Universal school choice: a roadmap for South Carolina

Update 10/27/23: School choice opponents on Thursday launched a legal challenge against South Carolina’s ESA program, seeking to deny students access to life-changing educational scholarships. Legislators crafted the program specifically to comply with the S.C. Constitution, which puts parents in charge of the scholarships, and provides funding entirely to student needs. We encourage a speedy court decision to uphold the program so that it may begin serving families next year without interruption.

South Carolina did something special this year: it promised to put more parents in charge of their children’s education. The change comes by way of a new Education Scholarship Account (ESA) program, signed by Gov. Henry McMaster in May, which will help thousands of families pay for K-12 expenses of their choice.

With the program starting next year, many are hopeful for a future of true freedom in education, and some have started to ask how South Carolina can achieve universal school choice. What does that future look like, and how can we get there? This report aims to shed light on these questions and offer a roadmap to universal school choice access.

Our recommendations:

Expand South Carolina's ESA program by removing household income restrictions and the cap on student enrollment for school years after 2026-27.
Create a robust tax-credit scholarship program by passing the S.C. Senate’s Academic Choice in Education (ACE) proposal. Preferably, legislators should revise the bill’s “general child” definition to make all state K-12 students eligible for scholarships.

What is “universal school choice”?

Universal school choice broadly means an education system where students can freely participate in one or more state school choice options with few, if any, barriers to entry. A program with a hard student enrollment cap, or one with household income restrictions, would not qualify as a universal. An ideal program gives all students the chance to pursue learning opportunities suited to their needs.

Critically, it does not mean putting all students in private school, as some critics have claimed. Traditional public schools have long served the needs of many American families, and that will continue as school choice expands. In fact, many school choice plans, including South Carolina’s ESA program, aim to enhance public education by covering supplementary learning resources.

When done right, universal school choice resembles a toolbox more than one specific tool. It aims to give all families a chance to shape their children’s education based on their needs, regardless of their financial situations or where they live.

The many forms of school choice

School choice programs vary by state and come in different forms. Some focus entirely on private school attendance (vouchers), while more flexible options, like South Carolina’s ESA plan, help parents pay for various educational expenses that include private school tuition, but also cover things like tutoring, computers, books and even therapies that can be used to enhance public school learning. EdChoice, a leading nonprofit school choice advocate, outlines five broad program categories.

Education Savings Accounts (ESA) – ESAs direct state funds to restricted savings (or “scholarship”) accounts that parents can use to pay for different educational expenses based on their children's needs. Permitted uses may include private school tuition, textbooks, tutoring, computers and even exam fees for college admissions. South Carolina’s ESA will even let parents pay for the cost of transporting their kids to new schools (public or private). ESAs aim to cover costs up front, meaning parents only have to pay out of pocket if their expenses exceed the scholarship amounts.
Tax-Credit ESAs – Instead of receiving direct state funding, these programs offer tax credits to generous groups and individuals who donate to private organizations that run ESA programs at the direction of parents. Covered expenses are generally in line with normal ESAs, and costs are typically covered up front for parents.
School Vouchers – Vouchers let parents use their children’s state education funds to pay for part or all of the cost of private school. Based on restrictions in our state Constitution, vouchers are probably not a good fit for South Carolina. Vouchers cover costs up front.
Tax-Credit Scholarships – Tax credits are offered to generous groups and individuals that donate to scholarship-granting organizations. Unlike ESAs, these scholarships are typically limited to covering private school expenses. Costs are generally covered up front.
Individual Tax Credits and Deductions – Some states offer tax credits or deductions to parents that pay for approved educational expenses. Unlike the programs listed above, this option requires parents to pay for expenses out of pocket and claim them when filing their taxes. Such an up-front cost has made this option less appealing for some families.

While these categories often get the most recognition, this is not an exhaustive list of school choice options. Charter schools, magnet schools, homeschool support, online programs and open enrollment within public school districts are some of the other ways states can support school choice.

South Carolina has an opportunity to shine here as well, as the S.C. House in March passed a bill requiring all school boards to adopt an open enrollment policy, letting parents send their kids outside of their normally designated schools where feasible. Districts would get to work out policy details based on local factors. We strongly support this measure and featured it in our Legislative Scorecard.

