Commentary

Senate special provision will cost $170 million over the next five years

This week’s Senate budget proposal includes a special provision that will cost North Carolina over $170 million over the next five years, with costs continuing to increase in future years.  Section 11A.3 incorporates Senator Chad Barefoot’s bill SB 862, creating a reserve fund in an attempt to “forward-fund” the Opportunity Scholarship voucher program, and increasing funding by $10 million per year until annual appropriations for the voucher program reach $144.8 million in FY 27-28.  According to the provision language, the intent is to expand the program by at least 2,000 students per year, and to provide funding stability.

The table below compares the annual impact of the Opportunity Scholarship voucher program under current law (where it will actually save the State a small amount in future years), versus the impact of the program if Section 11A.3 were to become law:

Summary Impact

A detailed description of the methodology for determining the fiscal impact of the Opportunity Scholarship program will be published soon.

Much of Section 11A.3’s $170 million cost over the next five years is driven by the nonsensical decision to expand the supply of vouchers far beyond the level that would be supported by demand for vouchers.  Based on the historical data, demand for Opportunity Scholarship vouchers maxes out at about 8,000 students per year.  Yet Section 11A.3 would be providing funding sufficient to offer 163,741 vouchers by FY 27-28.  Under Section 11A.3, unused funds would remain in the reserve fund, providing no use to North Carolina citizens.  By the time the program reaches its maximum size, the reserve fund will have a balance of approximately $665 million and will be accumulating over $100 million of unused funds per year.

Accumulation of Funds

 

The bill is also fundamentally silly in that it fails to achieve its own goals of guaranteeing program expansion and providing funding stability.  As the budget writers are aware, putting money in a reserve does not require future General Assemblies to always use those funds for the purposes set forth in this bill.  Future General Assemblies can always change the law.  These funds will be “in play” every fiscal year, just as if they had never been put into a reserve in the first place, and therefore do nothing to guarantee program expansion or provide any measure of funding stability.

So why are Senate budget writers pushing such costly, absurd and silly language?  I can think of two possible motivations:

  • First, it is possible that the Senate plans on expanding the eligibility for vouchers in future years.  For example, they might plan on removing the family income cap, opening the vouchers to more well-off families.  Or, they might allow vouchers to be provided to students who were already attending private school without a voucher.
  • The other possible reason is that Section 11A.3 is an indirect way to limit State spending in future years.  As explained above, Section 11A.3 would create a scenario where over $100 million per year would go unused and accumulate in a reserve balance.  If this language were to remain law, this would be money that could not be used on any other government services.

It is tough to know which motivation is driving Section 11A.3.  We do know, however, that the General Assembly continues to refuse to allow any meaningful accountability measures that would allow us to know whether Opportunity Scholarship students are receiving a high-quality education.  There are certainly some troubling anecdotes indicating that many of the participating private schools are failing their students.  As a result, it remains doubly unclear why Senate leaders are pushing such a costly proposal.

 

 

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