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David Smole, Congressional Research Service
Updated August 1, 2003

School Choice


According to the National Center for Education Statistics (NCES), during the 1990s, the proportion of the nation's school children attending schools of choice increased modestly, with most of the increase due to greater numbers of children attending chosen public schools. Across all income levels, greater proportions of students were reported to be attending public schools of choice in 1999 than in 1993. However, among students attending schools of choice (whether public or private), those from lower-income families were more likely to attend a public school of choice, whereas those from higher-income families were more likely to attend a private school. Despite modest growth in the exercise of school choice, three-quarters of elementary and secondary school students still attended a public school to which they were assigned. (U.S. Department of Education, National Center for Education Statistics, Statistical Analysis Report, Trends in the Use of School Choice: 1993 to 1999, May 2003.)

 The federal government, and many states and localities have implemented numerous policies and programs that have enhanced parents' ability to select the schools their children attend, contributing to the modest growth in the exercise of school choice observed over the past decade. While many school choice policies and proposals have become popular and broadly supported approaches toward increasing students' access to diverse educational opportunities and effecting elementary and secondary education reform, others remain controversial and divisive.

 This issue brief provides an overview of current local, state, and federal policies and programs that support school choice and identifies and summarizes recent federal school choice legislation. It is updated regularly to reflect congressional action on legislation concerning school choice and related developments in states and localities.

 Methods of Supporting School Choice

 Students from families with sufficient resources and capabilities may be considered able to choose from among the panoply of school options. For many students, however, the extent to which they and their parents can exercise school choice depends upon the scope of public policies and programs implemented at the federal, state, and local level. While existing federal, state, and local programs that support school choice with public resources have a variety of features, they generally fall into six broad categories.

 Intradistrict Public School Choice. Students may choose among some or all the public schools within their home school district. Magnet schools, created to promote voluntary school desegregation, and alternative schools also are examples of intradistrict choice options.

 Interdistrict Public School Choice. Students may choose to attend public schools outside their home school district. Included in this type are special school districts, such as secondary education districts providing vocational or technical education and training.

 Charter Schools. Students may choose to attend public schools operating under charters granting them greater operational autonomy in exchange for increased accountability for outcomes. A charter school may be a school within a local educational agency (LEA) or may be considered its own independent LEA. A virtual charter school is one that functions through the exchange of information electronically between student and teacher, such as from a student's home and which has no common education facility.

 Tax Subsidies. The federal and certain state tax codes provide for deductions or credits supportive of school choice. These include the exemption from taxation of income used for elementary and secondary education expenses, such as through federal Coverdell ESAs and certain state deductions or credits for educational expenses or contributions to school tuition organizations (STOs), which provide private scholarships to children. The federal tax code also allows deductions for interest paid on a home mortgage, as well as state and local taxes. These deductions act to subsidize the cost of families exercising their choice to reside in desired school districts or attendance areas, which often have higher property values and higher amounts of deductible local property taxes or home mortgage interest payments.

 Subsidies to Private Schools. Private schools are able to provide educational services at more attractive prices partially as a result of the provision of selected publicly funded services to private school pupils (e.g., transportation, health, and special education services), and the deductibility from taxation of certain contributions received by them or their parent organizations.

 School Vouchers and Supplemental Educational Services. Parents may be granted vouchers that they may use to pay a portion of or the total cost of full-time attendance at a private school. Vouchers are sometimes referred to as scholarships or tuition certificates. Parents also may be granted the opportunity to select the provider of supplemental educational or tutorial services for their children in much the same way as under a voucher program.

 Privately financed choice options also exist. For example, programs have been established in a number of localities by private groups (such as STOs) to help pay tuition and related costs of private elementary and secondary school attendance for pupils, most of whom come from low-income families. Some parents also choose to home school their children.

 Current State and Local School Choice Programs Involving Private Schools

 Of policies and programs currently operating or proposed in states or localities, most involve only public schools -- whether selected schools within an LEA or school district, all schools in an LEA, all public schools in a multi-LEA region or state, or charter schools. Currently, two localities, Milwaukee and Cleveland; and two states, Florida and Colorado, have choice programs which provide vouchers for attendance at private (including religiously affiliated) schools for a limited number of pupils.

The Milwaukee Parental Choice Program provides state funding for low-income students to attend private schools located within Milwaukee. When first implemented in schoolyear1990-1991, choice was limited to nonsectarian private schools. In the1994-1995 school year, the program was expanded to include religiously affiliated schools. Students in kindergarten through grade twelve are eligible to participate. Under the program, parents receive vouchers to cover the school's per-pupil costs (tuition, operating expenses, debt service, etc.), which they then submit to the school for payment. During the 2002-2003 school year, 11,621 students and 102 schools participated in the program with the value of the voucher set at the lesser of $5,783 or the private school's per-pupil costs (State of Wisconsin. Department of Public Instruction. Milwaukee Parental Choice Program (MPCP): MCPC Facts and Figures for 2002-2003. February 2003).

