As in many other countries, public education in the United States began at the instigation of churches. For a long time, schooling was openly religious. In the 1820s, in New York and in other states, legislators became concerned that many students were receiving the wrong type of education. It was not that children were going uneducated – in 1821, about 93 percent of New York’s school age youths were already attending private schools. As expressed in legislative debates, the fear was that students educated in private Catholic schools would learn the wrong values and end up becoming criminals. If Protestant schools could be made less expensive through government subsidies, the legislators reasoned, some Catholics would transfer their children there, thus saving them from a life of crime.
The subsidies began as a kind of voucher system in which approved Protestant schools received a per pupil payment. However, this had an unintended consequence: the subsidized Protestant schools started competing against each other to attract Catholic students. To compete, they began teaching more of what Catholic parents and students wanted – reading, writing, and math – and less of what they didn’t want – Protestant religious training. Advocates of the subsidies found that the subsidized schools were no longer providing the religious training that justified the funding program in the first place.In response, subsidies were limited to the approved Protestant school nearest to a student’s home. This reduced the incentive for the schools to compete against each other, and thus to limit their Protestant instruction. As government programs tend to do, over time the subsidy scheme grew until it began eliciting complaints that the subsidized schools were getting most of their money from the government while being protected from competition. With the Free Schools Act of 1867, the state simply took over the subsidized schools, which then became public institutions. This is the surprising, true origin of America’s public school system.
John Lott, Freedomnomics pp. 190-91.