NCPA - National Center for Policy Analysis

Education Savings Accounts

November 15, 2012

The public education system is long overdue for an innovative revamp that will improve student performance, says Jonathan Butcher, education director at the Goldwater Institute.

The most promising step toward this is the education savings account, which was first introduced in Arizona in 2011.

  • The savings accounts are parent-controlled bank accounts in which the state deposits funds from the education funding formula.
  • The state education department provides parents an account number and a check or debit card, and parents can use it to make purchases.
  • Parents use the accounts much like health savings accounts (HSAs) for medical services and can pay for a variety of expenses, such as tutoring, private school tuition and online classes.
  • Due to advancements in technology, families have more flexibility and choices in crafting their child's education.

The education savings account benefits children, parents and taxpayers.

  • Because the accounts allow families to choose from numerous academic services, a child can tailor an experience that precisely fits his or her needs.
  • The system provides parents with more services and, by extension, more freedom and flexibility to tailor their child's intellectual growth.
  • Every penny is accounted for, thus the state and taxpayers know exactly where and how the resources are utilized.

However, communities keen on integrating this program need to consider four critical issues.

  • First, all students should be eligible for an account.
  • Second is funding. State funding policies must be updated to accustom real-time student transfers and funding models where education dollars follow the child.
  • The third area is allowable expenses. State lawmakers, along with the state education department, must clearly define a list of all types of approved expenses available to parents through the internet and periodic mailings.
  • The last area is preventing fraud and abuse. The savings account programs should be designed with fraud protection systems, like in Medicare and food stamps.

Source: Jonathan Butcher, "Education Savings Accounts: A Path to Give All Children an Effective Education and Prepare Them for Life," Goldwater Institute, October 30, 2012.


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