Scholarship Tax Credit Programs Analysis

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ScholarshipTaxCredit

ProgramsintheUnitedStatesImplicationsforNewHampshire

JasonBedrick

January2012

THE JOSIAH

BARTLETTCenter for

PUBLIC

POLICY


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ScholarshipTaxCreditProgramsintheUnitedStates

CONTENTS

EXECUTIVESUMMARY 2

I.OVERVIEW:SCHOLARSHIPTAXCREDITS 3

1.TAXCREDITSVS.VOUCHERS 4

IMPLEMENTATION 4

CONSTITUTIONALITY 5

2.PARENTALSATISFACTION 7

3.PUBLICSUPPORT 9

II.FISCALIMPACT 10

1.FISCALIMPACTINNEWHAMPSHIRE 10

2.FISCALIMPACTINOTHERSTATES 12

III.PROGRAMDESIGN 13

1.MEANS-TESTING 15

2.DISBURSEMENTREQUIREMENT 17

3.CORPORATECREDITS 19

4.FURTHERSUGGESTIONSFORPOLICYMAKERS 20

IV.CONCLUSION 22

ABOUTTHEAUTHOR 23

SOURCES 23


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EXECUTIVESUMMARY

Inthelastdecade,scholarshiptaxcreditprogramshaveexpandededucationalopportunitiesforhundredsofthousandsofstudentsineightstates,particularlythosefromlow-andmiddle-incomefamilies.

PartI:OverviewEightstatescurrentlyoperatescholarshiptaxcreditprograms.Programdesign,levelsoffundingandstudentparticipationvary.Scholarshiptaxcreditprogramsareonfirmconstitutionalground.Parentsofscholarshiprecipientsreporthighlevelsofsatisfaction.Amajorityofparentssupportsuchprograms. PartII:FiscalImpactUndereventhemostconservativeassumptions,theproposedscholarshiptaxcreditprogramwillaffectlessthanhalfofonepercentofthecurrentstatespendingonpubliceducation.Moreover,theprogramisdesignedtosavemoneybyreducingstatespendingmorethanthelossintaxrevenue.Scholarshiptaxcreditprogramsinseveralotherstatesreducetheirstateexpenditureswhileexpandingchoicesforfamilies.

PartIII:ProgramDesign Thissectionanalyzessurveydatafromscholarshiporganizations(SOs)participatingineducationtaxcreditprogramsinfivestatestounderstandtheimpactofdifferentprogramdesigns.Someofthemainfindingsinclude:Means-Testing:

Means-testingcanhelptargetfundstothetrulyneedy,thoughevidencesuggeststhatSOstargetlow-incomefamiliesevenwithoutameans-testingrequirement.

IncomecapsthataretoolowreducetheflexibilityofSOstoaddresstheneedsoffamilieswithexigentcircumstances(illness,specialneeds,jobloss,etc.).

DisbursementRequirement:

Scholarshiporganizationsrequiresomelevelofallowanceforadministrativecosts,especiallywhenstartingup.Overtime,mostspendlessthan10%onadministrativecosts.

Amoreliberaladministrativecostallowanceallowsforthecreationofmorescholarshiporganizations.Policymakersshouldconsidergreateradministrativecostallowancesfornewscholarshiporganizations.

CorporateCredits: Mostscholarshiporganizationsreportedhavinglittletonotroublesoliciting

donationsfrombusinesseswhenthetaxcreditswereworth90%ofthedonations.

Policymakersshouldbeabletoreducethetaxcreditpercentagesomewhatbelow90%withoutasignificantlynegativeimpactonfundraising.However,itisnotclearatwhichpointtherewouldbeanegativeeffect.


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I.OVERVIEW:SCHOLARSHIPTAXCREDITS

Acorporatescholarshiptaxcreditprogramexpandseducationalopportunitiesbycreatingapartnershipamongfamilies,scholarshiporganizationsandbusinesses.Theprogramgrantstaxcreditstocorporationsthatdonatetostate-approved,non-profit

scholarshiporganizations(SOs).TheSOsusethefundstograntscholarshipstofamiliesseekingalternativestotraditionalpublicschools.SincePennsylvaniacreatedthefirstcorporatescholarshiptaxcreditprogramin2001,sevenotherstateshavefollowedsuit,includingArizona,Florida,Georgia,Indiana,Iowa,OklahomaandRhodeIsland.

Figure1.

Whilesimilarinstructure,eachstatesscholarshiptaxcreditprogramisunique.AsshowninFigure1above,programsvarywidelywithregardtosizeandparticipation.Majordifferencesincludethevaryinglevelsoftaxcredits,mean-testing,scholarshipcaps,

programbudgetcaps,anddisbursementrequirements.ThesedifferencesarediscussedingreaterdetailinSectionIII. Scholarshiptaxcreditprogramsvarybystateinotherimportantwaysaswell,bothintermsofpolicydesignandimplementation.Differentstatespermitdifferenttypesofcorporationstodonate,andsomeevengrantindividualseligibilitytoreceivetaxcreditsfortheirdonations.Auditingandreportingrequirementsvaryinfrequencyanddetail.Arizonasscholarshipcapforsecondaryeducationishigherthanthecapforelementary

State StudentsParticipating

SchoolsScholarship

OrganizationsYear

Enacted

Arizona 4,215 325 17 2006

Florida 37,578 1,181 1 2001

Georgia 1,900 400 39 2008

Indiana N/A N/A 4 2009

Iowa 9,265 140 13 2006

Oklahoma N/A N/A N/A 2011

Pennsylvania 38,646 unknown 247 2001

RhodeIsland 460 54 5 2006


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education,bothofwhichautomaticallyincreaseby$100eachyear.ArizonaandFloridabothhaveseparateschoolchoiceprogramsforstudentswithspecialneeds,whileOklahomasnewly-enactedscholarshipprogramraisesthecapforstudentswithspecialneeds.ThoughRhodeIslandhasnospecialregulationsforstudentswithspecialneeds,oneofitsfivescholarshiporganizationscatersspecificallytothem.

1.TaxCreditsvs.Vouchers Likescholarshiptaxcreditprograms,vouchersprogramsexpandtheeducationaloptionsavailabletofamiliesbyprovidingfundingtoattendanassortmentofdifferentschools.However,therearekeydifferencesbetweenthetwoprogramsregardingfunding,administrationandeligibility.Voucherprogramsarecentrallyadministeredbythegovernment,whichusestaxdollarstoprovidefundingtostudentsunderuniformstandardsforeligibility.Bycontrast,ascholarshiptaxcreditprogramisadministeredbynon-profitscholarshiporganizations,whichutilizeprivatedonationsandhavetheprerogativetoestablishtheirownstandardsforeligibilitysolongastheycomplywith

statestandards.Thesedifferenceshaveimportantimplicationsregardingtheimplementationandconstitutionalityoftheprograms. Figure2.

