CALIFORNIA COMMENTARY : Rolling the Dice With Prop. 174 : The voucher initiative is one big financial question mark--will it cost billions or save billions? No one can tell.

What would Proposition 174 do to public-school spending: push it up or pull it down? What would the Parental Choice in Education Initiative do to the state’s budget? In an effort to answer those questions, RAND colleagues and I have completed a thorough analysis of the initiative’s potential financial effects.

Our conclusion is as unshakable as it is unsatisfying: There is simply no way of knowing. Whether we vote for or against vouchers on Nov. 2, all of us will be taking a high-stakes gamble with the future of public education and state finances. Here’s why the outlook is so dicey: If voters pass 174, it’s only the first move in the game; the final outcome depends on plays by four other parties.

Parents will be crucial. Under Proposition 174, the state would offer every K-12 pupil a voucher, good at almost any private school, for roughly $2,600. Since the public schools cost about twice that much per pupil, those who leave the system will cost the taxpayers less. If enough students leave, California taxpayers could save as much as $2 billion or $3 billion per year. But other students would have gone to private schools even without a voucher. For them, the state would actually be spending more, providing a subsidy of more than $1 billion. There is no reliable evidence to suggest how many students would use vouchers, whether the state would save more than it spends.

The private sector plays a similar role. Will enough new schools open for many students to leave the public system? If not--and we’re talking about at least tripling the number of private-school classrooms--we could again be spending more for less, primarily subsidizing students who would have been in private school anyway.

The courts are involved as well. Proposition 174 reduces the amount the state is required to spend on public schools--but there is disagreement about how to figure that reduction. Under one interpretation (the so-called double-hit), legally mandated spending per pupil could drop sharply. Under the other interpretation, potential savings would be much smaller. Ultimately, judges will probably make the call. Their decision could make billion-dollar differences in how much the state can legally cut total education spending.

Finally, Sacramento has to play. Proposition 174 sets a minimum for education spending, not a maximum, as does current law. The governor and legislators can always spend more. So even if other players--especially parents--act in such a way that the state can save money, how will those savings be used? They could be plowed back into the public schools, increasing per-pupil spending by 10%. They could also be used for other services or not spent at all, cutting per-pupil spending by 20%.

To help sort things out, we constructed a simulation model of California’s school finance with and without vouchers. Normally, this kind of analysis can give us a reliable estimate of what’s going to happen. It may not tell us for certain whether we’ll have lots of money or only a little, for instance, but it will tell us that we’re sure to save something. In this case, though, there are just too many unknowns. We can’t tell whether voting for Proposition 174 will save billions of dollars--or cost at least $1 billion more a year. It could substantially increase the amount available for each public-school pupil--or cut it even more sharply.

Voting for Proposition 174, then, is literally to gamble. No one knows how it will affect the state budget or the public schools. Some may claim that they know, but we have found no reliable, quantitative evidence for such claims.

But voting against 174 is also a gamble. We face a looming fiscal crisis. Spending on K-12 education already consumes almost one-third of California’s entire general-fund revenues. Our projections show that by the years 2002-2003, this share will rise to 43%. That’s even bigger than it sounds, because a large part of state spending is locked into entitlements. As the number of pupils continues to grow, something will have to change in the state’s public-finance system.

Proposition 174 may not be the answer--it might even make things worse. But voting against 174 certainly leaves us with three unpalatable options: slashing spending in the public schools; cutting funds for prisons, colleges, state police or other services, or raising taxes.

For or against, voters will have to roll the dice when it comes to the initiative’s economic effects. There is one way, however, to hedge bets somewhat: find out how Sacramento might play. If our legislators and governor would make a commitment on how any voucher-related savings would be used, we could at least place smarter bets. Make no mistake, though, it will still be a gamble.