Voucher Math, Part 2

The number crunching done in the last Voucher Math post really helped me see how big of a difference the switch rate can be even with just minor changes. What I was hoping to establish is the need to replace assumptions that have to be made by the LFA with hard data. So far, nobody doubts that this would be helpful, but we do seem to disagree on how much this data is worth, the method used to collect it and the extent to which Utah should be involved in that process. I want to take some time to address some of the other assumptions made by the LFA that have a very heavy impact on the numbers.

The first thing we need to look at is how many non-switchers will be collecting and using a voucher. The LFA seems to make an assumption that every non-switcher will be using a voucher, driving up the costs substantially. This, however, is a worst-case scenario. The figures that I've seen used indicate that about 1/3 of Utah's private schools would not quality for vouchers. Of the remaining 2/3 that qualify, I seem to recall that about half of them would not accept vouchers. This leaves about 1/3 of the schools as voucher-eligible. So how does this impact the dollars and cents?

Simply put, dramatically. We go from losing money each year beginning in Year 7 to a net gain for the state in every year of the program. That's a huge difference to the bottom line and doesn't make out vouchers to be the money-loser that everyone seems to think they are. That makes the break-even point for non-switchers participation about 55% given a switch rate of about 1% of the total population.

The second point we need to address is the LFA's price elasticity arguments. Currently, they list the average private school tuition at around $8,000 per year. The question, however, is what "average" this is. If you recall from last post's brief math lesson, there are three kinds of average we need to look at: arithmetic mean, median and mode. I suspect that this figure is an arithmetic mean which, in the field of statistics, is highly ridiculed as being subject to extremes.

Let's use some examples. If you take 5 schools charging $2,500 per year and 1 school charging $25,000 per year, you get an arithmetic mean of $6,250 per year. This doesn't accurately reflect what the majority of the schools are charging. If we look at the median, that's tagged at $2,500 per year; so is the mode. This more accurately reflects the kinds of pricing you should expect and is not as subject to aberrations at either extreme.

Unfortunately, we don't have the raw pricing data that went into this figure to figure it out for ourselves. I will say, however, that I believe the figure used by supporters of somewhere in the neighborhood of $4,500 to $5,100 per year. What I'd like to know is how such a pricing difference affects the adoption rate. This is why I think the estimated adoption rate is highly underestimated.

The final point has less to do with the money end of things and more to do with who's currently using private schools. We all have this great image in our heads of rich kids wearing school uniforms attending gleaming classrooms. The reality, however, is that about 10% of the private school population are below the poverty line. How much of the general populace in Utah is below the poverty line? About 10%. In other words, poor people are using private schools at the same rate as the rest of us. It stands to reason they'd benefit greatly from those vouchers coming their way, especially when paired up with Children First Utah to make up whatever differences remain.

I firmly believe that we need to collect the data on switch rates. I firmly believe that this program will not be a money sink as the LFA has projected. I firmly believe that the poor will reap more benefit from this than is being said. I'm still voting Yes on Referendum 1 and I would encourage the rest of you to do so as well.