Implementation Oneofthemajordifferencesbetweenvoucherprogramsandtaxcreditprogramsistheimplementation.Underavoucherprogram,governmentfundingfollowsthestudent,whethertoherassignedpublicschoolortoachosenindependentschool.Thegovernmentdecideshowmuchmoneyshouldfollowthestudent,oftenthroughmeans-testing.A

portionoftheallocatedfundsoftenremainsattheassignedpublicschool.Inthissense,vouchersresemblefoodstampsorsubsidizedhousingassistance,bothofwhicharegovernment-runprogramsthatgrantbeneficiariespublicfundstopurchaseprivategoods. Bycontrast,thegovernmentsroleintaxcreditprogramsismuchmorelimited.Non-profitscholarshiporganizationsraisefundsdirectlyfromcorporationsthenadministertheprogramthemselves.Thegovernmentgrantstaxcreditstothecorporationor,insomestates,toindividuals.Thisismoreakintotaxdeductionsforcharitablecontributionsthan

Program FundingMechanism Administration Eligibility

Scholarship

TaxCreditsPrivatedonations

Decentralized:

Administeredby

non-profits

Tailored:

Determinedby

scholarshiporgs

School

VouchersTaxrevenue

Centralized:

Administeredby

government

Uniform:

Determinedby

government


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tofoodstamps.Taxcreditsanddeductionsstimulatecharitablegivingbyreducingthedonorstaxburden.TheNewHampshireDepartmentofRevenueAdministrationalreadyofferstaxcreditsforcommunityprojects,1aswellasforresearchanddevelopment2andjobcreation.3

Experienceinotherstateshasillustratedthatdecentralizedadministrationproducesavarietyofpracticesregardingmission,eligibility,partnerschools,prioritizationofresources,andmore.Somescholarshiporganizationsmightworkwithadozenschools,whileothersmightpartnerwithregionalschoolsorschoolswithaparticularreligiousaffiliationorpedagogicalapproach(suchasMontessoriorWaldorf).Somewilltargetlow-incomefamilieswhileothersmightfocusonstudentswithspecialneeds.Whentherearemoreapplicantsthanscholarshipsavailable,scholarshiporganizationswilldifferoverprioritizingneed,merit,andotherconsiderations.Ascholarshiptaxcreditprogramallowsindividualscholarshiporganizationstodetermineandaddresstheneedsoftheircommunities.

Constitutionality

Bothscholarshiptaxcreditprogramsandvouchersareonfirmconstitutionalgroundatthefederallevel.InthelandmarkZelmanv.Simmons-Harrisdecisionin2002,theU.S.SupremeCourtruledthatstatesareconstitutionallypermittedtousestaterevenuetopayforstudentstoattendprivateschools,eveniftheyarereligiouslyaffiliated.ThisisakintopatientswhouseMedicareatCatholicMedicalCenter,foodstampsrecipientswhopurchaseChristmasdinner,orcitizensholdingBiblestudiesintheirfederally-subsidizedapartments.Thesegovernmentprogramsareconstitutionalwhentheyhaveavalidsecularpurposeandthefundsaredisbursedtoindividualrecipients,notdirectlytoreligiousorganizations.Anyinvolvementwithreligiousactivitiesororganizationsmustbethe

personaldecisionoftheaidrecipients.ChiefJusticeRehnquistwroteinthemajorityopinion:Theincidentaladvancementofareligiousmission,ortheperceivedendorsementofareligiousmessage,isreasonablyattributabletotheindividualaidrecipientsnotthegovernment,whoseroleendswiththedisbursementofbenefits.4

Scholarshiptaxcreditsarealsoonfirmconstitutionalgroundatthestatelevel.

However,itisuncertainhowvoucherswouldfareundertheNewHampshirestateconstitutionsso-calledBlaineamendmentwhichstates:nomoneyraisedbytaxationshalleverbegrantedorappliedfortheuseoftheschoolsorinstitutionsofanyreligioussectordenomination.5FormerNHStateSupremeCourtJusticeCharlesG.Douglas,IIImakesacompellingcasefortheconstitutionalityofagovernment-runscholarship

program,usingsimilarlogictotheU.S.SupremeCourtsdecisioninZelman.6Indeed,statesupremecourtsinOhio7andWisconsin8upheldtheirstatesvoucherprogramsasconstitutionalevenundertheirBlaineamendments.However,itisnotclearhowtheNewHampshirestatesupremecourt,asitiscurrentlycomposed,wouldruleonagovernment-runvoucherprogram.

Oneofthemajorbenefitsoftheproposedscholarshiptaxcreditprogramisthatthe

fundsneverenterthegovernmenttreasury.OtherstateswithBlaineamendments


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consideredthisimportantfeaturewhendecidinghowtoexpandeducationaloptions,especiallysinceArizonasstatesupremecourtupheldascholarshiptaxcreditprogram9afterpreviouslyrejectingavoucherprogram.Nostatesupremecourtshaveruledagainstscholarshiptaxcreditprograms.

Inthespringof2011,theU.S.SupremeCourtruledinArizonaChristianSchoolTuitionOrganizationv.Winnthattheplaintiffsdidnothavethelegalstandingtochallengetheconstitutionalityofasimilartaxcreditprogrambecausemoneyneverenteredthegovernmenttreasury.Writingforthemajority,JusticeKennedywrotethattheplaintiffsargumentimproperlyassumesthatincomeshouldbetreatedasifitweregovernmentpropertyevenifithasnotcomeintothetaxcollectorshands.10TheCourtrejectedthatpremisesinceitfindsnobasisinstandingjurisprudence.PrivatebankaccountscannotbeequatedwiththeArizonaStateTreasury.WhiletheNewHampshirestatesupremecourtisnotboundtoacceptthisrulingwithregardtothestateconstitution,theyshouldacceptthatthesamelogicappliestotaxcreditprogramsatanylevelofgovernment.

ImpactonFamilies:TheFerreFamily(Laconia)Heidi Ferre is a single mom raising two teenage boys, Christian and Nicholas. Bothattendedpublicschool,butHeidigrewconcernedwhenin8thgrade,ChristianwentfrombeinghonorrollstudenttoaDstudentinhalfasemester.Itdidntraiseanyredflagstoteachers,Heidiexplains,Hewasslippingthroughthecracks.Heidihadtroublegettinghimhelpandwassurprisedwhenhiscounselordidntknowhisname.Unlessyoureatroublestudent,astarathleteoranA+student,theydontknowwhoyouare.Heidi was even more concerned about the block scheduling system at Christiansassignedpublichighschool.Underthenewsystem,astudentmightgomorethanayear

without taking amath class, allowing their skills to atrophy in the meantime. ManyparentssuspectedthatthenewschedulingsystemcontributedtotherecentdeclineinstudentperformanceontheNewEnglandCommonAssessmentProgram(NECAP)exam.Moreover, Christian struggleswithAttentionDeficitHyperactivityDisorder,orADHD.The high schools method of block scheduling meant that students would take fourclasseseachdaythatlastedoneandahalfhours.ForastudentwithADHD,thatsjusttorture,explainsHeidi,Ithinkitwouldbehardforanadulttositthroughfourhour-and-a-halfmeetingseveryday.But it was more than concerns over academics that led Heidi to choose a differentschool.WhenChristianvisitedthehighschooltoshadow,hewasdisturbedbywhatthestudentstoldhim.Theysaid,Ifyoucangosomewhereelse,gosomewhereelse,says Christian.More shocking was when hewitnessed students dealing drugs in themiddleofclass.WhenIgothome,Itoldmymom,Idontwanttobesurroundedbythatstuff,Ijustcantgothere.(Continuedonnextpage.)


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2.ParentalSatisfaction

Oneimportantbenefitofeducationalchoiceprogramsisparentalsatisfaction.In2010,asurveycommissionedbytheFloridaDepartmentofEducationfoundthat75.1%offamiliesintheirscholarshiptaxcreditprogramsaidtheirschoolswereexcellentand20.3%saidtheyweregood,foracombinedapprovalratinggreaterthan95%.11A2009FriedmanFoundationstudywentfurther,askingscholarshiprecipientsabouttheirsatisfactionrelativetotheirpreviousexperienceinthepublicschoolsystem.Thereportfound:

80%oftheparentswere"verysatisfied"withtheacademicprogresstheirchildrenaremakingintheirchosenindependentschools,comparedto4%intheirpreviouspublicschools.

80%were"verysatisfied"withtheindividualattentiontheirchildrenreceivedattheirchosenschools,comparedto4%inpublicschools. 76%were"verysatisfied"withtheteacherqualityintheirchosenschools,comparedto

7%inpublicschools.

76%were"verysatisfied"withtheirchosenschools'responsivenesstotheirneeds,comparedto4%inpublicschools.

