How voucher vendors could make millions from ‘school choice’

AUSTIN – The Texas Observer reports that in August 2024, the business magazine Inc. released its annual list of the top 5,000 fastest-growing private companies in the United States. At 815th, a burgeoning upstart called ClassWallet cracked the list’s top 20 percent for the third straight year. By expanding its operations managing school voucher programs for states across the country, earnings for the Florida company grew by 610 percent over the previous three years. Founded in 2014, ClassWallet now has more than 200 employees and has contracts to administer school vouchers and other educational programs in 18 states through its “digital wallet” platform. Indeed, managing school vouchers has become a big business. And, as Governor Greg Abbott and the Republican-controlled Texas Legislature gear up to pass their own program this session, private companies like ClassWallet are descending on the Capitol to lobby for the vouchers legislation and the lucrative contracts it could generate. This comes as other states have drawn scrutiny over myriad problems with the private contractors, including ClassWallet, they’ve hired to administer their voucher programs.

Senate Bill 2, which sailed through the upper chamber early last month, is a universal school voucher proposal that would give students $10,000 a year to attend private school or $2,000 for homeschooling. Lawmakers have initially set aside $1 billion in funding for the Texas school voucher program in 2027, though the Senate bill’s fiscal analysis says the program’s net cost could balloon to $3.8 billion by 2030. The bill stipulates that up to 5 percent of appropriated funds may go to pay up to five outside vendors like ClassWallet, which the legislation calls “certified educational assistance organizations” (CEAOs), to act as middlemen between the state, parents, and private schools by processing program applications and voucher payments. If the bill were to pass, these private companies could soon be reeling in tens and even hundreds of millions of taxpayer dollars per year. These private vendors could, under the bill, be tasked with managing a complex application process, connecting parents with private schools and education vendors, accepting payments, and “verify[ing] that program funding is used only for approved education-related expenses.” “They’re a for-profit pass-through, which just means the state appropriates dollars, the vendor holds it, they reserve a small fee for themselves, and then they pass it on to the consumer,” Josh Cowen, education policy professor at Michigan State University and author of the book The Privateers: How Billionaires Created a Culture War and Sold School Vouchers, told the Texas Observer.