Ben DeGrow, Education, Featured, Gold Dome, Politics, Taxes

Moving forward on scholarship tax credits in Colorado

Although programs increasing school choice through private investment have a strong legal track record, opponents continue pushing back in the courts. Their determined attacks shouldn’t deter Colorado families seeking better schools.

The New Hampshire Supreme Court delivered good news with an Aug. 28 ruling reinstating the Corporate Education Tax Credit. The two-year-old program reduces a business’s tax bill for each donation made to a nonprofit group giving K-12 students private tuition scholarships.

icon_op_edNew Hampshire’s program is overwhelmingly popular among participants. After one year, nearly 97 percent of low-income scholarship families said they were satisfied (including 89 percent “very satisfied”) with their newly chosen school.

Parental satisfaction didn’t dissuade New Hampshire choice opponents from taking their political defeat into the legal arena — a desperate attempt to slow down a growing national trend. Fourteen states now have enacted scholarship tax credit programs, harnessing private investment to expand opportunities for students.

Along with residents in most states, Coloradans currently receive only a tax deduction for giving to the state’s small number of nonprofit K-12 scholarship organizations. No one asserts that the deduction violates the state’s constitution. A tax credit would offer the same kind of incentive, but bigger, to individual and business scholarship donors.

The educational need is real. More than a third of low-income teens don’t finish high school on time. Many attend unsafe schools, or schools where they aren’t academically challenged. Sometimes, students’ individual learning needs just aren’t being met.

Colorado’s scholarship organizations serve many students well, but thousands are turned away because not enough funds are available.

Many school choice foes claim they are concerned about public tax dollars being used in private religious schools. Although parents have a neutral choice of different types of schools, this line of argument sometimes has succeeded in shutting down publicly funded voucher programs.

However, scholarship tax credit programs work differently because they don’t touch public dollars. These programs instead encourage donors to give more private dollars to nonprofit organizations that help families pay private school tuition. This design places the programs on stronger legal ground. Foes have not yet been able to shut down a tax credit program.

Following the U.S. Supreme Court’s lead in the 2011 Winn decision, New Hampshire’s highest court declared that the taxpayers who brought the suit could not stop the program just because they didn’t like it. Scholarship tax credits didn’t cause them any “personal injury.”

The ruling nullifies the questionable logic of a 2013 decision. The lower court judge decided tax credits made private donations “money that would otherwise be flowing to the government.” As a result, he concluded families could not use scholarships to attend a religious school.

On the same day New Hampshire successfully fended off a major legal attack on school choice, special interest groups filed a lawsuit to stop Florida from issuing tax credits for K-12 scholarship donations. This brash legal attack threatens bigger consequences.

Florida’s 13-year-old scholarship tax credit program is the nation’s largest. A successful lawsuit potentially would harm 67,000 low-income scholarship students attending more than a thousand different schools across the Sunshine State.

The program mirrors New Hampshire’s overwhelming parental satisfaction. A required independent annual evaluation further shows incoming Florida students represent some of the most disadvantaged learners. With a private tuition scholarship, though, they learn as much each year as the average student nationwide. One study also found that the competitive pressure of losing kids to private schools helped struggling public schools improve.

And because the average scholarship size is smaller than per-pupil state funding, each student who takes a scholarship provides financial relief. A 2010 legislative analysis found Florida’s program, then much smaller, saved the state $36.2 million. Arizona and Pennsylvania programs have demonstrated similar large savings.

Florida is not the only scholarship tax credit state with a pending legal challenge. School choice supporters in neighboring Alabama and Georgia also are playing defense in the courts. It’s unclear how many setbacks choice foes must experience before they abandon their litigious strategy.

Some established interests may be threatened by the proven success of scholarship tax credits, and the promise they offer students in more states. But that’s no reason to stop Colorado’s school choice champions from pressing forward.

Ben DeGrow is senior education policy analyst for the Independence Institute, a Denver-based free market think tank.

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