I've become convinced that if we want to unleash meaningful innovation in education and create more personalized learning environments for students, we have to give more families the chance to choose a school that best meets their child's individual needs. For far too long we've expected public schools to be all things to all students, an impossible burden for teachers, instead of empowering all families with more education options. That's why I support creating a scholarship tax credit for Kentucky which would encourage private donations to scholarship programs that enable lower income students to have access to tuition-based schools.
Two bills have been introduced in the Kentucky General Assembly that would create such a program, House Bill 134 and Senate Bill 36. On Thursday of this week the Senate Education Committee will have its first vote on SB 36 and I want to encourage every Kentuckian to contact your representative and state senator to support these two pieces of legislation. Please use this easy VoterVoice link to have an email sent immediately to your legislators urging them to support these bills. Past versions of these bills have enjoyed bipartisan support.
I've written about scholarship tax credits before (see links below), but let me briefly describe how this policy works and address some of the common concerns or objections. [Disclosure: I serve on the board of directors for EdChoice Kentucky, a non-profit coalition advocating for scholarship tax credits; Disclaimer: as always, opinions expressed here are mine alone and do not reflect the views of Western Kentucky University (where I work) or the Kentucky Board of Education (where I serve as a member).]
The basic issue is that many low-income families would love to be able to select a tuition-based school for their children but simply lack the resources. Needs-based scholarship programs for many private schools exist, but donations to these programs are not sufficient to meet demand. In fact, based on their applications for assistance, Kentucky's two main scholarship granting organizations, the Catholic Education Foundation and School Choice Scholarships, estimate at least $21 million in unmet need each year. And that's based only on student applications; many more families might like such an opportunity but don't know that it exists.
HB 134 and SB 36 would create a tax credit for private donations to such scholarship programs (many more of which would surely emerge if the bills are passed). Ninety-five percent of the amount of the donation would be credited to the donor's tax bill at the end of the year (but a donor could not receive back more money in credits than she paid in taxes), up to a total of $25 million in donations for the first year (and increasing by 25% the next year if donations reach at least 90% of that amount).
To be eligible for a scholarship, students' family income may not exceed 200% of the eligibility level for free and reduced-price lunch, and about 50-60% of all scholarship recipients must be fully eligible for free lunch (the same percentage as the state's student population as a whole). Students in foster care will automatically be eligible, and students with special needs would also be able to use scholarship funds to cover other services like speech/language or physical therapy.
To reiterate: scholarship money comes from private donors, not taxpayers. And while the tax credit will temporarily lower overall state tax revenues, this amount will be more than made up by reduced public school expenditures for students who receive scholarships. Eighteen other states have similar scholarship programs, most of which are actually larger in scope than what is proposed for Kentucky under HB 134 and SB 36. Florida's scholarship program, which is the nation's largest, has demonstrated positive long-term educational benefits for students. Scholarship tax credits empower low-income families with the same kinds of educational options enjoyed by the affluent while saving tax payers money. This is a strong win-win strategy for Kentucky.
The following are some common questions or concerns about scholarship tax credits:
Wouldn't such a plan violate the principle of separation between church and state since many scholarship students might seek to attend a faith-based school? No. Scholarships utilize private money to assist students with tuition. Tax credit programs in other states have withstood every legal challenge brought against them. Furthermore, there are other examples of programs that actually do utilize tax dollars to help students attend education institutions of their choosing, including faith-based options, like Pell grants and federally-subsidized student loans. Most Kentuckians support these programs because they recognize they are based on the public good of helping low-income students access a variety of high-quality educational choices.
Wouldn't such a plan primarily benefit students who are already attending tuition-based schools? No. Currently only about 10% of non-public school students are eligible for free and reduced lunch. If new donations are made to scholarship programs as a result of the tax credit, the overwhelming beneficiaries will be low-income students who will switch from public to non-public schools.
Then how can this proposal not cost local public schools money if they lose students? Because they will not have the expense of educating students who switch, but will retain all local and federal education dollars not based on enrollment. Presently the state of Kentucky saves $287 million per year because it does not spend money to educate the Commonwealth's 72,000 non-public schools students (whose parents pay state income and local property taxes to support public education), but that number has been in steady decline. Stabilizing or growing the population of non-public school students actually has a net positive effect on the state's fiscal resources and frees up additional monies to spend on students who remain in public schools. [Updated, 1/9/2018: See this collection of research studies on existing scholarship tax credits, which finds that in every state the impact has been fiscally neutral or positive for taxpayers].
Update, 1/26/2018: One of the criticisms that keeps popping up is that, even if scholarship tax credits have an overall neutral or positive impact on state revenues, there is still a cost to public schools when a student leaves (and the school losing the state SEEK money associated with that student) because fixed costs (staff, transportation, utilities, etc.] remain the same for the district unless very large numbers of students depart. There is some truth to this, but it's also true that students depart from districts all the time, just as new students are arriving all the time. Per pupil state funding does not account for the bulk of school spending in most districts, particularly the districts where students might likely switch to a non-public school, and schools are well equipped to deal with these kinds of small fluctuations in enrollment. By way of context, in other states with scholarship tax credits, history shows that approximately 1 to 1.5 percent of students statewide will take advantage of scholarships and switch to a non-public school in the first year. That's a change that is well within the normal variation in public school enrollments, which often rise and fall each year based on a wide variety of factors. It is simply not the case that if we pass scholarship tax credits, suddenly 5 students will disappear from a class of 30. Realistically, you might have 1 student leave out of 3 or 4 classes making up 100 students. So the argument that we can't allow a scholarship tax credit because it is going to cost public schools a punitive amount of money just does not hold up.
Won't high-income individuals get the most benefit from this tax credit? No. The beneficiaries of this proposal are low-income students who are likely struggling to fit in and be successful in their assigned public school and whose family could never afford an alternative. While it's true that donors to scholarship programs are likely to be higher-income individuals (they actually have the disposable income to make such donations), current tax guidelines around charitable donations are not encouraging sufficient donations to scholarship programs to meet the need. Remember, the donor isn't making any money off this proposal; the tax savings he experiences are going directly to benefit a needy child. If we can incentivize affluent families to give more of their money to help the less-affluent, that's a good strategy.
We use tax policy all the time in ways that let a taxpayer keep some of his or her money for personal expenditures that are nevertheless public goods, like the current federal deductions for home mortgage interest or the federal dependent child tax credit. Home ownership and helping parents afford daycare are public goods in themselves, and thus these are extraordinarily popular tax policies. Similarly, education is a public good and empowering low-income families to enjoy the same kinds of schooling options middle- and upper-income Kentuckians enjoy isn't just good policy from a fiscal and educational standpoint, it's also fair and just. Many different schooling structures and delivery methods make up the landscape that is "public" schooling; all families deserve access to that full landscape, regardless of their income level or ZIP code.
Please help promote educational access for all families by supporting HB 134/SB 36. Contact your state legislators today and urge them to support these bills by using this quick and easy VoterVoice link.
- Does giving parents education options "divert money" from public schools?
- Expand educational options for Kentucky families with scholarship tax credits
- Scholarship tax credits: Kentucky's best chance for school choice
- EdChoice Kentucky advocates more schooling options for all families
- A School Choice Primer, Parts I, II, and III