Additional thoughts on ESAs and microschools

Two recent blog posts (here and here) looked at educational savings accounts and their links to digital learning, including in microschools. A comment from a reader, and a new article in Education Next, are worthy of a quick follow-up.

The comment came from Evergreen’s Consulting Director Peter Robertson, who questioned the posts’ relegation of private school vouchers to a secondary status in driving school choice going forward. Peter’s main point is that the number of students enrolled in voucher programs currently exceeds the number tapping into ESA funds.

From his email to me:

“Education Savings Accounts have attracted significant attention, particularly given the dramatic increase in their use in 2023 (half of that growth came from Arizona); the universal access families now have to them in Arizona, Florida, and Utah; and the fact that their use is not limited to school tuition and promises to speed the unbundling of K-12 education.

However, more states have school voucher programs than ESAs, and in 2023, there were more than 3 times as many voucher recipients as there were users of ESAs. As of October, Ohio had universal access and had approved 56,793 students for participation in one of its four voucher programs. Ohio has budgeted $964.5 million for vouchers this school year, and current application rates suggest the number of voucher recipients could almost triple next year. Indiana and Wisconsin have also expanded eligibility, and Indiana had 44,000 students receiving a voucher. Voucher use is limited to schools, so while vouchers will expand school choice and allow public funds for private education, they do not allow the same flexibility in spending as ESAs.”

I wasn’t aware of how many students in Ohio were using vouchers, so I’ll adjust my mental framing of vouchers compared to ESAs. It still seems to me that the political energy is behind ESAs more than vouchers in most states, but perhaps I’m wrong about that too, or possibly that statement is broadly correct but there are some important counterexamples in addition to Ohio and the other states that Peter mentions.

Whether ESAs or vouchers, they both represent a shift from public funding of public education institutions to public funding of private offerings.

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In A New Crop of School Models Expands Choice, writer Michael Q. McShane provides a valuable analysis of the financial side of microschools.

“Let’s put together a fictional microschool. First, we need a location. In my old neighborhood in Kansas City, rent for a simple storefront will run between $15 and $20 per square foot per year, so a 1,500 square foot space will cost between $22,500 and $30,000. You want a great teacher or guide? The starting salary for Kansas City Public School teachers is $43,100…School operators also need insurance, utilities, furniture, and other incidentals that could easily crack another $1,000 to $1,500 per month.

For instructional materials, there are some free or low-cost resources…But are students going to supply their own laptops or tablets? Either way, someone is going to have to pay for them.

So, let’s say, with some pretty conservative assumptions, you’re in the range of $85,000 to $100,000 per year in operating costs. Divide that by the student population. If you have 12 students, costs are $7,083 to $8,333 per student per year. At 15 students, it is $5,667 to $6,667. With local Catholic elementary schools running in the $6,000–$7,000 range, the cost of your hypothetical microschool is certainly competitive. But there isn’t much room for upward revision before the model becomes markedly more expensive than its more established neighbors.

(SNIP)

Clearly, venture capitalists see an opportunity to turn a profit, but it’s not clear where the profits lie. Making money might be particularly challenging for ventures that look to recruit top teacher talent, offer innovative learning spaces, or use the latest technology to supplement instruction.”

The text I’ve copied here is just part of his analysis which is just part of an excellent article. I encourage you to read it.

The most striking thing to me is I’ve not seen this type of analysis broadly discussed. It’s not particularly hard, and I’m sure people who are running or supporting microschools are well aware of the numbers. But the broader movement players seem to shy away from discussing these numbers publicly, and I wonder if it’s because they complicate the narrative that microschools are poised to grow rapidly. There is room for growth, but it’s a narrow path to thread the needle to allow financial stability at a level that parents (or ESAs) will pay for.