Three Thoughts on Nevada’s ESA Funding: Part 2

Today, we’re finishing a two-part series answering a few questions about one central element to all education savings account (ESA) programs: funding.

Read part one here.

Yesterday, I posted two of three thoughts on funding for Nevada’s education savings account (ESA) program: 1) No one is content with the ESA Amount and 2) Utilize partial tax-credit scholarships to increase funding. (Click here to read the full post).

Now for my third and final point:

3) We need a flexible system of education that recognizes the dynamic range of different education opportunities. 

Often, the debate around education funding references per-student costs in public or private schools. But these do not tell us what education costs, only what is being charged. And more importantly, none of these figures provide any context of quality.

For 50 years, we have seen dramatic increases in inflation-adjusted spending in education with fairly flat test results. At what point will we stop talking about what people charge for education, and start incentivizing people to experiment with what it costs to provide a high-quality education?

Our system of funding is essentially a fee-for-service model that has no built-in incentives to lower costs, find more productive ways to achieve the same results or reward performance.  This needs to change and fortunately, there are numerous roadmaps for this approach.  The Fordham Institute released a compelling paper in 2006 with dozens of bipartisan signatures of support that suggested a modernized funding system with the following components:

• Funding should follow the child, on a per-student basis, to the public school that he/she attends.
• Per-student funding should vary according to the child’s need and other relevant circumstances.
• It should arrive at the school as real dollars (i.e., not teaching positions, ratios or staffing norms) that can be spent flexibly, with accountability systems focused more on results and less on inputs, programs or activities.
• These principles for allocating money to schools should apply to all levels (e.g., federal funds going to states, state funds going to districts, districts to schools).
• Funding systems should be simplified and made transparent.

An ExcelinEd paper in 2013 went a step further and encouraged states to link funding to performance:

• Weighted funding: Each child’s school receives a certain amount of funding based on the student’s characteristics and the cost factors that accompany those characteristics.
• Flexibility: Dollars aren’t restricted or designated for particular uses. Teachers and leaders are given more autonomy in determining how funds are spent.
• Portability: Ensure dollars can follow students to the school or course that best suits their individual needs – including fractional funding for full-time or part-time options. This portability should also extend to opportunities outside schools.
• Performance-based: Incentives are tied to student outcomes and schools are rewarded based on reward student outcomes. Rewarding performance will in turn create incentives for schools to think more creativity about selecting and using innovations in order to capture the additional dollars by reaching the performance goals.

The current system of focusing solely on per-pupil spending misses a central distortion in the market.  Inflexible pricing structures fail to take into account different cost structures in different models.  A pure online course may cost less than a blended-learning model that has some online instruction combined with some face-to-face interactions.  Louisiana’s course access program is a model in this regard. The program allows for dynamic pricing so courses cost from $275 for online elective courses such as sociology to $1,325 for more resource-intensive, in-person welding courses.

I will be bold and say that we can do better for less. Entrepreneurial educators could utilize the wealth of 21^st century education solutions to create a better education for half of what it costs today. These teachers could harnesses technology to teach more efficiently, freeing themselves to spend more time as facilitators, mentors and tutors. Outdated transportation methods that rely on fleets of giant vehicles and staff could give way to easy-to-use ride sharing systems that have proliferated in major cities across the country. Students could advance based on attaining knowledge, not sitting in a seat for 180 days regardless of whether they have mastered the material.

We don’t know the potential of what could happen. This is because we’re still approaching education as a standardized, industrial product that should look the same in Miami as it does in Montana.

This could not be any more clearly demonstrated than in a paper on education entrepreneurs written by the Center for American Progress, the American Enterprise Institute and New Profit. These authors stated:

Opening the marketplace to a diverse set of new—including private, for-profit and non-profit—providers is not a veiled call for privatization of our education system. Instead, it reflects our recognition that within a public system we must still remain open to various methods of delivery—and a spirit of innovation, whatever its source. Given the crisis in our nation’s schools, we must put aside ideological predispositions to support a rational conversation about which providers and approaches have the greatest potential to solve the problems that public education faces.

Indeed. We can do this one of two ways: top-down or bottom-up. We’ve tried the top-down approach for a few decades. I think it may be time to give parents a shot at determining which approaches have the greatest potential – maybe not to solve all the problems that public education faces, but at least to ensure that their own child get the education that is best for them.

Visit our Policy Library to learn more about education savings accounts.