Giving Credit to Private Schools

By MIKE FORD | July 2013

With the signing of the 2013-’15 state budget, Wisconsin became one of six states to offer an individual income tax deduction for families paying tuition to send their children to private schools. According to the Wisconsin Legislative Fiscal Bureau, the deduction is limited to “tuition expenses of up to $4,000 per year per pupil enrolled in kindergarten through grade eight and $10,000 per year per pupil enrolled in grades nine through 12.”1The Legislative Fiscal Bureau estimates that the program will reduce income tax collections, and in turn state general purpose revenue (GPR), by $30,000,000 in 2014-’15.

Evaluating Fiscal Impact

On the surface, this new program will create an additional expense to the state. However, it is possible that the loss in GPR may be offset by the positive fiscal impact of reducing declining enrollment trends in private schools.

As illustrated in Figure 1, the number of non-voucher pupils attending private schools in Wisconsin has declined by 29.7 percent since the 2000-’01 school year. Over the same period, enrollment in Wisconsin public schools declined by just 0.66 percent. In other words, the number of students paying tuition to attend private schools in Wisconsin is decreasing faster than overall Wisconsin K-12 enrollment.

As shown in Figure 2, total private enrollment including voucher users is down only 17.11 percent. The reasons for the decline in private school usage likely include the increase in the number of tuition-free charter schools in Wisconsin, increased use of the state’s open enrollment program as a financially preferable school choice option, and a decreasing ability of families to afford private schools due to the economic downturn.

Regardless of the reasons behind the decline in private school enrollment, it is reasonable to assume that declines in private school enrollments increase the comparative state and local taxpayer costs for K-12 education in Wisconsin.

Why? The most important factor in determining the total state investment in public education is enrollment. Total shared education costs, which are defined as those costs funded with state aid and local property taxes through the state equalization-aid formula, can be calculated by multiplying each local district’s per-pupil shared cost by its enrollment. The higher a district’s enrollment, the higher the total state and local taxpayer cost. In 2011-’12, the average state shared cost was $10,005, meaning on aggregate each public school pupil cost local and state taxpayers about $10,000 through the equalization aid formula.

When students attend a private school (without using a voucher) instead of a public school, they are not reflected in a district’s enrollment count and do not generate a state expense. Hence more students enrolled in private schools instead of public schools means a lower total Wisconsin taxpayer education cost.

Counterfactual Scenarios

Figure 3 presents several counterfactual scenarios on the additional theoretical total taxpayer costs if certain percentages of tuition-paying private school pupils attended their local school district instead of a private school. Numbers were determined by:

  1. Multiplying each district’s per-pupil shared costs by the total number of non-voucher private school users in the district;
  2. Multiplying the sum from Step 1 by the relevant percentage by district; and
  3. Summing every district’s data.


The relevant question for determining whether the private tuition tax credit is a net fiscal gain or loss for Wisconsin taxpayers is whether sufficient numbers of children who would otherwise attend public schools remain in or migrate to private schools because of the tax credit. A rough calculation reveals that the new deduction would have to encourage about 3,000 students annually to attend private schools instead of public to be fiscally neutral: $30,000,000 (total cost of the tax credit)/$10,000 (total savings for each private school user) = 3,000.

Note that all of these estimates are statewide aggregates for total taxpayer impact. The district-level impacts as well as the property-taxpayer impacts will vary depending on a number of factors. For many individual districts, increased enrollment would bring more state aid and hence actually benefit local property taxpayers despite an overall negative fiscal impact.


Evaluating the fiscal impacts of the new private tuition tax credit will require future study of private school enrollment trends, surveys of parents using the new taxpayer credit, and a deeper analysis of state and federal categorical aids that are not reflected in a district’s shared costs. A future fiscal impact study would determine whether the new tuition tax credit is simply a new  tax break for private school parents or a program
that improves the state’s bottom line.

Wisconsin Legislative Fiscal Bureau, “Comparative Summary of Budget Recommendations,” June 2013.