School Choice and Blackbaud Software

There is a lot of discussion about “school choice” programs across the U.S. and how they impact students, families, and public funding in general. But there is limited conversation about how schools must adapt to accept these funds. How much money is involved? How do you factor state-funded scholarships or school vouchers into your financial aid program? How do you receive and allocate those funds in the business office? What changes do you have to make in your processes?

The answers to those questions depend on your state, which program the family uses, and what software is in your school’s tech stack.

How much assistance are states providing?

More than half of U.S. states and the District of Columbia now have at least one school choice program, but no two are exactly alike. While primarily for tuition at private and independent schools, many programs also accommodate books, tutoring, transportation, and other school-related expenses. States may offer public funds in the form of tax-credit scholarships, vouchers, education savings accounts (ESAs), or a combination of those options.

Programs differ from state to state. Here are a few examples:

• Ohio awarded more than 82,000 private school vouchers for the 2023–2024 school year—triple the number of previous years. The state’s income-based EdChoice Expansion Scholarship program awarded each K–8 student up to $6,166, while high school students received up to $8,408. The vouchers are for tuition only.
• Iowa’s Students First ESAs are $7,826 for the 2024–25 school year to cover private school tuition, fees, and other educational expenses such as textbooks and tutoring. ESA funds stay with the state until a student’s parent or guardian approves payment to the school.
• Arizona reports that its Empowerment Scholarship Account has aided more than 77,000 students at $4,000–9,000 each with even higher amounts going to students with disabilities. Those funds are put into a virtual account or prepaid debit card for families to use for private school tuition, tutors, or approved online education and homeschooling expenses.
• Florida has among the most state-funded programs benefitting private and independent school students. Step Up for Students details several options including scholarships prioritized by income, which averaged $7,800 per student in the 2023–2024 school year. The state ESA for students with unique abilities provided $10,000 on average. Florida also offers an ESA designed for homeschooling and programs to support tutoring and transportation.

How do you track the ever-changing landscape?

Legislation is constantly evolving, and school leaders need to stay informed. The Education Commission of the States tracks the state funding sources for private school choice with detailed profiles of existing voucher programs, education savings accounts, and scholarship tax credits. They track state education policies—including enacted and vetoed bills and pending legislation—and maintain a state legislation watchlist in various educational areas, including school choice. They also list requirements for private schools to participate in state-funded programs.

School participation is optional.

While these programs offer additional support for families and may encourage a broader range of private school applicants, some schools find their state’s program requirements and restrictions at odds with the school’s mission, pedagogy, and priorities. Concerns include:

• Certain states require schools to accept a voucher as full tuition for the student, regardless of the school’s cost to educate.
• Some schools report extensive paperwork and months-long payment delays, resulting in less initial operating revenue.
• Regulations and standardization may jeopardize the programs and curricula that make each private school unique.

The National Association of Independent Schools (NAIS) offers a list of considerations about participation.

How do school choice programs impact tuition and financial aid?

Some independent schools participating in state-funded programs have taken the opportunity to positively impact their financial sustainability. Here are two examples:

1. Raising tuition. Almost every private and independent school has a gap between net tuition revenue and its cost to educate a student. Tuition discounting widens that gap. The rise of school choice programs has empowered some schools to do something they have delayed for a long time: raise tuition. They encourage all families to apply for available vouchers and ESAs knowing state funds can cover the increase.
2. Reducing school-funded financial aid. Since a high percentage of students using state funds were already enrolled in private education, some schools are adjusting their financial aid calculations. If unrestricted funding was bolstering their financial aid programs, those funds can now be used for faculty salaries, benefits, programming, or operational purchases—like upgrading their school’s K–12 software technology.

School choice, tuition, and financial aid policy changes deserve careful consideration, and each school must weigh the benefits and drawbacks for its particular situation. Decision-makers should include the board of trustees, school leadership, and legal counsel.

How do you manage school choice funds in Blackbaud software?

If you use Blackbaud’s K–12 Solutions, we encourage you to work with your auditors, accountants, and Blackbaud services team to configure Blackbaud enrollment, financial aid, tuition, and accounting software according to your school’s needs. Every state program is different, so there is no one setting that fits every situation.

From a broader perspective, there are different ways to account for school choice funding. It all depends on the timing and nature of your state’s program and the structure established in your school.

If you know the voucher amount ahead of contract completion:

• An admissions or business officer can add the state fund amount in Blackbaud Enrollment Management™ the same way they add financial aid to each family’s contract. The contract then flows into Blackbaud Tuition Management™, which feeds into Financial Edge NXT^®, the single source of truth for financial operations at the school.

If you need to add the amount after the contract is finalized:

• The business office can enter the amount into Blackbaud Tuition Management, the families see that discount in their payment portal, and that information feeds into Financial Edge NXT.

If the state uses direct deposit to the school:

• The business office can record the deposit in Financial Edge NXT—using a project code assigned to track the state funding—and then assign the appropriate amount to each covered student’s account in Blackbaud Tuition Management.

How do you track and report on state funds?

Since Blackbaud Tuition Management acts as a subsidiary ledger to Blackbaud Financial Edge NXT—the general ledger—we recommend using a project code in both systems so the business office can track the discount not only at the account level, but also at the project level.

Financial Edge NXT is designed to organize, track, and report different fund sources. By using a distinct project code, you can get the reporting you need for your state at the push of a button. Work with your Blackbaud team to create those reports.

There is no “one size fits all” approach.

Choice funding works differently in different states and sometimes there are various programs within the same state. Just like every private and independent school is unique, your approach to state funding will be, too. If your school chooses to participate in state-funded programs, start with your internal accounting team and your auditor. Then reach out to your Blackbaud account executive or customer success manager to explore how we can help set your school up for success.