‘Scholarship granting organizations’ drive Indiana voucher expansion

Donations for private school scholarships yield big returns from taxpayers

Here’s a feature of Indiana’s school voucher program that we critics may have overlooked. The program’s rapid growth is being driven by the awarding of vouchers to students who previously received private school scholarships – even small ones – from what the state calls scholarship granting organizations.

Credit Vic Smith of the Indiana Coalition for Publication Education for calling attention to the situation in a column highlighting findings of the annual school voucher report from the Indiana Department of Education.

The DOE report reveals that nearly two-thirds of first-time voucher recipients in 2014-15 had never attended a public school. And over half of the 13,000 new voucher recipients qualified because they or a sibling had previously received a scholarship from a nonprofit scholarship granting organization.

“This is simply giving vouchers not to those low-income families who wanted to make a choice but to families who had already made the choice and now just want the taxpayers to pay for their child’s private or religious education,” Smith writes.

As Smith suggests, many of these families are not low-income. Scholarships from scholarship granting organizations – and the resulting vouchers – are available to families that make up to 370 percent of the federal poverty rate: over $100,000 for a family of five.

When the voucher program was created in 2011, Gov. Mitch Daniels sold the idea as a way to let poor kids escape “failing” public schools; he said they would have to attend a public school for a year to qualify. Later the program was expanded to let in siblings; special-needs students; and students who, if not for a voucher, would attend a public school that got an F on Indiana’s grading system.

Those are the voucher routes that attracted most of the attention. But from the start, students could also qualify if they previously received support from a state-approved scholarship granting organization, under a tax credit program that pre-dated vouchers.

At first, only a few students qualified through that path. But its use has grown 10-fold over the four years that the voucher program has been in existence.

State law provides a 50 percent income-tax credit for contributions to scholarship granting organizations, which use the money to help students pay tuition at private K-12 schools. To qualify for a voucher, a student needs to have received a scholarship for $500 or more.

Suppose you give $500 to such an organization, helping pay tuition for a child to attend private kindergarten. You get $250 back in a tax credit, so your investment is $250. And the child qualifies for vouchers from grades 1-12.

The average voucher amount is about $4,000 a year. Multiply that by 12 years and the return is $48,000. Now say the child has a brother and a sister; they also qualify for vouchers under the sibling pathway. That triples the return.

With that situation, every dollar you invest can leverage nearly $600 from the taxpayers. What fundraiser wouldn’t dream of being able to make a pitch like that?

The state has limited tax credits for donations to scholarship granting organizations to $7.5 million a year. But now legislators want to raise the budget to $12.5 million in 2015-16 and then to increase the amount by up to 20 percent each subsequent year. That’s a good chunk of change. But the cost of the credits could be far outpaced by the cost of the additional vouchers that are created.

There are four approved scholarship granting organizations currently in business, and all are part of or affiliated with organizations that provide or promote private education.

The Institute for Quality Education is a partner of the advocacy group Hoosiers for Quality Education. The Sagamore Institute Scholarships for Education Choice is tied to the Sagamore Institute, a free-market and pro-voucher think tank. School Scholarship Granting Organization of Northeast Indiana is a program of the Catholic Diocese of Fort Wayne and South Bend. The Lutheran Scholarship Granting Organization provides scholarships to Lutheran schools.


12 thoughts on “‘Scholarship granting organizations’ drive Indiana voucher expansion

  1. Does anything in the law prevent a family from making donations to one of the Scholarship granting organizations so their child will be considered for the scholarship that gives them the voucher?

    • Good question. My reading of the Department of Education Donor FAQ is that that would not be allowed (question 5, last sentence of the answer). However, the donor may specific what school will receive the money. And parents apply to the school, not to the SGO. I can imagine a parent telling the school, “I donated $500 for your to provide a scholarship, so please give that scholarship to my child.” That’s just my speculation; I haven’t researched this.

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