or explicitly implements numerous other social and economic policy judgments through the Federal tax laws. See, e.g. Note, Income Tax Reductions and Credits for Nonpublic Education: Toward a Fair Definition of Net Income, 16 Harvard Journal on Legislation 91, 97, 100, 121, 125 (1979); McNulty, Tax Policy and Tuition Credit Legislation: Federal Income Tax Allowances for Personal Costs of Higher Education, 61 California Law Review 1, 22—24, 39-41 (1973). 20/ Section 17(c)(1) of the Initiative sets the minimum payment amount at one-half the average amount of state and local spending per primary and secondary student. _l3_ __/ Congress would presumably consider other objectives besides simply achieving tax equity among parents within a State. Such other objectives might include refining the definition of income to more clearly reflect economic benefits received and costs incurred by all taxpayers, providing greater incentives for education in general, redistributing educational resources to benefit disadvantaged groups, or correcting perceived misallocations of resources among education and other national priorities, among those being educated, or among different types of schools. See McNulty, supra note 19, at 14-15. g;/ Parents might also be tempted to argue that payments made under the Initiative to schools that qualify for tax-exempt status under IRC Section 501(c)(3) should be deductible as charitable contributions under IRC Section 170(c)(2). This argument is unlikely to prevail, since the charitable contribution deduction is not available for any amount that is paid in exchange for a benefit received by the contributor. The Initiative payments, which would help to purchase a very direct educational benefit, are no more likely to qualify for treatment as charitable contributions than ordinary tuition payments to a school that is a tax-exempt entity. 75055\0001\0005 -14.. r ‘ ‘ U.C. BERKELEY LIBRARIES Cll‘lla'i'fllll'i RETURN MAIN ' CULATION ’ '9 :r‘ r - School of Education School of Education University of California Stanford University Berkeley, CA 94720 ’Stanford, CA 94305 (415) 642—7223 (415) 723—4412 Sacramento PACE Center 1130 K Street, Suite 210 Sacramento, CA 95814 (916) 441 -5062