Tag: private school tuition

VICTORY! Supreme Court Upholds Education Tax Credits

Ruling in ACSTO v. Winn today, the United States Supreme upheld Arizona’s k-12 scholarship tax credit program. Under this program, individuals receive a tax cut if they donate to a non-profit scholarship fund that gives out private school tuition aid.

Today’s decision, a reversal of an earlier ruling by the 9th Circuit, found that the respondents had no right to sue to stop the AZ program because they have not been harmed by it. And the reason they have not been harmed is central to why, for nearly 20 years, I have favored education tax credit programs over both traditional public schooling and voucher programs.

Respondents alleged that cutting a person’s taxes is equivalent to spending government money – and since taxpayers are receiving credits for donations to religious organizations, that was ostensibly equivalent to the government giving to those organizations. The Court answered, quite simply: “That is incorrect.” Elaborating, the Court ruled that:

tax credits and governmental expenditures do not both implicate individual taxpayers in sectarian activities. A dissenter whose tax dollars are “extracted and spent” knows that he has in some small measure been made to contribute to an establishment in violation of conscience…. [By contrast,] awarding some citizens a tax credit allows other citizens to retain control over their own funds in accordance with their own consciences.       [emphasis added]

That is precisely the argument I have been making for a very long time (last Friday, at a conference in Berkeley; last year in a blog post, here; a dozen years ago, in my book Market Education: The Unknown History).

With this ruling, the way forward for the school choice movement is clearer than it has ever been. Education tax credits – both the scholarship form operating in Arizona and the direct form operating in Illinois and Iowa – allow for universal access to the education marketplace without forcing any citizen to subsidize instruction that violates their convictions. No other school choice system offers that advantage and it is an advantage that is central to the values of our nation. As Thomas Jefferson wrote in the Virginia Act Establishing Religious Freedom:

To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves… is sinful and tyrannical

Public schooling has long been a source of social conflict because it engenders just such compulsion. Education tax credits offer a way of securing universal public education without this blight. It is time to adopt them more widely.

Vouchers, Tax Credits, and Social Conflict

Yesterday, I contended that education tax credits substantially avoid the compulsion inherent in school voucher programs – that vouchers compel all taxpayers to fund every kind of schooling (including ones they may strongly object to) whereas tax credits do not.

In his most recent response, NRO’s Robert VerBruggen disagrees. He writes

I don’t see how [tax credits do] anything whatsoever to change this, at least mathematically speaking. Whenever someone earmarks their tax dollars for a certain purpose — in this case, by “donating” to a voucher program and being reimbursed with a tax credit — the government has to devote a higher share of everyone else’s tax dollars to the rest of the budget. Non-”donating” taxpayers, therefore, subsidize the voucher program to the exact same degree they would have if the government funded it directly.

Let’s deal with the core of our disagreement by following the money. Under a voucher program, you pay your taxes as always, the money goes into a big government pot, and it pays for every type of schooling – including some that may violate your convictions. About this sort of thing, I agree with Thomas Jefferson, who wrote in the The Virginia Statute for Religious Freedom that:

to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves is sinful and tyrannical

(Well, I agree with the tyrannical part, anyway).

Tax credit programs like Arizona’s are different. From the start, taxpayers are given a choice. If they wish, they may donate to any of a wide range of k-12 scholarship organizations that subsidize private school tuition, and receive a dollar for dollar tax cut to offset the cost. That portion of their money – and only that portion of their money – is then used for scholarships for private schooling. So far, there is no conviction-violating compulsion.

Alternatively, taxpayers may choose not to donate to any scholarship organization, in which case they pay their taxes as always and the money goes into the state treasury. From there, the only k-12 educational uses to which it can be put are funding the secular public and public charter school systems. In this scenario, none of the taxpayer’s money goes to fund religious instruction of any kind.

There is no intermixing of funds between these separate options. There are two different pots of money, and each individual taxpayer decides which pot will receive his money.

It is not true that “the government has to devote a higher share of everyone else’s tax dollars to the rest of the budget,” because the government is no longer financially responsible for the education of children once they accept scholarships. To understand this, we again just have to follow the money.

For example, imagine that half of all taxpayers donate to the scholarship program, and half do not. Are the half that do not make donations “subsidiz[ing] the [scholarship students] to the exact same degree” as if it were a voucher? No. Under a voucher program, every taxpayer would be paying some portion of the cost of the program. With tax credits, the entire cost of the private school scholarships is being borne by those taxpayers who are making the donations. The taxes still being paid by non-donors do not go toward scholarships and they do not go up. On the contrary, if anything, the taxes paid by non-donors go down.

