Update on the EdChoice Voucher Program

In 2019, a series of changes were made to the EdChoice voucher program that had a dramatic negative impact on school district funding as well as resulting in a large increase in the number of students eligible to receive vouchers in the FY20-21 biennium. This article provides a brief overview of Ohio’s various school voucher programs and a discussion of the recent changes made to the largest of those, the performance-based EdChoice voucher program.

Background on Ohio’s Five Voucher Programs
Ohio’s first voucher program (or “scholarship” program as the state refers to them) was the Cleveland Scholarship program, which began in the 1996-97 school year. The Cleveland voucher program involved the utilization of public funds to pay for vouchers for qualified students in the Cleveland Municipal School District to attend participating private schools. Because over 80% of the participating private schools had a religious affiliation, the legality of the Cleveland voucher program was challenged in court as a violation of the separation of church and state. After two lower court rulings overturning the Cleveland voucher program, in June 2002, the US Supreme Court upheld the legality of the Cleveland voucher program. Since that time, four additional voucher (or “scholarship”) programs have been created by the Ohio General Assembly:
• The Autism Scholarship program began in the 2004-2005 school year.
• The EdChoice Scholarship program began in the 2006-2007 school year. EdChoice allows students from “underperforming” public schools the opportunity to attend participating private schools. The EdChoice voucher amount is currently $4,650 for a K-8 student and $6,000 for a high school student.
• The Jon Peterson Special Needs Scholarship program began in the 2012-2013 school year. This program is targeted toward students with disabilities.
• The EdChoice Expansion program began in the 2013-2014 school year. EdChoice Expansion differs from the original EdChoice Scholarship because eligibility is based on household income (200% of Federal Poverty Level or below) rather than on the academic performance of the student’s home school.

The performance-based EdChoice voucher program is the largest of the state’s five voucher programs, both in terms of cost and the number of students participating. Table 1 below provides a summary of the number of students in Ohio’s four statewide voucher programs from FY17 to FY21. FY21 student counts are preliminary and based on figures found in the December #1 SFPR payment report and will likely be updated in the December #2 SFPR report. Note that EdChoice Expansion data is limited because it is not reported on the Ohio Department of Education (ODE) School Finance Payment Report (SFPR).

Table 1 shows that the EdChoice voucher program which began with 3,100 students in FY07 has now grown to over 30,000 students in FY21. Table 1 also shows that EdChoice enrollment increased by 6,448 students (28%) from FY19 to FY20 as a result of the changes made to the EdChoice eligibility criteria.

Table 1: Participation in Statewide Voucher Programs FY17-FY21

Sources: EdChoice, Jon Peterson and Autism data from ODE FY21 Dec. #1 SFPR. EdChoice Expansion data for FY16 and FY17 estimated from ODE May 2018 Scholarship Payment file spreadsheet and EdChoice Expansion data for FY19 and FY20 provided by ODE.

Voucher Funding in Ohio
The Autism, Jon Peterson and performance-based EdChoice voucher programs are all funded through the “deduction” method, where voucher students through the FY19 school year were included in the Formula ADM student count of the school district in which they live, and the full voucher amount was then deducted from the state aid that the district was slated to receive. This approach is the same as is used to fund community schools in Ohio. The deduction funding method has engendered frequent complaints from local school officials that local funds are effectively used to fund these programs because the state aid received by the district as a result of including a voucher (or community school) student is typically less than the amount that is deducted.

In contrast, the EdChoice Expansion program is funded entirely by the state (i.e. there is no deduction from school district state aid for these students) and the Cleveland voucher program is funded through a combination of direct state funding and deduction from Cleveland’s state aid (roughly 70% of the cost of these students is paid by the state).

