Tag: education tax credits

Scholarship Tax Credits: Still the Reigning School Choice Champion

Today, Education Next released the results of its annual survey of public opinion on education policy. The 2016 results are somewhat disappointing for advocates of school choice because support for some types of choice programs has diminished over the last decade, particularly for voucher programs targeted to the poor. However, support for scholarship tax credit (STC) programs – once again, the most popular type of school choice program – has remained high and steady.

When asked whether they favored or opposed a proposal to offer a “tax credit for individuals and corporate donations that pay for scholarships to help low-income parents send their children to private schools,” 53 percent responded favorably while only 29 percent expressed opposition. Respondents were nearly evenly divided over universal vouchers, with 45 percent in support and 44 percent opposed. However, nearly half of respondents opposed targeted vouchers while only 37 percent supported them. Charter schools fared better, but many people don’t know what they are. When the survey asked about charter schools without defining what they are, nearly half of respondents were neutral. However, when the survey defined them as “publicly funded” schools that are “not managed by the local school board” that “are expected to meet promised objectives, but are exempt from many state regulations,” the amount of respondents who expressed no opinion dropped to 21 percent while support increased from 34 percent to 51 percent and opposition increased from 17 percent to 28 percent.

2016 Education Next Survey: Support for Various Types of School Choice

2016 Education Next survey results.

Unfortunately, once again the survey failed to ask about education savings accounts.

Support for STCs was even higher among parents (60 percent), African-Americans (64 percent), and Hispanics (62 percent). This is not surprising since minorities are more likely to be low-income and therefore choice deprived. Interestingly, support for STCs was higher among self-described Democrats (57 percent) than Republicans (49 percent), although the GOP has generally been more supportive of school choice than the Democratic Party. Democrats were also more likely to support both universal and targeted vouchers (49 and 42 percent, respectively) than Republicans (41 and 31 percent, respectively). 

Previous Education Next surveys also found that STCs garnered the highest amount of support from among the various school choice policies. Since 2009, support has increased from 46 percent to 53 percent, although it is down from a high of 60 percent in 2014. However, at 29 percent, opposition to STCs is also at its highest level since EdNext began including the question in their survey. Neverthess, there is a 24 percentage point advantage for those who favor STCs. (Note: EdNext did not ask about STCs in their 2013 survey.)

Education Next Surveys: Support for STCs

Education Next survey results, 2009-2016 

With the addition of South Dakota earlier this year, there are now 17 states that have 21 STC programs. Last year, more than 230,000 students used tax-credit scholarships to attend the private school of their choice, compared to about 150,000 students who used school vouchers and about 6,000 who used education savings accounts ESAs. Their high level of public support makes them the most politically viable form of school choice and because they are privately (rather than publicly) funded, they have a perfect record of being upheld as constitutional, making them the most constitutionally viable form of school choice yet devised as well.

Although ESAs have some advantages over both vouchers and traditional STC programs because they allow for greater customization, it is possible to combine the advantages of ESAs and STCs by privately funding the education savings accounts with the assistance of tax credits. For more information, see the report I coauthored with Jonathan Butcher of the Goldwater Institute and Arizona Justice Clint Bolick (then of Goldwater): “Taking Credit for Education: How to Fund Education Savings Accounts through Tax Credits.”

The EdNext survey also covered topics such as Common Core, testing, merit pay, tenure, teachers unions, blended learning, and more. You can find the full results along with ten-year trend data here.

Taking (Tax) Credit for Education

One of the most promising recent developments in education policy has been the widespread interest in education savings accounts (ESAs). Five states have already enacted ESA laws, and several states are considering ESA legislation this year. Whereas traditional school vouchers empower families to choose among numerous private schools, ESAs give parents the flexibility to customize their child’s education using a variety of educational expenditures, including private school tuition, tutoring, textbooks, online courses, educational therapies, and more.

Today the Cato Institute released a new report, “Taking Credit for Education: How to Fund Education Savings Accounts through Tax Credits.” The report, which I coauthored with Jonathan Butcher of the Goldwater Institute and Clint Bolick (then of Goldwater, now an Arizona Supreme Court justice), draws from the experiences of educational choice policies in three states and offers suggestions to policymakers for how to design a tax-credit-funded ESA. Tax-credit ESAs combine the best aspects of existing ESA policies with the best aspects of scholarship tax credit (STC) policies. Like other ESA policies, tax-credit ESAs empower families to customize their child’s education. And like STC policies, tax-credit ESAs rely on voluntary, private contributions for funding, making them more resistant to legal challenges and expanding liberty for donors.

Here’s how it would work: individuals and corporations would receive tax credits in return for donations to nonprofit scholarship organizations that would set up, fund, and oversee the education savings accounts. There’s already precedent for this sort of arrangement. In Florida, the very same nonprofit organizations that grant scholarships under the state’s STC law also administer the state’s publicly funded ESA. Moreover, New Hampshire’s STC law allows scholarship organizations to help homeschoolers cover a variety of educational expenses, similar to ESA policies in other states. 

