Tag: education tax credits

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.

What Does “Fully Funded” Mean?

Maryland is on the verge of enacting a trailblazing expansion of educational freedom.

The Maryland Education Tax Credit would grant tax credits worth 60 percent of donations to nonprofit scholarship organizations that help low-income families cover certain educational expenses. Were it to become law, Maryland would become the second state, following New Hampshire, to allow families to use tax-credit scholarship funds on a wide variety of educational expenses beyond tuition, such as tutoring, books, education-related technology, transportation, and special-needs services. The legislation has some flaws–for example, eligible schools cannot charge tuition higher than the statewide average per pupil expenditure at district schools–but it still represents a significant step in the right direction.

Unfortunately, the proposal might not get an up-or-down vote in the legislature. Today, the Baltimore Sun reports that Maryland Speaker of the House Michael E. Busch opposes the school choice proposal because Maryland’s assigned schools are not “fully funded”:

“It’s hard for the legislature to fund private religious schools when Governor Hogan fails to fully fund the public education system,” said Busch, an Anne Arundel County Democrat.

There are numerous mistaken assumptions in that statement–tax credits are not government appropriations;  parents can use the scholarships at religious or secular schools; scholarship tax credits generally produce fiscal savings by reducing expenditures more than tax revenue,  etc.–but the claim that Maryland’s district schools are not fully funded raises the question: what does “fully funded” mean?

Learning in the Live Free or Die State

In 2012, New Hampshire launched a bold initiative to advance educational freedom: scholarship tax credits.

The New Hampshire Opportunity Scholarship Act grants business tax credits worth 85 percent of those businesses’ contributions to nonprofit scholarship organizations that fund low- and middle-income students to attend private or home schools. More than 100 students received scholarships in the first year and the results were remarkable.

In a survey of scholarship recipients, nearly 97 percent of families reported being satisfied with their chosen school, including 89.5 percent who were very satisfied. Just a few months into the school year, more than two-thirds reported seeing measurable improvement in their child’s academic achievement. This is especially impressive because the scholarship recipients were among the most disadvantaged in the state. More than nine out of ten scholarship recipients were from families that had a household income low enough to qualify for the federal “free and reduced-price lunch” program, about $43,568 for a family of four.

Yet despite all that, the scholarship tax credit law faced both a repeal effort in the legislature and a bitter lawsuit that went to the state’s highest court. The law survived both—much to the relief of the scholarship recipients—but not without doing great harm. During the period of uncertainty that the repeal effort and lawsuit created, donations to the Network for Educational Opportunity, the state’s sole scholarship organization, fell from about $130,000 to just over $50,000. The reduction in funds meant a significant reduction in the number of scholarship recipients, a drop from 103 to just 40.

In the second year’s scholarship recipient survey, 80 percent reported seeing measurable academic improvement in their child since participating in the scholarship program. It’s a shame that so few students had access to those scholarships. Opponents of the scholarships have vowed to bring another lawsuit and eight legislators are once again sponsoring legislation to repeal the law. The struggle for greater educational freedom continues.

Tonight at 8 p.m. EST, in celebration of National School Choice Week, the Cato Institute will present Live Free and Learn: Scholarship Tax Credits in New Hampshire, a short film detailing the struggle over New Hampshire’s scholarship law and some of the families it has touched. After the film, please join us live online and on Twitter at #CatoConnects for a discussion the politics, policy, and constitutionality of scholarship tax credit laws with former NH state senator Jim Forsythe, Institute for Justice Senior Attorney Dick Komer, and yours truly.

Families participating in New Hampshire’s pioneering scholarship tax credit program report near-universal levels of satisfaction because it enables them to choose the best educational fit for their children. Whatever parents are seeking for their children—improved academic performance, more engaged teachers, social acceptance, freedom from bullying, special needs programming, and so on—they are more likely to find it when they have more than one choice. Policymakers across the country who are seeking to expand the educational choices available in their state should look to New Hampshire as a model—then perhaps students from all states will have the opportunity to live free and learn.

