Order Code IB98035
Issue Brief for Congress
Received through the CRS Web
School Choice:
Current Legislation
Updated March 25, 2003
David P. Smole
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Introduction
Methods of Supporting School Choice
Intradistrict Public School Choice
Interdistrict Public School Choice
Charter Schools
Tax Subsidies
Subsidies to Private Schools
School Vouchers and Supplemental Educational Services
Current State and Local School Choice Programs Involving Private Schools
Legal Challenges to State and Local Programs
Current Federal Choice Programs
Elementary and Secondary Education Act Programs (as Amended by P.L. 107-110)
Coverdell Education Savings Accounts
Major Types of Proposals to Expand Federal School Choice Support
Choice Options in Existing Programs
Demonstration or Targeted Choice Programs
Block Grants
Tax Subsidies
Why Is There Debate Over Federal Support of Expanded School Choice?
LEGISLATION
Proposals in the 108th Congress
House and Senate Bills
Administration Proposal — FY2004 Budget
FOR ADDITIONAL READING

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School Choice: Current Legislation
SUMMARY
Legislative proposals to provide parents
–the Voluntary Public School Choice pro-
enhanced opportunities to select their chil-
gram.
dren’s schools are varied and widely debated.
Many school choice proposals have been
Public school choice also continues to be
made with the intent of improving the quality
supported under the ESEA through
and increasing the range of educational oppor-
reauthorization of the Innovative Programs,
tunities available to students. Some propo-
Charter Schools Programs, and Magnet
nents of school choice suggest that the avail-
Schools Assistance programs. During floor
ability of school choice both will provide
debates of the NCLBA, both the House and
more students with access to better schools
Senate rejected amendments that would have
and also will induce public schools to improve
authorized federal aid to support school choice
as a result of market competition. Some
programs involving private schools.
opponents express concern about potential
negative effects of choice on public schools
In June 2002, the Supreme Court ruled
and their pupils, including the redirection of
that the Constitution allows for public funding
public education resources and an erosion of
of school vouchers used to support children’s
the ideal of a common public education.
attendance at religiously affiliated schools, so
long as their parents also have the opportunity
The 107th Congress expanded the federal
of selecting from among options that include
role in providing support for elementary and
public and private secular schools. This ruling
secondary (K-12) school choice through
allays previous concerns about the constitu-
changes in federal tax policy and through
tionality of directing public funds to reli-
enactment of the No Child Left Behind Act
giously affiliated schools. Still, many state
(NCLBA), which amended and extended the
constitutions may prohibit the transfer of
Elementary and Secondary Education Act
public funds to religiously affiliated schools.
(ESEA). Major new school choice initiatives
of the 107th Congress include:
In the 108th Congress, several bills have
been introduced to expand the range of school
–authorization for distributions from
choices available to the nation’s schoolchil-
Coverdell Education Savings Accounts
dren. Proposals include:
(ESAs) to be used for K-12 education ex-
penses, including private school tuition;
–authorizing federal tax credits for K-12
education expenses, or for contributions to
–public school choice for students attending
organizations that provide students with schol-
schools that fail to make adequate yearly
arships to attend private schools;
progress (AYP) for 2 consecutive years;
–authorizing federal funding for voucher
–supplemental education services for students
programs to be operated in areas with low-
attending schools that fail to make AYP for 3
performing schools and in the District of
consecutive years;
Columbia; and
–school choice for students who are victims of
–authorizing school choice programs for
violent crimes or attend unsafe schools; and
students with disabilities.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On February 3, 2003, in his FY2004 budget request, the President proposed several
initiatives that would expand federal support of elementary and secondary education school
choice. Proposed new programs include a refundable tax credit for 50% of up to $5,000 for
certain costs associated with attendance at a different school for families of pupils assigned
to public schools that fail to make AYP; and a choice incentive fund that would provide
competitive awards to states, local educational agencies (LEAs), and community-based
organizations (CBOs) that expanded opportunities for children to attend schools of choice.
The President also proposed funding for two existing charter school facilities programs that
did not receive funding during the 107th Congress: the per-pupil facilities aid program and
credit enhancements for charter school facilities.