62%were"verysatisfied"withthestudentbehaviorintheirchosenschools,comparedto3%inpublicschools.12

ChristiannowattendsTiltonAcademy,asecularhighschoolwithadiversestudentbodyincludingchildrenfrom23statesand17countries.I likedtheirheadmasterandtheirsloganThePowerofPotential,saysHeidi,Tomethatsayssomuch.Ilookedatmysonandthought,Hehassomuchpotentialifsomeonecouldjustfinditandcultivateit.

HeidilikesthatChristiangetsalotofattention,bothinandoutofclass.Advisorsmeetwiththestudentsonaweeklybasis.Itsmorethanajobforalotoftheseteachers,itsalifestyle.HeearnedBsandCsinhisfirstterm,thenfacultyhelpedhimpullthemup.Thisyear,hemadethehonorroll.ChristianparticularlylikeshisEnglishteacher,thoughhehadnt liked thesubjectpreviously. Hemakes it interesting,hemakesmewant tolearnEnglish.Heidiisthrilledwiththechangesheswitnessed.[Christian]lovesschool.Hewantstobethereallthetime.Hesmuchmoreself-confidentnowthanheusedtobe.Hesmoremature,morededicated.He seesmorevalue inhis studies,and hesnot justdoing itbecausehehastodoit.

Payingthetuitionhasntbeeneasy.ItoldChristianbeforehewentthatIcouldonlydooneyear.ImadethisyearhappenIdontknowaboutnextyear.Thoughtheschoolofferedsomefinancialaid,thefamilyhashadtomakesacrificestocoverthedifference,includingusingmuchoftheirsavings.Itdbenicetohavesomeextrasupportasasingleparent, saysHeidi, In anotheryear, I haveanotherdecisiontomake.Unlesswegetsomehelp,IjustdontknowhowImgoingtodoit.


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Thatscholarshiprecipientsreportedsuchdivergentlevelsofsatisfactionregardingtheirpublicschoolandindependentschoolexperiencesshouldnotbeinterpretedasnecessarilyrepresentativeofparentsofpublicschoolstudentsingeneral.However,itclearlydemonstratesthatpublicschoolsarenotmeetingtheneedsofasegmentofthepopulation.

Evenwhensurveydataisnotavailable,thebehaviorofparentsindicatesademand

forscholarships.InPennsylvania,forexample,demandfortheprogramfarexceedsavailablescholarships.Overthelastdecade,asingleSO,theChildrensScholarshipFundPhiladelphia,hadover95,000applicationsforjust7,700scholarshipsawarded.13

Thereasonthatscholarshiprecipientsaresomuchmoresatisfiedissimple:when

givenmoreeducationoptions,familieshaveagreaterabilitytochoosetheprogramthatsrightforthem.Eventhebestschoolspublicorindependentcannotmeettheneedsof100%ofstudents.Familiesseekalternativeeducationoptionsforavarietyofreasons,includingacademics,discipline,classsize,specialneedsprograming,values,andmore.The

existingeducationsysteminNHassignsstudentstoschoolssolelyonthebasisontheirhomesgeographiclocation.Whenstatesempowerfamilieswithchoices,theychoosetheeducationthatbestmeetstheindividualneedsoftheirchildren.

ImpactonFamilies:TheBaronasFamily(Hopkinton)

Lee and VickyBaronasofHopkinton,NHhad two sons inpublic school. Their younger son,Matthew,thrivedsociallyandacademically,buttheirolderson,Peter,struggled.Inthirdgrade,hewasdiagnosedwithalearningdisabilityrelatedtodyslexia.Hewasbright,buthadextremedifficultydecodingreadingandencodinghisthoughtsintowriting.Thoughhedevouredbooksontapewithpassionandexpressedhimselfwellverbally,hisdyslexiaforcedhimto limitand

simplifyhiswritingtoonlyafractionofwhathewantedtoexpress.Peterreceivedassistancethroughspecialeducationclassesatschool,butbecausetheresourcesare finite and there is a wide range of demands for services, his parents had to constantlynegotiateandassertthemselvestogethimthespecialattentionandone-on-oneassistancethatheneeded.Weunderstoodtherewasonlysomuchfundingtogoaround,explainsLee,Butheneededit.Itwastherightthingtodo.Hisparentsalsopaidforoutsidetutoringtosupplementhiseducation.Worse, Peter was regularly bullied. A self-described geeky kid who preferred Star Wars,robotics,andsciencefictiontomainstreamsports,hewasatargetbothforhisinterestsandhislearningdisability.Histoughestyearwassixthgrade,whenbullieswouldfrequentlycallhim

names,stealhissupplies,andsometimesshovehimaround.Repeatedlyreportingtheincidentshadnoeffect.Hehadaparticularlytoughgroupinhisgrade,saysLee.Dreadingwhatthenextyearwouldhold for Peteratthegrade7-12public school,Lee andVickydecided tolook foralternatives.The next year, Peterenrolled in Shaker Road School, a small, secular independent school inConcordwithPre-Kthrough8thgrade.Runbyafamilyofeducatorswithadedicatedfaculty,theschoolhassmallclassessizessostudentsgetplentyofattention.Communityandrespectareas(Continuedonthenextpage.)


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3.PublicSupport

Publicsupportforschoolchoiceprograms,includingscholarshiptaxcredits,hasincreasedinrecentyears,particularlyamongparents.Thefollowingcharts(Figures3and4)employdatafromnationwidesurveysconductedbyHarvardUniversitysProgramofEducationPolicyandGovernancein2009,142010,15and2011.16Afteraskingaboutotherschoolchoiceprograms,thesurveysasked:Anotherproposalhasbeenmadetoofferataxcreditforindividualandcorporatedonationsthatpayforscholarshipstohelpparentssendtheirchildrentoprivateschools.Wouldyoufavororopposesuchaproposal?ResultsareshowninFigure3forthemostrecentyear.

Supportfortheproposalismorethandoubleoppositionamongthegeneralpopulace.Parentssupportscholarshiptaxcreditsbyafour-to-onemargin.Asshownin

Figure3

importantasgrades,saysLee,Therewerenobullies,soPetercouldfocusonhisacademics.Becauseofitssize,therewerefeweroptionsforspecialeducationstudentsatShaker,butthesmallclassesandindividualattentionfromtheteachersmadeupforthat.Peterthrived.Hejustblossomed. It was absolutelyawonderful thingto see.Heworked harder thanheever had,

earned excellentgrades,participatedin numerousextracurricularactivities, felt acceptedandrespectedbyhispeers,andtoldhisparentsthathelovedgoingtoschool.Payingtheyearlytuitionwasdifficult,butPeter'sgrandparentshelpedoutandLeeandVickydipped into Peters college fund. If he doesnt get through high school, hewont need thesecollege savings, they explained. Sources of tuitionassistance formiddle andhigh school areverylimited.Peterisfortunatethathisfamilywasabletoprovidehimwiththeeducationheneededinanenvironmentthatwassupportiveforhim,buttherearethousandsofstudentslikehiminNewHampshirewithmorelimitedoptions.AscholarshiptaxcreditprogramwouldhelpmorechildrenlikePetergettheeducationtheydeserve.


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Figure4,supporthasincreasedasoppositionhasdeclinedinrecentyears.(Note:Nodataisavailableforparentsin2009becausethesurveybeganseparatingparentsin2010.)

II.FISCALIMPACT

1.FiscalImpactinNewHampshire ScholarshiptaxcreditprogramshavesavedmoneyinotherstatesandHB1607is

designedtosavemoneyinNewHampshire.Thestatehasthepotentialtosavemoneyifthereductioninstatespendingoutweighsforgonerevenue.Moreover,ifstudentstransferfrompublicschoolstoindependentschoolsinsignificantnumbers,localschooldistrictscanreducetheirexpenses.Sinceschooldistrictrevenuesfromlocalsourcesdonotdeclinewithenrollment,districtshavethepotentialtosavemoneyaswell.

