Complaint will be filed today about the Georgia private school tax credit that operates in secrecy

The AJC is reporting that the Southern Education Foundation will file a complaint today with the state Department of Revenue alleging widespread abuses in the controversial private school scholarship tax credit program.

The tax credit has received national media attention because of allegations of misuse. Yet, state Rep. Earl Ehrhart, R-Powder Springs, the sponsor of the 2008 law creating the tax credit, is introducing a bill today to expand it.

Critics charge that the abuses — allowing donors to designate the recipients of their donation — have turned the private school scholarships into a back-door voucher. When the General Assembly approved the program, lawmakers said the money would enable poor students in public schools to move to private schools. Instead, the money appears to be going to students already in the private schools.

There have been reports that parents were making donations to schools that were then repackaged as “scholarships” for their own kids. In response to these allegations, the Georgia General Assembly has essentially shielded the program from public scrutiny, making changes in 2011 that make it a crime for state officials to release key information about the program.

According to the AJC:

Since 2008, when legislation established the tax credit program as a way to help students afford private schools, more than $170 million has been set aside for tax credits that could be claimed by donors to student scholarship organizations. State Rep. Earl Ehrhart, the Powder Springs Republican who was a key sponsor of the legislation that established the tax credit program, said he plans to introduce a bill Monday to expand it.

Advocates have called for the amount of state money set aside each year for the tax credits to be increased to $100 million from the $51.5 million per year that was set aside last year. Some legislators, however, have said they want to hold hearings to make sure the program is operating within state law.

Because tax records are not public, it’s difficult to determine how many tax credits may have been improperly claimed.

In its complaint to the Department of Revenue, the SEF said that “it appears that tens of millions of taxpayer dollars in Georgia have been unlawfully diverted from the state treasury through student scholarship organizations during the last four years.”

SEF Vice President Steve Suitts said that amount is an estimate based on the amount of money set aside for tax credits and the number of student scholarship organizations and private schools that the SEF found to be raising money by providing misleading information.

The SEF, which has shared its findings with multiple media outlets over the past couple of years, wants the department to launch a special investigation into the program.

“The state should discontinue the program or freeze the implementation of the program pending the findings of a statewide DOR investigation,” Suitts said. “The governor and the Legislature should consider carefully the DOR investigation’s findings as well as revelations about this program’s many other deficits in order to vastly mend or end this costly state program. So far, the program has been a failed experiment.”

Student scholarship organizations and private schools contacted by The Atlanta Journal-Constitution said they have done nothing wrong.

“We make sure no donor designates any individual,” said Cary Sinnett, a board member for Pay It Forward, a Gainesville-based student scholarship organization. “We go by the letter of the law.”

Ehrhart said the SEF complaints are “frivolous and inaccurate.” “They want to indict the whole program, which has provided hope to so many Georgia students, because of the anecdotal acts of a few,” said Ehrhart, who is the chief executive officer of a student scholarship organization, Faith First Georgia, which reported raising $1.2 million in 2011, according to federal tax forms.

The group’s complaint to the Department of Revenue lists specific student scholarship organizations and private schools as providing parents with misleading or outright false information. Quoting from information on Pay It Forward’s website, the SEF accuses the group of participating in a “give and get back” scheme.

“Do you know someone who could use a scholarship?” the group’s website asks potential donors. “Please provide the information below and we will send an email inviting them to apply for a scholarship from an anonymous donor.”

The SEF said that pitch invites a clear violation of the law. “Pay It Forward’s claim of a so-called ‘anonymous donor’ is a thin smokescreen in its attempt to evade Georgia law and regulations,” the SEF’s report states.

Parents, however, have received misleading information from program supporters, the SEF says, pointing to comments state Rep. David Casas, R-Lilburn, made during a seminar with private school parents in December 2009.

“You can take this chunk of money and be able to say, ‘I want this money to go to education, and not just education, I want it to go to the school of my choice, and maybe even more detailed — the student of my choice,’ ” Casas told the parents.

