Not all school choice programs are created equal. Policy design differs greatly across states. Because voucher-using families use public education dollars that would have otherwise gone to government schools, taxpayers and government officials are often highly concerned about the quality of private schools these families choose for their children. Government regulations are largely the result of these concerns.

Most regulators of private school choice programs have good intentions. They want children to get the education they need to be successful in the long run. Voucher program regulations can be thought of as attempts by regulators to prevent families that qualify for voucher funding from making poor educational decisions for their children. These regulations can also be efforts to push private schools to operate more effectively and equitably. Either way, it is pretty clear that the experts want what they think is best for kids.

Some of these regulations include requirements that teachers and administrators have bachelor’s degrees or teaching licenses, mandates that all students take the state standardized tests, and requirements that private schools admit students at random. As with many other uses of government force, these types of voucher program regulations may come with some unintended consequences.

Increasing the costs for private schools to participate in voucher programs may decrease the likelihood that private-school leaders decide to participate in the programs. Put differently, higher regulatory costs lead to fewer options for the students who need them the most. And we shouldn’t expect that raising program entry costs will equally deter private schools from participating in voucher programs, regardless of quality. In theory, lower-quality private schools may be less likely to turn down the voucher offer, regardless of the strings attached, since they are the most desperate for cash. On the other hand, highly specialized private schools that are already working well for their students may be less likely to accept government regulations that could change their successful educational models. In other words, voucher regulations could inadvertently reduce the average quality level of private schools that agree to participate in choice programs.

We empirically examine this hypothesis using school-level data from two of the most highly regulated voucher programs in the United States: the Milwaukee Parental Choice Program (MPCP) and the Ohio Educational Choice Scholarship Program (EdChoice). Using tuition, enrollment, and customer review scores as proxies for school quality, we find strong evidence suggesting that lower-quality private schools are more likely to participate in voucher programs in both locations. This result is a big problem if our aim is to provide high-quality educational options for children who are currently in government schools that are failing them. Maybe instead of trying so hard to prevent low-income families from making the wrong decisions, regulators ought to realize that their interference may exacerbate the very problems they wish to solve.

Theory

When a school voucher program is enacted in a given location, each private-school leader in the area must make a participation decision. The decision is based on the expected benefits and costs of program participation. The major benefit of participating in a school voucher program is, of course, the voucher revenue. Because private schools must compete with schools that are “free” — traditional public schools and public charter schools — some private schools may have a difficult time staying in business. Voucher funding makes private schooling more affordable, so private schools participating in voucher programs will have less difficulty filling empty seats and remaining financially stable, all else being equal.

On the other side of the equation is the bureaucratic red tape. Whenever private schools accept voucher funding, the government is given an avenue to exert additional control over those schools’ operations. For example, to participate in the MPCP, private schools must allow students to opt out of religious programs, submit annual financial audits, be accredited by the state, admit students on a random basis, take the voucher amount as full payment, require all teachers and administrators to hold a teaching license or a bachelor’s degree, and require all their students to take state standardized tests.1 If a given private school expects that additional costs will exceed additional benefits, it will not participate in the voucher program.

We expect that lower-quality schools — those schools likely to be more strapped for revenue — will have stronger incentives to accept voucher program regulations. On the other hand, we expect that high-quality private schools — as measured by tuition, enrollment, and customer reviews — will be more likely to turn down the voucher offer, especially if they already have an educational model that is working for their customers and do not need additional revenue to remain financially sound.

Literature Review

The evidence linking private school choice programs to standardized test scores is abundant. The preponderance of the most rigorous evidence suggests that private school choice programs improve test scores for children in the United States and abroad. A meta-analytic review of 19 experimental evaluations of voucher programs around the globe finds small improvements in math and reading test scores.2 These evaluations employ random assignment, considered to be the “gold standard” of empirical testing because it is intended to isolate the effects of the variable of interest from the effects of other factors. In other words, random-assignment evaluations allow us to confidently conclude that observed differences in student outcomes are the result of the types of schools the students attend. A majority of the 17 evaluations of voucher programs in the United States found statistically significant positive effects on test scores for some or all students.3 Only two of the studies — one in Louisiana and one in Washington, D.C. — found negative effects on student test scores.4

What led to the negative results in D.C. and Louisiana? Authors of the Louisiana study theorize that the high participation rates of low-quality private schools could explain the results.5 The schools that were most desperate for funding — the ones facing declining enrollment — were more likely to participate in the program and accept its heavy package of regulations.