The deduction method of funding EdChoice vouchers has been particularly important in FY20 and FY21 because HB166 (the FY20-21 biennial budget bill) froze state formula aid at the FY19 amounts. As a result, any increase in the number of voucher students in FY20 or FY21 as compared to FY19 means that the district will simply lose the entire additional voucher deduction amount. Thus, school districts that experience an increase in voucher use by resident students in FY20 are not really guaranteed FY19 funding levels as HB166 intended. Effectively, local money is being used to pay for the additional EdChoice voucher students in FY20 and FY21.

FY20 and FY21 Modifications to the EdChoice Voucher Program
After years of relative stability in the EdChoice voucher program, FY20 represented the beginning of a dramatic change in the eligibility criteria for the EdChoice program. In FY19, roughly 40 school districts had buildings which were eligible for the EdChoice voucher program. According to data released by ODE, roughly 140 districts (more than triple that of FY19) had buildings eligible for EdChoice in FY20, and this figure tripled again to roughly 420 districts that have buildings eligible in FY21. At the building level, according to Ohio School Boards Association data, there were 255 school buildings that met the “underperforming” criteria in FY19, a figure that more than doubled to 517 buildings in FY20, and which exploded to 1,227 buildings in FY21. In terms of both school buildings and school districts, more than 2/3 of Ohio’s school buildings and school districts were eligible for EdChoice in FY21 according to the definition of “underperforming school” as defined in current law. However, as a result of outcries by members of Ohio’s K-12 public school community, the legislature partially froze the implementation of the building eligibility list in FY21, meaning that no first-time vouchers could be awarded to a student if their building was new to the FY21 eligibility list.

What has changed to cause the dramatic increase in EdChoice-eligible school buildings with the costs being fully borne by local districts in this biennium? The answer to this question is that recent changes to the EdChoice program fall into three categories:
1. Changes to the criteria used to judge a school building as “underperforming”
2. A change that made more students eligible for an EdChoice voucher
3. Changes to the EdChoice program that have negative financial implications for Ohio’s public school districts

1. Changes to the “Underperforming School” Criteria
Since its inception, the underlying principle behind the EdChoice voucher program has been that students who attend an “underperforming school” are deemed eligible to receive an EdChoice voucher, which can be used to allow them to enroll in a participating private school. From FY13-FY19, a school building would be designated as “underperforming” if it met the following criteria:
• Receiving a grade of D or F grade on BOTH the school report card Performance Index component AND the Value-Added report card component.
This criteria is logical in the sense that meeting both of the above criteria indicate that a school is both low-performing and not showing improvement. Allowing students an avenue to leave such a school is defensible in many respects.

However, in 2019 this criteria was changed and in FY20 and FY21 a building was to be considered “underperforming” and designated as “EdChoice eligible” if:
• The building’s Overall Grade on the Report Card is a D or F, OR
• The building receives a Value-Added grade of F, OR
• The building’s performance index ranks it in the bottom 10% of all buildings ranked, OR
• The building’s four-year Graduation Rate grade is a D or F, OR
• The building receives a K-3 Literacy grade of D or F, OR
• The building is in a district subject to an academic distress commission

Not only were there more criteria that could be used to label a building as “underperforming” but the change from “AND” to “OR” meant that a building was now EdChoice eligible if it met ANY of the above listed criteria.

The new criteria were problematic in a number of ways. First, under the old criteria only buildings with a D or F on the overall report card grade could possibly be considered to be underperforming (and then only if their value-added grade was also a D or F). However, under the new criteria even buildings with an A, B, or C on the Report Card (these grades are all considered to be “passing” at the very least) could be labeled as underperforming for the purposes of EdChoice eligibility. Examination of ODE’s list of FY21 EdChoice eligible schools reveals that nearly 600 of the more than 1,200 eligible schools received grades higher than a D on the most recent school report card.

Second, the inclusion of the K-3 Literacy criteria was also problematic because this measure is widely considered to be seriously flawed, with nearly half of Ohio’s elementary buildings currently receiving a grade of D or F on this measure, often due to only a very small fraction of students. To use such a measure to allow any student in such a building to become eligible for a voucher is very difficult to defend.

