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VEC Completes ESA Economic and Fiscal Impact Study on Rural Virginia Counties

January 6, 2017 by uva72

For the third year, VEC has worked with Virginia Delegate Dave LaRock to introduce Parental Choice Education Savings Accounts (HB1605 Parental Choice Education Savings Accounts (PCESAs)). PCESAs allow a parent to withdraw their student from public school and receive approximately one-third on average ($3,500), of the state’s per pupil expenditure on education ($11,523). In return, the parent enters into a contract with the state to provide their student with an education using any non-public mode of education, currently allowed by Virginia law (private school or home education).  Similar legislation has been enacted in Arizona, Mississippi, Florida, Tennessee, and Nevada.

While the bill has enjoyed success, passing both houses in 2016 — only to be vetoed by Gov. McAuliffe (D) — some elected representatives do not support it because they believe it will have negative economic and fiscal impact in their district.  This is especially true in rural districts.

To alleviate this concern, VEC applied for and received a grant from the EdChoice Foundation (formerly the Friedman Foundation), to study the economic and fiscal impact of the PCESA legislation  on rural localities and school districts in Virginia.  The study was structured to answer four questions:

  • Will PCESAs produce positive economic outcomes in rural counties?
  • Will PCESAs have a negative fiscal impact on rural Virginia school districts?
  • Will PCESAs cause a mass exodus of students from public education?
  • Will PCESAs negatively impact teacher pay?

VEC extended the results of three recent education choice macroeconomic research studies to quantify the answers to these questions. The full report can be found here.  Key findings are:

Economic Outcomes

  • With additional investment of $143 million per year in K12 education, over the next ten years, Virginia’s forecasted net present value of Gross Domestic Product, associated with education improvement, can add $0.881 trillion to $1.439 trillion to base GDP; increase rural Virginia County income per capita by between $2,542 (11.7%) and $4,500 (20.7%); increase median Household Income by between $6,560 (12.1%) and $11,615 (21.3%); and generate a Return on Investment, for the State, by between 45.2 % (with adoption of PCESAs) and 39.4% (without PCESAs).
  • Without additional investment Virginia’s forecasted growth in Gross Domestic Product associated with education improvement can add between $0.683 trillion and $1.104 trillion to base GDP; increase rural counties’ income per capita by between $1,952 (9.0%) and $3,460 (15.9%); increase median Household Income between $5,040 (9.3%) and $8,930 (16.4%); and generate a Return on Investment, for the State, between 0.2% (with adoption of PCESAs) and -4.8% (without PCESAs).

Fiscal Impact

  • Implementation of PCESA legislation will reduce K12 education cost by between $6.8 billion and $16 billion over the next 10-18 years.
  • The state and localities will save between $145 million and $180 million in the first full year of PCESA implementation.
  • Under the worst case scenario, sufficient savings are generated by the PCESA legislation to preclude negative fiscal impact on rural local school districts.

Public School Enrollment

  • During the first full-year, it is estimated that between 3.5% and 4.06% of eligible students will take advantage of the PCESA. This is consistent with both other education choice programs in Milwaukee, WI, and Bexar County (San Antonio), TX, which showed no negative impact on public schools.

Teacher Pay

  • Initially, direct impact is minimal because net savings generated for each student who leaves is available for reinvestment.
  • In the long term, teacher pay is dependent upon the public education system’s response to demand for quality education. According to teachers who participated in the Bexar County, TX, program, schools have to “become proactive in working to keep our students and to keep parents happy….Teacher salaries had to go up in order to compete with other school districts for better teachers.”

For impact on specific Virginia localities, please contact Kris Allen at kallen@virginiaeducationcoalition.com.

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