Tag: scholarship tax credits

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.

Live Free and Learn: NH Supreme Court Upholds School Choice

Low- and middle-income children in New Hampshire will now be able to use tax-credit scholarships at any school they choose, whether secular or religious.

This morning, the New Hampshire Supreme Court (NHSC) followed the precedent of the U.S. Supreme Court in unanimously ruling that the petitioners challenging the “Live Free or Die” state’s scholarship tax credit law lack standing because they could not demonstrate any harm. The law grants tax credits to corporations worth 85 percent of their donations to nonprofit scholarship organizations that help low- and middle-income parents send their children to the schools of their choice. 

When two anti-school choice organizations challenged the law, the Institute for Justice intervened, representing several low-income families who had applied for the scholarships. The Cato Institute filed an amicus brief defending the law’s constitutionality.

The NHSC overturned a lower court’s flawed and unprecedented decision, which had forbidden scholarship recipients from using the funds at religiously-affiliated private schools. The lower court held that the scholarship funds constituted “money raised by taxation” and therefore violated the state’s historically anti-Catholic Blaine Amendment, which states: 

[No] money raised by taxation shall ever be granted or applied for the use of the schools of institutions of any religious sect or denomination. (New Hampshire Constitution, Part II, Article 83)

The NHSC did not address the merits of the lower court’s decision because it held the petitioners were unable to demonstrate that “their personal rights have been impaired or prejudiced.” Similarly, the U.S. Supreme Court, in rejecting the petitioners’ standing in ACSTO v. Winn, held that the tax-credit funds did not constitute public money because they had not “come into the tax collector’s hands.”

This is great news for the tens of thousands of students who qualify for tax-credit scholarships—parents like Melissa Cogan, who used the program to cover homeschooling expenses for her two children, Hope and Hunter.

“Without the scholarship from (the Network for Educational Opportunity), homeschool would not have been an option for us,” Melissa said. “We are a large family with very limited resources for supplies, books, workbooks, and electronic technology. The generosity of the Network for Educational Opportunity has made it possible for us to purchase everything we needed to become a successful homeschooling family.”

Such stories should make it unsurprising then that, last year, nearly 97 percent of scholarship families reported being satisfied with the learning environments they chose for their children.

NH tax-credit scholarship, parental satisfaction.

The decision’s import reaches far beyond New Hampshire’s borders. The NHSC’s ruling today takes some wind out of the sails of the Florida School Boards Association (FSBA), which is inexplicably suingthe Sunshine State over its more-than-decade-old scholarship tax credit law, in a complaint that mirrors the legal reasoning of the NH petitioners.  It is likely that the Florida Supreme Court’s reasoning will mirror that of the New Hampshire Supreme Court and U.S. Supreme Court.

Certainly there are families in Florida, and elsewhere nationwide, similar to the Cogans who are craving an educational environment that works best for them. Today, the New Hampshire Supreme Court handed them a much-needed victory and, thus, the ability to live free and learn.

Support for School Choice Continues to Grow

Today, Education Next released its latest survey results on education policy. As with the Friedman Foundation’s survey earlier this year and previous Education Next surveys, scholarship tax credits (STCs) remain the most popular form of private educational choice. STCs garnered support from 60% of respondents compared to 50% support for universal school vouchers and only 37% support for low-income vouchers.

The Friedman Foundation’s survey found the strongest support for educational choice among younger Americans. While Americans aged 55 and up favored STCs by a 53%-33% margin, Americans aged 18-34 supported STCs by a whopping 74%-14% margin. While it’s possible that younger Americans are more likely to support educational choice because they’re more likely to have school-aged children, it could also be evidence of growing support for educational choice generally. The series of Education Next surveys provides strong support for the latter interpretation, as shown in the chart below. (Note: the 2013 Education Next survey did not ask about STCs.)

Education Next 2014 Survey

While support for STCs was only 46% in 2009, it has grown to 60% this year. Over the same time, opposition has fallen from 27% to 24%, with a low of 16% in 2012. If support among millennials merely remains constant, overall support for educational choice will continue to grow in the coming years, making the adoption and expansion of such programs increasingly likely.

[See here for Neal McCluskey’s dissection of the Education Next survey questions concerning Common Core.]

Expanding Educational Opportunity in the Bay State

One of the central promises of educational choice is expanding equality of opportunity.  When students are assigned to schools based on where they live, access to higher-performing schools depends on a family’s ability to afford a home in a more expensive community. This disparity between higher- and lower-income families persists even in academically high-performing states like Massachusetts.

Though the Bay State consistently ranks among the very top performers on the National Assessment of Educational Progress (NAEP) and is internationally competitive in math and science, these aggregate scores obscure the reality that performance varies considerably across districts, particularly along socio-economic lines.