FurtherstudyisrequiredtodeterminetheprecisefiscalimpactonNewHampshire.However,whilethepreciseimpactisnotyetclear,itispossibletocomparerecentandprojectedstatespendingoneducationtothepotentiallyforgonerevenueresultingfromtheadoptionofascholarshiptaxcreditprogram.

TherevenueprojectionsforstatespendingonpublicschoolsinFigure5(nextpage)assumeaconstantgrowthof2.7%,theaverageofthethreepreviousfiscalyearsgrowth,minusthefullvalueofthetaxcredits.Taxcreditprojectionsforthescholarshiptaxcreditprogramassumedthemaximumgrowthallowedbytheproposedlegislation(HB1607-FN-Local,2012):25%growthperyear,withaninitialcapof$13.5millionintaxcredits(i.e.90%ofthe$15millionincredit-eligibledonations).Evenwithoutconsideringthepotentialsavings,itisclearthattheproposedscholarshiptaxcreditprogramwillhaveaminimalimpactontheoverallbudget.

General Parents General Parents General Parents

2009 2010 2011

Support 46% 50% 55% 50% 60%

Oppose 27% 22% 19% 21% 15%

0%

10%

20%

30%

40%

50%

60%

70%

NationalPublicOpinion

ofScholarshipTaxCreditPrograms

Figure4


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$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$2,552$2,590

$2,691$2,763

$2,838$2,901

$2,962$3,021

$3,077$3,127

$13.5 $16.9 $21.1 $26.4 $33.0

NHPublicSchoolSpendingvs.

EducationTaxCredits,inMillions

Public TaxCredits


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Furthermore,whiletheexactfiscalimpactisyetunknown,theprogramisdesignedtosavemoney.UnderHB1607,scholarshipsareworth$2,500onaverage,comparedwithanaverage$4,100instatespendingperpupil.17Sincemaximumadministrativeoverheadis10%ofdonations,theaveragespentperscholarshiprecipientwillbe$2,778underthemostconservativeestimates.Taxcreditsareworth90%ofdonations,thereforethestate

forgoes$2,500perscholarshiprecipient.Thismeansthatthestatesaves$1,600foreachscholarshiprecipientthatleavesthepublicschoolsystem.NewHampshiresavesmoneyifthepercentageofscholarshiprecipientsthatwouldotherwisehaveattendedpublicschoolsisgreaterthanorequaltothelossinstaterevenueperscholarshipdividedbytheaveragestatespendingperpupil,or61%.Sincethelegislationmandatesthatatleast70%ofscholarshiprecipientsbeswitchers,theprogramwillsavemoney.2.FiscalImpactinOtherStates

Whileeachstatefinanceseducationdifferently,itishelpfulforpolicymakerstoconsidertheimpactofagivenprogramonotherstateswhenconsideringtheadoptionofa

similarprogram.Thissectionexaminesthefiscalimpactofscholarshiptaxcreditprogramsonstatebudgetsinseveralstates,usingofficialstategovernmentreportswherepossible.ARIZONA

In2009,aneconomistfromBaylorUniversityreleasedanindependentstudyofthefiscalimpactofArizonasscholarshiptaxcreditprogram.Thestudydeterminedthatthestatesavesbetween$99.8millionand$241.5millionasaresultofitsscholarshiptaxcreditprogram.18Evenunderthestudysmostconservativeassumptions,thestatesavesnearlytwiceasmuchasthe$55.3millioninforgonerevenue.

FLORIDA

Inanofficialreportin2010,theFloridalegislaturesnonpartisanOfficeofProgramPolicyAnalysisandGovernmentAccountabilityestimatedthatSunshineStatetaxpayerssaved$32.6million,whichisapproximately$1.44instateeducationfundingforeverydollarlostincorporateincometaxrevenueduetocreditsforscholarshipcontributions.19WhileFloridasstategovernmentcollected$82.2millionlessintaxrevenueasaresultoftheprogram,thiswasmorethanoutweighedbythe$118.4millioninreducedexpenses.Thesefigureswereadjustedtoaccountforchildrenwhowouldhaveattendedprivateschoolanyway.

IOWA

ThefiscalimpactofIowasscholarshiptaxcreditprogramhasnotbeenstudiedinsufficientdetailbythestateorbyindependentanalyststowarrantstrongconclusions.TheIowaDepartmentofRevenuereportedin2009thatthereturnoninvestmentfortheprogramwasnotmeaningful.20However,thereportfailedtoestimatetheamountofmoneythestatesavedfromstudentsswitchingawayfrompublicschools.Iowasstategovernmentprovidesaminimumleveloffundingperpupilinpublicschools,plus


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additionalfundinginproperty-poordistricts.Consideringonlytheperpupilaid,Iowawouldsavemoneywhenthepercentageofscholarshiprecipientsthatwouldotherwisehaveattendedpublicschoolsisgreaterthanorequaltothelossinstaterevenueperscholarshipdividedbytheaveragestatespendingperpupil.

In2007(thelatestyearforwhichdataisavailable),Iowaawarded$4.9millionintaxcredits,whichtranslatedintoover$7.5millioninscholarshipsduetoIowas65%creditsfordonations.Thisfunded8,737studentsfromfamiliesearninglessthan300%ofthefederalpovertyline,thereforeaveragescholarshipswere$855andthelosttaxrevenueperscholarshipwas$555.75.AveragestateperpupilfundinginIowawas$6,497in2007,21thereforeIowawouldsavemoneyifatleast8.6%ofscholarshiprecipientswouldhaveotherwiseattendedpublicschool.Sincelow-incomefamiliesaretheleastlikelytobeabletoaffordindependentschooltuition,itislikelythattheIowascholarshiptaxprogramdidsavemoney.Savingswouldbeevengreateriflow-incomefamiliestendtoliveinproperty-poordistricts.However,estimatesofthemagnitudeofthesavingsarecurrentlyunavailable.

PENNSYLVANIA

A2011studybytheCommonwealthFoundationreportsthatPennsylvaniasaves$512millionayearasaresultofitsscholarshiptaxcreditprogram.22Thoughthestudydoesnottakeintoaccountstudentswhowouldhaveattendedindependentschoolsanyway,thereisstillverylikelysubstantialsavingssincetheaveragescholarshipsizeisonly$1,044,whichisfarbelowthe$14,300averagecost-per-childinKeystoneStatepublicschools.Moreover,asdiscussedinsectionIII-1below,amajorityofscholarshiprecipientsinPennsylvaniacomefromlow-incomehouseholds,whicharelesslikelytosendchildrentoindependentschoolswithoutassistance.

III.PROGRAMDESIGN

Scholarshiptaxcreditprogramsvaryindesignfromstatetostate.Inorderto

understandtheimpactofdifferentprogramdesigns,itisusefultoconsidertheexperienceofscholarshiporganizationsoperatinginmultiplestatesinvaryingregulatoryenvironments.Thissectionanalyzessurveydatafromscholarshiporganizationsparticipatingineducationtaxcreditprogramsinfivestates:Arizona,Georgia,Iowa,PennsylvaniaandRhodeIsland.OklahomaandIndianawereexcludedsincetheirprograms

arestillbeingimplemented.Floridassolescholarshiporganizationdidnotrespond.Responseratesinotherstatesvariedfrom10%to80%.*SincerespondentsmaynotberepresentativeofallSOsineachstate,thesurveydatashouldbeinterpretedcautiously.Nevertheless,suchsurveydataisusefulindrawinglessonsfromtheexperiencesofSOsoperatingindiverseenvironments.

*Responseratesvariedbystateasfollows:AZ:6/17(35%);GA:4/39(10%);IA:5/13(38%);PA:49/247(20%);RI:4/5(80%).


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Figure6.