On June 27, 2002, the United States Supreme Court ruled in Zelman v. Simmons-Harris
(2002 U.S. LEXIS 4885), concerning a school voucher program in Cleveland, Ohio, that the
Constitution allows for public funding of school vouchers used to support the attendance of
children at religiously affiliated schools, in instances where parents have the opportunity of
selecting from among options that also include public and private secular schools. This
decision overturns a lower court ruling which found the Cleveland voucher program to be
in violation of the Establishment Clause of the First Amendment to the Constitution.
BACKGROUND AND ANALYSIS
Introduction
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.
Greater proportions of students from all income levels were reported to be attending public
schools of choice in 1999 than in 1993. However, among students attending schools of
choice, 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. The Condition of
Education, 2001, Table 41-1).
The federal government, as well as 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
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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 extant
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 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
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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 homeschool 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 — operate choice programs which
provide vouchers for attendance at private (including religiously affiliated) schools for a
limited number of pupils from low-income families.
The Milwaukee Parental Choice Program provides state funding for low-income
students to attend private schools located within Milwaukee. When first implemented in
school year 1990-1991, choice was limited to nonsectarian private schools. In the 1994-1995
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, 11,624 students are participating 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. November 2002).
The Cleveland Scholarship and Tutoring Program, first implemented in the 1996-1997
school year, is designed to allow students from low-income families in kindergarten through
the 3rd grade to apply to receive compensation to attend a private school located within the
boundaries of the Cleveland Municipal School District, to attend a public school in a district
adjacent to the Cleveland Municipal School District, or to receive tutorial services from a
private or governmental provider. Once accepted, students may continue in the program
through the 8th grade. Parents of students attending private schools or receiving tutorial
services are reimbursed by the state for up to 90% of the cost of tuition. Participating private
schools agree to charge low-income parents no more than 10% of the cost of tuition (the
amount not covered by the voucher), all of which may be satisfied by in-kind contributions
or services. The maximum value of the voucher has remained at $2,250 since the program
was first implemented. During the 2001-2002 school year, 4,457 students received tuition
scholarships (SchoolChoiceInfo.org. “Cleveland Scholarship and Tutoring Program.”
(Based on data reported by the Ohio Department of Education), at:
[http://www.schoolchoiceinfo.org/what/cleve_enrollment.jsp]). According to testimony in
Zelman v. Simmons-Harris, no adjacent public school districts have elected to accept
students under the program.
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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. At present, 10 public schools are 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 $3,500 and $3,900.
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. 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. Approximately 9,000 pupils are expected to participate during the 2002-2003
school year (Alan Richard, “Florida Sees Surge in Use of Vouchers,” Education Week,
September 5, 2002).
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]).
Legal Challenges to State and Local Programs. There have been numerous
recent challenges to state and local programs involving public-private school choice. Most
recently, on August 5, 2002, a Florida circuit court judge ruled Florida’s Opportunity
Scholarship Program unconstitutional in Holmes v. Bush, finding that the Florida
Constitution prohibits the use of public money to fund religious schools or institutions. (An
appeal has been filed and pending the appeal, the program has been allowed to continue.)
This decision flows from an October 3, 2000 ruling by Florida’s First District Court of
Appeals (2000 Fla. App. LEXIS 12658) that remanded the case back to the circuit court after
ruling that the Florida Opportunity Scholarship program does not violate Article IX, Section
1 of the Florida Constitution and reversing an earlier ruling by a state circuit court judge.
The August 5, 2002 ruling is based on a challenge to the program under a different section
of the Florida Constitution. The Florida Constitution, like many state constitutions, contains
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provisions prohibiting the distribution of public funds to religious institutions or
organizations, including religiously affiliated schools.
On June 27, 2002, the U.S. Supreme Court ruled in Zelman v. Simmons-Harris that the
school voucher program in Cleveland, Ohio, in which publicly funded school vouchers may
be used to pay for the attendance of disadvantaged children at religiously affiliated schools,
is not in violation of the Establishment Clause of the First Amendment to the Constitution,
in instances where parents themselves have the opportunity of selecting from among options
that also include public and private secular schools. This decision overturns a lower court
ruling which found the Cleveland voucher program unconstitutional.
