Tennessee Education Vouchers Explained: A Comprehensive Guide

School voucher programs have been a topic of discussion since the early 1990s. While not available in every state, they are receiving unprecedented attention, especially as parents navigate complex decisions regarding their children's education, family, and work, particularly in the wake of the pandemic. This heightened scrutiny has led parents to explore educational options they were previously unaware of. This article aims to provide a detailed explanation of Tennessee's approach to education vouchers, including its funding mechanisms, specific programs, and the ongoing debate surrounding them.

Understanding Public School Funding in Tennessee

Before delving into school vouchers, it's crucial to understand how public schools are funded. Public school funding refers to the financial resources a school district receives from federal, state, and local sources to provide education to students. These funds cover academic programming, district and school operations, and other essential resources.

The federal government often provides grant funding to local schools to address specific needs within communities, such as economic disadvantages, English language learners, and other priority areas. Recently, school districts have received significant federal relief funds to address pandemic-related challenges and support recovery efforts.

However, the majority of funding for public schools comes from the state level. In Tennessee, public school funds are allocated through the state legislature's annual budget process. For the 2021-2022 school year, the Tennessee General Assembly allocated $5 billion to public school districts. The amount of funding is determined by an educational funding formula that utilizes revenues from taxes levied on property, goods, and services.

Tennessee's Educational Savings Account (ESA) Program

States often offer school voucher programs to provide parents with alternative educational options to public schools. Tennessee is implementing a specific type of voucher program known as an Educational Savings Account (ESA).

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Under the ESA program, eligible families with students attending public schools in Memphis (Shelby County) or Nashville (Davidson County) can apply to receive taxpayer money to attend participating private schools. Eligibility is limited to households with an annual income not exceeding twice the federal income eligibility for free school lunches. The voucher amount is approximately $8,192 per student.

Private schools in Davidson and Shelby Counties must opt-in to participate in the ESA program and accept students enrolled in the program. For the upcoming school year, there will be 5,000 ESAs available. If the Department of Education receives more eligible applications than the maximum number of students, an enrollment lottery will be conducted.

Participating non-public schools are required to use the funds for student expenses such as tuition, fees, computers, uniforms, or transportation by bus or train. The schools then submit invoices to the department for reimbursement. The Tennessee Department of Education is developing an application and wallet platform for participants to manage their ESA funds. To ensure proper use of funds, the department will monitor how ESA money is spent by requiring pre-approval for all expenses and requests for payments. If the department determines that an ESA account holder has misused funds, they may be removed from ESA eligibility.

According to Chalkbeat Tennessee, nearly 2,200 families had completed forms indicating their interest in participating in Tennessee's private school voucher program in Memphis and Nashville by the application deadline.

Application Process for the 2023-2024 School Year

For the 2023-2024 school year, parents or guardians of potential students must complete an Intent to Enroll form and an application, providing proof of address and household income. Upon review of the Intent to Enroll form, parents or guardians will receive additional application and program information.

History and Controversy Surrounding Voucher Laws in Tennessee

Tennessee has been engaged in a long-standing debate regarding the use of taxpayer money to provide parents with more education choices, with some arguing that this approach diverts funding from already underfunded public schools.

The Tennessee Department of Education currently oversees a statewide private school voucher program for students with disabilities called the Individualized Education Account (IEA). Created by the General Assembly in 2015 and launched in 2017 with 36 families, the IEA program now serves 284 students. The maximum annual amount is equivalent to the per-pupil state and local funds generated through the state's funding formula for public education in the student's resident school district.

The ESA program has faced several court rulings. In May, the Tennessee Supreme Court upheld the state's 2019 voucher law. Subsequently, a three-judge panel lifted a two-year-old order that had blocked the program's original launch in 2020. Following this decision, Governor Lee announced plans to resume work immediately to start the program in the upcoming school year.

However, local governments in Nashville and Memphis filed a motion calling the launch "rushed and haphazard," seeking to block the program's start for the second time while challenging its constitutionality in court. These lawsuits cite provisions in the state constitution that guarantee equal protection under the law, arguing that vouchers would create unequal systems by targeting two counties and diverting funds from their public school systems to private schools.