Contacted Friday night, Casas said it was legal at that time to designate a student for assistance as long as the student wasn’t the child of the donor. Casas said the state law was changed in 2011 to prohibit designating any student for assistance.

But Suitts said it has always been a violation of Georgia law to claim a tax credit after making a donation that’s designated to assist a specific student. The SEF’s complaint to the Department of Revenue said Covenant Christian Academy in Loganville gives parents the false impression that they can designate a specific student for assistance and claim a tax credit.

Michelle Deaton, the school’s financial director, said that’s not the case. She said the school has no way of knowing whether a donor improperly claims a tax credit after making a donation that is directed to a specific student.

–From Maureen Downey, for the AJC Get Schooled blog

32 comments Add your comment

I dropped my fried twinkie

January 28th, 2013
12:42 am

I pay taxes to provide a “Free Education” for some Government School kid so why shouldn’t I get a TAX Credit for giving money to a private school to educate my kid? I’m paying twice for educating students so I should get a Tax Credit.

Private Citizen

January 28th, 2013
2:32 am

Congratulations on being featured on Google News main page.

Astropig

January 28th, 2013
5:33 am

Few things are more delicious to watch than the education monopoly being outflanked by proponents of choice. Maureen ,thanks for posting this. You made my day. What the heck, you’ve made my month!

Slo Pony Dog Food Company

January 28th, 2013
6:02 am

What SEF ignores is that the people that have done/are doing this also pay property taxes to support the very schools that they have escaped. You won’t see that mentioned. This is just another victory in the guerilla war between the education cartel and parents. The cartel lost this one. Suck it up.

Clutch Cargo

January 28th, 2013
6:07 am

I hope Governor Deal tells his revenue commissioner to tell these people to stick their complaint where the sun don’t shine.Sour grapes because they can’t get their hands on that $$$ to create more administrators and bureaucrat sinecures.Not a dime of it would ever make it to the classroom if it was handed over this very day.

Pride and Joy

January 28th, 2013
8:30 am

Slo Pony makes an outstanding point. The parents of the kids going to private schools (like me) are still paying the full property taxes that go to public schools. We are also paying the rest of the public school tax through our federal and state income taxes. I don’t get that money back when I send my children to private school.
ALSO, what this “article” fails to mention is that the “scholarship” that goes to the child is only $1,000. There is NO private school that educates a child for $1,000. My children attend one of the least expensive private schools and $1,000 is no where near that amount.
Indeed, this “article” is slanted to try to eliminate choice for people who need it.
And let’s get REAL here…
I would LOVE to put my kids in public school.
I live in the APS district and own another residential property in Dekalb. BOTH of those districts are rotten, dirty lying organizatioons dedicated to greed and incompetence and make a mockery of the very democracy we are supposed to live in.
WHEN our local governments give us honest, decent, public schools, I will come running back to them.

Entitlement Society

January 28th, 2013
8:51 am

I pay exorbitant property taxes (my choice). The APS school my children are zoned for is supposedly a “good one,” but been there, done that. Not in my book. So much for a “free public education.” Now we are forced to pay private school tuition to provide an adequate education for our children (my choice if I want my children to succeed in life) on top of high property taxes. The “tax credit” is completely misunderstood. It is merely redirecting up to $2,500 of tax liability for couples. I write a check for $2,500 out of my own pocket to the Apogee Scholarship Fund. Then at tax time, I get a $2,500 credit on my Georgia taxes. Net to me is zero. In fact, I have lost the use of that $2,500 for the 6 months that I have donated it. NOTHING comes back to me from the school. I repeat NOTHING. I pay FULL TUITION for each of my children. Nothing is shady or underhanded. The school then benefits by being able to give scholarships to qualified applicants. That is how the program works in ethical schools.

Google "NEA" and "union"

January 28th, 2013
9:00 am

One wonders if Maureen gets her daily talking points memo from the teachers’ unions—or if the unions actually get theirs from Maureen!

Parents desperate to get their kids out of failing schools are certainly with you on this one, Rep. Ehrhart. Please keep fighting the good fight.

