How Empowerment Scholarship Accounts (ESAs) Work
How ESAs would be funded
- ESAs are not paid for through the state budget – Under the proposed ESA legislation, individuals and businesses would make a donation to a scholarship granting organization and in return receive a tax credit. Those donations would then be used to grant scholarships to qualifying students who could use the funds to enroll in another school district, a charter school, a private school, or cover the costs of homeschooling.
- ESAs do not directly impact the funding formula – As a result of this funding structure, ESAs may result in decreases in the general revenue through tax collections, but they will not directly impact the foundation formula funding for public schools in Missouri.
- Tax credits go to donors, not scholarship recipients – There is no connection between the individual or businesses making donations and those receiving scholarships. For example, making a donation does not guarantee access to a scholarship for your child and conversely, families do not receive any tax credit for paying for private school tuition or homeschooling expenses.
- There are no federal funds being redirected to support proposed ESA legislation – ESAs would be funded solely through donations that would be encouraged/rewarded through tax credits. No direct funding, either from the state foundation formula or from federal education funding is involved.
- Learn more here
ESAs actually increase funding for public schools
- Two amendments to HB349 would actually increase funding for public schools in Missouri if Empowerment Scholarship Accounts are finally passed.
- The first amendment ties the operation of the ESA program to increasing state reimbursement for school transportation costs to at least a 40% level. In recent years the state has only reimbursed district schools for 10%-15% of their transportation costs, so this would be a major increase in funding, especially for rural schools. The same provision has been added to SB55.
- The second amendment creates a “hold-harmless” condition that guarantees that any district that has students leaving their schools as a result of receiving an ESA scholarship will still receive state funding for that student for five years. This means that over a five-year period district schools could receive $31,875 in state funding for every student who receives an ESA even though they no longer have to pay for that child’s education.
- See the final text of HB349 passed by the House: https://house.mo.gov/billtracking/bills211/hlrbillspdf/0711H.03P.pdf
ESAs are not vouchers and not the same as 529 plans
- Empowerment Scholarship Accounts are very different from vouchers used in other states:
- Vouchers involve state funding being directly paid to private schools through a voucher distributed to families sending their children to those schools. Under the proposed ESA legislation, funds would be distributed directly to families who could then choose to use those funds in a variety of ways. As highlighted above, the funds sent to families would come from a non-profit scholarship granting organizations funded through donations NOT from the state budget.
- Vouchers limit families to spending funds for private school tuition. The proposed ESA program would allow families to use funds for a wide variety of educational costs including costs for homeschooling, testing costs, tutoring needs, therapies for students with special needs, transportation to school, tuition at public charter and district schools outside of their home district and private school tuition. As a result, ESAs give families many more options to find an educational environment that meets their children’s specific needs.
- ESAs are not the same as 529 plans
- Under current federal law, families can open a 529 savings account for their children, use funds in that account to pay for private K-12 tuition and receive the same tax benefits (about $500 in savings a year) as they would if they used the 529 account to pay for college tuition. While this is a benefit to families who can already afford private school tuition, it does not make accessing a private school a possibility for low-income families in the same way that an ESA would. The Show Me A Brighter Future Scholarship program that has been proposed would be funded the same way as Empowerment Scholarship Accounts, but instead of disbursing funds to families through a scholarship granting organization, the state treasurer would set up a 529 account for families receiving a scholarship and they would then use that account to pay tuition.
- Learn more here