A Generation of School Choice – Part 1: Tuition Rates

Since Indiana took its first dramatic steps away from treating K-12 education as a public good, an entire generation of children has progressed through our state’s education system. Over those 15 years, special interest groups have spent enormous amounts of money to transform our legislature.

Once upon a time, lawmakers pretended our subversive voucher system was intended to empower lower- and middle-class parents who lived in poorly performing school districts. Today, that pretense has been dropped entirely. Instead, our General Assembly gladly takes taxpayer money that was once set aside for a public education system and instead uses large portions of it to line the pockets of wealthy families and allow private schools to raise their tuitions.

Wait. To allow private schools to raise their tuitions?

Well, yes, that’s what some experts predicted would happen, and it’s certainly what appears to have happened as a result of Indiana turning its back on public schools to adopt the dogma of ‘the funds follow the child.’

A Story in Charts

The following charts demonstrate tuition growth rates at 71 of the largest private schools in Indiana. Together, these entities account for 43.3% of the students currently attending accredited private schools in our state.

Why 71? Because I’m just one guy, doing this in what free time I have after working full-time and doing my best at being a good dad and husband. Searching for historic tuition information is extremely time consuming and I had to set a cut-off somewhere. I decided to do my best to track down data for each of the 109 private schools that currently enroll more than 300 students. I was able to find it for 71 of them.

Let’s start by looking at how much our General Assembly has increased spending on K-12 public education over the past fifteen years, as represented by the blue bar. The orange dotted line shows total inflation over the same time period.

That’s right. Our state, which currently ranks 38th in K-12 spending BEFORE removing the amount spent on private school vouchers, hasn’t even kept public school funding abreast of inflation. Spending on public K-12 increased at a cumulative rate of 41.58%, while inflation over the same period came to 43.87%.

And if we were talking solely about traditional public schools, it would be even worse. The blue bar represents the combination of spending on both traditional public schools and charter schools. Considering our General Assembly has aggressively pushed for increased funding to loosely overseen charter schools over the past 15 years, funding for traditional public schools has lagged even further behind inflation than shown.

For the next chart, let’s add the private schools with tuition rate growth that’s less than the increase to public school funding.

That’s not a mistake. Out of 71 schools, only 5 have tuition growth of a lower percentage than the increase in public school funding.

Let’s go ahead and add the private schools with tuition growth rates that fell short of doubling over the past 15 years.

Next, we’ve got to zoom out a bit to fit in those with cumulative tuition growth rates between 100% - 150%.

And then one more zoom out to add in the three schools with the highest cumulative growth rates.

As I said, it certainly appears that our state’s current dogma of ‘the funds follow the child’ has driven growth in tuition rates. The average growth rate for private school tuitions, weighted by total 2023-24 enrollment, comes to 84.68%. That's more than double the 41.58% growth in public school per-student spending by the state.

But why?

Last year, when our General Assembly hadn’t yet adopted its latest expansion of Indiana’s School Choice vouchers, I went to the Statehouse to provide testimony to the Senate’s School Funding Subcommittee. I spoke against expanding vouchers to even wealthier families. In doing so, I pointed out that research has indicated that voucher programs that fail to exclusively target low-income families end up driving growth in private school tuition rates.

Senator Linda Rogers, recipient of at least $45,000 in donations from pro-voucher lobbyists, repeated the ‘funds follow the child’ mantra at me and seemed not to understand the impact of unfettered vouchers on private school tuition rates. To help clarify, I submitted the following to Senator Rogers and the other members of the subcommittee.

Senator Rogers, from your questions, I feel that I may have done a poor job explaining the concept. In retrospect, I realize it likely would have been helpful for me to have prepared a more relatable example to demonstrate the effect, so I am writing to do just that.

I see, Senator Rogers, that you own a golf course that offers all-inclusive family memberships for $2,500/year. For the sake of this hypothetical example, let’s say that the city of Granger owned a golf course that it allowed all residents to use for free. The city-owned golf course would be of similar quality and offer similar amenities to yours, but with some key aesthetic differences. We’ll assume those differences created enough demand for your golf course that you were able to maintain your non-hypothetical pricing and a healthy membership.

Furthermore, let’s say the government decided that if people wanted to play at your golf course instead of the one owned by the city, that should be supported. As a result, they passed an ordinance stating that any family of four could receive a voucher for $2,250 to purchase a membership at your course.

Now, let’s say you had been selling 1,000 of the family memberships per year. Following the implementation of the voucher program, you experienced a 10% growth in this number, which is roughly by how much Indiana private school enrollment has increased since choice scholarships were implemented.

So, prior to the voucher program, you were making $2.5 million/year from 1,000 people willing to pay $2,500 for a family membership. After the voucher program, you started making $2.75 million/year from 1,100 people willing to pay $250 year for that same membership.