A three-judge panel heard the legal challenge on August 5th in Davidson County Chancery Court, deciding whether the program would proceed or be paused while the law's constitutionality is challenged.

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Despite these challenges, the Department of Education and the state are working to establish systems and processes for redirecting public education spending in Memphis and Nashville to private schools and vendors. The application process involves a detailed application that may take up to 21 business days for the Department of Education to process.

Up to 5,000 students may use an ESA in the first year, with the number increasing by 2,500 each subsequent year.

ESA vs. M.O.S.T.: Key Differences

It's important to distinguish ESAs from the Memphis Opportunity Scholarship Trust (M.O.S.T.). M.O.S.T. scholarships are entirely privately funded, making it the only privately funded school-choice program in the Mid-South. M.O.S.T. provides scholarships through donations and grants. Since its inception in 1998, M.O.S.T. has provided over $24 million in scholarships to more than 3,500 students in the Memphis area.

Like the ESA program, M.O.S.T. uses a lottery system and has a waitlist of over 300 students. However, the application process and eligibility requirements for M.O.S.T. scholarships differ from the ESA program.

While the two programs are distinct, some M.O.S.T. scholars receiving a scholarship for the first time have expressed interest in the ESA Program and have begun the application process with the state.

Governor Lee's Universal Private School Voucher Plan: The Education Freedom Act

Gov. Bill Lee's universal private school voucher plan, known as the Education Freedom Act, if approved by Tennessee lawmakers, would cost taxpayers at least $1.1 billion during the first five years, according to a state analysis.

In the program's first year (2025-26), the cost would be approximately $350 million, including:

Nearly $146 million to provide vouchers of $7,075 each for 20,000 recipients to use toward their private education costs.
$198 million to pay public-school teachers one-time bonuses of $2,000 each.
$3.3 million to reimburse public school systems for funding they are projected to lose if students disenroll to use a voucher.
$2.7 million to administer and staff the program.

After the first year, the program would cost over $191 million annually. Appropriation bills filed by Senate and House majority leaders seek $447 million to launch the Education Freedom Act, including $226 million in recurring funds and $198 million in nonrecurring funds. The recurring funds include the $144 million in unused voucher funds set aside for the program last year.

Key Assumptions and Projections

The analysis released by the legislature's fiscal review staff includes the following assumptions and projections:

Student eligibility: Income limits would end after the first year.
Voucher amount: Each voucher would pay $7,075 during the first year to up to 20,000 eligible students.
Program expansion: It is expected that all vouchers will be awarded, allowing the state to expand the program by 5,000 participants each year, potentially doubling the program's size by the 2029-30 school year.
Income restrictions: During the first year, half of the vouchers would be reserved for students whose families fall below an income limit that is set at 300% of the amount required to qualify for free or reduced-price meals ($173,160 for a family of four). The other half would have no income restrictions.
Current private school students: It is assumed that 65% of the vouchers would be awarded to students who already attend private schools, with 35% going to students switching out of public schools. This split is expected to continue in subsequent years.
Existing voucher programs: It is assumed that no student currently receiving a voucher through the state's smaller education savings account and individualized education account programs will opt to participate in the new statewide voucher program, since their current benefits are higher.

Accountability and Incentives

Private schools accepting the new vouchers would be required to administer national or state tests annually. However, they are likely to opt for using national tests instead of the Tennessee Comprehensive Assessment Program (TCAP). Test results would be incorporated into an annual state report delivered to the legislature's education committees.

The plan includes incentives for public schools, such as one-time bonuses for an estimated 86,000 public school teachers and a proposed school building improvement fund.

In the first year, 12 public school systems are expected to meet the state's criteria to receive reimbursements for funding lost when students disenroll to participate in the voucher program. The reimbursements would be completely paid for by the state, not from local governments.

Program Administration

Student First Technologies, the current vendor for the state's smaller voucher programs, is likely to serve the statewide program. The state also expects to hire 11 people to administer the program.

Political Landscape and Opposition

Gov. Lee has expressed his support for universal school choice, stating that it is now a reality for Tennessee families. However, the plan has faced significant opposition.