 The Cleveland Scholarship and Tutoring Program, first implemented in the 1996-1997 school year, allows students in kindergarten through grade 3 to apply to receive scholarships to enable them to attend a private school located within the boundaries of the Cleveland Municipal School District or a public school in an adjacent district, or to receive tutoring grants for tutorial services delivered by a private or governmental provider. Students from low-income families are given priority in participating in the program. Once accepted, students may continue to participate in the program through higher grades. Parents of students attending private schools or receiving tutorial services are reimbursed by the state for an amount up to either 90 percent of the cost of tuition (for families with incomes below 200 percent of the poverty line), or 75 percent (for families with incomes at or above 200 percent of the poverty line), with the maximum K-8 scholarship amount set at $3,000 for the 2003-2004 school year. The program was recently expanded to allow students to continue to receive scholarships worth up to $2,700 for high school tuition. (Ebony Reed, "High School Freshmen Can Use Vouchers This Fall," The Plain Dealer, June 30, 2003). Participating private schools must agree to charge low-income parents tuition of no more than 10% of the scholarship amount, all of which may be satisfied by in-kind contributions or services. During the 2002-2003 school year, 5,147 students received tuition scholarships, and 1,112 received tutoring grants (SchoolChoiceInfo.org. "Cleveland Scholarship and Tutoring Program Student Enrollment." (Based on data reported by the Ohio Department of Education) at: [http://www.schoolchoiceinfo.org/facts/index.cfm?fpt_id=5&fl_id=2].) According to testimony in Zelman v. Simmons-Harris, no adjacent public school districts have elected to accept students under the program.

 In addition to these two local voucher programs, in 1999, the state of Florida implemented Opportunity Scholarship legislation, which authorizes the provision of vouchers to pupils in grades K-12 assigned to low-performing public schools that receive an `F' rating for any 2 years during a 4-year period. The vouchers may be used to pay either the full cost of private school tuition or the costs of enrollment in another public school in the same or a neighboring county. For school year 2003-2004, nine public schools have been designated as failing schools. The amount of funding available for attendance at private schools is based on that generated by the child for the public schools -- generally between $3,600 and $4,300. Participating schools must accept the scholarship as payment in full for tuition and fees. School districts are required to provide transferring students with transportation to public schools within the same district, but not to out-of-district public schools nor to private schools. (Floridachild.org, "Opportunity Scholarships -- The Basics for Families," at: [http://floridachild.org/opportunityscholarships/basics.html]).

 Florida also operates the John M. McKay Scholarships Program for Students with Disabilities, distinct from the Opportunity Scholarship Program. Under this program, all pupils with disabilities who attend Florida public schools may receive a voucher to attend a public or private school of their family's choice. The value of the voucher is based on the amount of aid that is generated by that child and is dependent on the nature of the pupil's disability. Generally it ranges between $4,500 and $21,000. (Alan Richard, "Florida Sees Surge in Use of Vouchers," Education Week, September 5, 2002). If the voucher amount is insufficient to cover the full cost of tuition and the school does not accept the voucher as payment in full, families are permitted under the program to make additional payments to the private school, although most families pay either nothing or less than $1,000 above the voucher amount. During the 2002-2003 school year, 9,202 students participated in the program. (J.P. Greene and Greg Forster, Vouchers for Special Education Students: An Evaluation of Florida's McKay Scholarship Program, (New York: Center for Civic Innovation, No. 38, June 2003).

 In April, 2003, the Colorado Opportunity Contract Pilot Program, a state-wide school voucher program was enacted into law. School districts with at least eight schools that received "low" or "unsatisfactory" ratings according to state standards must participate in the program, while other school districts may participate voluntarily. Under the program, parents of students who are eligible for free or reduced-cost lunches and who are identified as low- performing students according to academic assessments will become eligible to enter into an "opportunity contract" with their child's school district to receive a voucher for payment toward their child's tuition at a private school. To be eligible, students also must have been continuously enrolled in a public school the year prior to participating in the program, or be entering kindergarten. The value of the voucher is the lesser of the educational cost per pupil at the private school or a specified percentage of the sending school district's per-pupil operating revenues, varying by grade level: 37.5% for kindergartners, 75% for students in grades 1-8, and 85% for students in grades 9-12. After allocating funds to voucher recipients, sending school districts are able to retain any remaining per-pupil operating revenues (e.g., 63.5%, 25%, or 15%). In the first year of the program, a maximum of 1% of a district's students may participate in the program. Over subsequent years, the percentage that may participate gradually increases to 6%. (Title 22, Colorado Revised Statutes, Article 56).

