Kids Win. Taxpayers Win.
The fiscal benefits to state
government of a school
voucher program
March 17, 2010
Tens of thousands of Chicago families are
trapped in failing public schools. A new school
voucher program has been proposed by the
Reverend Senator James Meeks. Its goal is to
give parents of students enrolled in the worst
performing public schools the choice to send
their children to private schools.
Similar programs in other states have been
Education Brief
shown to improve academic outcomes for
the students who use vouchers, and surveys
unsurprisingly show that parents are happier
with their new schools.1 Moreover, when the
impact of school voucher programs on public
school performance has been researched,
practically every study has shown that the
increased competition for students has actually
led surrounding public schools to improve as
well.2
As a means of improving education in
inner-city Chicago, Rev. Meeks’ proposal is
solid. Many lawmakers, however, have raised
concerns over whether state government can
afford to pay for students to attend private
school. This policy brief examines that
question, and finds that the school voucher
program proposed by Rev. Meeks will almost
certainly lead to significant savings for state
government.
A school voucher program requires the state to
cut new checks as students transfer to private
schools from failing public schools. However,
this also means that the state will lower the
amount of its regular payments to Chicago
Public Schools (CPS), since the district would
Collin Hitt is Director of Education Policy at the Illinois Policy Institute. Ted Dabrowski is an independent policy
consultant who recently served as a chief advisor to the education committee of the Illinois Taxpayer Action Board.
see a corresponding decline in enrollment.
How do these two factors balance out? In
the scenario we find most likely, with twenty
thousand students redeeming school vouchers
at an average of $4,500 apiece, the savings from
reduced General State Aid (GSA) payments
would not only cover the cost of the school
vouchers but also lead to a five-year surplus of
$37 million.
Calculating the Fiscal Impact of School
Vouchers
A pilot school voucher program can lead to
significant savings for state taxpayers. Any
drop in public school enrollment – such as that
created by a school voucher program – would
lower the state’s financial obligation to the
district. Local revenue streams, which account
for roughly half of CPS’s budget, would be
unaffected. In calculating the potential savings
to state government, this paper looks only at
how the state’s General State Aid obligation
would be affected by various potential declines
in enrollment.
Tables 1 and 2 (next page) present the findings
from our analysis, according to the wide range
of possible scenarios.
Enrollment Declines and General State Aid
General State Aid is the primary – though
certainly not the only – means through which
state government subsidizes public education
in Chicago. CPS receives approximately $1.2
billion in General State Aid support. There
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are also grant programs for transportation
reimbursement, bilingual education, reading
improvement and special education that
together provide hundreds of millions of
dollars in support to CPS. General State Aid,
more than these other programs, is influenced
by enrollments. All other factors aside, the
more students a district has, the larger its state
aid payment. As such, this policy brief focuses
solely upon General State Aid, as it relates to
potential voucher outlays.
• The Foundation Level, as determined
annually by the Illinois General
Assembly, currently at $6,119;
• Average daily attendance within the
district for the past three years;
• Average “Low Income” student
enrollment within the district for the
past three years; and
• Total assessed property value within
the district, which provides the base for
local property taxes.

The “General State Aid Overview” published
by the Illinois State Board of Education
contains a lengthy explanation of how a given
A pilot school district’s General State Aid entitlement
is calculated.3 Four main variables influence a
school voucher given district’s state aid entitlement:
program
Local property taxes are the initial revenue
stream for public schools. If a district is
deemed to have a high property tax base
relative to the number of its students, then it
receives less state aid – with the expectation
being that the district will draw upon local
resources to fund local schools.

can lead to Table 1: Five-Year Net Savings

significant of School Voucher Plan
savings Average Voucher Vouchers Used Annually
for state Amount 10,000 20,000 30,000

taxpayers. $3,000 $94,190,068 $186,984,684 $278,360,384

$3,500 $69,190,068 $136,984,684 $203,360,384
$4,000 $44,190,068 $86,984,684 $128,360,384
$4,500 $19,190,068 $36,984,684 $53,360,384
$5,000 -$5,809,932) -$13,015,316 -$21,639,616
$5,500 -$30,809,932 -$63,015,316 -$96,639,616
$6,000 -$55,809,932 -$113,015,316 -$171,639,616