2. Allowing High School Students Who Have Never Attended a Public School to be EdChoice Eligible
In addition to changing the criteria to be used to designate a school building as EdChoice eligible, policymakers have also altered which students are eligible to receive an EdChoice voucher. Since its inception and through FY19, the EdChoice voucher program has required that in order to qualify for a voucher the student must have attended an EdChoice eligible public school in the preceding year. Until FY20, the only exception to this criterion had been for kindergarten students for whom kindergarten is (obviously) their first year in school. (For kindergarten students their assigned elementary school must be deemed EdChoice eligible.)

However, beginning in FY20, high school students who have never attended a public school became eligible to receive a voucher to attend a private high school as long as their home high school was an EdChoice eligible building. This resulted in a dramatic increase in the number of EdChoice high school applications from FY19 to FY20. According to ODE data, in FY19 there were 5,396 high school EdChoice applications and in FY20 this increased by 4,026 to 9,422, an increase of 75%. In contrast, the number of K-8 applications increased by only 14% from 18,112 to 20,696.

Another way to look at this is that in FY19 high school applications were 18% of the total of 22,138 applications and in FY20 high school applications had increased to 30% of the total of 31,560 EdChoice applications. This trend continued in FY21 where high school applications increased to 32% of all applications.

Not only did the elimination of the requirement that high school students had to have been in a qualifying public school in the prior year result in an increase in EdChoice vouchers, it also provided these vouchers to families who already have their children in private schools. It is one thing to facilitate school choice for students who do not have the means to move to a better school district or pay for private school themselves, but it is quite another to simply provide a voucher to a student who is already attending a private school. This is not expansion of educational choice to those without the means to exercise it themselves, it is merely a transfer payment for families who have already shown they can do so themselves.

In FY21, despite the fact that the implementation of the EdChoice building eligibility list was partially frozen, EdChoice applications still increased by 2,104. There were two primary reasons for this increase. First, high school students still did not have to have actually attended an EdChoice-eligible public school in FY20 to receive a voucher. And second, a sibling policy was added which allowed children from families who already had an EdChoice-eligible student to become eligible themselves. Together, these two provisions once again worked to expand choice for children in families who already had the means to attend private school rather than to children in families that were actually attending EdChoice-eligible schools.

3. The Fiscal Impact of the EdChoice Voucher Modifications on Ohio School Districts is Both Real and Unprecedented
As noted above, the change in the EdChoice eligibility criteria, the elimination of the public school attendance requirement for high school students, and the new sibling policy have served to drastically expand the number of students now eligible for the EdChoice voucher program. In addition, the preceding section of this article also explained how the proportion of high school EdChoice students has increased in the past two years. These two changes increase the cost of EdChoice by both increasing the number of students and also by increasing the proportion of higher cost high school students (remember that the voucher amount is $6,000 for a high school student and $4,650 for a K-8 student.)

Ordinarily, the new voucher students would be added to formula ADM and the district would receive an increase in state aid; however, in both FY20 and FY21 that was not the case. This was because the freeze in the state foundation aid formula at FY19 levels meant that any increase in the voucher deduction amount would simply result in a loss of revenue for the school district, which is essentially the equivalent of funding new voucher students out of local funds. A solution to this problem would have been for the legislature to freeze the EdChoice deduction at its FY19 amount along with the foundation aid formula. In that event, the state would have paid for the additional cost of new EdChoice students in FY20 and FY21.

Furthermore, considering that most of the increase in EdChoice students is due to high school students – the great majority of whom have likely never attended a public school – it is completely inaccurate to argue (as a number of uninformed commentators have over the past year) that districts now have fewer students to educate and can therefore save money. This phenomenon is exemplified by the case of the Cleveland Hts.-University Hts. (CHUH) school district, where of an additional 522 new EdChoice applications received in FY21 only 17 (3%) were from students who had attended CHUH schools in FY20.

