Tax credit scheme ‘more like money laundering’

Secretary of Education Betsy DeVos will reportedly unveil a proposal for federal private-school scholarship tax credits Monday in Indianapolis. That makes a recent report on the topic especially timely.

The report, “Public Loss, Private Gain: How School Voucher Tax Shelters Undermine Public Education,” was released last week by AASA the School Superintendents Association and the Institute on Taxation and Economic Policy. It describes how 17 states, including Indiana, divert $1 billion to tax credits for contributions to private K-12 schools, including religious schools.

Remarkably, nine states provide a 100 percent tax credit for the scholarship donations. Taxpayers who make such donations get back every penny from the state, tax-free. Some can even make a profit on their contribution by claiming an additional deduction on their federal taxes.

Report co-author Carl Davis said that, in those states, donors may not even have a charitable interest in private schools or their students. It’s simply a risk-free scheme to make money while, in some cases, getting around prohibitions on public funding of religious schools.

“I don’t see how you can help but draw the parallel to money laundering,” Davis told Jennifer Berkshire and Jack Schneider in an episode of the “Have You Heard” podcast devoted to the tax credits. “It’s certainly more like money laundering than charitable giving. There’s no charity involved.”

Indiana’s scholarship tax credit is 50 percent; in other words, a taxpayer who donates $1,000 gets back $500, plus any savings from a federal deduction. There is no limit on the size of an individual’s state credit. There is an annual cap on the total tax credits the state will award, but the legislature voted last month to increase it: from $9.5 million this year to $12.5 million next year and $14 million the year after. Continue reading

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Voucher program gets outsized share of K-12 funding increase

Students who receive tuition vouchers to attend private religious schools will get nearly 10 percent of the K-12 education funding increase that Indiana lawmakers included in the 2017-19 state budget.

That’s an outsized share given that voucher students make up only about 3.5 percent of the students who receive funding from the state.

Per-pupil funding is less for voucher students than for public school students – voucher students get either 90 percent or 50 percent of the money that would otherwise go to the public schools where they live, depending on family income. But total funding for vouchers will increase because the number of voucher students is expected to continue to grow while public school enrollment is flat.

Projections in school funding data provided by the House Republican caucus show the number of voucher students increasing by over 10 percent in the next two years.

Indiana’s voucher program started small in 2011 but has grown rapidly as new pathways were added. It is now possible for nearly any child from a low-to-middle-income family to qualify by first being awarded a tuition scholarship from a state-approved scholarship granting organization.

The state is spending $146 million on vouchers this school year. The cost is projected to increase to $156.6 million next year and $167.4 million the following year. Continue reading

Scholarships a sweet deal at taxpayer expense

Indiana’s School Scholarship Tax Credit program is “almost too good to be true,” the head of the state’s Lutheran Scholarship Granting Organization tells the Fort Wayne Journal-Gazette.

That may be true if you’re one of the rich people getting a 50 percent kickback from the state on your contributions to private K-12 schools. Two-thirds of the credits go to Hoosiers who make more than a half million dollars a year, the JG’s Niki Kelly reports.

And it’s also a good deal for private schools like those represented by the Lutheran group and the other four Scholarship Granting Organizations that dispense the tax credits. No one else gets such generous help from the state to help with their fundraising.

But it’s arguably not so good for the Indiana taxpayers who are paying more and more money every year to fund private schools, most of them religious. And it’s not a good deal for public schools that struggle as the state sends more money to private schools.

Betsy Wiley, president and CEO of the Institute for Quality of Education, another of the Scholarship Granting Organizations, suggests that paying for the program is a wash because the state isn’t paying to educating students who might otherwise be in public school.

But that’s bogus. It’s likely that most of the scholarships are going to students who would never have attended public schools. So their schooling is an added-on cost for the state.

More significantly, any student who receives a scholarship from a Scholarship Granting Organization for one year becomes eligible for taxpayer-funded vouchers for as long as his or her family remains income-eligible. And the student’s siblings get vouchers too.

Continue reading

‘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. Continue reading

Tax credits for private-school scholarship donations: Yes, Indiana has them

The New York Times reported this week on abuses in state programs that provide generous tax breaks for donations that fund scholarships for private K-12 schools.

The article, which focused on Georgia, Pennsylvania and Arizona, said the programs were created to “help needy students escape struggling public schools.” Instead, they’ve turned into a way for religious schools to milk the public treasury, often to benefit families who could afford tuition without help.

“This school year alone, the programs redirected nearly $350 million that would have gone into public budgets to pay for private school scholarships for 129,000 students, according to the Alliance for School Choice, an advocacy organization,” the Times says.

The article says eight states have programs that provide tax credits for donations that are funneled to private schools through nonprofit “scholarship granting organizations.” And yes, Indiana is one of them.

Indiana’s tax-credit scholarship program is small and limited to low- or middle-income families. On the other hand, Indiana last year enacted the nation’s most extensive voucher program, in which the state – not private donors – gives money to parents to send their children to private schools.

Some of the Christian schools that receive voucher funding in Indiana provide the same A Beka and Bob Jones curricula as the sectarian schools described by the Times, rejecting evolution, teaching that God created the world in six days and presenting a politically biased picture of American history. Continue reading