Table 2: Twelve-Year Net Savings of

School Voucher Plan

Average Voucher Vouchers Used Annually

Amount 10,000 20,000 30,000
$3,000 $362,183,522 $722,979,930 $1,082,341,173
$3,500 $302,183,522 $602,979,930 $902,341,173
$4,000 $242,183,522 $482,979,930 $722,341,173
$4,500 $182,183,522 $362,979,930 $542,341,173
$5,000 $122,183,522 $242,979,930 $362,341,173
$5,500 $62,183,522 $122,979,930 $182,341,173
$6,000 $2,183,522 $2,979,930 $2,341,173
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Table 3: Annual Voucher Outlay (dollars)

Average Voucher Total Vouchers Used

Amount 10,000 20,000 30,000 Projected
$3,000 $30,000,000 $60,000,000 $90,000,000 state aid
$3,500 $35,000,000 $70,000,000 $105,000,000 obligations
$4,000 $40,000,000 $80,000,000 $120,000,000 to CPS
$4,500 $45,000,000 $90,000,000 $135,000,000 will total
$5,000 $50,000,000 $100,000,000 $150,000,000 $6.11 billion
$5,500 $55,000,000 $110,000,000 $165,000,000 between the
$6,000 $60,000,000 $120,000,000 $180,000,000
five-year
period of
However, if a district has a relatively low Gross Savings to State Aid
property tax base relative to its number of FY2012 to
students, then it receives state aid sufficient For the purposes of this paper, we assume
that students who use school vouchers attend
FY2016,
to fund each student’s education at the
statutory Foundation Level, currently set at school at a similar rate as their peers and have averaging
similar economic backgrounds. This is to
$6,119. Moreover, the higher a given district’s
concentration of low income students, the say – for the purpose of our projections – a $1.22 billion
more state aid it is entitled to receive on a per potential five percent drop in CPS enrollment
would lead to an identical five percent drop in
per year.
pupil basis via the GSA “Poverty Grant.”
both average daily attendance and low-income
In short, each district has a predefined amount student enrollments. For the purposes of our
of per pupil resources that it should have access projection of General State Aid obligations,
to, according to state law. In a vast majority we assume that all other relevant factors will
of instances, local resources are insufficient to remain constant at 2008-09 Levels.
cover the state-set levels of per pupil spending.
General State Aid covers the difference. Projected state aid obligations to CPS will total
$6.11 billion between the five-year period of
A school voucher program would have an FY2012 to FY2016, averaging $1.22 billion per
impact on two of the main variables of year. A ten thousand student drop in annual
Chicago’s General State Aid application, since enrollment would lower that obligation to $5.86
the program would create a slight decline in billion, showing a gross savings of $244 million.
enrollment. A district’s average daily attendance Twenty thousand and thirty thousand student
(ADA) would drop, as would the total number decreases would lower state aid obligations by
of Low Income students. $487 million and $728 million, respectively, over
that five-year period.
This will affect the Chicago Public School’s
General State Aid application in two ways. It is worth noting that the current formula
For one, it lowers the amount of students for for General State Aid reimburses districts for
whom the district and the state will need to three-year averages in enrollments. This means
support financially. Second, it will mean that an that, even though a school voucher program
unchanged level of local property tax resources would lead to an immediate decrease in district
will be available for a reduced number of public enrollment, state aid payments would take three
school students, thus meaning that fewer state years to fully reflect that decrease. As Table
resources are needed to aid Chicago schools in 2 shows, we find that the state will eventually
reaching Foundation Level funding. Both of realize a net annual savings as a result of a
these factors would lower the state’s General school voucher program, regardless of the
State Aid payment to CPS. popularity of the program or the average that
vouchers are redeemed for.
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Potential School Voucher Outlays
The pilot school voucher program, as outlined
in Senate Bill 2494, would give parents with
children attending the bottom-performing ten
percent of public schools “a School Choice
Voucher for payment of qualified education
expenses incurred on behalf of the qualifying
pupil at any participating nonpublic school in
which the qualifying pupil is enrolled.”4 The
voucher can be redeemed for as much as the
current state Foundation Level of $6,119. This
is more than sufficient to cover the average cost
of private elementary school tuition in Chicago.
It is impossible to know beforehand what
exactly will be the average value of the school
vouchers issued. Similarly, it is impossible to
predict exactly how many students will take
advantage of the program. Thus we have
In every created Table 3 to demonstrate the various
scenario, a potential outlays for school vouchers, according
to various assumptions about voucher program
school voucher enrollments and average voucher amount.
program The math is uncomplicated: if 20,000 vouchers
will generate are redeemed at an average amount of $4,500,
then the total annual voucher outlay would be
annual net $90 million, which is roughly equivalent to 7.5
percent of what the state pays annually to the
savings district in General State Aid. What we show
to state in full in the Appendices is that concomitant
reductions in General State Aid – reflecting the
government marginal decline in enrollment for the district –
will more than cover the costs of the voucher
by its third program.
year. In every scenario, a school voucher program
will generate annual net savings to state
government by its third year.
This slow adjustment will soften the financial
impact to the district, to be sure, though it
will also delay the date by which a school
voucher program will generate savings for
state government. Under our projections, there
are no instances wherein Rev. Senator Meeks’
proposed school voucher program would come
at a net cost to state taxpayers.
Conclusion
As the Rev. Senator Meeks said to the editorial
board at the Chicago Tribune, “the worst
thing that could happen is that a child might
get a decent education,” if the state creates a
school voucher program.5 And indeed, research
on existing voucher programs suggests that
Chicago students who use vouchers will end
up in safer schools that can give them a better
education, while surrounding public schools
will in turn improve their performance as well.
Moreover, as shown above, the pilot school
voucher program outlined in Senate Bill 2494
would likely generate significant savings to state
government simply by reducing its General
State Aid liabilities. This says nothing of the
potential savings to other educational grant
programs, some of which can be adjusted to
reflect declining enrollments. Those savings
could be further invested in public education or
used to pay down portions of the state’s record
budget deficit. In either case, as the editorial
board of the Tribune rightly anticipated, “the
Meeks plan wouldn’t cost the state a dime.”6