Changes to the EdChoice Voucher Program for FY22 and Beyond
Prior to the onset of the Covid-19 pandemic in March 2020, the Ohio legislature was deliberating between two potential changes to the EdChoice voucher program that were both designed to avoid the calamity of having 1,227 buildings placed on the eligibility list for FY21. The proposal advanced by the Ohio Senate would have redefined the EdChoice building eligibility criteria and resulted in 420 EdChoice-eligible buildings in FY21. The proposal advanced by the Ohio House of Representatives would have phased out the performance-based EdChoice vouchers and shift the program entirely to the income-based EdChoice Expansion voucher program. However, because the coronavirus pandemic prevented the legislature from deliberating among the proposals, they instead chose the most expedient solution of freezing the building eligibility list for FY21 as described above.

While the freezing of the building eligibility list addressed the problem for FY21, the legislature still needed to take additional action in order to avoid the EdChoice list growing to over 1,200 buildings in FY22. This action needed to be taken prior to January 31 as the EdChoice application window typically opens on February 1 of each year. Consequently, it was widely expected by both public and private school advocates and observers that the Ohio legislature would hold hearings and otherwise deliberate in January 2021 in order to reach a solution to the “EdChoice problem”.

However, the Ohio Senate surprisingly inserted changes to the EdChoice eligibility criteria into the Conference Committee version of SB 89, a Career Technical Education Omnibus bill on Wednesday, November 18. The new criteria were approved by the Senate later that day and then approved with no changes by the House on Thursday November 19. Gov. Mike DeWine signed SB 89 into law on November 27. Thus, with virtually no warning and in less than 36 hours with no public hearings or outside testimony allowed, the Ohio General Assembly modified the EdChoice voucher program criteria.

The new EdChoice eligibility criteria as enacted in SB89 are:
1) The school building must have an overall Performance Index (PI) score that ranks in the bottom 20% of all buildings in both FY18 and FY19.
2) The school building must be in a school district that has an average of 20% or more students eligible for Federal Title 1 funding over the past three years. (Title 1 eligibility is based on the number and percentage of children in poverty in each school district)

The Legislative Service Commission estimates that 473 buildings will meet these criteria for FY22.

While the new SB 89 EdChoice building eligibility criteria does reduce the number of eligible buildings compared to both FY20 and FY21 building lists, these changes are nonetheless problematic.

First, the use of the bottom 20% of the Performance Index as opposed the pre-FY20 criteria of D or F on the Performance Index substitutes an “absolute” criterion for a “relative” criterion. Under the criteria in use from FY13-FY19, a building would be eligible if its Performance Index score was below a certain absolute level as determined by the state report card system. While Ohio’s state report card system is far from perfect, this was at least an attempt to identify low performing buildings as measured against a known standard. In contrast, the “bottom 20% rule” simply defines that a set of buildings will always be EdChoice eligible because – by definition- there will always be a bottom 20% of the PI score distribution, even if all buildings perform well enough to receive A grades. This issue is further exacerbated by the fact that the 20% of lowest PI scores is computed after community schools and STEM schools (which are public schools in Ohio) have been excluded from the pool.

Second, the elimination of the value-added component means that low-performing buildings whose students are showing improvement can still find themselves on the EdChoice eligibility list. Because the negative correlation between socioeconomics and student performance has been well-known for many years (this finding dates back to the seminal “Coleman Report” in 1966), school buildings that are providing more than a year of academic growth for their students (a measure that any reasonable person would describe as successful) can still be branded as “underperforming” for purposes of voucher eligibility.

Finally, the use of the “greater than 20% Title 1 eligibility” provision will have the practical effect of concentrating EdChoice vouchers in urban areas. This is because most suburban and small-town school districts fall below this threshold, and while there are a number of poor rural districts that exceed 20% of Title 1 eligibility, these districts tend to be small in size and there are not very many private schools in these areas.