On February 8, 2001, in Toney v. Bower (2001 Ill. App. LEXIS 248), an Illinois
appellate court upheld under the Illinois Constitution a state tax credit for 25% of qualified
K-12 educational expenses over $250 (with a maximum credit of $500). The Illinois
Supreme Court has declined a petition to review the case. More thorough analysis of these
and other recent cases involving legal challenges to school choice programs can be found in
CRS Report RL30165, Educational Vouchers: Constitutional Issues and Cases; and CRS
Report RS21273, The Law of Church and State: Public Aid to Sectarian 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 FY2002 appropriation amounts. FY2003 appropriations will be
included when final.
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 2 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
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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 2003-2003, $385 million are appropriated
for these programs (FY2002: $100 million; and FY2003 advance appropriation: $285
million).
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 39 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.
Under Title V-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
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a per-pupil basis. Fifty percent funds appropriated in excess of $300 million are reserved for
each of the two uses. In FY2002, $200 million were 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. No funds were
appropriated for Title V-B-1 during FY2002; however in FY2001, $25 million were
appropriated for a similar demonstration program. 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 FY2002, $25 million were 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 FY2002, $25 million were appropriated for these 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.
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24). For further information, see CRS Report RS20289, Education Savings Accounts for
Elementary and Secondary Education.
Major Types of Proposals to Expand
Federal School Choice Support
The range of school choice proposals that the U.S. Congress might consider is broad
and can be clustered into at least four basic groups — choice options in existing programs,
demonstration or targeted choice programs, block grants, and tax subsidies. These are not
mutually exclusive. Each of these is briefly reviewed below. (See CRS Report 95-344,
Federal Support of School Choice: Background and Options for a more thorough discussion
and analysis of the broad types of federal policy options (but not specific bills) regarding
school choice.)
Choice Options in Existing Programs. Advocates of school choice may seek to
amend existing federal education programs in various ways, such as removing possible
program barriers to choice, adding school choice to authorized uses of funds, expanding
current choice provisions, or reconstituting programs to focus them on choice. They also
may consider appropriations language directing how program funds may be spent. The
primary examples of past and current proposals in this category involve ESEA Title I-A. As
noted, Title I-A has certain choice-related provisions. These proposals have sought, among
other things, to authorize or require school choice or supplemental services grants under Title
I-A for special groups of students or schools, such as for victims of violence on school
grounds or for students enrolled in poorly performing schools. Choice amendments to Title
I-A have also endeavored to include private school enrollment among its choice options.
Additionally, as previously noted, the Innovative Programs, Public Charter Schools,
Voluntary Public School Choice, and Magnet Schools programs promote school choice. The
Individuals with Disabilities Education Act (IDEA) also might be amended to include a
school choice component.
Demonstration or Targeted Choice Programs. Federal support for school
choice might be fashioned to demonstrate the impact of school choice in a discrete number
of locations (e.g., specific cities or a limited number of places around the country, such as
empowerment zones) or to target choice in a similarly limited fashion to particular kinds of
students or schools. The most frequent examples of this kind of proposal have sought to
expand choice options for special groups of students (e.g., low-income students, victims of
violence on school grounds) or students in specific kinds of schools (e.g., schools
characterized by poor levels of academic performance).
Block Grants. Block grants are federal grants to states that provide an exceptionally
high degree of flexibility in the ways in which aid may be used, perhaps coupled with more
specific requirements for accountability in terms of outcomes. They are frequently proposed
as the outcome for a consolidation of several existing federal education programs. Groups
of existing programs might be transformed into block grants in selected states under
“performance agreement” proposals (see CRS Report RL30835, Elementary and Secondary
Education: Accountability and Flexibility in Federal Aid Proposals). Under a block grant,
school choice might be an explicitly authorized use, a required use (perhaps of some
specified portion of funding), or a precondition for participation (i.e., federal funds are
available only to those implementing choice plans). At times, choice programs have been
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explicitly included among the authorized uses of funds under these block grant proposals or
the authorities are sufficiently open for choice to be supported without explicit mention.