In wealthier towns and cities like Dover and Weston, where the median household income is $184,646 and $180,815 respectively, students perform well. On the 2013 state assessment (the MCAS), 99 percent of Dover-Sherborn Regional High School students scored ‘proficient’ or ‘advanced’ in math, and 100 percent scored ‘proficient’ or ‘advanced’ in English. Likewise, 97 percent of Weston High School students scored ‘proficient’ or ‘advanced’ in math and 99 percent scored proficient or advanced in English. 

By contrast, students from lower-income communities like Chelsea and New Bedford, where the median household income is $43,155 and $37,493 respectively, often do not perform nearly as well. On the most recent MCAS, only 61 percent of Chelsea High School students scored ‘proficient’ or ‘advanced’ in math and 77 percent scored ‘proficient’ or ‘advanced’ in English. So too, only 49 percent of New Bedford High School students scored ‘proficient’ or ‘advanced’ in math, and 76 percent scored ‘proficient’ or ‘advanced’ in English. 

This pattern is repeated across the commonwealth – in the 10 poorest cities and towns in Massachusetts, only 40.6 percent of students scored ‘proficient’ or ‘advanced’ on the MCAS score compared to a statewide average of 65.1 percent. In 2013 the percentage of low-income students who scored ‘proficient’ or ‘advanced’ in English or math in all grades was approximately 33 points below the percentage for higher-income students.

One might assume that the differences in performance across income groups reflect disparate funding levels, yet there is scant evidence that increased school resources lead to increased student performance. Indeed, after adjusting for inflation, K-12 spending in the United States has tripled since 1970, but NAEP scores have remained essentially flat.

The Coming School Choice Tidal Wave

Last week I reviewed the latest survey on education policy from the Friedman Foundation but I missed something that should warm the cockles of the hearts of everyone who supports greater choice in education: each generation is progressively more favorable and less opposed to educational choice. 

Scholarship tax credits (STCs) remain the most popular form of educational choice. Even among the 55+ cohort, there is a 20 point spread in favor of choice, 53 percent to 33 percent. Support increases in each cohort by 8 to 13 points. Meanwhile, opposition falls precipitously from 33 percent to only 14 percent. The 35-54 cohort has a 39 point spread in favor of educational choice and the 18-34 cohort has a whopping 60 point spread, 74 percent to 14 percent.

Friedman Foundation survey: popularity of scholarship tax credits

Vouchers are the second most popular of the three reforms. While the oldest cohort is slightly more pro-voucher than pro-STC, opposition is 7 points higher at 33 percent, for a spread of 16 points. The margin widens considerably to 32 points for the middle cohort (65 percent support to 33 percent opposition) and 44 points for the youngest cohort (69 percent support to 25 percent opposition), which is 16 points narrower than the spread for STCs.

School Choice Lawsuit Explained

Last week, the New Hampshire Supreme Court heard oral arguments in Duncan v. New Hampshire, concerning the constitutionality of the “Live Free or Die” state’s trailblazing scholarship tax credit program. The Cato Institute filed an amicus brief in support of the program. Over at the Friedman Foundation’s blog, I summarize the law’s history and the primary legal arguments on each side, including legal standing, public versus private money, and the use of public funds at religious schools. I conclude by outlining four possible outcomes:

1. The court rules that the plaintiffs lack standing. In this case, the trial court’s opinion would be overturned and scholarship students would be able to attend the school of their choice, religious or secular.

2. The court rules in favor of the program on the merits. That would mean either the court holds that tax credits are private money or that public money may be spent at a religious school so long as it reaches the schools in a manner that is indirect and incidental to the choices of parents. As in the first scenario, scholarship students would be able to attend the school of their choice, religious or secular.

3. The court upholds the trial court’s decision. In this case, the tax-credit scholarship program would continue as it has in the last year. The trial court forbid the use of scholarships at religious schools but allowed their use at secular private schools, out-of-district public schools, and homeschool environments. In this scenario, the Institute for Justice likely would challenge the decision in federal court for violating the Free Exercise clause of the First Amendment since such a decision would require legislative hostility toward religion rather than neutrality.

4. The court rules against the program and rejects the severability clause. The trial court found that the severability clause that the legislature had added was valid, therefore the program could continue for parents selecting secular schools or homeschooling. The state supreme court could reach the same conclusion on the merits, but reject the severability clause. This would be the most devastating outcome for educational choice in New Hampshire, as it would completely obliterate the tax-credit scholarship program.

Ideally, New Hampshire’s Supreme Court will follow the precedent of the U.S. Supreme Court and the Arizona Supreme Court by holding that taxpayers’ money is their own until it reaches the tax collector’s hand.

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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