Yujie Sude, Corey A. DeAngelis, and Patrick J. Wolf found evidence supporting this idea in the Louisiana program.6 Specifically, the authors found that a $1,000 increase in tuition was associated with a 3.5 percentage-point reduction in the likelihood of participating in the Louisiana Scholarship Program.7 Of course, tuition is not a perfect measure of school quality. However, tuition may be the best measure of quality available because school quality is subjective; tuition represents the price that customers are willing to pay for each given school’s educational product, and price, as in other industries, should at least be positively correlated with quality. Sude, DeAngelis, and Wolf also found that a one-point increase in review scores from the website GreatSchools was associated with around a 12 percentage-point reduction in the likelihood of participation in the Louisiana voucher program; however, the difference was not statistically significant.8 Recent empirical evidence also suggests that burdensome voucher regulations led to homogenization of the supply of private schools in Louisiana and other states.9

Only a third of private schools elected to participate in the highly regulated voucher program in Louisiana, while private-school participation in less heavily regulated programs tends to be more than double that proportion.10 These patterns likely have to do with high regulatory costs. Indeed, Brian Kisida, Patrick J. Wolf, and Evan Rhinesmith found that 100 percent of leaders of private schools participating in the Louisiana program stated that future regulations were a concern in general, and 64 percent reported that program regulations were a “major concern.”11 David Stuit and Sy Doan found that private schools are less likely to participate in voucher programs that have heavier packages of regulations.12

We follow the methodology employed by Sude, DeAngelis, and Wolf to examine the types of schools that choose to participate in voucher programs in Ohio and Milwaukee.13 We expect to find similar results, suggesting that lower-quality schools are more likely to participate in school choice programs in those two locations.

The Programs

Milwaukee Parental Choice Program

The MPCP, launched in 1990, is considered the nation’s first modern-day private school choice program.14 Children are eligible for the program if their family’s income does not exceed 300 percent of the federal poverty level ($73,800 for a family of four in 2017–2018.) Milwaukee has 126 schools participating in the voucher program, serving 28,702 students. Indeed, around 63 percent of the eligible children in Milwaukee participate in the MPCP.15 The MPCP is the largest of the four private school choice programs in Wisconsin, and the average voucher funding amount is $7,503 per student each year. The other three programs are the Racine Parental Choice Program, the Wisconsin Parental Choice Program, and the Special Needs Scholarship Program. Our analysis focuses on the MPCP because it has the highest participation levels for both schools and students. Indeed, the MPCP has almost 10 times more participating students than the Racine Parental Choice Program, which is the second-largest voucher system in the state.

Schools that participate in the MPCP are required to abide by many rules and regulations. Participating private schools must administer state standardized tests, undergo annual financial audits, require that each administrator and teacher have either a teaching license or a bachelor’s degree, require all administrators to go through financial training, admit students on a random basis, take the voucher amount as payment-in-full, and allow their students to opt out of religious activities. Participating schools are also graded by the Wisconsin Department of Public Instruction, and the results are published on its website every year.

Ohio Educational Choice Scholarship Program

Ohio’s EdChoice was enacted in 2005 and launched in 2006. It has 482 participating schools serving 22,846 students, and the average voucher value is $4,705. There are four other voucher programs in the state: the Cleveland Scholarship Program, the Autism Scholarship Program, the Income-Based Scholarship Program, and the Jon Peterson Special Needs Scholarship Program. We examine the EdChoice program because it is the largest in the state of Ohio in terms of participating schools and students. In addition, the regulatory burden for participation in the EdChoice program is higher than for participation in the other four programs in the state. In the second-largest voucher program in the state, the Cleveland Scholarship Program, private schools only need to administer state tests, meet state standards, and comply with nondiscriminatory codes.

Private schools participating in EdChoice are bound by extensive rules and regulations. The program targets kids in “low-performing” public schools and participating private schools must accept the voucher funding as full payment for students from families with incomes at or below 200 percent of the federal poverty level. Participating private schools are required to administer state standardized tests to voucher students and the aggregate results are publicized on Ohio’s Department of Education website. If more than 65 percent of a participating private school’s student body uses voucher funding, the school is required to administer state standardized tests to all of its students.16 However, nonvoucher families may opt out of the tests.

As shown in Table 1, the MPCP is more heavily regulated overall than the EdChoice voucher program. The Milwaukee voucher program requires private schools to use random-based admissions, mandates that students are allowed to opt out of religious activities, prohibits parental copayment for all students, and places more restrictive requirements on teachers and administrators than the Ohio EdChoice program. Stuit and Doan ranked both of these voucher programs in the top three in the United States for highest regulatory burdens, but they also concluded that the MPCP was more heavily regulated than the EdChoice program.17 Does this mean that the MPCP is more likely to deter high-quality schools from participating than the EdChoice program?

