School Choice Cost Savings Isn’t Magic, It’s Math!

One of the great things about math is it often doesn’t need much defense. The numbers can speak for themselves. In this post, I’m going to provide an example of that. I’m going to show you some math that explains how the state should calculate the fiscal savings in an Empowerment Scholarship Account (ESA).

I’m doing this for two reasons. First, the state’s fiscal note on a recent ESA bill inaccurately accounts for potential savings. The second reason is due to something that was said during testimony about the bill. Scott Kimble, a lobbyist for the Missouri School Administrators Association, mischaracterized how funding works in Missouri. He said something to the effect of, “Districts like Kirkwood only get $500 from the state. If a student left Kirkwood to use an ESA, the state would only save $500.” That’s simply not the case, and it’s similar to the error found in the fiscal note, which uses an “average” expense for each student.

Now, here’s the real math.

In 2018, Kirkwood spent roughly $12,000 in per pupil operating expenses. Over 92 percent of those funds came from local taxes. Meanwhile, just 6 percent came from the state. As such, the state gave the district an average of $728 per student. On its face, it would appear Kimble was correct. However, the state doesn’t fund the average student in each district. The state funds districts through a formula and that formula pays progressively more for each additional student. Let me illustrate (I don’t have exact figures for Kirkwood, these are just illustrative).

This is how the funding formula works. You multiply the weighted average daily attendance (WADA) by the dollar value modifier (DVM, a proxy for cost of living) and the state adequacy target (SAT). Then, you subtract local effort. The end result is how much money the state is supposed to provide the district. Divide that by WADA and you get a per pupil figure.

What the lobbyist mistakenly did is look at that end result and assume that is how much the state would save if a student left the district and used an ESA.

Here is what would actually happen:

                                                                             Difference=              $6,901           $1.07

Notice what happens. When one fewer student is multiplied by the DVM and SAT, the total state aid required to fund the district drops by the product of those figures. The local effort stays the same in both scenarios. The state doesn’t just save the $728 per student, they save $6,901.

It’s not magic…it’s math!