StateScholarship

CapsAverage

ScholarshipsMeans-testing

Program

Cap

Corporate

Credits

Minimum

Disbursement

ArizonaK-8:$46009-12:$5,900

$2,158 185%ofFRL $10million 100%credit 90%

Florida

$4,106(maynotexceedprivateschool

costs,75%usedfor

tuition)

$4,011 185%ofFRL $175million 100%credit 97%

Georgia $9,437 unknown No $50million100%credit(upto75%of

taxliability)

90%

Indiana Nocap N/A 200%ofFRL $2.5million 50%credit 90%

Iowa Nocap $1,184 300%ofFRL $8.75million 65%credit 90%

Oklahoma

Greaterof:$5000or80%averagelocalcostperpupil;Specialneeds:

$25,000

N/A

300%ofFRL(orneeds

improvementdistrict)

$3.5million(50%

corporate/50%

individual)

50%creditupto

$100,000peryear

90%

Pennsylvania Nocap $1,044$50,000+$12,000per

child$44.6million

75%credit(90%iftwoconsecutive)

upto$300,000per

year

80%

RhodeIsland Nocap $2,248 250%ofFRL $1million

75%credit(90%iftwoconsecutive)upto$100,00

peryear

90%

Thesurveyaskedrespondentstosharetheirviewsabouttheimpactofseveralstate

policiesontheeffectivenessoftheirorganizationsincarryingouttheirmissions.Inparticular,thesurveyaskedabouttheimpactofmeans-testingrequirements,disbursementrequirements,andthepercentageofcorporatecontributionseligiblefortaxcredits.ThesurveyalsoaskedgeneralquestionsaboutwhichpoliciesorregulationstheSOswouldliketomodifyoreliminateandwhatadvicetheywouldgivepolicymakers.Figure6,above,


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providesabroadoverviewofthevariationamongkeycomponentsofthescholarshiptaxcreditprogramsineachstate.1.Means-Testing

Thegoalofascholarshiptaxcreditprogramistoexpandeducationalchoicesforfamilies.Wealthyfamiliesalreadyhavethefinancialabilitytosendtheirchildrentoindependentschoolsortomovetoatownorcitywithhighqualitypublicschools.Thosewhostandtogainthemostfromascholarshiptaxcreditprogramarethosewiththeleastmeans.However,asdiscussedbelow,incomecapsthataretoorestrictivemayunintentionallyexcludefinanciallystrugglingfamilies.

AllbutoneeducationtaxcreditprograminAmericarestrictseligibilityonthebasisofhouseholdincome.AsshowninFigure6,moststatesusethefederalfreeandreducedlunch(FRL)programasabenchmarkforpoverty,withmeans-testingcapsrangingfrom185%oftheFRLinArizonaandFloridato300%oftheFRLinIowaandOklahoma.Under

Pennsylvaniasprogram,childrenareeligibleforscholarshipsiftheirhouseholdincomesareunder$50,000,plus$12,000foreachschool-agedchildinthehome.Thedefinitionofhouseholdincomevariesacrossstates,butitgenerallydoesnotincludedisabilitypayments,workerscompensation,retirementpensions,publicassistanceorunemploymentcompensation.Scholarshiporganizationsaregenerallyauthorizedtodeveloptheirowneligibilityrequirementsinadditiontomeans-testingrequirements.

Respondentswereaskedwhethertheybelievedtheirstatesmeans-testingrequirementsweremuchtoohigh,somewhathigh,justright,somewhatlow,muchtoolow,orifthereshouldnotbeanymeans-testing.Raisingoreliminatingthecapwouldallowmorefamiliestoparticipate,whileloweringthecapwouldtargetfundingtowardthe

familieswithlowerincomes.

Despitestate-by-statevariationofmeans-testinglevels,amajorityof

respondentssupportedmaintainingtheirstatesstatusquo.(SeeFigure7,below.)Oftheremainder,mostsupportedraisingoreliminatingincomecapswithfewinfavorofmakingthemmorerestrictive.Theleveloftheincomecapdoesnotappeartoaffectsupportforraisingorloweringthecap.

OneIowarespondentsupportedraisingtheincomecapbecausetuitionthereisgrowingatafasterratethantheaverageincomeintheregion.However,anotherwasconcernedthatifthecapweretoohighthenpeoplewhocouldactuallypaytuitionwould

qualifyandthatwouldtakemoneyoutofthepocketsoffamilieswhotrulycan'taffordprivateeducation.

SeveralSOrespondentsinPAstatedthattheincomecapishighenoughtoallow

mostmiddleincomefamiliestoqualify.Others,however,notedregionaldisparities.Onerespondentcomplainedthatstatepolicymakerswerenotlookingatthemedianincomeforourregion.Whatmightbeconsideredmiddle-incomeinoneareacouldbelow-incomeinotherregions.


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Amongthosewhowishedtoeliminatemeans-testing,somecomplainedthatitis

difficulttogettheproperFAFSAforms.Anothernoted:Manyfamiliesmaketoomuchmoneytoqualifyforaidbutnotenoughtoaffordtosendtheirchildrento[anindependentschool].

InArizona,SOsmayonlydisbursecorporatedonationstostudentswhosehouseholdincomeisbelow185%ofFRL,howevertheyhavenomeans-testingrequirementforindividualdonations.Nevertheless,astudybyHarvardUniversitysProgramonEducationPolicyandGovernancefoundthattheprogramdisproportionatelybenefitedlow-incomefamiliesevenwithoutameans-testingrequirement.Morethantwo-thirdsofscholarshiprecipientsfamiliesearnedlessthan185%ofFRL(approximately$75,000forafamilyoffour).23Theseresultsshouldnotbesurprising,sincenon-profitorganizationsliketheSalvationArmyandToysforTotsalsoprovidefortheneedsoflow-incomefamilieswithoutagovernmentmandate.

Whiletargetinglow-incomefamiliesforaid,someSOstakeexigentcircumstances

intoconsideration.OneArizonaSOexplained:

Wemaygivetuitionaidtosomeonewhosefamilyincomeismorethanthe185%,butonlyiftherearemitigatingcircumstances,likehugemedicalbillsduetocancer,ortaxreturnincomeisover,butthefamilyearnerlosthisjobandhasnothadanyincomeformonths.Wecanalwayslookatparticularcircumstances.

0

5

10

15

20

25

3035

LowerCap StatusQuo RaiseCap Eliminate

Arizona 0 4 1 1

Iowa 1 1 2 0

Pennsylvania 7 23 11 4RhodeIsland 0 3 0 1

Means-TestingRequirementFigure7.


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Eveninstateswithmeans-testing,SOstendtograntscholarshipstofamilieswithincomeswellbelowtheincomecap.InFlorida,theaveragehouseholdincomeofscholarshiprecipientsis$25,971,only20%aboveFRL,thoughFloridascapis185%ofFRL.24InPennsylvaniathemajorityoffamiliesreceivingtaxcreditscholarshipshadfamilyincomesbelow$29,000,thoughthestateallowsafamilyoffourtoearnupto$74,000.25

2.DisbursementRequirement

Ideally,allofthefundsraisedwouldbedisbursedintheformofscholarships.

However,SOsincuradministrativeexpensesinordertofilloutallthepaperwork,raisefunds,fieldquestionsfromfamilies,conductaudits,etc.Inordertobalancethegoalofprovidingfinancialassistancewiththenecessityofadministrativeexpenses,stateshavesetvaryinglevelsofrequireddisbursement.

Moststatesrequirethatscholarshiporganizationsdisburseatleast90%oftheir

fundsintheformofscholarships,allowingonlyupto10%foradministrativecosts.Two

exceptionsarePennsylvania,whichallowsupto20%foradministrativecosts,andFlorida,whichallowsonlyupto3%.Thereisalsosometechnicalvariation,suchastheamountoffundsscholarshiporganizationsmayrolloverorcarryforwardintothefollowingfiscalyear,whichisbeyondthescopeofthispaper.Thesurveyaskedrespondentswhatleveltheybelievedthedisbursementpercentageshouldbe.

Thevastmajorityofrespondentsfavoredthestatusquofortherequireddisbursementlevel.(SeeFigure8,below.)Amongtheremainder,supporttiltedinfavorofhigherdisbursementrequirements,leavinglessmoneyforadministration.