Tax Subsidies. Advocates of federal support for school choice often turn to the
federal income tax system in order to provide tax benefits — deductions, credits (refundable
or non-refundable), or exemptions from taxation of certain income — for all or certain
categories of families paying tuition or related costs for K-12 education. Coverdell ESAs are
a current example of a tax subsidy supportive of elementary and secondary education school
choice (these accounts also support postsecondary education expenses). Proposals also have
been made to provide tax subsidies for contributions to STOs, which in turn would award
private scholarships to enable children to attend schools of choice. Some see tax subsidies,
especially tax credits, as a viable option to school vouchers, which supporters have not been
successful in having enacted through federal legislation. (For further information on
proposals to support school choice through the federal tax code, see CRS Report RL31439,
Federal Tax Benefits for Families’ K-12 Education Expenses in the Context of School
Choice).
Why Is There Debate Over Federal Support of
Expanded School Choice?
This section considers some of the issues that have framed the debate over school
choice. Over the past several Congresses, many school choice proposals have been
introduced and debated, often vigorously. Most failed to be enacted. The most divisive issue
regarding publicly funded school choice is the provision of direct support to aid pupils
attending private, often religiously affiliated, schools. Conclusive evidence about the impact
of private school choice remains elusive; however, proponents and opponents alike often cite
conflicting findings from studies of the Milwaukee and Cleveland voucher programs and
some privately financed voucher programs to support their views. In contrast, there is
currently relatively little opposition to federal support of choice options that include only
public schools, as under the ESEA Title V programs: Innovative Programs, Charter Schools
Programs, Voluntary Public School Choice Programs, and Magnet Schools Programs.
Those who support choice proposals that include private schools have argued that in
view of the apparent institutional rigidity and resistance to change in many public school
systems, the most effective way in which the federal government can help to improve
educational performance, especially for pupils in low-income families, is to increase such
pupils’ opportunities to select from a range of schools, including private and religiously
affiliated schools. Proponents frequently state that helping at least some pupils from low-
income families “escape” their current, often poor-performing public schools provides an
immediate benefit to those pupils, and helps to provide such pupils with a degree of
educational choice and opportunity that those from more affluent families already have.
Competition through choice, it is argued, also would stimulate major improvements in the
performance of many public school systems serving large numbers of poor children. Finally,
while recognizing the possibility that new forms of government regulation may accompany
public funding, proponents argue that this threat can be limited through statutory
prohibitions, especially if the aid is provided indirectly (i.e., through pupils’ families).
Supporters likely will be encouraged by the U.S. Supreme Court’s ruling in Zelman v.
Simmons-Harris.
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Opponents of federal school choice proposals that include private schools tend to focus
on the limitations of the choice options being proposed, and the potentially negative effects
on public schools and their pupils, including diversion of attention and resources away from
the goal of public school system reform. Many of the current choice proposals generally
involve only a portion of the potentially eligible pupil population — e.g., they would be
available only in one or a few localities, or only for a selected number of pupils in low-
income families nationwide. In addition, they typically are limited in the proportion of
private school tuition and fee costs that may be covered, and/or the maximum voucher or
scholarship per pupil. While these amounts may pay a substantial share of the costs of
attending some private — especially elementary — schools, they are typically sufficient to
pay the full costs of attending only the least expensive types of private schools. Further,
opponents frequently argue that substantial new forms of governmental regulation will
inevitably accompany new forms of governmental financial assistance to them, even if the
assistance is indirect. Finally, they argue that the effects of competition on public school
systems are more likely to be negative than constructive, including a reduction in funds that
are linked to enrollment levels, abandonment of public schools by pupils whose families are
most alert to the choices available to them, and unequal constraints on public schools (e.g.,
the public schools must continue to serve numerous and diverse hard-to-educate pupils who
might be rejected by private schools).
LEGISLATION
Proposals in the 108th Congress
In the 108th Congress, a number of proposals have been made to increase federal support
of school choice at the elementary and secondary education level. Proposals include those
that would amend the Internal Revenue Code (IRC) of 1986 to support school choice through
the creation of new tax credits or the expansion of existing credits; those that would provide
federal funding of voucher or scholarship programs to be used to provide select students with
the opportunity to attend public or private schools of choice; and those that would amend
existing school choice provisions under the ESEA. None of these proposals have been voted
out of committee.