For more details on how to design tax-credit ESAs, how they would work, and the constitutional issues involved, you can read the full report here. You can also find a summary of the report at Education Next.

Preserving Scholarship Organization Autonomy

Over at the EdChoice Blog today, Robert Enlow of the Friedman Foundation for Educational Choice, Lindsey Burke of the Heritage Foundation, and I argue that the government should not force nonprofit scholarship-granting organizations (SGOs) to check their values at the door as a precondition of participating in scholarship tax credit programs, as some groups have recently proposed in Georgia. In addition to violating core American principles, such as freedom of conscience, the proposed regulation would also reduce SGO effectiveness and jeopardize the financial support for tax-credit scholarships, which is certainly not in the best interest of the children who rely on them. The policy is not only unwise, it is also unnecessary:

A Solution in Search of a Problem

Last week, Georgia Governor Nathan Deal’s Education Reform Commission released its draft recommendations for improving and expanding the state’s school choice programs. While some of the commission’s proposed changes are meritorious, the commission failed to recommend expanding the state’s highly popular, nearly universal scholarship tax credit (STC), instead proposing that the state create a new STC that is highly regulated and much more limited in scope.

The commission’s two proposed changes to the existing STC (having the Department of Revenue count actual contributions against the tax credit cap rather than mere pledges and changing the start date for claiming credits) would make it easier for scholarship organizations to raise funds. The commission also explored the possibility of converting the STC into an education savings account (possibly still funded through tax credits, though the report is not clear about that), enabling families to use the scholarship funds for a variety of educational goods and services beyond private school tuition along the lines of what I described in my testimony before the commission in May. 

The Reigning School Choice Champion

On Monday, Education Next released the results of its 2015 survey on education policy. Neal McCluskey already summarized the key findings, but I want to highlight one finding in particular: scholarship tax credits (STCs) are the most popular form of private educational choice. 

STCs received the support of 55 percent of respondents compared to somewhere between 47 percent and 51 percent for charter schools (depending on whether the survey first explained what charter schools are), 27 percent to 46 percent for universal school vouchers (again, depending on the wording of the question), and 34 percent to 41 percent for low-income vouchers. Unfortunately, the survey did not ask about education savings accounts.

2015 Education Next survey: types of choice

Support for STCs was even higher among parents (57 percent), African-Americans (60 percent), and Hispanics (62 percent). This is not surprising since minorities are more likely to be low-income and therefore choice deprived. Those voicing support for STCs more than doubled those opposed in the general public (26 percent) and more than tripled the opposition among African-Americans (16 percent) and Hispanics (18 percent).

Previous Education Next surveys–as well as the Friedman Foundation’s survey last year–also found the most support for STCs among school choice policies. 

"A proposal has been made to offer a tax credit for individual and corporate donations that pay for scholarships to help low-income parents send their children to private schools. Would you favor or oppose such a proposal?"

Support for STCs dipped slightly from a high of 60 percent last year, but it is still higher than any other year since Education Next first started asking the question in 2009. (They did not ask about STCs in 2013.) However, the poll also revealed the second highest level of opposition since 2009.

In the Friedman Foundation’s 2015 survey, released in July, scholarship tax credits, school vouchers, and education savings accounts all received high levels of support that were within the margin of error of each other when the question was prefaced with an explanation of how the policy worked:

  • Scholarship tax credits: 60 percent support, 29 percent opposition;
  • Education savings accounts: 62 percent support, 28 percent opposition;
  • School vouchers: 61 percent support, 33 percent opposition.

However, when not preceded by a prompt, only 39 percent of respondents supported school vouchers while 26 percent were opposed. (The other questions were only asked with an explanatory prompt because few Americans are familiar with STCs or ESAs.) Charter schools were the least popular with 53 percent in support and 27 percent opposed.

Encouragingly, support for STCs and ESAs in the Friedman poll was highest among Americans aged 18-34 with 72 percent and 75 percent support respectively. These results may well indicate a coming school choice tidal wave.

Florida Judge Dismisses Lawsuit against School Choice

This morning, a Florida circuit court judge dismissed with prejudice a lawsuit by the members of the education establishment against the 13-year old Florida Tax-Credit Scholarship law, which grants tax credits to corporations that make donations to nonprofit scholarship organizations. About 70,000 low-income students in Florida currently receive tax-credit scholarships to attend the schools of their choice. Travis Pillow of RedefinEd (a blog connected to the scholarship organization Step Up for Students) has the story:

The statewide teachers union, the Florida PTA, the Florida School Boards Association and other groups filed the lawsuit in August, arguing the tax credit scholarship program unconstitutionally created a “parallel” system of publicly supported schools and violated a state constitutional provision barring state aid for religious institutions.

Judge George Reynolds, however, dismissed the case this morning. The plaintiffs, he ruled, could not show the scholarships harmed public schools, and could not challenge the program as taxpayers because it was not funded through the state budget.