I Teach Writing

January 28th, 2013
9:19 am

@Entitlement Society — The whole AJC article turns on the “in ethical schools” question. The allegations are that some schools aren’t behaving ethically, that they are (to borrow your example), taking a $2500 donation from parents, laundering it (more or less) via their scholarship fund, and giving that same $2500 back as a scholarship for a(n explicitly or implicitly) designated child. The parents then get to claim a $2500 tax credit, making their net NOT zero, as in your example, but +$2500 — directly from other taxpayers. That would be illegal under the law you enthusiastically support.

That some schools and parents may be using the law as a cover for fraud should mean that you and other supporters of the law would be outraged. If you’re making a genuinely charitable donation (albeit one that turns 100% of other people’s tax money into a donation for your child’s school) for no gain, then the idea of others besmirching this program should leave you appalled. Does it?

bootney farnsworth

January 28th, 2013
9:20 am

@ entitlement

exactly what sort of return were you expecting?

More People, Less Government

January 28th, 2013
9:23 am

This is an excellent program that provides additional educational options for all of Georgia’s children. I’ve heard from other parents of children in private schools that certain schools direct funds to specific students based on the instructions of donors. That was not the intent of the program nor is it the letter of the law. Rather than eliminating the program, what is needed is an ongoing process of reporting and audit of SSO’s and private schools to assure taxpayer funded scholarships are being used as intended. SSO’s and schools that misuse or break the law then need negative consequences for their bad behavior. Negative consequences should include, at a minimum, revoking eligibility for program participation.

bootney farnsworth

January 28th, 2013
9:23 am

seems to me a whole lot of people are missing the point here. they are so busy trying to spin this into a blanket endorsement for a POV they are lost in the forest unwilling to look away from a single tree

Clutch Cargo

January 28th, 2013
9:30 am

@I Teach Writing

Unless there is an explicit quid pro quo here, you’re trying to punish people for an offence (laundering) that hasn’t even occurred. You want to use prior restraint to keep the school from using that money on whom it sees fit and deserving. A more Orwellian mindset would be hard to imagine.

Tip to AJC- If you want to see the real scandal here, try and find out how many EDUCATORS do this while condemning it. A little birdie told me that you will be surprised.

Holly Jones

January 28th, 2013
10:00 am

Pride and Joy makes an interesting, although I’m sure unintended, point, one that I have heard again and again in regards to vouchers and the SSOs. If the scholarship amount is capped at $1,000 as P and J states, and no private school tuition is anywhere near that low, then where do the parents find the rest of the tuition? Poor kids in poor-performing schools- the alleged beneficiaries of the SSOs- won’t have the money to make up the difference.So, just like HOPE funds going primarily to upper and middle class kids who would go to college anyway,the SSO benefits kids who already are in in private schools (by registering at, yet never attending, their public school their become eligible) or whose parents can afford the tuition difference but needed that “scholarship” to help the budget.

The same legislators who scream about how bad our schools are while they do nothing to help them improve created this sham then shielded it from the public. That’s a huge red flag and it’s wrong, wrong, wrong. I would be all for a program that truly helped poor kids get out of bad schools, but this is not it.
And I don’t for one minute believe the legislators who are behind this care one bit about how well a poor kid in South GA or downtown Atlanta is educated. I wonder, to piggyback on Clutch Cargo’s question, how many of those legislators who holler about welfare and bailouts have their hands out for this?

CJae of EAV

January 28th, 2013
10:06 am

The sad commentary on this program is usual bait and switch arguements that are used to establish it in the first place. Say it’s a program to provide wider choice for the economically downtrodden and it gets widespread support. Describe it in terms of how its practically being used and it struggles for passage.

Personally, I don’t see anything wrong with the program on its face save the dishonest way in which it was established. If the attempt to extend it isn’t honest about its true intent and practical application, then the bill should go down in flames.

Entitlement Society

January 28th, 2013
10:07 am

@ I Teach Writing – Your logic is flawed if you are implying that because I support a law that some people choose to defraud, it is therefore a bad law. So, some people choose to break the speed limit, so should we do away with speed limits because people intentionally choose to break the speed limit? No, we have negative consequences for those who break the law. Why would this law be any different from any other law?