House and Senate Bills. Brief descriptions of a selection of bills introduced during
the 108th Congress that contain provisions explicitly supporting school choice are provided
below, as is a description of the administration’s proposal to increase school choice, which
was included in the President’s FY2004 Budget. Bills in which the support for school choice
is incidental or that would extend education tax benefits currently scheduled to expire are not
addressed.
H.R. 120 (Hoekstra, et al.)
Voluntary Opportunities for Increasing Contributions to Education Act. Amends the
IRC to allow a non-refundable tax credit of up to $500 per year for individuals ($1,000 for
joint filers) and $100,000 for corporations for 75% of qualified charitable contributions made
on behalf of elementary or secondary schools, including contributions to STOs. Introduced
January 7, 2003; referred to Committee on Ways and Means.
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H.R. 282 (Hoekstra, et al.)
Education Freedom Act. Amends the IRC to allow a tax credit of up to $250 per year
for individuals ($500 for joint filers) and $50,000 for corporations for 50% of qualified
charitable contributions to education investment organizations which make grants for
qualified elementary and secondary education expenses, or to public, private, or religious
elementary or secondary schools. Elementary and secondary school expenses would be
expanded to include home school expenses. Introduced January 8, 2003; referred to
Committee on Ways and Means.
H.R. 385 (Shadegg)
Leave No Child Behind Tax Credit Act of 2003. Amends the IRC to allow a non-
refundable tax credit of up to $250 ($500 for joint filers) for contributions to STOs that
award scholarships for the purpose of assisting children to attend elementary or secondary
schools. Introduced January 27, 2003; referred to Committee on Ways and Means.
H.R. 499 (Smith, Christopher)
Education, Achievement, and Opportunity Act. Amends the IRC to allow a refundable
income tax credit for qualifying education expenses incurred for each qualifying child of a
taxpayer to attend a public or private elementary or secondary school. Qualifying expenses
include tuition and fees (except for non-academic fees), tutoring, special needs services for
students with disabilities, transportation, and academic testing. A credit of up to $2,500
would be allowed for elementary school expenses, and up to $3,500 for secondary school
expenses. Introduced January 29, 2003; referred to Committee on Ways and Means.
H.R. 611 (Paul, et al.)
Education Improvement Tax Cut Act. Amends the IRC to allow a non-refundable tax
credit of up to $3,000 ($1,500 in the case of a married individual filing separately) for
contributions to STOs that award scholarships for the purpose of assisting children to attend
elementary or secondary schools. Also, amends the IRC to allow a non-refundable tax credit
of up to $3,000 ($1,500 in the case of a married individual filing separately) for qualified
school materials contributions to elementary or secondary schools or to school materials
organizations. Introduced February 5, 2003; referred to Committee on Ways and Means.
H.R. 612 (Paul, et al.)
Family Education Freedom Act of 2003. Amends the IRC to allow a non-refundable
tax credit of up to $3,000 for qualified elementary and secondary education expenses at a
public, private, or home school. Introduced February 5, 2003; referred to Committee on
Ways and Means.
H.R. 615 (Paul, et al.)
Hope Plus Scholarship Act of 2003. Amends the IRC with respect to the Hope
Scholarship Credit (currently available for postsecondary education expenses) to include as
qualified tuition and related expenses, elementary and secondary education expenses and
contributions to the school (other than a home school) attended by a taxpayer’s dependent.
Introduced February 5, 2003; referred to Committee on Ways and Means.
H.R. 684 (Flake, et al.)
District of Columbia Student Opportunity Scholarship Act of 2003. Establishes the
District of Columbia Scholarship Fund, managed by a publicly appointed board of directors,
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for the purpose of awarding scholarships to District of Columbia residents from families with
incomes not exceeding 185% of the poverty line for attendance at elementary and secondary
schools (including private schools) in the District of Columbia and seven surrounding
jurisdictions or for the receipt of supplemental educational services. Limits scholarship
awards to $5,000 for students from families below the poverty line and $3,750 for students
above the poverty line. Limits scholarships for supplemental educational services to $800.
