Tag: scholarship tax credits

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.

School Choice Week Grinches in Colorado

Just before National School Choice Week, Democratic state legislators in Colorado killed a school choice tax credit bill. The legislation would have granted tax credits to families with children in private schools worth up to half of the average per pupil spending at government schools or up to $1,000 for homeschoolers.

Democratic Senate President Morgan Carroll did not even give the legislation a fair hearing in the committee that normally takes up education or tax related bills. Instead he assigned it to the State, Veterans, and Military Affairs Committee, locally known as the “kill committee,” where it faced certain doom from legislators apparently impervious to the evidence:

Under SB 33, a family’s tax credit for full-time private tuition costs could not be more than half the state’s average per-pupil amount. While revenues to the treasury would decline,the official fiscal note showed that over time the limited credit amount would reduce state spending even more for each student who exercised an educational option outside the public system.

Still, Democrats on the committee were unconvinced. “I think it will actually detract from the funding of our public schools,” said Sen. Matt Jones (D-Louisville).

Colorado currently has a school voucher program operating in Douglas County.

A Governor’s Warped Priorities

The governor of New Hampshire just submitted an amicus brief in the lawsuit against the “Live Free or Die” state’s scholarship tax credit program. Last year, Governor Maggie Hassan unsuccessfully sought its repeal. The brief offers nothing new in the way of legal arguments. As with the ACLU and, unfortunately, the trial court judge, the governor’s brief tries to imagine a constitutional difference between tax credits and tax deductions and absurdly assumes that money that a private corporation donated to a private nonprofit that financially assists private citizens sending their children to private schools is somehow “public” money because the state could have collected it in taxes had the legislature so decided. This claim contradicts both logic and the U.S. Supreme Court’s holding in ACSTO v. Winn:

Like contributions that lead to charitable tax deductions, contributions yielding [scholarship] tax credits are not owed to the State and, in fact, pass directly from taxpayers to private organizations. Respondents’ contrary position assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands. That premise finds no basis in standing jurisprudence. Private bank accounts cannot be equated with the … State Treasury.

The Cato Institute submitted an amicus brief defending the constitutionality of the program back in November.

What’s noteworthy here is not the legal reasoning, but the governor’s chutzpah. First, as the Union Leader noted, “Hassan is pushing state-funded, need-based scholarships for college students while trying to eliminate need-based scholarships for students in grades K-12.” The governor’s amicus brief does not explain why direct public expenditures that students can use at a Catholic college are perfectly constitutional but a low-income student using a tax-credit scholarships at a religious elementary or secondary school would, as her amicus brief melodramatically puts it, “jeopardize both the hallowed underpinnings of religious tolerance and freedom, and the prohibition against entanglement made sacred by [the] New Hampshire Constitution.” 

Second, Hassan is a strong proponent of “research and development” tax credits that pick winners and losers among certain types of businesses and business activities, thereby distorting the market. Moreover, by the governor’s faulty logic, these tax credits constitute direct subsidies of public funds to profit-seeking entities. R&D tax credits clearly reduce state revenue to fund activities that businesses are generally doing anyway for their own financial self-interest.  

By contrast, scholarship tax credits expand the market for private education without distorting it. Parents pick winners and losers among schools rather than the government. The corporations who receive the 85 percent tax credits do not benefit financially – indeed, they’d be better off financially had they not donated at all. Moreover, the Josiah Bartlett Center projected that, if fully utilized, the scholarship tax credits would save New Hampshire taxpayers millions of dollars in the long run by reducing state expenditures by more than they would reduce state tax revenue.

In short, Governor Hassan supports corporate welfare but opposes tax credits that assist low-income families seeking the best education for their children.

2013: Yet Another ‘Year of School Choice’

In 1980, frustrated by the attention given to Paul Ehrlich’s Malthusian doomsaying, economist Julian Simon challenged Ehrlich to a wager. They agreed on a basket of five commodity metals that Simon predicted would fall in price over 10 years (indicating growing supply relative to demand, contrary to the Malthusian worldview) and Ehrlich predicted would rise. In 1990, all five metals had decreased relative to their 1980 prices and Ehrlich cut Simon a check.

In 2011, two education policy analysts made a similar wager. After Jay Mathews of the Washington Post predicted that voters would “continue to resist” private school choice programs, Greg Forster of the Friedman Foundation for Educational Choice challenged Matthews to a wager, which Mathews accepted: Forster would win if at least seven new or expanded private school choice programs (i.e., vouchers or scholarship tax credits, but not including charter schools) were signed into law by the end of the year. That July, the Wall Street Journal declared 2011 to be the “Year of School Choice” after 13 states enacted 19 new or expanded private school choice programs, nearly triple the number Forster needed to win the bet.