Claims the lawsuit would harm public schools were purely “speculative,” Reynolds wrote, siding with arguments made by the state and parents who had intervened in the case. The plaintiffs could not show the program would hurt school districts’ per-pupil funding, or result in “any adverse impact on the quality of education” in public schools.

In dismissing the lawsuit on these grounds, the judge is following the precedent set by the U.S. Supreme Court and the New Hampshire Supreme Court.

In ACSTO v. Winn (2011), the U.S. Supreme Court rejected the standing of plaintiffs against Arizona’s tax-credit scholarship law because the scholarships constitute private funds, not government expenditures. Private funds, the Court ruled, do not become government property until they have “come into the tax collector’s hands.” Moreover, any impact on other taxes or spending is purely speculative, so the plaintiffs could not demonstrate any harm:

The costs of education may be a significant portion of Arizona’s annual budget, but the tax credit, by facilitating the operation of both religious and secular private schools, could relieve the burden on public schools and provide cost savings to the State. Even if the tax credit had an adverse effect on Arizona’s budget, problems would remain. To find a particular injury in fact would require speculation that Arizona lawmakers react to revenue shortfalls by increasing respondents’ tax liability.

Last year, in Duncan v. New Hampshire, the New Hampshire Supreme Court unanimously dismissed a lawsuit against the Granite State’s tax-credit scholarship law for the same reasons:

The personal injuries alleged by the petitioners in this case […] are insufficient to establish standing. The petitioners’ claim that the program will result in “net fiscal losses” to local governments does not articulate a personal injury. […] Moreover, the purported injury asserted here – the loss of money to local school districts – is necessarily speculative. […] Even if the tax credits result in a decrease in the number of students attending local public schools, it is unclear whether, as the petitioners allege, local governments will experience “net fiscal losses.” The prospect that this will occur requires speculation about whether a decrease in students will reduce public school costs and about how the legislature will respond to the decrease in students attending public schools, assuming that occurs.

This morning, the Florida judge reached the same, logical conclusion. The plaintiffs are not challenging “a program funded by legislative appropriations” so they lack standing to sue. Moreover, citing both of the above opinions, the judge concluded that any “injury” they allege is purely speculative:

Plaintiff’s Complaint also does not allege special injury sufficient to confer standing on Plaintiffs to challenge the constitutionality of the Tax Credit Program. […] [W]hether any diminution of public school resources resulting from the Tax Credit Program will actually take place is speculative, as is any claim that any such diminution would result in reduced per-pupil spending or in any adverse impact on the quality of education.

The plaintiffs are likely to appeal. And they are likely to lose that appeal. Last September, another circuit court judge dismissed a separate teachers union lawsuit alleging that the legislation expanding the tax-credit scholarship law was passed improperly. That judge also held that the plaintiffs lacked standing to sue because they could not demonstrate any harm.

Perhaps the education establishment should spend less time trying to prevent students from leaving their schools and more time trying to improve their schools so families will choose them.

National School Choice Proposal Heartening, Frightening

According to the American Federation for Children, Sen. Marco Rubio (R-FL) and Rep. Todd Rokita (R-IN) have reintroduced “the Educational Opportunities Act, which would create an individual and corporate tax credit for donations that pay for scholarships for students to attend a private school of their parents’ choice.”

It is encouraging to see growing support for scholarship tax credit school choice programs, which have been found to simultaneously boost achievement for students who switch to private schools, do the same for students who remain in public schools, and save taxpayers millions of dollars every year–a win-win-win scenario. Nevertheless, it is ill advised to pursue such a program (or other school choice programs) at the federal level.

Years ago I summarized those problems when President George W. Bush advocated creating a federal school voucher program. Such programs are not only beyond the mandate accorded to Congress by the Constitution, they bear the risk of suffocating private schools nationwide with a raft of new regulation, defeating their very purpose of increasing the range of educational options available to families with limited means.

In the past few years I have visited Sweden and Chile and studied their federal school chioce programs. Both confirm my earlier worries about national programs. Chile’s entrepreneurial voucher schools grew rapidly at first, but with a recent change of government hostile to the program they have sensed the new climate and stopped expanding.The new government is trying to enact regulations to diminish the scope and freedom of private schooling in Chile.

Meanwhile, something similar is happening in Sweden. Among other things, the government has mandated that all schools hire graduates of government-certified teacher training programs, despite the well known fact that those programs are currently attracting the lowest-achieving college students.

National school choice programs have proven to be a prime case of “staff car legislating.” The legislators who enact them are not always the ones in the official staff cars, making the rules. New lawmakers with different preferences ultimately come to power and can wreak havok on a nation’s entire K-12 education sector.

This problem can be minimized by leaving school choice legislation to the state level, where the Constitution rightfully leaves it. We thus have a “laboratory of federalism”–a variety of different policies across states that make it easier to determine how best to design such programs.

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