Across the nation: school choice success stories

After passing a true ESA program, some have wondered where South Carolina stands in the national school choice conversation. After all, only about a quarter of states have achieved this amazing feat. To find our answer, let’s first look at a few pioneering states with major school choice wins and study their success.

Note: State school choice data in this section is primarily sourced from EdChoice. For more information about these programs and those in other states, visit their website here.

Arizona and Florida

Without question, the two leading states when it comes to school choice are Arizona and Florida. Together, they offer nine total programs (Arizona having five, and Florida having four). These include state-funded ESAs and privately supported tax-credit scholarship programs to maximize student participation. In both states, at least one program exists where 100% of students are eligible.

More than 30,000 students participated in Arizona’s ESA program during the 2022-23 school year, while over 85,000 students took part in Florida’s tax-credit ESA the year prior. Florida’s companion school choice program, the Family Empowerment Scholarship ESA, served nearly 84,000 students during 2021-22 and is described as “the most expansive education savings account” in the nation by EdChoice.

Wisconsin's model

Wisconsin is one of the earliest adopters of school choice, launching its first option, The Milwaukee Parental Choice Program, in 1990. In total, the Badger State offers four voucher programs, along with a tax deduction that is available to parents who pay for their children to attend private school. Three of its four voucher programs have no enrollment cap, however; all but its special-needs voucher program have income limits.

School choice is effectively offered statewide, as the two districts that are exempt from the main program (the Parental Choice Program) are served by regional options. Although Wisconsin may not be widely recognized for its universal access, it had more than 52,000 students participating in its voucher programs as of 2022.

North Carolina goes universal

In September, North Carolina expanded its private school choice option known as the Opportunity Scholarship to all families, ending the program’s income restrictions. All families will have an opportunity to apply for the program starting with the 2024-25 school year. Funding amounts vary based on household income, with lower-income students getting the biggest scholarships.

North Carolina also recently launched an ESA program for students with special needs, which provided critical support to more than 3,200 students last year.

Indiana's varied approach

Indiana has programs in four school choice categories, including a state-funded ESA, a private school voucher program, a privately funded tax-credit scholarship program, and a tax deduction for private school and homeschool expenses. Notably, none of these imposes a hard enrollment cap. While its voucher and privately funded scholarship programs technically have income restrictions, the limits are fairly generous, giving the vast majority of Wisconsin families the option to participate. None of its programs have geographical restrictions.

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When it comes to school choice, there is no one-size-fits-all approach, and each state has its own way of addressing student needs. However, a few things stand out among these top performers. First, they all offer more than one program, giving parents more options to meet their children’s educational needs. Second, their programs are largely accessible, with all having no enrollment caps except for one program in Florida and another in Wisconsin, and many avoiding strict income restrictions. And third, they boast strong levels of student participation because of these smart policy choices.

Where does South Carolina stand?

On paper, South Carolina has three school choice options: a state-funded ESA, a privately funded tax-credit scholarship program, and a refundable tax credit for parents.

However, as currently written, the ESA is being held back by unwanted restrictions that will harm student participation. Meanwhile, the other options, which were created specifically to serve special-needs students, are failing to deliver on their promise. South Carolina can do better.

SC’s Education Scholarship Account (ESA)

Starting in school year 2024-25, this program will offer $6,000 scholarships to a limited number of eligible families to cover costs such as private school tuition, textbooks, tutoring services, computers, fees for certain exams, and transportation for their children to attend other schools (including public schools). A complete list of approved expenses can be found here.

To qualify, a student’s household income must not exceed 200%, 300% and 400% of the federal poverty guidelines in school years 2024-25, 2025-26, and 2026-27 and beyond, respectively. For a family of four, this represents a yearly household income of up to $60,000, $90,000 and $120,000, according to The Nerve.

The program is capped at 5,000 students in its first year, 10,000 students in its second year, and 15,000 students in its third and subsequent years. With approximately 834,000 South Carolina students collectively enrolled in public and private schools, the final cap of 15,000 would represent less than 2% of the overall student population.

Verdict: While it benefits from having a broad list of approved expenses, the program is weakened by relatively strict income limitations, arbitrary student enrollment caps, and a fixed scholarship amount that will have less purchasing power over time.