Undeterred, the following year Mathews proclaimed that school choice programs “have no chance of ever expanding very far,” prompting another challenge from Forster. Mathews did not take the bet, which was fortunate for him because in 2012 10 states enacted 12 new or expanded private school choice programs.

Now, for the third year in a row, Forster’s prediction has proved true, with 10 states enacting 14 new or expanded private school choice programs, including:

Most of these laws are overly limited and several carry unnecessary and even counterproductive regulations like mandatory standardized testing. Nevertheless, they are a step in the right direction, away from a government monopoly and toward a true system of education choice.

Of course, that’s why defenders of the status quo have made 2013 the Year of the Anti-School Choice Lawsuit.

New Study Explains How and Why Parents Choose Private Schools

Why do parents choose a particular school? What information do they consider in making that choice? Do they prioritize high standardized test scores, rigorous college preparation, moral or religious instruction, or something else?

This morning, the Friedman Foundation released a new study, “More Than Scores: An Analysis of How and Why Parents Choose Private Schools,” that sheds light on these questions. The study surveyed 754 low- and middle-income parents whose children received scholarships from Georgia GOAL, a scholarship organization operating under Georgia’s scholarship tax credit law.

The study’s findings provide analysts and advocates across the education policy spectrum with much to consider. 

SPLC: If You Can’t Help Every Child, You Can’t Help Any Child

Most people know the story of the boy who was rescuing sea stars that had washed up on a beach by throwing them back into the ocean. When a man scoffed to the boy that his efforts didn’t make a difference since he couldn’t save all of them, the boy tossed another sea star back into the ocean and replied, “It made a difference to that one.” The little-known ending to the story is that the boy was sued by the Southern Poverty Law Center for violating the Constitution’s Equal Protection clause.

Sadly, this is only a slight exaggeration. Earlier this week, the Southern Poverty Law Center filed a federal lawsuit contending that Alabama’s new scholarship tax credit program violates the Equal Protection clause and harms the low-income students attending failing public schools whom the law is intended to help:

[SPLC] President Richard Cohen said the new Alabama Accountability Act will take millions away from public schools and will make the failing schools worse than they are now. He said the law was promoted by Republican Gov. Robert Bentley as giving students a way out of failing schools. 

“It’s a lie. Our clients do not have a way out of the failing schools that they are in,” he said.

The Montgomery-based law center sued on the opening day of classes for most public schools in Alabama. The suit focuses on a part of the law that allows families with children in Alabama’s 78 failing public schools to move them to a non-failing public school or to a private school that participates in the program. They can get a state tax credit of about $3,500 annually to help cover private school costs.

The lawsuit was filed on behalf of eight plaintiffs who say that they can’t afford to go to private schools and that the non-failing public schools are not accessible. The lawsuit raises equal protection issues.

One of the eight plaintiffs, Mariah Russaw, said she couldn’t afford the transportation costs even if her 12-year-old grandson, J.R., could leave Barbour County Junior High School in Clayton. All junior highs in the Barbour County school system are on the failing list. The nearest non-failing public school is 19 miles away in Pike County. The nearest private school is about 30 miles away, but it is not participating in the program.

The 62-year-old grandmother said it wouldn’t matter if the private school were participating. “I cannot afford to transport him to another school,” she said.

In short, SPLC argues that if the law can’t rescue every child from a failing school, then it shouldn’t be allowed to rescue any child. Not only would this line of reasoning hobble almost every government effort to incrementally address any problem, but the argument also rests on a misunderstanding of the status quo and the law’s likely impact.

The SPLC lawsuit claims that the law “creates two classes of students assigned to failing schools – those who can escape because of their parents’ income or where they live and those, like the Plaintiffs here, who cannot.” In fact, those two classes of students already exist. In our existing education system, low-income families are trapped in failing schools while wealthier families can afford either to live in districts with better public schools or to send their children to private school. The scholarship tax credit program is too limited to solve all the existing inequities, but it moves more students out of the first category and into the second. In other words, by expanding opportunities to low-income families, it makes an already unequal education system more equal.

Moreover, there is no evidence the program does harm to students who remain in public schools. The SPLC claims that the failing public schools are “likely to deteriorate further as their funding is continually diminished” as a result of students fleeing from those schools. But a mere assertion that harm is “likely” doesn’t cut it. Had the SPLC consulted the research literature instead of their fevered imaginations, they would have discovered that 22 of 23 studies of school choice programs found that they have positive impact on public school performance. The last study found no visible impact.

In other words, the increased choice and competition help both the students who participate in the program and those students who remain in their assigned public schools. Striking down the program would thus make matters worse for the litigants and other families like them, not better. Expanding the program would improve outcomes even further. If the SPLC is truly motivated by a desire to help low-income families, it should drop its lawsuit and join the effort to expand educational options. There are lots of sea stars left on the beach and they could use a hand.