Understand the costs associated with proposed school choice bill in Kansas Legislature
The Kansas House of Representatives is considering a bill (HB 2119) that would transfer tax dollars from public schools to individual accounts for eligible students to fund private education. These proposed student transaction accounts would be managed by the State Treasurer's Office.
While the role of the state treasurer is not to make education policy, I believe it is important to address the costs associated with the implementation of this proposed legislation.
As a retired banker with more than 40 years of experience serving in a number of capacities for a variety of financial institutions, I understand the administrative costs, initially and ongoing, and the lift behind programs such as these.
These accounts would be low-balance, multiple transactions per month types of accounts. Unlike true education savings accounts where balances increase over time, these would remain near zero in order for parents to pay current school bills.
The State Treasurer’s Office would need to create an entirely new division to manage the program. Staff would need to be added in order to efficiently handle applications from schools and students, file reports with various state agencies, review school invoices, apply deposits, monitor accounts and field numerous customer inquiries each day. Auditing staff would also need to be added to make sure tax dollars are used as expected.
Further, parts of this program would likely need to be bid out to a third-party vendor. The accounting software used by the State of Kansas does not have this kind of functionality, and the scope of this project is unfeasible for internal programmers to develop.
There is potential for a large number of accounts. The broad definition of eligible student could apply to nearly every Kansas student. Additionally, current private and home school students would also be eligible to start accounts.
Our original research has shown it could cost between $3-$5 per month for each student to operate these accounts. If 25% of all Kansas students (125,000) participate, the cost could be anywhere from $4.5 million to $7.5 million annually.
The State Treasurer’s Office continued to study what this bill could cost after the fiscal note was published. Further research has shown a Kansas program with similar transactional accounts handling 25,000 accounts costs $95.26 per account per year to administer.
If this cost is applied to 125,000 student accounts, the cost rises to $12 million annually. If more kids participate, costs would skyrocket. That cost is only for the software management of the accounts. This does not account for the staffing needs and other administrative expenses with the State Treasurer’s Office.
It also does not account for the administrative expenses for any other agency involved in the implementation of this program nor does it address the increased estimates of nearly $40 million for BASE aid for students currently enrolled in private schools.
To put it lightly, the fiscal note is incredibly worrisome. That’s a lot of funding for administrative costs that would never make it into a classroom benefiting Kansas students.
Lastly, the bill sets a deadline for this program to be up and running by Jan. 1, 2022. This would be a costly, complex endeavor to accomplish by this deadline without diminishing the confidence of the overall performance of the program or ultimately wasting taxpayer dollars. A similar program administered by the State Treasurer’s Office with significantly fewer accounts took nearly two years to fully implement.
With that said, the State Treasurer’s Office stands ready to work with the Legislature, but it’s important that we all go into the process with a full understanding of the costs and a more realistic timeline before getting too ahead of ourselves.
Lynn Rogers is the state treasurer.