 Some states support private school choice through tax policy. Arizona provides tax credits to individuals for contributions to STOs that provide scholarships to students to meet the costs of private school attendance. Florida provides tax credits to corporations that fund organizations providing scholarships to low-income children. Pennsylvania also grants corporations tax credits for contributions to organizations that award scholarships allowing children to attend the school of their choice. Additionally, Illinois and Iowa allow individuals to claim a tax credit for certain educational expenses, including private school tuition; and Minnesota allows tax credits and deductions for similar expenses. (Robert E. Moffit, Jennifer J. Garrett, and Janice A. Smith, School Choice 2001: What's Happening in the States, Washington, D.C., The Heritage Foundation, 2001. Also see National School Boards Association, at [http://www.nsba.org/novouchers/vsc_state.cfm].)

 Colorado was the first state to enact a school choice program since the Supreme Court decided Zelman v. Simmons-Harris; however, legislatures in a number of other states also are considering school choice legislation. In addition, several existing school choice programs are being challenged in the courts. Some of these challenges involve state constitutional prohibitions against the provision of state aid to support religious activities, such as education. It is unlikely that these cases will be decided until the Supreme Court hears Davey v. Locke, an appeal of a lower court ruling which found a provision of the Washington State constitution, which prohibited a state postsecondary education scholarship from being used to support the study of theology, to be in violation of the free exercise clause of the First Amendment. The Supreme Court's ruling on Davey v. Locke likely will affect elementary and secondary education school choice programs that involve religiously affiliated schools.

 Current Federal Choice Programs

 Currently, elementary and secondary education school choice is supported through several ESEA programs and through the federal tax code. The following provides a brief description of current federal school choice programs. Where appropriate, program descriptions include FY2003 appropriation amounts.

Elementary and Secondary Education Act Programs (as Amended by P.L. 107-110).

 Local Educational Agency Plans (ESEA Title I-A). Schools with 25% low- income enrollment may be granted a waiver allowing participation in Title I-A if they are involved in desegregation programs under which students change schools (the threshold otherwise is generally 35% or higher). This provision was added to Title I-A in 1994.

 School Choice as a Component of School Improvement (ESEA Title I-A).. Pupils attending public schools that fail to meet adequate yearly progress (AYP) standards for two consecutive years must be offered the choice of attending a higher performing public school within their LEA, unless prohibited by state or local law or policy. The lowest achieving children from low-income families must receive priority in choosing alternate schools. The U.S. Department of Education has issued regulations prohibiting LEAs from using lack of capacity as a reason for denying students the opportunity to transfer to a school of choice (34 CFR 200.44(d)). Schools identified for improvement also are required to implement school improvement plans.

 Pupils attending public schools that fail to meet AYP standards for a third consecutive year must continue to be offered the option of attending another higher-performing public school within the same LEA. Pupils from poor families who continue to attend a school that has failed to make AYP for a third consecutive year must be offered supplemental educational services from a non-profit entity, a for-profit entity, or the LEA, unless such services are determined by the state education agency (SEA) to be unavailable in the local area. The SEA is required to maintain a list of approved supplementary education service providers (including those offering services through distance learning) from which parents can select. In instances where a school fails to meet AYP standards for 4 consecutive years, it must be identified for corrective action. If, after a year of corrective action, the school still does not improve, the LEA may begin planning to restructure the school, with one option being to reopen the school as a charter school. In instances where there are no schools in the LEA that have made AYP, LEAs are encouraged to enter into cooperative agreements with surrounding LEAs to enable students to transfer to a successful public school. LEAs may be required to expend an amount equal to 20% of their Title I-A grants on transportation for public school choice and supplemental educational services.

 In instances where an LEA fails to make AYP for 2 consecutive years, the SEA is required to identify it for improvement, and require the LEA to develop and implement a new LEA education plan, with technical assistance provided by the state. If an LEA is identified for improvement, the SEA also has the option of authorizing students attending a school in that LEA to transfer to a higher-performing public school in a different LEA, with transportation costs provided by the sending LEA. If an LEA does not meet AYP for 4 consecutive years, the SEA is required to take corrective action, which may consist of requiring the LEA to provide students the option of attending a higher-performing school in another district.

 Innovative Programs (ESEA Title V-A). As means of achieving education reform, states may use Innovative Programs funds for the planning, design, and implementation of charter schools. LEAs may use Innovative Programs funds for magnet schools; for the planning, design, and implementation of charter schools; for school improvement activities; to promote, implement, or expand public school choice; and for supplemental educational services. For school year 2003-2004, $382.5 million is appropriated for these programs (FY2003: $97.5 million annual appropriation, and $285 million advance appropriation).