Supportforraisingthedisbursementrequirementwasmorepronouncedin

Pennsylvania,whichhasthemostgenerousadministrativecostallowance.OnePArespondentwrote:Iunderstandsomeentitiesmayhavesomeexpenses,butthe20%allowanceseemsoverlygenerous.Yetsomeallowanceisneededduetostudentsnotattendingandothermattersbeyondourcontrol.A100%distributioncouldcreatesomeunintendedproblems.Nevertheless,eveninPAmostSOssupportedmaintainingthestatusquo.AnotherPArespondentwrote:The80%limitallowsamplefundsforadministrativeworkwhileatthesametimeensuringthattheprogram'sprimaryfocusremainsonprovidingassistancetofamiliesinneed.

KeyTakeaways:

Means-testingcanhelptargetfundstothetrulyneedy,thoughevidencesuggests that SOs target low-income families even without a means-

testingrequirement.

IncomecapsthataretoolowreducetheflexibilityofSOstoaddressthe

needsoffamilieswithexigentcircumstances(illness,specialneeds,jobloss,etc.).


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Severalorganizationsnotedthattheywereabletodisburse100%oftheirfundsas

scholarships,thoughmanywhodidsoweresupportedbyreligiousorganizations.Onesecularrespondentwrotethatthecurrentpercentageallowsforindependent[scholarshiporganizations].Loweringthepercentagecouldreducethenumberof[scholarshiporganizations]thatoperatewithoutthehelpofthereligiouscommunity.

ItappearslikelythatPennsylvaniasrelativelyliberaldisbursementrequirementis

onereasonwhyPennsylvaniahasthemostSOsofanystate,evenwhencontrollingforitssize.Pennsylvaniahas247SOscomparedwithGeorgias39,Arizonas17andFloridas

singleSO.Indeed,Floridasmeageradministrativecostallowance(3%)mayexplainitslackofSOs.AllowingmoreroomforadministrativecostsmayopenthedoorformoreSOstostartup,especiallysecularSOswithoutabuilt-inreligiouscommunityorfaith-basedinstitutionstoprovidecrucialfinancialandadministrativesupport.AsonePennsylvaniaSOwrote:Competitionbetweenorganizationsmeansthatfewtakethefull20%,butsomeneedthattogetstarted.Oneapproachmightbetoallow20%offundstobeforadministrationintheSOsfirstyearortwo,thendecreasetheallowanceto10%.

SomeSOssuggestedasliding-scalemodelforthedisbursementrequirement,based

ontheSOsamountofscholarshipdollars.Asscholarshiporganizationsgrow,economiesofscalemeanthatadministrativecostsbecomeproportionallysmaller.AsonePArespondentnoted:Thecoststooperatetheprogramaresimilarnomatterhowmuchrevenueswereceive.

Anotherconsiderationindeterminingthedisbursementlevelistheamountofregulation.OneIowaSOstatedthatthe10%allowanceforadministrationcostsisaworkablenumberbutcautionedthatoverheadincreaseswiththeexpansionofgovernmentrequirements,suchasincreasedpaperworkormandatoryaudits.AnArizona

05

101520253035

40

RaiseLevel StatusQuo LowerLevel Eliminate

Arizona 0 6 0 0

Georgia 0 4 0 0

Iowa 2 2 0 0

Pennsylvania 13 27 2 2

RhodeIsland 3 1 0 0

DisbursementRequirementFigure8.


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SOagreed:Alowerpercentagewouldbedifficulttoattaingiventheamountofreportingrequired.Whenpolicymakersconsideraddingorexpandingregulations,theyshouldalsoconsiderthefinancialimpactonSOsandadjusttheadministrativeallowanceaccordingly.

Finally,oneSOsuggestedreplacingthedisbursementrequirementwitha

requirementthateachSOpublishtheamounttheydisbursedversustheamountusedonadministrativecosts.

3.CorporateCredits

Anotherkeyfeatureofscholarshiptaxcreditprogramsisthepercentageof

corporatedonationseligiblefortaxcredits.Higherpercentagesmakeiteasierforscholarshiporganizationstoraisefundsbyreducingtheactualexpenseforbusinesses.Lowerpercentagesmitigateforgonetaxrevenue.Therightbalancewouldmaximizeoverallspendingoneducationbyincreasingprivatespendingasmuchaspossiblewhilereducingtaxrevenueaslittleaspossible.

Variationalsoexistsinthepercentageofcorporatedonationseligiblefortaxcredits.ArizonaandFloridagrantdollar-for-dollartaxcreditsuptotheentirecorporatetaxliability.Georgiaalsograntsdollar-for-dollarcredits,butonlyupto75%ofacorporationstaxliability.Iowaoffersa65%creditwhileIndianaandOklahomaoffertheleastat50%,witha$100,000annuallimitinthelatter.PennsylvaniaandRhodeIslandbothoffer75%creditsforasingle-yeardonation,butcorporationscanreceive90%creditsiftheypledgetodonatetwoconsecutiveyearswithlimitsof$300,000and$100,000respectively.

Onlystatesthatgrantcreditsforaportionofcorporatedonationsandwhichhaveoperatedtheprogramforseveralyearsweresurveyed.Sinceallfourrespondentsfrom

Iowawrotethatmostoralloftheirfundingcomesfromindividuals,notcorporations,alltheresponsesinthissectionarefromtheforty-ninePennsylvaniarespondents.Respondentswereaskedwhetherthepolicyofgrantingonlypartialcreditshinderstheirfundraisingabilitygreatly,somewhat,ornotatall?ItisimportanttonotethatmostcorporatedonorsinPennsylvaniapledgetodonatefortwoyears,hencetheyreceivea90%taxcredit.26

KeyTakeaways:

Scholarship organizations require some level of allowance for

administrative costs, especially when starting up. Over time, mostspendlessthan10%onadministrativecosts.

Amoreliberaladministrativecostallowanceallowsforthecreationofmorescholarshiporganizations.Policymakersshouldconsidergreater

administrativecostallowancesfornewscholarshiporganizations.


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Mostrespondentssaidthatthe

75%levelforcreditssomewhatnegativelyimpactedtheirfundraising,

followedby43%whoanswerednotatall.Justunder5%ofrespondents

answeredthatthecorporatetaxcreditcapgreatlyhinderstheirabilitytoraisefunds.(SeeFigure9.) Amongthosewhohadlittletroubleraisingfunds,mostemphasizedtheroleofthefederaltaxdeduction.AsoneSOwrote:Thecompaniesthatparticipatearewillingtomakethe10%donation.Theyareabletowritethe10%outofpocketcostoffontheirfederalreturnasthecontributionisbeingmadetoa501c3.Anothernoted:Inmyexperience,corporationsaresatisfiedwiththe

amounttheygetback.Ithinkwithasmallinvestmentthisallowsthemtobegoodcommunitypartnerswhilestillmakinggoodbusinessdecisions. TheexperienceinPennsylvaniaindicatesthatpolicymakerscansafelyreducethepercentageofcorporatedonationseligiblefortaxcreditstoatleast90%withoutexcessivelyburdeningbusinessesorscholarshiporganizations.Indeed,whenfederaldeductionsaretakenintoaccount,itmaybepracticaltodecreasethatpercentageevenfurther.However,cautionisadvisable.InthewordsofoneSO:Intheenvironmenttodayweneedhelpinopeningupthedoorstofundingsourcesnothinderthem.

4.FurtherSuggestionsforPolicymakers Oneofthefinalopen-endedquestionsinthesurveyaskedrespondentstoprovideanyadditionalsuggestionstheymighthaveforpolicymakers.Often,respondentswithinthesamestatewouldoffersimilarrecommendations,whichmaypointtospecificchallengesinthosestates.Forexample,manyPennsylvaniaSOswantedregulationstobestandardizedandclarified.SOswantedtostandardizeregulationsgoverningPre-KandK-12aswellasthedifferentreportingdatesfordifferentcorporationsrelativetothefirstcome,first

KeyTakeaways:

Most scholarship organizations reported having little to no trouble

solicitingdonations frombusinesseswhen thetax creditswereworth

90%ofthedonations.