Introduced February 11, 2003; referred to Committee on Government Reform.
H.R. 947 (Weiner)
School Capacity Relief Act. Amends the ESEA to allow LEAs to prohibit the transfer
of students under public school choice provisions to schools that are at or above capacity or
in which the transfer of such students would increase average class size to a level above that
prescribed by the state. Requires LEAs, to the extend practicable, to establish cooperative
agreements with other LEAs to accept transfer students in instances where all the public
schools in the LEA are ineligible to accept them. Authorizes grants to increase the school
capacity of high-performance schools in LEAs in which a significant number or percentage
of students attend schools identified for school improvement, corrective action, or
restructuring. Introduced March 17, 2003; referred to Subcommittee on Education Reform.
H.R. 1373 (DeMint, et al.)
IDEA Parental Choice Act of 2003. Amends the IDEA to authorize funding for grants,
contracts, and cooperative agreements with eligible entities to support the planning, design,
and implementation of state school choice programs for students with disabilities. In states
with school choice programs for students with disabilities, authorizes the use of IDEA
funding to supplement state funding; provides that authorization of a parent to exercise
private school choice under such a program fulfills the state’s obligation to provide a free and
appropriate public education to the parent’s child while the child is enrolled in the private
school; and provides that acceptance by a private school of IDEA funding deems it to be
providing a free and appropriate education and to be in compliance with section 504 of the
Rehabilitation Act of 1973. Authorizes the use of IDEA funding to support the
accommodation of students with disabilities who are eligible to receive supplemental
education services under the ESEA.
S. 4 (Gregg, et al.)
Opportunity for Every Child Act of 2003. Authorizes federal funding for education
certificates to be awarded to students eligible for free or reduced price meals who are
assigned to schools identified for school improvement and who are unable to transfer to a
school not identified for school improvement to enable them to attend a private school.
Eligible state, local, or non-profit entities may award federally funded education certificates
valued at an amount not to exceed the per pupil expenditures in the student’s LEA to eligible
students.
Establishes the District of Columbia Scholarship Fund, managed by a publicly
appointed board of directors, for the purpose of awarding scholarships to District of
Columbia residents from families with incomes not exceeding 185% of the poverty line for
attendance at elementary and secondary schools (including private schools) in the District
of Columbia and seven surrounding jurisdictions or for the receipt of supplemental
educational services. Limits scholarship awards for students from families below the poverty
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line to the lesser of District of Columbia per pupil expenditures or the cost of attendance at
the school attended; limits scholarships for supplemental educational services to $800.
Amends the IRC to allow families with a child otherwise assigned to a school identified
for school improvement to claim a refundable tax credit of up to 50% of the first $5,000 in
expenses incurred to enroll their child in a public or private school not identified for school
improvement. Introduced February 14, 2003; referred to Committee on Health, Education,
Labor, and Pensions.
Administration Proposal — FY2004 Budget. In its FY2004 budget request, the
administration proposes two new initiatives supportive of school choice: a refundable tax
credit for 50% of up to the first $5,000 in costs associated with attending a different public
or private school, and paid by the taxpayer, for families whose children are assigned to a
public school that has failed to make AYP according to ESEA requirements; and a choice
incentive fund. The administration requests increased funding for the Public Charter Schools
Programs, to include funding for per-pupil facilities aid programs and for credit
enhancements for charter school facilities. Continued funding also is proposed for the
following ESEA Title V programs: Innovative Programs, Voluntary Public School Choice,
and Magnet Schools. Descriptions of existing ESEA Title V programs are provided above.
The following provides a description of the administration’s two proposed school choice
initiatives.