Table 1: Regulatory burdens, Milwaukee Parental Choice Program and Ohio Educational Choice Scholarship Program



Not necessarily. Of course, program regulation is only one side of the participation decisionmaking model. The other side of the equation — voucher funding and the eligible student pool — provides more benefits to the MPCP participants than those opting into the EdChoice program. Specifically, only 10 percent of the students in Ohio are eligible for the EdChoice voucher funding, while 69 percent of the students in Milwaukee are eligible for MPCP funding. Similarly, the EdChoice voucher amount is only 37 percent of the public school per pupil funding level in Ohio, while the MPCP voucher amount is 65 percent of the public school per pupil funding level in Milwaukee. Put differently, the Milwaukee voucher program provides participating private schools with a larger share of the education market than the EdChoice program.

Because the MPCP offers more potential financial benefits to private schools, while the EdChoice program allows for more private school autonomy, it is unclear where we will detect the strongest negative relationship between school quality and participation. However, as Table 1 shows, only 44 percent of Ohio private schools participate in the EdChoice program, while 79 percent of Milwaukee’s private schools participate in the MPCP, indicating that the overall voucher offer is more enticing in Milwaukee than in Ohio. This divergence in private school participation rates suggests that lower-quality schools should be more likely to participate in Ohio than in Milwaukee.

Data

Schools participating in the MPCP were identified through Wisconsin’s Department of Public Instruction website.18 The department also provided enrollment numbers and type of school for participating schools in the program for the 2017–2018 school year.19 We gathered tuition data from individual school websites for participating and nonparticipating schools. If schools did not have their tuition data available online, we called school leaders to obtain the information. Because the department did not provide enrollment numbers for nonparticipating schools, we used the U.S. Department of Education’s National Center for Education Statistics (NCES) website to gather their enrollment numbers.20 The NCES only provided enrollment numbers for the year 2015–2016, the most recent year of data available. There are 126 schools participating in the MPCP, and we found 50 schools in the city of Milwaukee that were not participating in the program. Our analytic sample — with complete data for tuition, enrollment, and school type — for the MPCP analyses is 126 schools. Because there are 159 open private schools in Milwaukee, the analytic sample represents 79 percent of all schools in the city.21

For Ohio’s EdChoice program, we found enrollment numbers on the Ohio’s Department of Education website for both participating and nonparticipating schools.22 If the website did not have enrollment information for a given school, we used the NCES database. The Ohio website provided tuition levels for participating private schools. We found tuition data for nonparticipating schools using institutions’ websites. According to data from NCES and the Ohio Department of Education, there are more than 500 private schools in the state that do not participate in the EdChoice program. At the same time, according to NCES, there are 278 Amish schools in the state of Ohio. Because these schools generally do not have websites or phone numbers needed to find relevant information, we removed them from our analysis. We found 482 participating private schools and 229 nonparticipating private schools in Ohio. Our analytic sample — with complete data for tuition, enrollment, and school type — for the Ohio EdChoice analysis is 549 schools. Because there are 1,098 open private schools in Ohio, the analytic sample represents 50 percent of all schools in the state.23

Because private schools may charge different tuitions for different grades, we calculated the average tuition level for each school. In addition, many Christian schools provide a discount to members of the parish. Because the Ohio Department of Education did not account for these types of discounts in its tuition data, we used tuition levels for nonmembers for both the participating and nonparticipating schools.24 For the MPCP, we averaged the tuition levels for members and nonmembers for both participating and nonparticipating schools. We did not include daycare programs or other prekindergarten institutions in this study. Private school customer reviews were found through GreatSchools, an online nonprofit that provides educational information and reviews for private, public, and charter schools.25 We also used each private school’s average Google review score as a proxy for quality.

Descriptive statistics of school-level data used for all analyses can be found in Table 2. The composition of schools in Milwaukee and Ohio are similar on observable characteristics. GreatSchools review scores are nearly identical across locations: on the five-point scale, the average private school in our sample has a score of 4.17 points in Milwaukee and 4.16 points in Ohio. The average private school Google review score is 4.14 points in Milwaukee and 4.23 points in Ohio. Tuition levels are $1,043 higher per student in Ohio, while total student enrollment is 22 students higher per private school in Milwaukee.

Table 2: Descriptive statistics by program



Methods

We employ a probit regression approach of the form: