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Supporters of a free market in education haveimmense constitutional discretion in craftingschool choice programs in the wake of theSupreme Court’s landmark 2002 decision in
 Zelman v. Simmons-Harris
. It is now time to focuscarefully on the
details
of school choice programs,to discern what specific legislative provisions andregulations advance or impede the developmentof a free market.Regulation of private schools is a growing con-cern among proponents of school choice. Thispaper uses a national survey of private schools asa basis for analyzing the potential effects of vari-ous regulations. More than a thousand schoolsresponded to questions about their willingness toparticipate in a school choice program if they hadto comply with particular regulations. The surveyreveals that the directors of many private schoolswould rather turn down “free money” than com-promise the core qualities of their schools; it alsoreveals that different kinds of schools often do notagree on what those core qualities are.The paper also examines some economicflaws in school choice programs and explainswhy limiting student eligibility narrows the mar-ket and stunts improvement and why schoolchoice policies must be carefully crafted to takeinto account the dominance and funding struc-ture of Catholic schools.Finally, the paper provides a series of dos anddon’ts for school choice policymakers, organizedunder four principles. First, create broad-baseddemand. Second, create a wide-open playing fieldon which schools may differentiate themselves andcompete, and eliminate entry barriers to newschools. Third, avoid skewing prices with tuitioncaps or non-need-based subsidization. Finally,avoid conflicts of interest between the people pay-ing for education and the parents and children ben-efiting from education by creating a system thatmaximizes direct payment by parents and mini-mizes coercive wealth transfers through the state.
The Struggle for School Choice Policyafter 
Zelman
 Regulation vs. the Free Market 
by H. Lillian Omand
_____________________________________________________________________________________________________
 H. Lillian Omand is a student at the University of Virginia School of Law. She was formerly associate program direc-tor of the Children’s Scholarship Fund and program director of the Washington Scholarship Fund.
Executive Summary
No. 495October 29, 2003
 
Introduction
After more than a decade of intense publicdebate, the Supreme Court of the United Statessquarely addressed the constitutionality of school vouchers on June 27, 2002. Its decisionin
 Zelman v. Simmons-Harris
decisively approvedschool choice plans in the broadest possibleterms: public funds may flow to private, includ-ing religious, schools so long as they reach theschools “wholly as a result of [a parent’s] owngenuine and independent private choice.”
1
Thedecision gives proponents of school choiceimmense room to maneuver in deciding how toconstruct school choice legislation.Most policymakers are familiar with thebasic arguments in favor of a free market ineducation. The most common argument isvirtually indisputable: public schools have agovernment-imposed monopoly on elemen-tary and secondary education, inevitably pro-ducing inefficiencies. A competitive educa-tion marketplace would produce muchgreater upward pressures on quality anddownward pressures on price. The secondargument is not economic but is derivedfrom the ideal of liberty of conscience, deeplyingrained in American culture: parentsshould be free to choose the content,method, values, and other details of theirchildren’s education. Thus, when parentsexercise their right to choose an educationalenvironment for their children differentfrom that of public schools, it seems unfairthat they should have to pay both privateschool tuition and taxes to support a publicsystem they are not using.The goal of a competitive education mar-ketplace and the goal of increased educationalfreedom for parents are closely aligned. Thebenefits of a competitive education market-place are dependent on the ability of schoolsto innovate and differentiate themselves fromtheir competition. The process of innovationand differentiation improves quality andincreases choices, and an industry that is givenlittle room to do that has limited ability toimprove customer satisfaction. The goals of competitive efficiency and educational free-dom are thus inseparable. Any school choiceprogram that tries to introduce competitiveefficiency without educational freedom will befar less effective than a program that pursuesboth goals together.
Types of School ChoicePrograms
“School choice” encompasses a broadvariety of public and private programs. Themost basic distinction among school choiceprograms is the source of funds used to payfor private school tuition. When the govern-ment makes direct payments to parents orschools, the program is generally called a“voucher.” A second kind of program is a taxcredit; parents or donors pay the school andreduce their state tax liability accordingly.
