School Choice & Charters

What’s the Difference Between Vouchers and Education Savings Accounts?

By Arianna Prothero — June 09, 2015 4 min read
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Not everything labeled a ‘school voucher’ in the news and on social media is technically a voucher, and it seems every time news breaks about another private school choice law passing or getting challenged in court, the same argument pops up.

A recent exchange on Twitter between the Washington Post’s Emma Brown and the Cato Institute’s Neal McCluskey following the passage of a universal private school choice law in Nevada illustrates this perfectly:

As Brown and McCluskey highlight, this is more than a classic case of ‘you say to-MAY-to, I say to-MAH-to': Voucher is a politically loaded term, but it’s also a well-known one. As a journalist, being succinct while also being accurate can be a tough balancing act, and although tax-credit scholarships and education savings accounts are distinct programs, in the eyes of many people they are variations on the voucher theme.

What’s the Difference?

But the differences between private school choice programs such as traditional vouchers, tax-credit scholarships, and education savings accounts are still very important, and can even explain why one kind is legal in a given state, but another isn’t. So, what are the differences?

School Vouchers: This type of program allows parents to use public funding allocated for their child toward tuition at a private school of their choice, including religiously affiliated private schools. Most voucher programs typically start out targeted toward certain groups of students such as those with disabilities, those zoned to a failing school, or those from low-income families. Some states, such as Indiana, have expanded their programs to include more middle-income families.

Tax-credit scholarships: Through this type of program, the state uses tax-credits to incentivize businesses or individuals to donate money to a scholarship granting organization, which then gives money to students to use toward tuition at a private school. To qualify, students usually have to be from a low-income family, a failing school, or have other special needs. Some states offer another variation, such as individual tax-credits or deductions.

Education savings accounts: In an ESA program, the state sets aside money usually [Corrected: the original version of this post implied that all states use a per-pupil formula to calculate funding allowances, Mississippi’s does not] based on its per-pupil funding formulas in individual accounts for participating students. Their parents or guardians can then withdraw that money to spend on approved educational expenses. That may be private school tuition, but it may also be used for tutoring, online courses, transportation, or even some types of therapy. In addition to helping families send their children to private school, an ESA program can also allow them to home school or cobble together a hybrid public-private education. ESAs were initially aimed at students with disabilities, but Arizona has been steadily expanding eligibility to its program to include other groups of students, such as those from failing schools, military families, and students who live on American Indian reservations. Nevada blew the lid off that last week when it passed a universal ESA program open to all students in public schools.

Why the Differences?

To answer that question, we have to go back to 2002 when the U.S. Supreme Court ruled that a small voucher program in Cleveland did not violate the Establishment Clause in the U.S. Constitution. The Justices ruled the voucher program was constitutional because it served a valid secular purpose and it was neutral to religion—in other words, parents pick what schools the money goes to, not the state government.

However, many state constitutions have specific amendments expressly prohibiting taxpayer money from going to religious organizations. These are generally called Blaine Amendments. (For a short history on Blaine amendments, here’s an informative Q&A with a George Washington University law scholar).

So, if a state’s constitution has a Blaine Amendment, tax-credit scholarships and ESAs can offer workarounds. A story I wrote on education savings accounts offers a good example:

Created in 2011, Arizona's ESA program was, in many ways, the outcome of a protracted legal battle over the state's original voucher program, which was ruled unconstitutional by the Arizona Supreme Court in 2009 because it provided public dollars directly to private schools, and to private schools only. In that decision, the court left open the possibility that a voucher-like program could be structured to remove that conflict. 'They left us a trail of breadcrumbs to follow,' said Matthew Ladner, who worked at the Phoenix-based Goldwater Institute, a conservative public policy and advocacy organization whose legal arm also helped defend the ESA program. 'I took the hint from that, and we published a new paper at the Goldwater Institute basically calling for an account-based choice program for special needs kids that would have multiple uses including private schools,' he said."

But that doesn’t mean those programs can’t be challenged. State teachers’ unions have led the legal charge against tax-credit and ESA programs in several states. They generally argue that no matter how circuitous the route, state governments are still directing money toward private and sometimes religious institutions and away from public schools. Here are some examples of recent lawsuits:

Union-Backed Court Challenges to School Choice Hit Snags in Florida, Louisiana

Alabama’s Private School Choice Program Ruled Constitutional

Related stories:

For a deep-dive on ESAs and the first two states, Arizona and Florida, to implement them, click here.

And finally, here’s an in-depth look at the country’s most expansive voucher program, Indiana’s.

A version of this news article first appeared in the Charters & Choice blog.