Chalkbeat Ideas is a new section featuring reported columns on the big ideas and debates shaping American schools. Sign up for the Ideas newsletter to follow our work.In the last decade, enrollment in California’s public schools has fallen by about half a million students, or 8%. At the same time, funding for the students who have remained in public schools has shot up, as the state implemented a new funding formula. California once lagged behind the national average in education funding per student; now it’s above average.These seemingly paradoxical trends are worth considering at a moment when many state governors, including California’s Gavin Newsom, are deciding whether to participate in a school choice program subsidized by a new federal tax credit.Public education associations are urging states to stay away. They say that offering this voucher-like credit will drain students, and thus resources, away from public schools. That could happen, especially if political support for funding education falls.But the California experience suggests it’s not inevitable. Fewer students in public schools doesn’t necessarily result in less funding. “As enrollments decline, we tend to see total spending at least stay constant and in many cases still increase,” says Bruce Baker, a school funding expert who has tracked school funding patterns for years.The fiscal impact of the tax credit remains a source of intense debate, confusion — and uncertainty. Here’s how to think about this question.The federal tax credit is effectively “free” money for states.The federal school choice tax credit, passed by Congressional Republicans in the so-called “Big Beautiful Bill,” works like this: Americans will soon be able to redirect up to $1,700 of their income tax bill to nonprofits that provide stipends for private school tuition or other educational expenses. This is similar, in many ways, to a government-funded voucher. But the program includes a loophole. States have the option to participate or not. Nearly every Republican governor has said they will join the program, while most Democrats have not publicly made a decision, according to a tracker from Education Week. The undecided governors are currently facing an intense lobbying campaign from both sides.A key selling point for advocates: The money comes entirely from federal taxes. States don’t have to put in any funding. The tax credit could also be used to pay for certain extra programming offered in public schools, like after-school care or tutoring. Observers say it’s unclear how successful public school systems will be at tapping into this money. Lower enrollment doesn’t necessarily mean less funding.Even though it doesn’t cost the state money, public school advocates fear that the credit — a new subsidy for private education expenses — will induce some number of students to leave public schools.It’s not clear this would result in less money for public education, though. Think of school funding as a pie that is divided among students. If there are fewer students, and the size of the pie remains the same, each remaining student could actually get a slightly bigger slice. In recent years, school funding in states like Illinois and Vermont have increased even as enrollment has fallen.That’s not guaranteed, of course. A state could slash its overall education budget — shrink the pie — in response to declining enrollment. It’s possible that fewer students could weaken political support for public schools, although that may be less likely in the left-leaning states that are still considering whether to participate in the choice program.In California, there’s an additional backstop: The state Constitution requires a certain amount of state funding to go toward education. “To the extent there actually is any measurable exodus from public schools it would mean more money per kid,” says Julien Lafortune, a school funding expert at the Public Policy Institute of California.This doesn’t mean every district is financially secure. Even if the overall pie of funding holds steady, districts that lose an especially large swath of students might get a smaller slice. This can lead to layoffs or school closures.Some critics of the tax credit also say there are other reasons to oppose it beyond its budget implications. “Significant growth of a voucher program could slowly dismantle public education, and I don’t think that’s what most voters want, even if it does save the state some money,” says David Knight, a professor at the University of Washington.So far Congress hasn’t cut public school budgets either.The tax credit critics have an additional concern. Every dollar spent on this program is a dollar less in federal tax revenue. The more states opt in, the larger the cost of the program. Estimates vary, but some predict this will amount to several billion dollars.The money has to come from somewhere. This could leave federal funding for public schools “more vulnerable to cuts,” warns Education Trust’s Denise Forte, who is urging states not to participate in the program.But K-12 education is just a tiny fraction of federal spending, and the federal government can, and does, run budget deficits. Recently Congress rejected efforts by the Trump administration to cut school budgets. So while it’s true the tax credit will add a small hole to the federal budget, there’s little reason to assume it will be filled by cuts to public schools. Matt Barnum is Chalkbeat’s ideas editor. Reach him at mbarnum@chalkbeat.org.
