KY Policy Blog

Tax Credit Doesn’t Help Kentucky Schools and Kids

By Anna Baumann
March 3, 2017

A recent op-ed from the sponsors of private school tax credit proposals in this year’s General Assembly suggests the program would help provide educational opportunities to families in need and save the state and local schools money. But “Ed Choice” tax credits are simply back-door private school vouchers aimed at shifting resources. They reduce the dollars available for public education, limiting schools’ ability to help low-income children succeed.

The Legislative Research Commission is the source of the $76 million price tag on the bills in the program’s sixth year. In a recent blog of ours critiquing the proposal, we noted that $76 million is about the same as what Kentucky budgeted for Family Resource and Youth Service Centers (FRYSCs) and extended school services for kids needing additional instruction in 2017, combined.

If the legislature were to extend Ed Choice beyond that year, the voucher program could grow to cost an enormous $233 million by its 10th year. And grow, it would – language in the bill increases the size of the program by 25 percent every year at least 90 percent of the available credits are claimed. A similar program in Florida, which has the same language, has seen its costs grow from $229 million in 2013 to $559 million this year. Maximum usage of the available credit is essentially guaranteed since wealthy people can actually make money by “donating,” as we noted in our blog. Individuals who are subject to the federal alternative minimum tax can make a profit of more than $200,000 by stacking the generous 90 percent state level credit with federal deductions.

Ed Choice advocates argue that rather than losing revenue because of the tax credit vouchers, state and local school districts will come out ahead financially. This argument is based on the idea that scholarships to private schools cost less per pupil than a public education. However, these hypothetical savings fall apart upon closer examination. One reason is that, when students switch from public to private schools, public districts cannot proportionally reduce fixed costs on things like facilities, maintenance, debt service and transportation.

Also, alleged savings don’t appear because a large share of Ed Choice scholarships go to families whose kids already attend private schools, or who would go to private schools anyway. Kentucky’s proposed program does not target students who are currently enrolled in public schools. And the eligibility criteria would allow a family of 4 making $91,020 a year to qualify – almost $22,000 more than median income for a family that size in Kentucky. Programs in other states that do not target low-income students end up instead serving families with kids already enrolled in private schools.

Similarly, though students with Individualized Educational Plans (IEPs) and students with developmental disabilities would be eligible, the program does not ensure scholarships would go to families who have the greatest difficulty covering the costs associated with education alternatives. Nor does it provide oversight or accountability for how those resources are spent.

Another fundamental problem with Ed Choice involves an attempt to circumvent Kentucky’s constitution. A key provision of our constitution expressly prohibits “any fund of tax now existing” from going toward “any church, sectarian or denominational school.” Ed Choice tries to skirt this prohibition by funding vouchers through a back-door mechanism that avoids any direct payment of tax dollars to private schools. This complicated mechanism hands over to wealthy people — who “donate” money to the scholarship program — the ability to redirect large amounts of public dollars to private education, with many of the students receiving scholarships to attend religious schools. Though other states have been able to circumvent similar clauses by arguing that tax credit subsidies do not constitute the direct expenditure of state funds, Kentucky lawmakers should resist this transfer of resources away from our already underfunded public schools to private religious schools.

The Ed Choice tax credit is a poorly designed policy that would further reduce the monies available to help all Kentucky children succeed.

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