Why Tax Credits Survive Legal Challenges But Vouchers Often Don’t

Yesterday, on the same day that the New Hampshire Supreme Court rejected a challenge to the state’s scholarship tax credit law, a district court judge struck down Oklahoma’s special-needs voucher law.

Both vouchers and scholarship tax credit laws are constitutional under the U.S. Constitution, but vouchers laws have often run afoul of states’ historically anti-Catholic Blaine Amendments, which prohibit public funds from being expended at religiously affiliated schools. By contrast, scholarship tax credit laws have a perfect record at both the federal and state courts because they rely on voluntary, private donations. Donors to nonprofit scholarship organizations receive tax credits worth 50 percent to 100 percent of their donation, depending on the state. In ACSTO v. Winn, the U.S. Supreme Court held tax credit funds did not constitute public money because they had not “come into the tax collector’s hands.” These credits are constitutionally no different than tax deductions for charitable donations to nonprofits (including religious organizations) or the 100 percent property tax exemption granted to houses of worship. In none of those cases do we say that the nonprofit or religious institution is “publicly funded.” 

Yesterday’s decision is heartbreaking for the hundreds of Okie children with special needs who use the vouchers to attend the schools of their parents’ choice. If Oklahoma policymakers want to help those children, they will follow the legal advice of the Institute for Justice and enact a special-needs scholarship tax credit or expand their existing tax credit law.

For more on the the New Hampshire decision, listen to this Cato Daily Podcast with the Institute for Justice’s Dick Komer, who argued the case before the state Supreme Court.

Another “Winn” for Educational Freedom in New Hampshire

In ACSTO v. Winn (2011), the U.S. Supreme Court upheld Arizona’s scholarship donation tax credit program on the grounds that plaintiffs did not have standing to sue in the first place, because they could not show any specific injury to themselves caused by the voluntary program. Today, the New Hampshire Supreme Court reached the same conclusion in a case involving that state’s new scholarship program. Importantly, this preserves the perfect legal record of modern education tax credit school choice programs.

Under these programs, individuals or businesses can donate money to a non-profit Scholarship Granting Organization that then uses the money to make private education affordable to lower income families. The donor’s taxes are cut in proportion to the size of the donation they make (100% in AZ, 85% in NH). No one is compelled to make a donation, and those who do not donate have their taxes collected as they always were. Those who choose to make donations can pick the organization that receives their money, just as they would pick any other charitable organization.

To have standing to sue over the constitutionality of a law, it is generally required to show that the law has personally and concretely harmed you in some way. Though this may seem arbitrary, it has a very important purpose, which the NH ruling explains in detail: without the harm requirement, courts would have sweeping power to override the will of voters and their elected representatives. If anyone could sue to overturn any law for any reason, innumerable cases would be filed and courts could simply agree to hear the ones pertaining to whatever laws they happened not to like.

But there is another reason why it is important that both the U.S. and NH Supreme Courts rejected challenges to education tax credits due to lack of standing: freedom of conscience. The plaintiffs lacked standing in these cases because the programs are voluntary. No one has to donate to a scholarship organization. Those who do not donate see their taxes collected as they’d always been. As a result, no one is compelled to pay for religious instruction, which would violate many state constitutions.

In fact, education tax credits offer a meaningful improvement for freedom of conscience over the public schooling status quo. Under the current system, everyone is forced to pay for a single official system of education that cannot possibly reflect the values of such a diverse nation. The result, as my colleague Neal McCluskey has shown, is an endless battle over the content of public schooling. Education tax credits avoid that compulsion, allowing people to choose the organization that receives their education donations. In a mature program like the one in Pennsylvania, there are over a hundred different scholarship organizations to choose from. It is thus possible to ensure funding to a diverse range of educational choices without forcing any taxpayer to support a particular sort of instruction that might violate his or her most deeply held convictions.

As I wrote three years ago, in the wake of the U.S. Supreme Court ruling, education tax credits are A “Winn” for Education and Freedom of Conscience.

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