Tag: education tax credits

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.

Equity vs. Excellence. Or…A Crank Phone in Every Home!

Education secretary Arne Duncan has just announced the Obama administration’s latest initiative to improve educational quality for low-income and minority students: pressure states to measure the distribution of “quality” teachers across districts; and then to make that distribution more uniform. The emphasis is on the pursuit of equity rather excellence. In fact, a state could make a massive leap forward on this scale by simply randomizing the assignment of public school teachers to schools. And if it turned out that some districts were badly managed and actually had a consistently negative effect, over time, on the performance of their teachers, well then the randomized teacher assignment process could be repeated every school year—or even every half-year!

But is a uniform distribution of today’s “quality” teachers really the best we can do for low-income and minority students (or, for that matter, everyone else)? Would they be better off today if Arne Duncan’s and Barack Obama’s equity focus had driven, say, the telelphone industry over the last century? Back around 1900, most telephones were hand-cranked, and not everyone had one. Would the poor, minorities, and others be better off today if we had achieved and maintained a perfectly equitable distribution of hand-crank phones?

The alternative, of course, is what we do have: a vigorously competitive phone market that has given rise to cell phones and then smart phones containing super-computers, global positioning satellite receivers, wireless networking, etc. But of course only rich whites have cell phones and smart phones, right? Not according to Pew Research. Based on 2013 data,

92% of African Americans own a cell phone, and 56% own a smartphone… blacks and whites are equally likely to own a cell phone of some kind, and also have identical rates of smartphone ownership.

In fact, Pew’s comparable smart-phone ownership figure for whites is 53%, but the difference is not statistically significant. With regard to income, Pew finds a 9 point difference in smartphone ownership between those making < $30,000 and those making between $30,000 and $49,999. Most of that difference seems to be accounted for by age, however. Among 18-24 year olds, 77% of those making < $30,000 own a smartphone vs. 81% for those making $30,000 to $74,999.

So pretty much everyone who wants one now has a cell phone which is rather more functional than the old hand cranked variety, and the majority of young people, at all income levels, even have smartphones. That’s a relatively high level of equity, coupled with excellence. Brought to you, again, by a competitive industry. Could the federal government’s Lifeline (a.k.a., “ObamaPhone”) phone subsidy programs be helping out? Certainly, to some extent. Though it’s far from true that every low-income American’s cell phone is paid for by Uncle Sam.

Ironically, many of the people who staunchly support subsidized access to the cell phone marketplace are dead set against programs that subsidize access to the educational marketplace. They’d much rather just redistribute teachers within our hand-crank-era public school systems, sentencing everyone—rich and poor alike—to more generations of academic stagnation. We can do better. We can encourage the same dynamism, choice, and entrepreneurship in education that have driven the fantastic progress in every other field, and we can ensure universal access to the educational marketplace via state-level education tax credit programs.

Live Free and Learn

Earlier this week, the Show-Me Institute released my study “Live Free and Learn,” the first analysis of New Hampshire’s trailblazing scholarship tax credit program, which is the first in the nation to include homeschoolers. The study found that participants in the program were overwhelmingly low-income and nearly universally satisfied. Some of the key findings include:

  • 97 percent of parents of scholarship recipients are satisfied with their chosen private or home school.
  • 68 percent of parents reported that they noticed measurable academic improvement in their child since receiving the scholarship.
  • 91 percent of scholarship recipients had a household income that would qualify for a free or reduced-price lunch program under the federal National School Lunch program (185 percent of the federal poverty line, or $43,568 for a family of four).
  • 74 percent of private school parents reported that they would have been unable to afford tuition without the scholarship.

I discuss the findings of the study in greater detail at the Education Next blog.

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