Private school tax credit: A $170 million tax diversion that Georgia lawmakers cloak in secrecy. Why?

State Rep. Edward Lindsey, R-Atlanta, met with the AJC Friday for a general discussion on education issues in the state.

By design, it is impossible to know how the $170 million in private school tax credits have been spent or on whom. (AJC file photo)

Among his concerns: Whether the private school scholarship tax credit is working as it was presented to the General Assembly  — as a means to help low-income kids whose parents had no other way to afford private schools.

“I want us to make sure the money is going to the kids I have envisioned so they can have better choices,” he said. Lindsey said he disagrees with state Rep. Earl Ehrhart, R-Powder Springs, who recently said the scholarship “was never sold” as a program to benefit only low-income students.

“Rep. Ehrhart and I don’t always agree,” said Lindsey.

The AJC has done several good stories on the tax credit and the challenges — deliberately injected into the law –  in figuring out how the money was being spent and on whom.

And the money is considerable. Since 2008, more than $170 million has been set aside for tax credits that could be claimed by donors to student scholarship organizations. Now Ehrhart wants to expand the program.

Education advocate and Atlanta attorney Carolyn Wood sent me a dissection of the tax credit and why expansion is not in the best interest of taxpayers. I thought it was worth sharing:

By Carolyn Wood

Georgia’s tax credit scholarships for private schools were established with the passage of House Bill 1133 in 2008 which allows individuals and corporations to make donations to Student Scholarship Organizations (“SSO”) and receive a dollar-for-dollar Georgia income tax credit for these donations.

The stated rationale for this program was to fund scholarships which would help low income parents transfer their children from low-performing public schools to private schools in the hope of obtaining a better education. Now, the law allows $51.5 million in such tax credits to be claimed per year. Since 2008, more than $170 million in Georgia tax dollars has been set aside pursuant to this program.

A bill under consideration in the Legislature, House Bill 140, would increase the annual cap to $80 million. This program raises many questions.

1: How many recipients of scholarships actually attended a public school the year prior to receiving an SSO scholarship?

We don’t know. The current law does not require the students to actually ever attend a public school prior to receiving a scholarship. It only requires them to be “enrolled.” This has allowed students who currently attend private schools and those who never intend to attend public school to ”enroll” (register) without ever actually attending a public school, solely to receive a private school scholarship.

HB 140 would even enlarge this pool of students by dropping the requirement of “enrolling.” Under the proposed legislation, all students “eligible to enroll” in a public school can be recipients of the scholarships. Thus, all private school students are eligible. This hardly solves the problem of providing a better education for students in low-achieving public schools, or of moving the cost of public school students off Georgia’s rolls.

2: What percentage of scholarship recipients would qualify for free or reduced price lunches in public schools?

We have no idea. The initial idea behind this program was to help low-income students escape low-achieving schools. But unlike other states’ programs, the Georgia tax credit scholarship program does not include any provisions for means-testing the scholarship recipients. Because this law does not require any accountability, there is no way to determine how many, if any, Title I students are benefiting from the program. Without accountability, no one will ever know if the program is succeeding, or if the funds are actually benefiting other, less needy students. In fact, Georgia has made it a criminal offense to publicly disclose specific information submitted by SSOs to the Department of Revenue.

3: What percentage of their total scholarship revenue are the various SSOs actually providing as scholarships each year?

Again, no one knows. The law requires SSOs to distribute at least 67.5 percent of each year’s credits for scholarships. Because the law provides no accountability, in order to determine compliance with this requirement the only data available is gleaned (laboriously) from the individual SSOs’ IRS 990s. This data indicates that the SSOs raising much of the diverted funds have failed to meet the statutory requirement of distribution.

4: How can taxpayers be assured that these tax credits aren’t supporting “failing” private schools?

They can’t. The tax credit program in Georgia does not include a requirement that qualified private schools administer or make arrangements to allow scholarship recipients between grades 3 and 10 to take an approved standardized test. Because private schools don’t routinely take such standardized tests, the state has no way of assuring that the tax credits aren’t going to “failing” private schools.

5: By providing scholarships to schools that are overwhelmingly attended by white students, is the state encouraging racial segregation?

Yes. The Georgia private schools that are eligible for tax-credit scholarships are significantly more segregated by race and ethnicity than the state’s public schools. Approximately half of the state’s private school students attended schools that are “virtually” segregated – where one race or another constituted between 90 to 100 percent of the school’s student population in the 2007-08 school year. While there is hardly any data on how SSO scholarships are being awarded, it appears that the tax credit scholarships have done little more than provide support for white students to attend schools that are already racially isolated.

HB 140 would commit an additional $30 million annually from the state treasury to fund private school scholarships.  No one, including legislators and taxpayers, will know which schools receive scholarship monies, which students receive scholarships, what curriculum is being taught, how well the scholarship students perform academically, how wealthy the parents of scholarship recipients are, or how much of the $30 million is actually used for scholarships and how much is used for administration by the student scholarship organizations.

In short, there will be no accounting for how the $30 million annually will be used—or the results of its investment.

If $30 million in additional funding can actually be found for K-12 education in the extremely tight FY 2014 budget, there are probably hundreds of ways it could be better spent than for the unaudited, unregulated scholarship fund. Here are just 10 suggestions for using any “extra” education funds.

•Funding to allow every pre-k applicant to attend a pre-k program ($35 million to clear the wait list of 8,000 applicants).
•Funding for additional safety equipment (metal detectors, cameras, carbon monoxide detectors, etc.) for all public schools.
•Funding to allow every public school to provide every student with a full 180-day school calendar
•Funding to provide additional technology in schools where it is lacking.
•Funding to provide teachers with needed professional development regarding the uses of technology and the state’s new curriculum, as well as other high-quality professional learning programs.
•Increasing the number of school counselors (recommendation of the state’s Education Finance Study Commission).
•Restoring all of the state funds that have been cut since 2009 to the 29 districts with the lowest per-pupil spending in fiscal year 2012.
•Beginning to reduce class size back to pre-recession levels.
•Providing a nurse for every school.
•Providing a graduation coach for every high school.

During a time of diminishing state revenues, a growing population, and increasing expenses, it is not good public policy to divert taxpayer money to fund a program that has virtually no accountability, shows no evidence of improving the quality of education for any students (especially ones of limited economic means), decreases funding for already underfunded public schools, supports religious institutions in violation of the state constitution, and fosters discrimination against a variety of ethnic and demographic groups.

–From Maureen Downey, for the AJC Get Schooled blog