2
The next distinction concerns which chil-dren are eligible to benefit from the voucher ortax credit. Many programs have limited eligi-bility, generally based on family income or thestatus of the local public school or district as“failing,” or both. In contrast, “universal”school choice programs are available to allchildren of elementary or secondary schoolage, regardless of their parents’ income or theperceived quality of their local public school.The third distinction applies only to taxcredits: who is eligible to claim a credit?“Personal” tax credits allow parents to take acredit for some or all of the money they spendon private school tuition for their own chil-dren. Personal tax credits are usually universalin child eligibility, but in practice low-incomefamilies with minimal tax liabilities do notreceive a significant advantage from those pro-grams. “Scholarship” tax credits allow individ-uals or corporations, or both, to take a creditfor donations to a scholarship-granting orga-nization, which in turn pays the tuition of children, almost always children from low-income families. A program may also combinepersonal and scholarship tax credits; this istermed a “universal tax credit” because it ben-efits low-income students via the scholarship
2
Any school choiceprogram thattries to introducecompetitiveefficiency withouteducationalfreedom will befar less effectivethan a programthat pursues bothgoals together.
 
tax credits and higher-income students via thepersonal tax credits.The final distinction concerns how theschool choice program defines eligible partic-ipating schools. A few programs do not defineschool eligibility at all, implying eligibility of any private school legally operating understate law. Most programs provide that fundscannot be distributed to schools unless theymeet certain eligibility requirements. Somecommon regulations found in enacted orproposed school choice legislation follow.
•
Nondiscrimination: Most programsrequire that schools not discriminate onthe basis of race, color, or ethnicity.
3
Others add factors such as sex, family sta-tus, economic status, or disability.
4
Allexisting voucher programs also prohibitadmissions preferences based on religion.
5
•
Nonselective admissions policies: Someprograms specify that schools may notrefuse enrollment to any voucher-bear-ing student who wishes to attend. If there is a scarcity of spaces, schoolsmust use a random lottery to determineenrollment. Admission cannot be basedon testing or previous school record.
6
•
Expulsion policies: A few programsrequire schools to provide parents with awritten expulsion policy and dictate thatno voucher-receiving child may beexpelled except according to the provi-sions of the policy.
7
•
Tuition caps: Some programs providethat if the school’s normal tuition rateexceeds the maximum scholarshipamount, the school cannot charge thedifference to the parent
8
(or can chargeonly a limited amount).
9
•
Religious activity “opt-out”: Some pro-grams provide that parents of voucherrecipients must be given the option torequest that their children be exemptedfrom all religious activities.
10
•
Fiscal viability or accountability: Someprograms require that schools demon-strate their ability to operate for a fullschool year on current assets, expectedtuition, and voucher revenue.
11
Somerequire schools to submit to audits by thestate.
12
•
Accreditation: Some programs requireschools to be accredited by a recognizedprivate accrediting body, or the schoolmust be approved by the state on thebasis of specified criteria.
13
•
Teacher qualifications: A few programsrequire that teachers hold a bachelor’sdegree, have three years of experience, or beotherwise qualified to teach the particularsubject matter.
14
State certification orlicensure of teachers is not required exceptwhere required for all private schools.
15
•
Standardized testing: Some programsrequire private schools to administer thesame standardized tests required of pub-lic schools in the state.
16
One programwould require that the school repay thevoucher funds to the state if a voucherchild does not meet a minimum score.
17
Table 1 outlines the details of the majorforms of school choice and indicates whattypes of school regulations tend to be presentunder the different forms of school choice.
18
Economic Flaws in SchoolChoice Programs
Limited Eligibility
Virtually all existing school choice pro-grams—including all the privately funded pro-grams—limit eligibility for children.
19
Mostoften eligibility is limited to families with verylow incomes. Although caps are often set near200 percent of the federal poverty line, thisamounts to a mere $24,240 for a single parentwith one child and $36,800 for a family of four.
20
In addition, most of these programslimit eligibility to a particular urban areawhere the cost of living is higher than average,so in practical effect they reach only familieswho are truly poor; those who can barely payfor basic necessities regardless of privateschool tuition.
3
Some programsspecify thatschools may notrefuse enrollmentto any voucher-bearing studentwho wishes toattend.
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