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By Stephen Herzenberg, Third and State

A story in Monday's New York Times explores the use of state tax credit programs to pay for "scholarships" for students who attend private schools. The story suggests that many of the students who receive such scholarships already attend private school and are not low-income.

To the extent that this is true, the political marketing of these programs as alternatives (for a select few students) to public schools in distressed communities is a "bait and switch." Educational tax credits actually siphon taxpayer dollars to subsidize private schools, reducing state revenues available for public schools.

Is this how the scholarships to attend private schools work under Pennsylvania's Educational Improvement Tax Credit (EITC) program?

Probably: there is no prohibition on EITC scholarships going to students already attending private schools; middle-class families are eligible to receive scholarships (the income limit for a family of four is $84,000); and there is no evidence that even this income limit is enforced. In fact, Pennsylvania's Act 46 of 2005 prohibits the state from requesting from scholarship organizations any information other than the number and amount of scholarships that they give out. I guess we're just supposed to trust the scholarship organizations to self-enforce the income limit.

The lack of definitive evidence on who receives scholarships under Pennsylvania's EITC program is consistent with the overall lack of accountability in the program, which has now cost Pennsylvania taxpayers more than a third of a billion dollars. EITC scholarships lack both financial accountability (how money is actually used) and educational accountability (who gets the scholarships and how scholarship students perform in school compared to similar public school students) — as we documented in a report last year. 

The New York Times story documents that Pennsylvania's program works very well for some businesses, lobbyists, and lawmakers. The lobbyists set up scholarship organizations, solicit business clients whose donations actually make them money (because the state tax credit alone is worth up to 90% of donations and the federal tax write-off takes the savings well over 100%), and the lobbyists and key lawmakers then influence which schools (and students?) get the scholarships. Then there's a photo op at the private school that local media write up as a demonstration of the business's generosity and the legislator's good work.

Everybody wins. Except perhaps the children whose public schools face funding cuts that much bigger because of the revenues lost to the EITC program.

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Comment Preferences

  •  Read this story today. (2+ / 0-)
    Recommended by:
    Mostel26, MiddleClassMom

    Please note that the URL headline for the link is

    "Scholarship Funds, Meant for Needy, Benefit Private Schools"

    and when you actually go to the story, the Headline is

    "Public Money Finds Backdoor to Private Schools"

    I think it is a very instructive article if someone would to get the public to pay for their kids to go to the private school they were going to anyway.

    This entire article could have been called "Writing a System Meant to Be Gamed, and Here's How To Game It."

    Too clever by half.

    Reminds me of  how financial regulations are written on purpose to "ambiguous" and "subject to interpretation" or "loosely defined" or essentially unenforced until we get to "Holy shit! The whole place is coming down! Whose in charge here?!"

    “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR

    by Phoebe Loosinhouse on Wed May 23, 2012 at 03:09:36 PM PDT

  •  I really appreciate you posting these diaries at (1+ / 0-)
    Recommended by:
    Mostel26

    DK.

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