 Public Charter Schools (ESEA Title V-B-1&2). The Charter Schools Programs support increasing the number of charter schools by providing financial assistance for their planning, design, and implementation. Charter schools are authorized through charters entered into by different community groups and school authorities. They are authorized by law in 40 states, the District of Columbia, and Puerto Rico. In exchange for exemption from significant state and/or local rules, these schools are expected to be held accountable for achievement of agreed-upon objectives. The Charter Schools Programs require that all students in a community served by a charter school be given an equal opportunity to attend.

 UnderTitleV-B-1,the first $200 million appropriated for the Charter Schools Programs are reserved for grants to states and eligible applicants for the planning, design, and implementation of public charter schools and for the dissemination of information about charter schools; for state revolving loan funds; and for national activities. The next $100 million appropriated for Title V-B-1 is reserved for per-pupil facilities aid programs, in which competitive grants are awarded to states for purposes of establishing and administering programs dedicated to funding charter school facilities, in whole or in part, on a per-pupil basis. Fifty percent funds appropriated in excess of $300 million are reserved for each of the two uses. For FY2003, $198.7 million is appropriated for Title V-B-1.

 Title V-B-2 authorizes funding through FY2003 for grants to public or private entities (or a combination of the two) for the development of credit enhancement initiatives to assist charter schools in acquiring, constructing, or renovating facilities. (A 1-year extension of the program is authorized under the General Education Provisions Act (GEPA) (20 U.S.C. 1226a)). For FY2003, $24.8 million is appropriated. For additional information on funding for charter school facilities, see CRS Report RL31128, Funding for Public Charter School Facilities: Federal Policy Under the ESEA.

 Voluntary Public School Choice Programs (ESEA Title V-B-3). These programs support school choice by providing competitive grants for transportation services in support of public school choice, and allow funds also to be used for tuition transfer payments, school enhancement in schools receiving transfer students, and public education campaigns. For FY2003, $25.8 million is appropriated for these programs.

 Magnet Schools Assistance (ESEA Title V-C). Magnet schools are schools with special programmatic and other features, and are designed to encourage voluntary desegregation through the mechanism of parental choice. The Magnet Schools Assistance program supports school choice by offering students the opportunity to attend a public school with a special curriculum that attracts substantial numbers of students from differing racial backgrounds. For FY2003 $109.3 million is appropriated for these programs.

 Fund for the Improvement of Education (ESEA Title V-D-1). The Fund for the Improvement of Education (FIE) provides the Secretary authority to support nationally significant programs aimed at improving the quality of elementary and secondary education at the state and local levels. Programs may be carried out directly by the Secretary, or through grants or contracts. Specifically authorized uses of FIE funds include, among others, the exploration of state and local public school choice programs. For FY2003, $318.1 million is appropriated for FIE programs.

 School Choice Offered to Pupils Attending Unsafe Schools. Each state receiving ESEA funding is required to allow pupils who attend chronically unsafe schools and those who are victimized on the grounds of an elementary or secondary school to transfer to a safe public school within the LEA.

 Funding Allocations for Services to Students Attending Private Schools ESEA. Funds provided under several programs are required to be used to provide certain education services, on an equitable basis, to eligible pupils enrolled in private schools.

 Coverdell Education Savings Accounts. On June 7, 2001, the President signed into law P.L. 107-16 (H.R. 1836), the Economic Growth and Tax Relief Reconciliation Act of 2001; and on July 26, 2001, P.L. 107-22 (S. 1190). This legislation provides that Coverdell ESAs (previously Education Individual Retirement Accounts, which were investment accounts for saving to meet higher education expenses) be renamed and extended to cover elementary and secondary education expenses. Annual contributions to Coverdell ESAs previously were limited to $500, and distributions from these accounts excluded from gross income if used for qualified higher education expenses. P.L. 107-16 increases the annual contribution limit to $2,000 and expands qualified uses of distributions to include certain elementary and secondary education expenses at public, private, or religiously affiliated elementary or secondary schools. These changes affect tax years beginning after December 31, 2001 and will lapse after December 31, 2010. The Joint Tax Committee estimates that from 2002-2006, tax expenditures for the exclusion from taxation from earnings on Coverdell ESAs will total $2.5 billion (Joint Committee on Taxation. Estimates of Federal Tax Expenditures For Fiscal Years 2002-2006. JCS-1-02. January 17, 2002. p. 24). For further information, see CRS Report RS20289, Education Savings Accounts for Elementary and Secondary Education.

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