By the way, you’re talking about “OTHER people’s tax money into a donation to your child’s school.” Don’t worry. It’s not YOUR tax money unless you are writing a $2,500 check to the scholarship program, so don’t lose any sleep over it.

I Teach Writing

January 28th, 2013
10:16 am

@CC — I’m not trying to punish anyone. No real dog in the fight. I was simply interpreting the article for the many in the thread who don’t seem to understand that fraudulent abuse of a program they support is a BAD thing. And a program that’s designed to facilitate the appearance of impropriety needs to be redesigned. Prior restraint is bad. So’s fraud. Let’s figure out how not to have either.

I Teach Writing

January 28th, 2013
10:29 am

@Entitlement — Read better.

I neither said nor implied that the law was bad. I said the abuse of the law was bad. And especially bad for people who support the law.

In the fraudulent scenario I outlined, however, it IS my tax money that goes back to the parent. The tax credit is a state budget cost. X dollars come in, and the budget allocates those dollars; a certain amount ($51.5M last year) gets allocated for this particular tax credit. If it were not so allocated, it would be allocated some other way. No one’s base tax rate changes. The closest federal analogies are the education credits (American Opportunity & Lifetime Learning), which are 1:1 credits up to a certain cap. Scaled federal credits that are still roughly analogous include the Child & Dependent Care credit and the Earned Income Credit.

Beverly Fraud

January 28th, 2013
10:54 am

“This is just another victory in the guerilla war between the education cartel and parents. The cartel lost this one. Suck it up.”

Apparently Slo Pony doesn’t realizing that wanting to break up the education cartel and wanting alternatives to be implemented with transparency and integrity are not mutually exclusive things.

Wanting some much needed sunlight shone upon the process does not equate with wanting to keep the education cartel intact unless one has an extremely simplistic world view.

Penny

January 28th, 2013
10:56 am

HB 1133 is excellent legislation that benefits everyone. Filing a complaint is petty and a waste of a lot of peoples time and paper! Maureen Downy, take a line from your own title – “Get Schooled”. Your articles and goal seems to destroy anything good and to get attention to futher your personal agenda.

J K

January 28th, 2013
11:02 am

I have actually read many of the brochures provided by the so called education providers that propose for you to get free tuition of at least reduced by the amount you personally give for the GOAL scholarship (especially the organization in Gainesville). They are playing the system. However, the organization that our money goes to has controls (I verified) that prevent this from happening. It is a very good program and handles the awful public school system in counties such a Gwinnett. The SEF has a very vested interest in keeping the sorry public scholol system but they are crying foul without checking everyting out thoroughly.

Concerned DeKalb Mom

January 28th, 2013
11:41 am

I don’t think the majority is decrying the law. The majority is decrying ABUSE of the law.

I know many people who donate to the scholarship funds with full faith in what the law is intended to do–open doors to those who cannot afford private school tuition. And I don’t think they are the focus of this discussion; nor are the organizations that rightfully, ethically disburse those funds.

What seems to be troublesome, however, are the organizations (schools and others) that want to “Game the System” and allow for people of means to make their own tuition payments lower. That’s not the intent of the law, at least as I read it.

And supporters of the law, you would do well to acknowledge that fraud happens so that you can change, rather than erase, the law.

in the middle

January 28th, 2013
11:55 am

Plain and simple. If you contribute to the fund you cannot then have your child benefit from the fund. Keeps it clean.

Dewey Cheatham & Howe

January 28th, 2013
12:07 pm

Some definitions for those of you joining us late:

Waste,Fraud & Abuse – A program that benefits people that don’t vote the way we’d like.

Strong,Effective Public Policy- The same money, spent on us.

Glad to clear that up.

equality25

January 28th, 2013
12:32 pm

Please dont loose sight of the point. Its not that they’re against the tax credit program, they’re against those who are illegally misusing it. It has nothing to do with vengeance toward private schools and “making everyone suffer equally” @TheTrain. They are simply exposing the facts . Its an inconvenient truth.