In only a few instances – if voucher enrollment

is very high and the average voucher amount
approaches the Foundation Level of $6,119 –
will it take longer than six years for the state
to realize a net savings. In these instances,
it will take between seven and twelve years
for state government to realize a net savings
from the voucher program. This is not due to
any inherent cost of a voucher program per
se. Rather, Illinois’s current state aid formula
takes three years to fully adjust to permanent
enrollment decreases. In effect – because
General State Aid is paid out based on three-
year enrollment averages – the state will
temporarily and heavily compensate CPS for
the thousands of students who have already
accepted a voucher and left the public schools.
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Appendix 1
The fiscal projections for this analysis were possible to calculate the projected net savings
calculated using data from the Illinois State for a school voucher program over any period
Board of Education. The “General State Aid of time according to any range of assumptions,
Fiscal Calculator” is available for download at as was done over a twelve year period in Table
www.isbe.net. Enrollment figures and other 2.
data for Chicago Public Schools are available
from the Interactive Illinois Report Card, co-
published with Northern Illinois University, at
www.iirc.niu.edu.

In order to calculate projected levels of General

State Aid spending, we first created separate
baseline projections for each fiscal year between
2012 and 2016. Since we assumed all relevant
factors would remain constant with FY2010
figures over that time, each projected payment
for those years was an identical $1.221 billion
per year.

When projecting the fiscal impact of a sudden

decrease in enrollment – such as that created by
a new school voucher program – we assumed
that any decrease in CPS enrollment would lead
to an identical percentage decrease in average
daily attendance (ADA) and Low Income
student enrollment. For example, a 20,000
student drop would represent an enrollment
drop of 4.89 percent for CPS (currently:
409,055 students); therefore we reduce ADA
and Low Income student enrollment for 2010-
11 and each school/fiscal year thereafter.

As mentioned above, General State Aid is

largely based on three-year average district
enrollments. So, as demonstrated in our mock
fiscal years 2011 through 2014, it will take three
years before the annual savings to GSA reaches
optimal levels. We projected General State Aid
obligations under three separate scenarios, each
available in Appendix 2:

• Scenario 1 reflects a 10,000 student

decrease for CPS;
• Scenario 2, a 20,000 student decrease;
• Scenario 3, a 30,000 student decrease.