Not knowing you personally, Senator Rogers, I cannot speak as to whether or not you would raise your price. Perhaps you would be so overjoyed that 100 extra families were using your course that you would be perfectly content with $2.75 million/year.

That said, in our economic system, most organizations would raise their price significantly. At a very simplistic level, if your original 1,000 customers still felt membership at your club was worth paying $2,500 for, you might raise your annual price to $4,750. At that price point, all of your customers would be paying the same price as before and your annual revenues would jump from $2.5 million to $4.75 million.

Or you might think it was fair to split the difference, allowing your existing customers to keep half of the savings and keeping half for yourself. In that scenario, you would raise your price to $3,625 and your customers would effectively be paying $1,375. There, even if no new customers were willing to pay that amount, your profits would grow from $2.5 million to $3.625 million.

Beyond that, even if you were entirely unmotivated by the idea of increasing your profits, it is likely that your customers would pressure you to increase your pricing. After all, if they were willing to pay $2,500 for your course as it currently exists, they would likely be thrilled to have their cost drop by some substantial amount and have you significantly increase your amenities. Whether you were motivated by personal gain or merely keeping your customers happy, there would be strong economic pressures to increase your pricing.

In this hypothetical, the city of Granger intended to give families $2,250 so that they could play at your course for $250, but only a percentage of that money would be applied towards moving in the city’s preferred direction and the rest would be spent on items the city did not intend to fund.

So it is with offering choice scholarships and not limiting them to those truly in need. You can claim that Indiana funds students and not schools. The pragmatic reality, at least as it relates to private participating choice schools, is that the state currently funds both.

To be clear...

I am not leveling any specific allegations at any specific public schools, but rather, merely pointing out natural side effects of our state’s approach.

There are religious schools that used to be extremely inexpensive because their parent church viewed it as a ministry to provide a religious education, that now seem to have increased tuition suspiciously close to the maximum voucher amount.

Likewise, there are religious schools that used to be extremely inexpensive for parishioners while charging considerably more for non-parishioners, that have now narrowed or eliminated that gap to bring both classes of tuition much closer to the maximum voucher amount.

I’m sure there are also many schools that, facing the decision of how much to increase tuition, simply aim high to create some padding. After all, vouchers have slashed the amounts parents actually pay for tuition, regardless of whether rates go up 2% or 5%.

Lastly, while I think private schools should be subject to criticism for the fact that lobbyists have spent, at a minimum, hundreds of thousands of dollars to buy policy that favors those schools, it’s hard to fault most of the schools for increasing tuition. Why wouldn’t they? The General Assembly has intentionally created market conditions that incentivizes them to. Our legislators deserve the brunt of the blame and we can only hope voters hold them to account before they do even more damage.

Notes on Date & Methodology

For those wanting a general overview of how I approached compiling the data referenced in this piece, read on.

As mentioned, I began by targeting the 109 accredited private schools with current enrollment in excess of 300 students. Over the course of several months, I extensively researched their historic tuition data.

There were a handful of schools for which I could find no publicly available data. There were considerably more for which I could only find tuition rates representing a span of less than 5 years. I eliminated those from the analysis because I didn’t want to misidentify or overstate a trend from using too narrow of data.

Of the 71 schools left, I had identified tuition data representing spans ranging from 5 to 17 years, with an average of 11.5 years.

Next, I determined a single representative tuition number for each year for each school that I had from my research. That is, many schools charge different levels of tuition for different grade levels. Additionally, many charge different rates for parishioners vs non-parishioners.

For grade levels, I took a simple average that equally weighted each grade offered. For parishioners vs non-parishioners, I again took a simple average, weighting them equally. For schools with both variations, I first averaged by grade level, then by parishioner status.

Once the tuition rates had been simplified, I calculated the average annual increase, including annual compounding. So, to offer an example, for a specific school with a 2008-09 tuition level of $4,793 and 2023-24 tuition level of $10,303, I calculated an average annual growth rate of 5.23%.

Then, to ensure that all of the aggregate amounts would be apples-to-apples comparisons, for each school I calculated 15 years of growth using their average annual growth rate. To continue on with the previous example, that became 114.83%.

To determine comparable growth in public school funding, I used the state’s 2009-10 distribution for tuition support ($6,420,765,650) and enrollment from the same year (1,102,482) to arrive at a per-student rate of $5,823.92. For 2023-24, I used the distribution for tuition support ($8,840,000,000) less the amount that the General Assembly forecasted would be spent on vouchers ($526,965,714), along with current enrollment (1,032,724) to arrive at a per-student rate of $8,049.62. From there, I had to determine the average annual growth rate (2.34%) and 15-year aggregate rate (41.58%). I would’ve preferred to use 2008-09 budget data instead of having to adapt 14 years of data to  a 15-year rate, but the state completely changed how it funds schools with the budget of 2009-10 and I would not have been able to draw an apples-to-apples number from 2008-09.

If you spot an error in my approach or just have a question, please send me a message through the form on the contact me page of the site.