For everyone who has commented on how much this program has helped and how it has not been misused, you should especially be outraged because others ARE misusing the program to benefit themselves, by essentially making a tax deductible donation that goes back to their own child. Before you are quick to say it isnt true, please take a few minutes and dig deep. These people are on your side and are trying to better the lives of all children. They are trying to make sure that YOUR taxpayer money isn’t being used by corrupt organizations.

Local girl

January 28th, 2013
2:28 pm

A family friend told me last year (could have been the year before, my mind is fuzzy), that she and her husband had donated to the private school of a child they know. She told me that the child in question was going to receive that money as a scholarship to attend. This is a lovely, well-meaning woman who was trying to help out a friend, and certainly did not know that this was an illegal abuse of this law. She had been told by the friend’s family (who was told by the school) that this was allowed. At the time, I was not aware of this tax credit or its true purpose, or I certainly would have explained it to her.

These are the types of abuses that need to be stopped. This child was not a poor student from a failing school. This was a current private school student who was benefiting from a program not meant to help her. Although it may be shocking to some of the commenters on the blog, I work in education and I have NO problem with this program when used in the way it is intended. However, I do have a problem with schools that are intentionally abusing this program – it is the taxpayers who lose. Families who attend schools that are using this program as intended should be outraged.

(And please, for the love of all that is holy, PLEASE stop with the “I pay taxes for other people’s children to go to school” argument. We all do that, whether we have children or not. My child is not old enough for school, yet I happily pay for the children in my neighborhood and state to attend school. It is in my best interest as a citizen that other citizens are educated, even if that education is not at the number one school in the state).

BessBear

January 28th, 2013
2:29 pm

It’s fine to do something to prevent people from abusing this tax credit program, but don’t take it away from those using it correctly. Keep in mind that every child that leaves public education to go to private is saving the county that money, usually around $10,000/yr.

Maureen Downey

January 28th, 2013
2:32 pm

@Local, I have had parents tell me that their donations went to defray their own children’s tuition. I told them that the program should not work this way, but they assured me that their schools had advised them on how to make this happen. And these, too, were not low-income families. The abuses of this program seem flagrant to me.
Maureen

Concerned Taxpayer

January 28th, 2013
3:43 pm

The intent of the law is good and that is to help students attend a private school that they would not normally be able to attend. In other words expand educational opportunities for students.

But we don’t know if that is happening!

Why?

Because the law specifically prohibits any information being released about the program itself. It makes no sense. They are using state tax dollars but no one can see how they are using the money. You think this does not smell like fraud. Of course it does. Open up the books and lets see how each school is using the money and than it will be legitimate until than it will continue to be suspicious.

I pay state taxes and I deserve no I demand to know how the state is spending my money. We all deserve that but when government is dominated by one party be it democrats or republicans it becomes corrupt and that has happened again in this state. Open government is good for everyone.

Open the books!!!

lc johnson

January 28th, 2013
4:53 pm

i have a son who is a senior at a private school that he has attended since k-3. Since he is graduating this year you might wonder why it concerns me so here goes. I know what ia am talking about when i say that this money to help a child get a better education is being used in a lot of schools to recruit athletes, some who are failing subjects. there should be guidlines such as, students on this program have to maintain a B average and can’t enroll in it after the 9th grade. most of the recruiting is done after the 9th grade so the :”students” can be better evaluated in their athletic ability.

3schoolkids

January 28th, 2013
6:52 pm

The legislature will not place controls on the SSO’s until one goes under, leaving a school or schools without funds. These are basically nonprofit investment firms, some of them are entirely operated by governing boards of the schools they serve. It is only a matter of time before someone gets greedy or stupid and loses a boatload of money. Then you will hear the screams of angry parents when the school closes due to lack of funding and they have to scramble to find alternatives and don’t get their money back. It is unfortunate that the education of many is being risked so that a few can game the system. But, then again this is Georgia and that is par for the course.

[...] Southern Education Foundation said it will file a complaint today alleging that the private school scholarship program is being abused and turned into a “back-door …. When the General Assembly approved the program, lawmakers said the money would enable poor [...]