House Democrats have deemed the proposal a "scam" and have stringently opposed vouchers. Critics argue that the plan would lead to public schools closing across the state and that Tennessee should focus on rebuilding schools in storm-ravaged areas instead.

The Statewide Organizing Committee for Community eMpowerment (SOCM) has also voiced its opposition, arguing that the policy would channel tax dollars away from public schools and into the hands of a few exclusive private schools.

Concerns and Criticisms

Opponents of voucher programs raise several concerns:

Lack of improved student achievement: Voucher programs in other states have not consistently led to improved student achievement scores.
Discrimination and exclusion: Private schools can reject students based on religion, test scores, disabilities, or subjective reasons, potentially undermining the goal of equal opportunity.
Inadequate funding: The voucher amount may not cover the full cost of private school tuition, limiting access for low-income families.
Impact on students with disabilities: Private schools may not offer the same level of special education services as public schools, potentially disadvantaging students with disabilities.
Diversion of funds from public schools: Voucher programs can divert funding from public schools, which serve the majority of students in the state.

Critics argue that instead of vouchers, the legislature should support children and working families by reducing their tax burdens, expanding funding for public schools, and investing in affordable childcare, teacher programs, college access programs, and early childhood development programs.

Education Freedom Act of 2025: A New Proposal

A new fight over school choice is already brewing, as Republican leaders have filed a new proposal to offer publicly funded vouchers for 20,000 Tennessee students to attend private schools.

The Education Freedom Act of 2025 would offer 20,000 vouchers worth about $7,000 each in taxpayer funds to students statewide to attend private schools, while guaranteeing state funding to make up any gaps school districts could see from enrollment drops, offering a one-time $2,000 bonus to every teacher in the state, and establishing a new state funding source for school building construction and maintenance.

If approved, the program would take effect immediately, making use of $144 million in funding allocated in this year's state budget specifically for a statewide school voucher program.

Key Provisions of SB 1/HB 1

State-funded scholarships of $7,075 per student to up to 20,000 students attending Category I-III state-accredited private schools.
10,000 vouchers reserved for families with incomes below 300% of the income limit to quality for free or reduced price lunch, or children with disabilities. The remaining 10,000 slots would have no income limit.
A standardized achievement test would be required each year for participating students in 3rd through 11th grade.
A provision guaranteeing that state funding for each school district will not decrease from the previous school year.
A one-time, $2,000 bonus for every teacher in the state during the 2024-25 school year.
A new dedicated funding source for construction and maintenance of public school buildings, allocating 80% of privilege taxes collected from sports wagering for construction and maintenance of public school buildings.

Support and Opposition

Outside groups supportive of school choice have endorsed the proposal. However, the Tennessee Education Association (TEA) has expressed disapproval, stating that teachers aren't fooled by the promise of a small bonus in exchange for a bill that would lead to public schools closing across the state.

Recent Developments and Implementation of the Education Freedom Scholarships (EFS) Program

Tennessee State Education Board members recently voted on how to roll out the voucher program, now called the Education Freedom Scholarships (EFS) program. Students for participating families will receive $7,295 to attend a school of their choice.

The state aims to open the application process this spring for use in the next school year. According to Sam Pearcy, Deputy Commissioner for the Tennessee Department of Education, the program will operate on a "first come, first serve" basis within the 20,000 student limit.

To participate, families must show their students are enrolled in a private school before accessing the money. The funds will not cover room, board, or meals. The state Office of Research and Education Accountability will oversee testing for students using the tuition money, focusing on students in third through eighth grade.

Families will receive a waitlist number if the number of applications exceeds 20,000. The scholarships do not increase for students with special needs.

Participating schools are primarily located in Davidson, Montgomery, Robertson, Rutherford, and Sumner Counties. Of the 20,000 scholarships, 10,000 are reserved for students whose family income doesn't exceed 300% of the amount required for free and reduced lunch (a family of four making less than $170,000 per year). The remaining 10,000 vouchers can go to any student regardless of income.

The legislative analyst anticipated that 65% of existing private school students would take advantage of the available money, with only 35% of public school students transitioning out. The following year, the state may open up 25,000 available vouchers if demand meets expectations, with the voucher amount increasing to $8,750.

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