The Heritage Foundation

Executive Summary #1172es on Education

April 17, 1998

April 17, 1998 | Executive Summary on Education

BG1172ES:  A+ Accounts: More Educational Opportunity, Not MoreBureaucracy

The Senate will soon debate the Parent and Student Savings Account Plus Act, as well as several proposed amendments to the bill. The key component of this bill, sponsored by Senators Paul Coverdell (R-GA) and Robert Torricelli (D-NJ), offers parents and concerned citizens a new way to invest in a child's education from kindergarten through 12th grade: A+ Accounts. Under this plan, families, single parents, or anyone earning less than $95,000 annually ($150,000 on joint tax returns) could deposit up to $2,000 per child in after-tax income into these interest-bearing savings accounts each year. The tax-free funds that accumulate in A+ Accounts could be used for any education-related expense, from books and transportation to special programs or private school tuition.

The A+ Account program offers a tangible opportunity to parents to improve their children's K-12 education. In addition, the bill would allow parents to make tax-free withdrawals from state-operated tuition savings and prepaid tuition programs for their children's higher education expenses. The bill also contains two provisions on school building and repair: The first (Private Activity Bonds) would free $3 billion in school construction bonds for public schools over the next five years--enough to build 500 new elementary schools. The second would expand from $10 million to $15 million the maximum value a school district could issue in tax-exempt bonds without having to comply with complicated IRS arbitrage rebate rules.

STRENGTHENING A+ ACCOUNTS

Several proposals before the Senate would strengthen A+ Accounts. For example, measures have been proposed that would:

  • Promote equity. A proposal sponsored by Senator Kay Bailey Hutchison (R-TX) would promote the use of existing federal education dollars for reform projects that provide same-gender schools and classrooms, as long as comparable opportunities are offered to students of both sexes.

  • Promote parental choice. Senator Dan Coats (R-IN) proposes to increase to 110 percent the tax deduction that individuals and families may take on charitable contributions to schools and other organizations offering educational scholarships to children at or below 185 percent of the federal poverty level.

  • Send dollars and power to states and localities. Senator Slade Gorton (R-WA) advocates block granting several federal education programs to the states. Under this policy, a state's legislature and governor could send the money directly to a local or state education agency or else spend it as they always have.

WEAKENING A+ ACCOUNTS

Many proposed amendments to the Coverdell-Torricelli measure, however, would undermine the value of A+ Accounts. Senator Barbara Boxer (D-CA) would create a five-year program for 300 to 500 after-school enrichment programs for students in kindergarten through 12th grade, which local districts already have authority to establish and many already fund. Congress should not pre-empt state and local authority.

Senators Dale Bumpers (D-AR) and Christopher Dodd (D-CT) would eliminate the Coverdell-Torricelli A+ Accounts while increasing funds for the Individuals with Disabilities Education Act (IDEA). Congress should not expand an unreformed federal program.

Senator Jeff Bingaman (D-NM) will offer an amendment to strike A+ Accounts and authorize $750 million over five years to create a National Dropout Prevention program. Congress should not create another federal program, especially when existing programs are all inefficient.

Senator Kent Conrad (D-ND) would reduce the annual allowable contribution to an A+ Account for taxpayers with incomes between $60,000 and $95,000 from $2,000 to $500. The goal should be to encourage, not reduce, private investment in education.

Senator John Glenn (D-OH) would limit the use of A+ accounts to public schools. Again, the goal should be to expand, not restrict, parental choice.

Senator Edward Kennedy (D-MA) would replace A+ Accounts with new funding for a loan forgiveness program for teachers in areas with a shortage of qualified teachers (for example, bilingual education). Congress should not create another government loan program.

Senator Carol Moseley-Braun (D-IL) proposes allowing states and school districts to issue $21.8 billion of school bonds at 0 percent interest to build and modernize schools, and providing tax credits to purchasers of the bonds in lieu of interest payments. Congress should not focus on extracurricular "inputs."

Senator Patty Murray (D-WA) proposes a "sense of Congress" resolution to support efforts to hire 100,000 new teachers and reduce class size in the 1st through 3rd grades to an average of 18 students per class. Congress should refrain from creating a "100,000 cops" program for education.

Senator Carl Levin (D-MI) would increase to 50 percent the funding for "lifetime learning credits" for technology training of K-12 teachers. Funding for "technology" education should not be increased.

Senator Paul Wellstone (D-MN) would undermine welfare reform by counting school attendance as a "work activity." Congress should not undermine the work requirements in welfare reform.

CONCLUSION

The Coverdell-Torricelli A+ Accounts legislation is one of the first serious federal efforts to encourage parents to save for their children's education. Members of Congress interested in improving educational opportunities by getting parents involved should consider the benefits of A+ Accounts. Otherwise, federal dollars will continue to be directed to "input-driven" solutions and school systems instead of to academic outcomes and children.

Nina H. Shokraii is the former Education Policy Analyst at The Heritage Foundation and Sarah E. Youssef is a former Research Assistant at The Heritage Foundation.

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