Exceptional SC

Another South Carolina plan offers a limited number of scholarships to families with special-needs children (up to $11,000 per pupil) to help pay for private school tuition, textbooks and school-related transportation. Run by a government-designated nonprofit called “Exceptional SC,” scholarships are funded through private tax-deductible contributions, with an annual funding allowance of $12 million.

Unfortunately, the program has struggled in recent years to secure funding. It has not reached its $12 million fundraising target since 2018; and as of this September, total 2023 donations barely surpassed $500,000. If every child got the full $11,000, current-year funding would not even cover scholarships for 50 students. Click here for SCPC's full program analysis.

A separate but related tax credit, also worth up to $11,000, can be claimed by parents who pay for private school expenses out of pocket. The credits are normally capped at $2 million per year, however this limit can increase if Exceptional SC funding falls short. Just 213 taxpayers used the tax-credit program in 2020, according to EdChoice.

Verdict: Despite good intentions, funding deficiencies prevent more than a fraction of special-needs students from utilizing scholarships, and the tax-credit program has proven unpopular with parents. The needs of South Carolina’s most vulnerable children are not being met.

Reform and the path to universal access

With a few policy changes, South Carolina can become a leader on school choice and join the elite list of states providing universal access. SCPC proposes a two-pronged approach to achieve this goal: 1) expand the current state-funded ESA program by removing barriers to entry, and 2) pass the S.C. Senate’s tax-credit scholarship bill (ACE) with broad student eligibility, replacing the current special-needs program.

Expanding our ESA

We recommend striking the ESA's enrollment cap so that more students can participate. While it may seem early to have this discussion, we anticipate the small caps of 5,000 (2024-25), 10,000 (2025-26), and 15,000 (2026-27 and beyond), will be hit quickly as word-of-mouth spreads among parents. After all, South Carolina’s recent educational shortcomings suggest plenty of families will be in the market for scholarships to assist their children.

There is no need to wait to do this. Lawmakers next year should revise the law and eliminate the enrollment cap starting in school years after 2026-27. Doing this now will save them the trouble of having to revisit this issue later.

We also suggest removing the use of any income restrictions, preferably along the same time frame. Students should not be denied learning opportunities because of their parents’ income, and this change would ensure that students of all economic backgrounds are able to obtain scholarships. It would also generally mean that more education dollars are following students to schools and services of their choice.

In the event, however, that scholarships are limited because of funding, we would advise giving first priority to low-income families.

Finally, lawmakers should consider adjusting the scholarship values to increase annually, which are currently fixed at $6,000. As private school tuition and other approved expenses rise in cost, it is important to make sure parents don’t lose purchasing power.

Passing the Academic Choice in Education (ACE) program

In March, the S.C. Senate passed a bill (S.285) to dramatically expand our tax-credit scholarship program and provide scholarships to four student groups: (1) students with disabilities; (2) students from low-income families; (3) students from middle-income families; and (4) homeschool students. The proposal would replace the scholarship program run by Exceptional SC.

Under the plan, donors could claim up to 100% of their tax liability by funding scholarships, raising the current program’s limit of 75%. It would also let multiple nonprofits raise money – a huge improvement over the present model that gives Exceptional SC (a government-designated nonprofit) exclusive rights to fundraise. We believe these changes will incentivize larger, more frequent donations, and increase funding consistency.

The program would not cap student enrollment, though funding would be limited based on annual caps to the tax credits. Under the current proposal, that is $15 million each for special-needs, low-income, and middle-income scholarships, and $10 million for homeschool scholarships.

The original version of the bill would have arguably met the bar for universal school choice. On the floor, Senators added household income restrictions to the “general child” category, now capped at 400% of the federal poverty guidelines. We would encourage lawmakers to reverse this change before giving the bill final passage. At a minimum, the cap should be phased out over time.

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We believe South Carolina can do better than joining the school choice movement. With hard work and a clear vision, our state can become a leader when it comes to educational freedom. States like Arizona, Florida, and even neighboring North Carolina are places to look for inspiration, all having decided to give every family a voice in their children’s education.

In addition to removing barriers to participate in the state’s ESA program, legislators next year should pass the ACE bill to create a tax-credit scholarship program with broad eligibility, making sure to include a category for all students. This will maximize student opportunity, improve learning outcomes by fostering healthy competition in our education system, and make school choice universally accessible in South Carolina.