Corporate tax credits mean more school choice for parents

By Maggie Thurber | Franklin Center School Choice Fellow

Two students whose parents took advantage
of the Florida Tax Credit Scholarship Program.
Photo courtesy of Step Up For Children

There are corporate tax credits for all kinds of things – from making a film in a certain location to providing health insurance for employees. But a corporate tax credit for school scholarships?

Yep – in Florida.  And why not?

The Florida Tax Credit (FTC) Scholarship Program grants corporations a dollar-for-dollar tax credit for donations to scholarship funding organizations. The Florida legislature created the program in 2001 as a way to give low-income families a choice in their children’s education.

Under the program, corporations can redirect up to 100 percent of their corporate income, insurance premium and direct-pay sales taxes, 90 percent of their alcohol beverage excise, and/or 50 percent of their oil and gas severance tax liabilities to non-profit scholarship organizations like Step Up For Students.

Scholarships are for kindergarten through 12^th grade students who qualify for the free or reduced-price lunch program.  It can be used to provide tuition assistance to one of nearly 1,500 participating private schools or $500 to help cover transportation costs to an out-of-district public school.

The program was expanded in 2010 to allow more participation by students through an increase in the eligibility thresholds and by increasing the maximum amount that can be allocated. It also indexed the scholarship amount to public school spending.

According to the Step Up For Students website, the bill granting the expansion was approved by a bipartisan majority, which included “nearly half the Democrats, a majority of the Black Caucus and all but two in the Hispanic Caucus.”

It’s not just another voucher program – there’s accountability with it.

All students in grades 3 through 10 must take a state-approved test and a University of Florida research team reports test gains in reading and math. Schools that receive more than $250,000 in scholarship monies must also file a financial report with the state.

In 10 years, the number of participants has grown 643 percent – from 10,549 in the 2004-05 school year to 67,800 in the 2014-15 school year. And 54 percent of those students are from single-parent households.

The majority of the students are minorities and “tend to be among the lowest-performing students in their prior school,” regardless of how well their prior school did in overall performance.

Sounds like a good deal – right?

Not to everyone – or rather, not to those who gets money for public education.

The Florida Education Association, the Florida School Boards Association and the state Parent Teacher Association filed a lawsuit against the program on Aug. 28.

They claim the tax credit program is unconstitutional because it funnels taxpayer money into private and religious schools, which is similar to the complaint made in North Carolina.

And like in the North Carolina case, where a judge ruled the program unconstitutional, hypocrisy abounds.

In 2006, the Florida Opportunity Scholarship Program was overturned by the courts. That program granted students vouchers from the state so they could attend private schools. The court ruled the Florida Constitution prohibits using “public monies to fund a private alternative to the public education system.”

But unlike the Opportunity Scholarship Program, this isn’t money from the state – it’s a tax credit just like for contributions to churches or food banks or other non-profits.

No one claims those organizations are publicly-funded – why is the Florida Tax Credit scholarship any different?

Interestingly, the organizations waited until the FTC Scholarship was expanded to higher incomes. They didn’t have a problem with the program when it was just low-income, low-performing students.

Florida Senate President Don Gaetz issued a statement:

“When Florida Tax Credit Scholarships were available only to the very poor, who disproportionately are minority families, and other students with unique needs, the School Boards Association didn’t challenge their constitutionality. These students often bring more challenges to the classroom and require extra help, more individualized instruction and additional resources. It is only now, when the eligibility for scholarships has been expanded and when less-impoverished students can participate that the School Board Association has discovered its constitutional indignation."

But it doesn’t look good for the opponents of school choice.

A 2011 U.S. Supreme Court ruling in Arizona Christian School Tuition Organization v. Winn said that tax-credited contributions are not government expenditures.

“When Arizona taxpayers choose to contribute to (School Tuition Organizations), they spend their own money, not money the state has collected from respondents and other taxpayers,” the majority opinion read. “…the tax credit system is implemented by private action and with no state intervention. … Like contributions that lead to charitable tax deductions, contributions yielding (School Tuition Organization) tax credits are not owed to the state and, in fact, pass directly from taxpayers to private organizations.”

And it’s clearly a popular tax option, with more than $88 million pledged so far in 2014.

Ultimately, it’s all about the money. The organizations and entities that receive tax funds don’t want to lose funding – even when it’s funding they wouldn’t otherwise receive.

As for the children?

They’re just pawns in the struggle and whatever education best suits them be damned.