According to the Senate Bill 294 Arkansas LEARNS Act Fiscal Impact Statement, Education Freedom Account vouchers will cost $46.7 million for 7,000 students in year one and $97.5 million for 14,000 students in year two. In year three, the voucher program will be available to all K-12 students; however, the 2025-2026 fiscal impact of the voucher program was not disclosed.
To better understand future fiscal impact, the state of Arizona's implementation of a similar voucher program can provide insight.
In June 2022, Arizona legislators approved expanding their voucher program to all 1.1 million K-12 public school students. After only two months of the expansion being enacted, $210 million was distributed for vouchers and deducted from the general state revenue that funds public schools. The Arizona Empowerment Scholarship Account vouchers are estimated to cost $500 million this year and $1 billion per year within the next few years.
According to the Arkansas Department of Education, there are currently 476,579 K-12 public school students, or 43.3 percent of the number of K-12 students in Arizona. Thus, Educational Freedom Account vouchers would cost an estimated $433 million based on the known outcome of Arizona's implementation of a commensurate voucher plan.
The future fiscal impact of the voucher program can also be estimated based on the current home school enrollment of 26,378 and private school enrollment of 26,550 for the 2022-2023 school year. If zero new students enrolled in private or home schools, there would still be a total of 52,928 students eligible for Education Freedom Account (EFA) vouchers. The cost of an EFA voucher is $7,349 for 2022-2023. If all 52,928 students received this voucher amount without any new private or home school enrollment, the total cost would be $389 million.
When analyzing the future fiscal impact of the voucher program, it is also essential to consider a future policy agenda of ending the state income tax. For the 2022 fiscal year, the Arkansas net available general revenue collections totaled $7.477 billion, including $4.17 billion from individual income taxes, $3.15 billion in sales and use taxes, and $837.2 million in corporate income taxes. If state income taxes were eliminated, there would only be $3.15 billion remaining.
A substantial portion of the 2022 fiscal year $1.628 billion surplus was a result of unspent funds from the federal Coronavirus Aid, Relief, and Economic Security Act; this funding is a one-time allocation and not a sustainable source of state revenue.
There are 28 states with higher state income-tax rates than Arkansas; any Arkansas resident making more than $23,600 pays the same state income-tax rate of 4.9 percent, which is the lowest rate since the inception of the tax in 1929. For 2022, a household income of $200,000 married filing jointly would pay $10,541 in state income taxes. The Arkansas statewide average effective property tax rate is 0.57 percent, the 16th lowest rate in the nation. At this rate, owning a $500,000 property would result in a $2,850 tax payment. I am aware that there would still be some additional taxes, but the total of state income and local property taxes would be $13,391.
The value of an EFA voucher is $7,349 for 2022-2023. For a moment, let's imagine the same family making $200,000 has two kids attending private school. If $13,391 paid in taxes is subtracted from the $14,698 value of two EFA vouchers, the net contribution to revenue would be -$1,307.
Allen Eason graduated from the Arkansas School for Mathematics, Sciences, and the Arts; Hendrix College; and Oklahoma State University with a Ph.D. in Educational Psychology.