Under each of these scenarios, we have

included in the following tables the projection
for school years 2011 through 2015, which will
pay out in fiscal years 2012 through 2016.

For each year after the first two years of the

program, the projected annual net savings are
identical, since GSA payments will have fully
adjusted for the initial enrollment changes
caused by a voucher program. As such, it is
 Page 6 of 7
Appendix 2

Base Case: Actual GSA projections

Poverty
GSA 3-year ADA DHS Count
Year Concentration
Entitlements Average Average
Level
Year 1 2011-2012 $1,221,447,239 347,118 296,166 85.32%
Year 2 2012-2013 $1,221,447,239 347,118 296,166 85.32%
Year 3 2013-2014 $1,221,447,239 347,118 296,166 85.32%
Year 4 2014-2015 $1,221,447,239 347,118 296,166 85.32%
Year 5 2015-2016 $1,221,447,239 347,118 296,166 85.32%

Scenario 1: 10,000 student decline

Savings/ Poverty
GSA 3-year ADA DHS Count
Year (Costs) over Concentration
Entitlements Average Average
Base Case Level
Year 1 2011-2012 $1,218,038,018 $3,409,221 344,289 293,753 86.75%
Year 2 2012-2013 $1,185,520,730 $35,926,510 341,460 291,339 86.03%
Year 3 2013-2014 $1,153,162,460 $68,284,779 338,632 288,926 85.32%
Year 4 2014-2015 $1,153,162,460 $68,284,779 338,632 288,926 85.32%
Year 5 2015-2016 $1,153,162,460 $68,284,779 338,632 288,926 85.32%

Scenario 2: 20,000 student decline

Savings/ Poverty
GSA 3-year ADA DHS Count
Year (Costs) over Concentration
Entitlements Average Average
Base Case Level
Year 1 2011-2012 $1,215,805,052 $5,642,187 341,460 291,339 88.25%
Year 2 2012-2013 $1,149,816,991 $71,630,248 335,803 286,512 86.78%
Year 3 2013-2014 $1,084,876,490 $136,570,749 330,146 281,685 85.32%
Year 4 2014-2015 $1,084,876,490 $136,570,749 330,146 281,685 85.32%
Year 5 2015-2016 $1,084,876,490 $136,570,749 330,146 281,685 85.32%

Scenario 3: 30,000 student decline

Savings/ Poverty
GSA 3-year ADA DHS Count
Year (Costs) over Concentration
Entitlements Average Average
Base Case Level
Year 1 2011-2012 $1,214,634,242 $6,812,998 338,632 288,926 89.82%
Year 2 2012-2013 $1,114,463,048 $106,984,191 330,146 281,686 87.57%
Year 3 2013-2014 $1,016,592,841 $204,854,398 321,660 274,445 85.32%
Year 4 2014-2015 $1,016,592,841 $204,854,398 321,660 274,445 85.32%
Year 5 2015-2016 $1,016,592,841 $204,854,398 321,660 274,445 85.32%
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Endnotes
1 “School Vouchers and The Students Who
Use Them: What the Research Says,” Illinois
Policy Institute Education Policy Point¸ March 3,
2010: http://www.illinoispolicy.org/uploads/files/
voucherresearch.pdf

2 Greg Forster, 2007, “A Win-Win Solution: The

Empirical Evidence on How Vouchers affect Public
Schools,” published by the Foundation for Educational
Choice: http://www.edchoice.org/research/
ShowResearchItem.do?id=10108

3 “General State Aid Overview,” published by the

Illinois State Board of Education, available online at:
http://isbe.net/funding/pdf/gsa_overview.pdf

4 Senate Bill 2494, Senate Amendment 1, 96th

Illinois General Assembly.

5 “A Decent Education,” lead editorial in the March

2, 2010 edition of the Chicago Tribune: http://www.
chicagotribune.com/news/opinion/editorials/ct-edit-
vouchers-20100302,0,7726504.story

6 “A Decent Education,” lead editorial in the March

2, 2010 edition of the Chicago Tribune: http://www.
chicagotribune.com/news/opinion/editorials/ct-edit-
vouchers-20100302,0,7726504.story