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School Choice Pays Off, Literally

by Patrick Wolf & Michael Q. McShane
National Review
February 1, 2013

The District of Columbia Opportunity Scholarship Program (OSP) produced $2.62 in benefits for every dollar spent on it. In other words, the return on public investment for the private-school voucher program during its early years was 162 percent.

That is the major finding from a follow-up study we completed, based on the results of the official U.S. Department of Education evaluation of the program. Our study has just been published in the peer-reviewed journal Education Finance and Policy.

The OSP was the nation’s first federally funded private-school choice program. It was launched in 2004 as part of a three-sector strategy for urban education reform that also included increased funding for public charter-school facilities and added funds for educational improvements in District of Columbia public schools.

After the program’s five-year pilot run ended in 2009, Congress and President Obama cut funding for the school-choice program and closed it to new students. Senator Joe Lieberman (I., Conn.) and House Speaker John Boehner (R., Ohio) persuaded President Obama to agree to a reauthorization of the program as one of the final elements of the budget compromise in April 2011.
That was a good thing, as the research indicates. The OSP increased the high-school graduation rate of students by 12 percentage points if they were lucky enough to win the annual scholarship lottery. Scholarship winners had the chance to use their scholarships at any of the more than 60 private schools in the District participating in the program. Some 3,738 students won scholarships during the trial period, and the older students among them have graduated from high school at a higher rate than their peers who lost the lottery. We can reasonably estimate that 421 extra students will walk across the stage, mortarboards atop their heads, as a result of this school-choice program.

Students who graduate from high school live longer, healthier, and more productive lives than their peers who do not. They make significantly more money and as a consequence pay significantly more taxes, are less likely to commit crimes, and are less likely to become a burden on the public. In other words, high-school graduates on average contribute more to society and require less from it than do high-school dropouts.

In our study we combined the increased-graduation results from the rigorous government evaluation with the work of labor, health, and public-policy economists who have at various times estimated the value of a high-school diploma to get an overall estimate of the impact of the program. Combining the increased income and financial benefits of longevity and quality of life, a high-school diploma is worth almost $350,000 to an individual.

Because a high-school diploma makes an individual less likely to commit crimes, it therefore decreases both the costs incurred by victims of crimes and those borne by the public in administering the justice system. Coupled with the increased tax revenue made on the increased income, this yields an extra benefit for society of over $87,000 per high-school graduate.

Multiplying the number of additional graduates by the value of a high-school diploma yields a total benefit of over $183 million. Over the time of our study, the OSP cost taxpayers $70 million, so dividing the benefits by the cost yields an overall benefit-to-cost ratio of 2.62, or $2.62 for every dollar that was spent.

Programs that perform better and save money are the most sought-after of public policies. The District of Columbia Opportunity Scholarship Program was and is such a program. We see no reason why the current group of 1,584 low-income DC students participating in the program won’t realize the same benefit of higher high-school graduation rates that their predecessors did.

January has ushered in three major events: Martin Luther King Day, President Obama’s second inauguration, and National School Choice Week. Dr. King shared with us his dream of equal opportunity in our society, beginning with education. President Obama has promised to “fund what works in education, regardless of ideology.” National School Choice Week brings attention to the issue of parental options in education. Our analysis of the OSP suggests that increased parental choice works in education in ways that deliver the dream of high-school graduation to more disadvantaged inner-city children.

It is often said that nothing seems to work in Washington. One clear exception is the DC Opportunity Scholarship Program.

Patrick J. Wolf is professor of education reform and 21st Century Endowed Chair in School Choice at the University of Arkansas in Fayetteville. Michael Q. McShane is a research fellow in education-policy studies at the American Enterprise Institute and a distinguished doctoral fellow in the department of education reform at the University of Arkansas.