Policymakers should be able to reduce the tax credit percentagesomewhat below 90% without a significantly negative impact on

fundraising. However, it is not clearat which point therewouldbea

negativeeffect.

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servedpolicyontaxcredits.Additionally,thereissomeconfusionastowhichcorporationsareeligiblefortaxcreditsatall.

SeveralrespondentsfromArizonarequestedthatthestatepermitmoretypesof

corporationstodonate,suchasLLCs.Theyalsowantedtoraisetheoverallprogramcap.

Onewrote:[Wewouldlike]moreavailabilitytocorporatedonors.Wearestrugglingtogetthefundsweneed.Ourwaitinglistisgrowing.Raisingtheprogramcapwasacommonthemeacrossstates.Othercommentsincluded:

Iwouldjustliketoseemoremoneysetasideintermsoftaxcreditssothatprivateeducationiswithinreachformoreparents.(IA)

Regulationsdon'tseemtobehinderingourmission,justthecaponfundsavailableinthestatebudgettofundtheeducationaltaxcredit.Weareabletorecruitanumberofdonors.However,thedonorsarenotalwaysapprovedforfundingbythestateandthenthebusinessisnotabletoparticipate.(PA)

[The state should] raise the corporate donation cap to $500,000 from $300,000. (PA) Thestate-widecapontotalcontributionsinRhodeIslandisridiculouslylow.(RI)

ThecapisonemilliondollarsinRhodeIsland.

[Thereare]insufficientfundstomeettheneedsoffamilieswhochoosetosendtheirkidstooneofourschools.(RI)

Severalrespondentsemphasizedtheneedtorelievetheburdenofpaperworkfor

SOsanddonors.Onesuggestedswitchingfromannualtobiennialreportingtocutdownpaperwork.Anothersuggestedonlineapprovalfordonors,whichwouldreducepaperworkandallowapprovalsinrealtime.ThissentimentwasechoedbySOsthatwerefrustratedbyalackofcredits,especiallywhensomeclaimedcreditswereactuallynotbeingused.OneGeorgiaSOwrote:[Thereshouldbe]monthlyreconciliationofapproveddonationsfrom

actualdonations.SOsonlyreconcilethedonationsversustheapproveddonationsonceperyear,aftertheyearhasclosed.Reconcilingmonthlywillallowunusedcreditstogobackintothepooltobeusedbyotherdonors. OneGeorgiaSOwantedtoraiseindividualscholarshipcaps,particularlyforstudentswithspecialneedsandlow-incomehouseholds:

Weserveanumberofspecialneedsstudentswhorequireabitmorefundingthanwhatthenewcapwillprovide.Additionally,thenewcapwillmakeitmoredifficultforhigherpricedschoolstooffertaxcreditscholarshipstolowerincomefamiliesasthevariancebetweenthetuitionrateandthescholarshipcapamountwillputanenormousamountofpressureon

existingfinancialaidbudgetsforthoseschools.ManyofourhighertuitionschoolshaveutilizedtaxcreditscholarshipstoofferfamilieswithgreatneedanopportunitytoattendaschoolthatwouldneverhavebeenapossibilitywithoutanSOnon-cappedscholarship.Ithinkanaveragescholarshipawardcapisamorereasonablewaytogivealegislativebodythefeelingthattaxcreditscholarshipsaren'texceedingthepublicschoolcostofachild'seducation.

Othersuggestionsincluded:

Increasingschoolchoiceoptionsinareaswithfailingschools.(PA)


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Allowingindividualschoolstoincorporateasascholarshiporganization.(AZ) Allowingparentstocontributedirectlytotheirownchildren.(GA)

IV.CONCLUSION

Ascholarshiptaxcreditprogramhasthepotentialtoexpandeducationalopportunitiesforneedyfamilieswhilesavingmoney.Scholarshipprogramshaveaproventrackrecordofincreasingparentalsatisfactionandreducingthestrainonstatebudgets.Whendesigningascholarshiptaxcreditprogram,thereareoftencompetingvaluesandinterests.Policymakersshouldconsiderboththeexperienceofotherstatesandtheparticularneedsoftheirownstatewhendecidinghowtostructureascholarshipprogram.

ImpactonFamilies:TheNoletFamily(Hooksett)

BeforeBrandoncametoLibertyHarborAcademyinManchester,hewasatroublestudent. Hed shut down. He didnt care anymore about school, explains hismother,Sandy,whoraisedtheyoungestfourofhersevenchildrenbyherselfsinceher husband passed away in 2002, He was just turned off and they didnt doanything tomakehim interested inschool. Thoughhehad previouslyperformedwellacademically,thepublichighschoolBrandonattendedwantedtoputhiminaprogramforslowlearners.Hismotherhadotherideas.Brandonwas reluctantat first,but hismotherpersuaded him toat least visit theschool. At the endofthe tour, Brandon smiled and told hismother hewanted to

attendLibertyHarbor . Mysonlovesgoingthere!exclaimsSandy,Idonthavetofightwithhimtogetupatfiveoclockinthemorningtogotoschool.Andhesdoingextremelywellacademically!At Liberty Harbor, Brandon is in smaller classes with lots of personal attention.TeachersmakesurethatstudentslikeBrandonarealwayschallengingthemselves,without letting them become overwhelmed. Sandy is happy that there are highstandards for both academic achievement and behavior, with a focus on civicinvolvement.Ireallybelieveinthisschoolanditsbeenwonderfulformyfamily,saysSandy,I

think most people dont think they have a chance so they dont even go visit theschool.ItookthechancebecauseIjustfeltIneededtodosomething.Theymadeitpossibleformychildrentogotoschoolthere.BecauseIcertainlycouldnotaffordit.Likemany independent schools, Liberty Harbor offers tuition assistance to somestudents,butresourcesarelimited.TheNoletswerefortunatethatresourceswereavailableforBrandon,butthousandsoffamiliesarenotsofortunate.AscholarshiptaxcreditprogramwouldgivefamiliessimilartotheNoletstheabilitytochoosetheeducationthatsrightforthem.


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ABOUTTHEAUTHOR

JasonBedrickisaResearchFellowattheJosiahBartlettCenterforPublicPolicyandaformerstatelegislatorfromWindham,NH.HeisalsoaFellowattheTaubmanCenterforStateandLocalGovernmentatHarvardUniversitysJohnF.KennedySchoolofGovernment,whereheispursuingaMastersinPublicPolicy.

SOURCES

SourcesforChartsandTablesFigures1&6Arizona:

1)ArizonaDepartmentofRevenue.CorporateIncomeandInsurancePremiumTaxCreditsforContributingtoSchoolTuitionOrganizations:Reportfor2010.August4,2011.http://www.azdor.gov/Portals/0/Reports/2010-corporate-school-tax-credit-report.pdf2)TheFriedmanFoundationforEducationalChoice.SchoolChoicePrograms:AZ.http://www.edchoice.org/School-Choice/Programs/Corporate-Tax-Credits-for-School-Tuition-Organizations.aspx

Florida:

1)FloridaDepartmentofEducation.FloridaTaxCreditScholarshipProgram:November2011QuarterlyReport,November2011.http://www.floridaschoolchoice.org/Information/CTC/quarterly_reports.asp#20122)TheFriedmanFoundationforEducationalChoice.SchoolChoicePrograms:FL.http://www.edchoice.org/School-Choice/Programs/Florida-Tax-Credit-Scholarship-Program.aspx

Georgia:

1)GeorgiaDepartmentofEducation,GeorgiaPrivateSchoolTaxCreditforDonationstoStudentScholarshipOrganizations,http://public.doe.k12.ga.us/pea_policy.aspx?PageReq=PEAHB1133

