Tax-credit scholarships need a critical, not hostile, eye

and Adam Emerson

It’s hard to get past the New York Times’s animus toward anything “private” or profit-seeking in the realm of K-12 education, particularly when investigative reporter Stephanie Saul applies her own biased and acidic pen to the topic. And Tuesday’s interminable “expose” of state-level tax-credit scholarship programs certainly deepens one’s impression that the writer (and, presumably, her editors) is in love with anything that smacks of “public dollars” or “public schools” and at war with anything that might be seen as diverting even a penny from state coffers into the hands of parents to educate their kids at schools of their choice. Never mind whether the public schools they are exiting are good or bad, nor whether the dollars being spent by those schools are well targeted on high-quality instruction or frittered away on over-generous benefits for underemployed custodians and their retired pals.

Dollars Roll
Tax-credit scholarship programs must be well designed and monitored or more "exposes" over how dollars are distributed will follow.
Photo by Images Money.

Having gotten that out of the way, it’s also worth learning that while some of these state programs (especially Florida’s) are models of sound policy, efficient administration, and careful targeting of available resources, some others appear to be burdened by dubious practices on the part of schools, donors, elected officials, and maybe parents, too.

First, a brief refresher on what these programs are and how they work. Eight states allow individuals or corporations to take a full or partial credit against their state taxes for contributions they make to nonprofit groups that award private-school scholarships. Some states, like Florida, award scholarships only to low-income students. Others, such as the programs in Arizona and Georgia, place no income restrictions on eligibility. None excludes participation in religious schooling (and, in fact, the majority of scholarship students attend faith-based schools).  

Yes, they are cousins of voucher programs but they don’t involve checks written by the state (or district) to private schools, using money that has already entered the public coffers. The money, in fact, never enters the state treasury. Such programs thus skirt some of the statutory and constitutional obstacles that get in the way of vouchers—and in many cases enjoy smoother political sailing as well.

If Ms. Saul is to be believed, however, some of these programs are vulnerable to various forms of misbehavior, including parents getting cash in their pockets, politicians deciding which schools should benefit, even donors getting tax credits while underwriting particular students.

These programs involve credits against state taxes. Hence a state’s tax code determines what is and isn’t kosher. Certainly some of these alleged practices wouldn’t be acceptable to the Internal Revenue Service. (For example, one cannot make a gift to a college or school that is then used to provide tuition relief to one’s own kid. If that were allowed, nobody would pay tuition to Princeton; they’d make gifts instead—and benefit from the tax deduction.)

Even in Ms. Saul’s telling, it’s evident (from the Florida example) that such programs can be meticulously designed, well run, and close to fool proof. But it also appears that some are loosey-goosey and vulnerable to chicanery. Which raises the question of whose job it is to set them right on behalf of the kids, parents, educators, and taxpayers who have every reason to expect that?

The state, of course, should do much of this. It’s a state program and the state equivalent of the IRS should be monitoring its collection and distribution of money. State watchdog agencies, too, should ensure that taxpayers are benefitting, as has happened in Florida. The state education department (or local school system) should be ensuring that the kids who benefit from it are attending bona fide educational institutions that satisfy the applicable requirements for private schools to operate in that jurisdiction. And legislatures should examine the academic impact of these programs, as greater transparency often weeds out schools with shaky credentials and questionable business practices.

But aspects of this go well beyond state government and could well be superior to it. Should the private school “community,” such as it is, be monitoring its own members for their participation in and handling of such aid programs? (What is the Council for American Private Education and its state affiliates for?) How about the accrediting bodies that typically review many aspects of private schools and allow them (if they pass muster) to declare that they are accredited? What about advocacy groups (such as the American Federation for Children) that press for the expansion and replication of such programs and that presumably have an interest in their integrity and reputation? The private foundations (e.g. Friedman, Walton, DeVos) that underwrite such efforts? Why does this sector of school choice have no counterpart to the National Association of Charter School Authorizers (NACSA) to promulgate a code of sound practices and invite membership from organizations that adhere to these?

The more such entities do to ensure sound practices in state-level tax-credit-scholarship programs, the less temptation there will be for government agencies to clamp down on them, with likely adverse effects on legitimate schools and needy pupils.

And the less that hostile publications like the Times and "gotcha" journalists like Ms. Saul will have with which to make mischief.

PS: It’s not just “private” and “profit” that she abhors. Her piece on Tuesday was really a model of take-no-prisoners left-wing journalism! She hit at least five hot buttons: privatization, football, evolution, fundamentalism, and fracking! Somehow she missed climate change, phonics, and traditional family units.

Ed. note: Adam Emerson previously contributed to policy and public affairs initiatives for Step Up For Students, the scholarship organization responsible for administering the Florida Tax Credit Scholarship for low-income students.

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