Educating students in private schools via scholarship programs costs less than placing them in government schools. The more students leave the government system for independent schools, the less it costs to operate the government schools. [And anyone out there who thinks that fixed costs are dominant in the public school sector should consult the relevant econometric literature. I and others have done marginal cost estimates of public schooling and found it to be in the 80 to 85 percent range – so when a child leaves the public school system, the system saves almost the entire average per-pupil cost.] And as the cost of the public school system goes down, the amount of revenue that needs to be appropriated for it goes down as well. In most states, state level public school appropriations are tied to enrollment, so appropriations will fall as students leave the government system.

The only scenario in which non-donating taxpayers could be said to have an “increased” tax burden due to an an education tax credit program is one in which there was never a tax-funded government school system in the first place. Then, there would be no savings from moving children out of public schools. But even in that fictional scenario, no taxpayer would be forced to pay for devotional religious instruction. They would always have the choice of donating to secular scholarship organizations, if they so wished.

So credits don’t suffer the same conviction-violating, conflict-generating, compulsion problem that afflicts vouchers.

I should add, of course, that public schools are much worse than vouchers in this regard. The conventional public school system not only forces all taxpayers to fund a single official government organ of education, sparking endless battles over what is taught, it puts huge financial pressure on all families to place their kids in that system, by virtue of its lavish funding monopoly. How a nation founded on liberty was ever lured into adopting such a compulsion-laden, Balkanizing system is a very interesting story of its own.

‘All Your Income Are Belong to the State’

An otherwise very good story in the Arizona Republic today begins badly:

The U.S. Supreme Court on Monday agreed to review the constitutionality of an Arizona program that diverts state tax revenue into private-school scholarships.

Here’s the thing: it doesn’t do that. No state tax revenue is used in Arizona’s program, which offers a tax cut (a.k.a. “credit”) to folks who donate to non-profit k-12 tuition assistance organizations. Those non-profits then subsidize private school tuition for families seeking financial help.

Back in 1999, the Arizona Supreme Court made all this clear. Those who were trying to kill the program (at the time, the “petitioners”) claimed that the donated funds were “public money.” The Court begged to differ, writing:

Petitioners argue that this tax credit channels public money to private and sectarian schools in violation of the state constitution…. As respondents note, however, no money ever enters the state’s control as a result of this tax credit. Nothing is deposited in the state treasury or other accounts under the management or possession of governmental agencies or public officials. Thus, under any common understanding of the words, we are not here dealing with “public money.” (p. 19-21)

It would be fine for the Arizona Republic to report that critics refuse to accept the Arizona Supreme Court’s interpretation, and that they are hoping the U.S. Supreme Court will see things their way (FYI: not gonna happen). But it is not okay for the Republic, on its “news” pages, to take sides in a case now before the U.S. Supreme Court by adopting the legal assumptions of the program’s critics.

P.S.  Yes, the title is a reference to this.

A Dialogue on School Choice, Part 2

The South Carolina legislature is currently considering a tax credit bill intended to give parents an easier choice between public and private schools. It would do this by cutting taxes on parents who pay for their own children’s education, and by cutting taxes on anyone who donates to a non-profit Scholarship Granting Organization (SGO). The SGOs would subsidize tuition for low income families (who owe little in taxes and so couldn’t benefit substantially from the direct tax credit). Charleston minister Rev. Joseph Darby opposes such programs, and I support them. We’ve decided to have this dialogue to explain why. Our initial comments were posted Tuesday. The next installment is here.


Rev. Darby Rev. Joe Darby

First Response

Since this is a “dialogue,” let me focus on something that Andrew said in his first installment – that public education “…has failed because it lacks the freedoms and incentives that drive progress in every other field.” I take that as a defense of the “free market,” where competition allegedly leads to quality and success. I don’t think that the “free market” is the best model for education. To quote African Methodist Episcopal Church Bishop John Hurst Adams, one of my mentors, “the free market has limitations when it comes to the human condition, because it’s an amoral concept that ‘lets the market decide’ who swims and who gets swept away.” That’s applicable to the standard argument that private school choice would improve public schools through “competition.”

The first schools established for African-Americans following the Civil War were private schools. They sometimes, however, exclusively accepted the children of the black upper and middle economic classes while excluding the children of former slaves who struggled economically to survive. Public schools for African-Americans were decidedly and intentionally inferior, and the irony is that the opponents of quality public education in Charleston, South Carolina in that era included affluent African-Americans who saw good public schools as a threat to their private schools.

Public funds going to private schools would revive that tradition, for every tax dollar that “follows” a child to private schools in tough economic times will lead to understaffed and under-equipped public schools. Public school funding is set by legislators who are well aware that their constituents without children in the schools are loathe to fund them, and who’ve catered to those constituents by cutting funding for public education. There can be no true “competition” between public schools that only receive public funds and private schools that would have public and private funds at their disposal, for the free market turns on available capital.

The economic crisis now rocking markets in our nation and the world is also instructive. That crisis was, at least in part, created by policies that deregulated the free market and promoted not only innovation, but sheer greed which crafted a shaky, “house of cards” economy that has collapsed and taken people down with it. The lesson now, as it was during the Great Depression, is that unregulated free market activity can have disastrous results. I believe that the current financial crisis is also an element in the push for Private School Tuition Tax Credits. Many private schools are hurting because parents who can no longer afford high tuition are considering public school alternatives – private schools are hungry for the “bailout” that the pending South Carolina legislation would provide.