Refundable Tax Credit for Certain Costs of Attending a Different School for Pupils
Assigned to Failing Public Schools. The administration proposes a refundable credit of
50% of the first $5,000 of qualifying educational expenses associated with sending a
qualifying student, who is a taxpayer’s qualifying child, to a different qualifying elementary
or secondary school. The refundable credit would apply toward both a taxpayer’s regular and
alternative minimum tax liabilities. In addition, a taxpayer could claim credits for more than
one qualifying child. Qualifying expenses for the tax credit could not also be considered as
qualifying expenses for distributions from Coverdell Education Savings Accounts. The
Department of the Treasury estimates that receipt and outlay effects of the program would
total $3.32 billion over 5 years (FY2004 through FY2008).
Under the administration’s proposal, qualifying educational expenses would include
tuition and required fees, transportation expenses, and certain other expenses (such as
academic tutoring, special needs services for special needs students, books, supplies,
uniforms, room and board, extended day care, and computer technology equipment)
associated with attendance at a qualifying school, but would exclude tuition and fees for any
public school within the same LEA as a student’s assigned local school. A qualifying school
would be any public school (other than the local school), including a public charter school,
that made adequate yearly progress during the prior year, a private elementary or secondary
school, or a home school. A qualifying student is one who attended, at the close of the prior
school year, a public elementary or secondary school identified as failing to make adequate
yearly progress for that year according to the terms of the ESEA, as amended by P.L. 107-
110. In addition, a student newly assigned to a school identified as failing to make adequate
yearly progress for the prior school year also would be considered a qualifying student. Such
students generally would continue as qualifying students from year to year, even if their local
school ceased to be identified as failing, until such time as they would be assigned to a
different school that had made adequate yearly progress (e.g., being newly assigned to a
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successful high school for the 9th grade). A qualifying child would be defined as a taxpayer’s
son, daughter, stepson, stepdaughter, sibling, stepsibling (or descendant of such individuals),
or foster child, who shared the same principal residence as the taxpayer for more than half
of the tax year. (U.S. Department of the Treasury, General Explanations of the
Administration’s Fiscal Year 2004 Revenue Proposals, February 2003, pp. 40-42).
Choice Incentive Fund. The Choice Incentive Fund would provide competitive awards
to states, LEAs, and CBOs that expanded opportunities for parents of children who attend
low-performing schools to attend higher-performing public schools (to include charter
schools) or private schools. Priority would be given to applicants that would provide
expanded school choice opportunities to large numbers of students. The administration is
requesting $75 million to fund the program. Of these funds, a portion would be reserved for
school choice programs in the District of Columbia.
FOR ADDITIONAL READING
CRS Reports
CRS Report 97-519, Charter Schools: State Developments and Federal Policy Options, by
Wayne C. Riddle, James B. Stedman, and Steven Aleman.
CRS Report RS20289, Education Savings Accounts for Elementary and Secondary
Education, by Bob Lyke and James B. Stedman.
CRS Report RL30165, Educational Vouchers: Constitutional Issues and Cases, by David
M. Ackerman.
CRS Report RS21254, Education Vouchers: An Overview of the Supreme Courts Decision
in Zelman v. Simmons-Harris, by Christopher Jennings.
CRS Report RL30835, Elementary and Secondary Education: Accountability and Flexibility
in Federal Aid Proposals, by Wayne Clifton Riddle.
CRS Report RL30372, ESEA Title I Portable Grant Proposals: Background and Issues, by
Wayne Riddle.
CRS Report 95-344, Federal Support of School Choice: Background and Options, by
Wayne C. Riddle and James B. Stedman.
CRS Report RL31439, Federal Tax Benefits for Families K-12 Education Expenses in the
Context of School Choice, by Linda Levine and David Smole.
CRS Report RL31489, Individuals with Disabilities Education Act: Possible Voucher
Issues, by Richard N. Apling, Nancy L. Jones, and David Smole.
CRS Report RS21273, The Law of Church and State: Public Aid to Sectarian Schools, by
David M. Ackerman.
CRS Report 98-455, Magnet Schools Assistance Program: Overview and Status, by Carol
Glover.
CRS Report RL30663, The Reading Excellence Act: Implementation Status and Issues, by
Gail McCallion.
CRS Report RL30805, School Choice: Legislative Activity by the 104th Through 106th
Congresses, by James B. Stedman.
CRS Report RL31329, Supplemental Educational Services for Children from Low-Income
Families, by David P. Smole.
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