2)TheFriedmanFoundationforEducationalChoice.SchoolChoicePrograms:GA.http://www.edchoice.org/School-Choice/Programs/Tax-Credits-for-Student-Scholarship-Organizations.aspx

Iowa:

1)Iowa.gov,http://www.iowa.gov/tax/1040EI/Line/06Line54.html


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2)TheFriedmanFoundationforEducationalChoice.SchoolChoicePrograms:IA.http://www.edchoice.org/School-Choice/Programs/Tax-Credits-for-School-Tuition-Organizations.aspx

Indiana:

1)IndianaSchoolScholarshipTaxCreditPlan,http://www.inscholarshiptaxcredit.com/About.htm2)TheFriedmanFoundationforEducationalChoice.SchoolChoicePrograms:IN.http://www.edchoice.org/School-Choice/Programs/School-Scholarship-Tax-Credit-Program.aspx

Oklahoma:

1)OklahomaSenateBill969,http://www.oklegislature.gov/BillInfo.aspx?Bill=SB969

2)TheFriedmanFoundationforEducationalChoice.SchoolChoicePrograms:OK.http://www.edchoice.org/School-Choice/Programs/Oklahoma-Equal-Opportunity-Education-Scholarships.aspx

Pennsylvania:

1)PennsylvaniaDepartmentofCommunityandEconomicDevelopment.EducationalImprovementTaxCreditProgram,http://www.newpa.com/find-and-apply-for-funding/funding-and-program-finder/educational-improvement-tax-credit-program-eitc

2)TheFriedmanFoundationforEducationalChoice.SchoolChoicePrograms:PA.http://www.edchoice.org/School-Choice/Programs/Educational-Improvement-Tax-Credit-Program.aspx

RhodeIsland:

1)StateofRhodeIslandDepartmentofRevenue,DivisionofTaxationhttp://www.tax.ri.gov/Credits/index.php2)TheFriedmanFoundationforEducationalChoice.SchoolChoicePrograms:RI.http://www.edchoice.org/School-Choice/Programs/Corporate-Tax-Credits-for-Scholarship-Organizations.aspx

Figures3&4EducationNextPEPGSurvey2009ProgramonEducationPolicyandGovernance,HarvardUniversity,JohnF.KennedySchoolofGovernment.Fall2009.http://educationnext.org/files/pepg2009.pdf


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EducationNextPEPGSurvey2010ProgramonEducationPolicyandGovernance,HarvardUniversity,JohnF.KennedySchoolofGovernment.Fall2010.http://educationnext.org/files/Complete_Survey_Results_2010.pdfEducationNextPEPGSurvey2011ProgramonEducationPolicyandGovernance,

HarvardUniversity,JohnF.KennedySchoolofGovernment.Fall2011.http://educationnext.org/files/EN-PEPG_Complete_Polling_Results_2011.pdfFigure5SourceforNHpublicschoolspending:NewHampshireDepartmentofEducation,StateSummaryRevenueandExpenditureofSchoolDistrictsforyears2007-08,2008-09,2009-10.http://www.education.nh.gov/data/financial.htm

EndNotes1NewHampshireDepartmentofRevenueAdministration,CommunityDevelopmentFinanceAuthority,TaxCreditProgram.http://www.nhcdfa.org/web/cdip/cdip_tax_credit.html2NewHampshireDepartmentofRevenueAdministration,ResearchandDevelopmentCredit.http://www.revenue.nh.gov/faq/dra_165.htm3NewHampshireDepartmentofRevenueAdministration,CoosCountyJobCreationTaxCredit.http://www.revenue.nh.gov/faq/dra_3000.htm4Zelmanv.Simmons-Harris,536US639(U.S.SupremeCourt2002)5NewHampshireStateConstitution,PartSecond,Article83.6Douglas,CharlesG.,III.TheConstitutionalityofSchoolChoiceinNewHampshireJosiahBartlettCenterforPublicPolicy,May4,2004.www.jbartlett.org/wp-content/uploads/2011/06/constitutionality05404.pdf7Simmons-Harrisv.Goff,711N.E.203(Ohio1999)8WarnerJacksonv.Benson97-0270(Wisconsin2002)9Kottermanv.Killian,972P.2d606(Arizona1999)10ArizonaChristianSchoolTuitionOrganizationv.Winn,Nos.09-987and09-991,UnitedStatesSupremeCourt,2011.


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11Figlio,David.EvaluationoftheFloridaTaxCreditScholarshipProgram:Participation,Compliance,TestScoresandParentalSatisfaction.UniversityofFlorida,June2010.12Forster,GregandChristianDAndrea.AnEmpiricalEvaluationoftheFloridaTaxCredit

ScholarshipProgram,FriedmanFoundationforEducationalChoice.August2009.13LeFevre,Andrew.ADecadeofSuccess:PennsylvaniasEducationImprovementTaxCredit,CommonwealthFoundation.PolicyBrief,Vol.23,No.8.August2011.14EducationNextPEPGSurvey2009ProgramonEducationPolicyandGovernance,HarvardUniversity,JohnF.KennedySchoolofGovernment.Fall2009.http://educationnext.org/files/pepg2009.pdf15EducationNextPEPGSurvey2010ProgramonEducationPolicyandGovernance,HarvardUniversity,JohnF.KennedySchoolofGovernment.Fall2010.

http://educationnext.org/files/Complete_Survey_Results_2010.pdf16EducationNextPEPGSurvey2011ProgramonEducationPolicyandGovernance,HarvardUniversity,JohnF.KennedySchoolofGovernment.Fall2011.http://educationnext.org/files/EN-PEPG_Complete_Polling_Results_2011.pdf17Adequacyspendingperpupilis$3,540,plusadjustmentfortheFreeandReducedLunchprogramandspecialeducationspending.TheNHDepartmentofEducationconfirmedthattheaveragestatespendingperpupilis$4,100.18North,CharlesM.EstimatingtheSavingstoArizonaTaxpayersofthePrivateSchool

TuitionTaxCredit,BaylorUniversity.November2009.http://www.azpolicy.org/sites/azpolicy.org/files/downloads/ArizonaSTOTaxCreditCMNorth.pdf19OfficeofProgramPolicyAnalysisandGovernmentAccountability.FloridaTaxCreditScholarshipProgram:FiscalYear2008-09FiscalImpact,March1,2010.20IowaDepartmentofRevenue.StateofIowaAgencyReportsonTaxCredits,2009.Pages93-6.http://www.iowafiscal.org/2009docs/StateIowaAgencyReportsTaxCreditsFinal.pdf21EducationFundingforIowaStudents:HistoricalFundingPerPupil,IowaState

Legislature,FiscalServicesDivisionhttp://staffweb.legis.state.ia.us/lfb/docs/k-12_ed/per_pupil/historical_per_pupil.pdf22LeFevre,Andrew.ADecadeofSuccess:PennsylvaniasEducationImprovementTaxCredit,CommonwealthFoundation.PolicyBrief,Vol.23,No.8.August2011.


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23Murray,Vicki,Ph.D.AnAnalysisofArizonaIndividualIncomeTax-creditScholarshipRecipientsFamilyIncome,2009-10SchoolYear.ProgramonEducationPolicyandGovernance.HarvardUniversitysJohnF.KennedySchoolofGovernment.Spring2011.24

StepUpforStudents,AfewfactsabouttheFloridaTaxCreditScholarship,http://www.stepupforstudents.org/NewsResearch/BasicProgramFacts25PennsylvaniaLegislativeBudgetandFinanceCommittee.PennsylvaniasTaxCreditPrograms,June2010.http://lbfc.legis.state.pa.us26ConfirmedinatelephoneconversationwithJimODonnell,DirectoroftheTaxCreditProgramatthePennsylvaniasDepartmentofCommunityandEconomicDevelopment,onNovember3,2011.

Documents

Scholarship Tax Credit Programs Analysis