America makes the lofty claim in our Pledge of Allegiance to be “one nation under God.” If we’re serious about that, then we should heed the words of the Jesus who is seen as the Messiah by Christians and as God’s prophet by Jews and Muslims. He said that the Creator’s standard for right behavior includes equitable treatment for all people. That equity is at the heart of public education but is not a factor in free market competition, where the vagaries of the market decide outcomes and impact success in life. I said so six years ago in one of my conversations with my friend Mark Sanford, the Governor of South Carolina. He laid out his argument for private school choice over more funding for public schools in familiar, logical and compellingly Libertarian free market terms, but he never answered one question that I asked – why can’t we provide good public schools because it’s simply the right thing to do?

***

The Rev. Darby is senior pastor of the AME Morris Brown Church in Charleston, and First Vice President of the Charleston Branch of the NAACP.

Andrew Coulson Andrew Coulson

First Response

Glad you brought up the objective studies, Joe, but you only mentioned one of them. I recently collected every scientific study I could find comparing outcomes between public and private schools (Journal of School Choice, vol. 3, no. 1). I came up with 65 studies that compare student achievement, cost-effectiveness, parental satisfaction and other measures. The results overwhelmingly favor private schooling. What’s more, the least regulated, most-market-like school systems stand out as the best of all (here’s an earlier version of the paper).

Interestingly, there’s one study I couldn’t include because it wasn’t released ‘til a few weeks ago. It’s the 3rd year DC voucher study (the successor to the one you mentioned), and it shows that students who’d been attending private schools for the full 3 years are 2 school-years ahead of their public school peers in reading! Even including the kids who’ve only been in the program for 1 year, the vouchers are now producing significant gains.

And there’s no evidence that school choice weakens the public schools. Professor Jay Greene looks at this question in his book Education Myths. He finds that public schools either improve under school choice programs, or are unaffected. So even the families that don’t choose to attend private schools will likely be better off, and certainly no worse off, than they are now.

Who would be the biggest beneficiaries of the SC education tax credit bill? Low-income kids. As noted in the preamble at the top of this column, only low-income families would be eligible for tuition aid from Scholarship Granting Organizations (SGOs). The amount of aid each family could receive from an SGO is not capped, so that assistance can be allocated based on individual need. Pennsylvania already has such a tuition-assistance program, serving over 40,000 students with bi-partisan support.

Parents who earn enough to owe state taxes would be eligible for direct tax credits to offset their own kids’ education costs, but those credits are explicitly capped (at around $2,800, if their kids are not zoned to attend a “failing” public school – more if they are).

It’s certainly reasonable to wonder how poor families would cope with transportation and any non-tuition costs, but we can just look at how scholarship tax credit programs are working in states like Pennsylvania and Florida: some schools provide transportation, some are within walking distance, some families form carpools, and others use public transportation. Tens of thousands of poor children manage to get to their private schools under these programs every day, and to obtain uniforms for the schools that require them. Many others do so even without scholarships.

As for wanting to start by fully funding public schools… we’re already there. The 2007-08 budget for Charleston public schools lists total expenditures at over $548 million (p. 21) for 40,202 students (p. 4). That’s $13,650 per pupil – more than the state and national averages, which are both about $12,000. These numbers are vastly higher than the median U.S. private school tuition, which the Department of Education reported as $3,500 in 2003-04 [the most recent year available]. And only about a fifth of private school revenue comes from sources other than tuition. Even if tuitions have doubled since then, they’d still be barely half of Charleston’s per pupil spending.

I’ll have to wait ‘til next time to address your concern about the history of school choice, since I’ve run out of word count. In the meantime, here’s a thought:

There’s nothing wrong with trying to fix the public schools. But you don’t lock kids in a burning building while you try to put out the fire.

***

Andrew Coulson is director of the Cato Institute’s Center for Educational Freedom, and author of Market Education: The Unknown History.

Why So Shy With The Hatchet?

ABC reports, “The Los Angeles Board of Education voted Tuesday to lay off as many as 5,400 teachers and support personnel for the upcoming school year” in order to help close “a roughly $718 million deficit.”

Ok, that’s a start. But the number of public school employees in the US has doubled since 1970, while the number of students has increased by just 9 percent.

The bloated, inefficient and ineffective LA District now spends nearly $13 billion a year –- over $20,000 per student –- so they might want to keep on cutting.

Considering the fact that the median private school tuition is around $4,800, maybe they could just let parents and taxpayers keep, say, a third of that money to spend on education themselves.

Presto, no budget problem! Although there would be a huge increase in unemployed school bureaucrats and ineffective teachers … I think it’s a good trade.