SB503 and HB1183 are presently traveling through the legislative process as sister bills, but are far from identical twin sisters.  Each deserve individual attention as nuances as well as vast differences exist between the two bills focused on one goal of implementing school choice in Tennessee.  Our series on the school choice movement in Tennessee has highlighted multiple aspects of each bill given that Tennessee’s ultimate school choice, if passed, will result from a fusing of these two bills in some form.  Today, we look at how the funding formulas and methods of each will affect private schools in our state.

SB503

The Senate bill attempts to cut costs by using TISA funding and by allowing children with ESA funds to transfer between Local Education Agencies (LEA’s).  In the SB503, children are eligible to attend either a private school or another public school outside their LEA.  For transfer to another LEA, children take their TISA (Tennessee Investment in Students Achievement) funding with them and leave the local funding.  There are funding formulas for movement between LEA’s that I will not spend time on here since they make little difference for private or homeschool students which is my focus. (SB 503 pg. 4-5 (c) (1) (B)

For private school- Non-Public Category I-V- the approximately $7000 is paid out from 100% state funds (SB503 p. 5 (2) (B)).  From our understanding of the language, TISA money is generated for each student who receives an ESA.  This would mean that those students currently in private education either schools or homeschools who are not allocated TISA money currently, could now receive TISA money allocation from the state.  That TISA calculated money would be transferred into the EFSA scholarship fund for the student.

By approaching the funding in this manner, SB503 offers a smaller price tag in the first year of the bill at less than $100,000,000.  In contrast to the $140,000,000 estimated price tag for the House bill HB1183, this might seem like a good deal, but we have to continue reading to the punch line.  Each bill in the Senate and the House requires an attached fiscal note that estimates the cost of a bill on the state since each budget must be balanced so that the state does not go into debt.  The fiscal note for SB503 begins with the lower cost of the program but continues that within 2 years the program could balloon to over $500,000,000 per year.  That amount of money is a hefty price for the state and will make a sizable impact on the state’s private school sector.  More to come on that impact after considering the House’s sister version.

HB1183

The House bill takes a more straightforward approach, ignoring the exchange of students between public school districts and seeming to leave TISA funding untouched.  It simply lays out $7075 per student multiplied by 20,000 students and funds this from $140,000,000 earmarked for the program in the Governor’s budget.  The TISA money already earmarked for public schools from prior and current budgets is not addressed, meaning that the money likely comes from the Tennessee General Fund although this is not stated explicitly.  I believe this lack of mention might allow flexibility in future appropriations decisions for future year budgets by not pigeonholing the legislature into where future money can be appropriated from. 

The House bill then offers a slower growth formula built into the legislation than the sudden expansion possible with the Senate version.  As the number of scholarships actually given out each year reaches 90% of those available, the following year, the total number of scholarships can be increased by 20% if the legislature appropriates money in the coming year’s budget.  The hypothetical situation in which each year the total is increased by 20% due to a high use of the scholarships each year would produce a price tag of over $500,000,000 like the Senate version in about 7 years. Although this formula allows a slower buildup, the costs to the state and ultimately the taxpayer are impressive over time.

Impact of either bill

The independent nature of private education funding which is free from government money would be fundamentally changed by this legislation in either form described above.  Over time, as the program grows, government funding would become a major source of income for private institutions.  Studies in other countries have shown that governmental funding fundamentally changes private education even if that is not the intent of those passing the initial legislation.  Over time, the presence of the largest payor of services flattens out the differences in education like happened in Chile and Australia.  In the end, the difference between private and public education becomes more a matter of semantics than content- same system, different building.  Additionally, dependence upon government funds is likely to increase prices over time and increase administrative costs to meet governmental reporting requirements and testing which will be discussed later. These cost increases have been seen in higher education as well as medicine when government funding entered the picture and grew into a major funder of these services.