Vouchers are already here, under another name

I’ve been thinking about charter schools and school vouchers for a long time.
 
Many have said that vouchers are the slippery slope to privatization of the public schools, from which charter schools are already draining funds.  I share the same fear.  But the more I learn, the less simple it seems.

Let’s remember that charters are public schools too, in the sense that they are paid for by the taxpayer, are accountable for student performance through the statewide PSSA tests, and are subject to public and media scrutiny through PA Right To Know laws.

Nevertheless, many charters are profit-making enterprises, and, as seen in recent headline-making scandals, can contract with providers who have a suspect relation to the charter operators; and owners and principals can, sometimes unconscionably, earn money from more than one charter school at the same time.

As publicly-funded schools, charters are, in fact, in competition with any private and religious schools that might receive voucher money.

See Philadelphia’s Archbishop Chaput’s remark quoted in the 1/22/12 Daily Local editorial “Philly archdiocese has little faith in Roman Catholics”:

“It’s useful to wonder how many of our schools might have been saved if, over the last decade, Catholics had fought for vouchers as loudly and vigorously as they now grieve about school closings.”

That is probably true.  And some of those voucher-supported students would doubtless have transferred from, or never have gone to, charter schools, which get a lot more tax money per student than even the most generous voucher proposals.

My view, which many may not like, is that there will be vouchers and there will be charters; the issue is to hold both to an educationally justifiable role that does not diminish traditional public education.

There already are charters.  And actually, there already are vouchers, in the sense of a procedure to turn over what would otherwise be tax revenue to private and religious schools.

This is public money, because if a corporation didn’t use the voucher-like option known as EITC, its tax money would go to the state. 

Let’s be clear about this: if your marginal tax bracket is 25%, and you donate $100 to a qualified school, church, or other non-profit, you are really donating $75 of your own money and the US government—meaning other taxpayers—is donating the other $25, since you don’t have to pay that in your tax bill. If a corporation donates $100,000 for scholarships, and thus reduces its taxes by $90,000, the rest of us are making up for the loss of that tax revenue.

So, if you believe it’s a slippery slope, we’re already on it.

See “Educational Improvement Tax Credit Program (EITC),” downloadable as EITC_Business_2011_F.pdf at the site of the state’s Department of Community and Economic Development. 

The overall EITC download explains it all.  Instead of paying its taxes due to the state, your company can contribute through a non-profit intermediary.  Download the full list of those as Scholarship Organizations, Pre-Kindergarten Scholarship Organizations, and Educational Improvement Organizations (dedicated more to supporting innovation in public education) farther down that page).

The Scholarship Organization in turn can award scholarships for students to attend any school in the Commonwealth.  That school can be public or private, profit or non-profit, religious or not.  The student needs to be in a household that (currently) has an annual income of $60,000 or less (plus more for each other dependent, plus a lot more if the student is considered to have a disability.

The company can also count a donation of personal property or services, including hourly wages.  So your company organizes volunteers to assist a qualifying organization, or donates old computers, and gets a tax credit.

Well, you may say, isn’t this the same as making a donation to a non-profit organization, just like the rest of us?  Not at all, because on the whole corporations can’t deduct charitable contributions from their income for PA tax purposes.  (Download the instructions here after searching for 2011_rev-1200.pdf.)

The EITC is a tax credit, of which PA businesses can claim a wide array (see 2011 Restricted Tax Credits).

You take a credit not off your income but off the tax you owe.  Suppose your corporation’s income in 2011 was $1,000,000.  “Pennsylvania’s corporate tax structure consists of a flat rate of 9.99% on all corporate income” (Tax Foundation).  So, your corporate tax will be $99,900.  But if you donate $99,000 to a qualifying Scholarship Organization, you deduct a credit of 75% of that from what you owe the state.  Or, if you agree to donate to that organization two years in a row, you get a tax credit for 90% of the donation. 

Voila!  Your tax is now (rounding off) $10,000, and the other $90,000 went to an organization that channels it in scholarships to a public, charter, religious, or other private school.

Just like vouchers!  Except, the most viable variants of this year’s stalled voucher bill are much more restrictive than the current EITC regarding the school students attend before getting the scholarship and the student’s household income.

See more background in Eric Boehm, “Educational choice in PA has expanded in past 20 years,” Daily Local News, 1/23/12):

In 2002, Pennsylvania created the EITC program, which is funded through corporate tax contributions.

The tax credit program is widely considered a success — the PSEA’s official position is it neither supports nor opposes it. Last year, in a vote of 190-7, the state House approved a bill to increase the cap on the EITC program to $200 million annually.

“I think EITC is the signature program in Pennsylvania when it comes to school choice,”said state Rep. Tom Quigley, R-Montgomery, who sponsored the bill expanding the program last year. “It seems like all parties have been satisfied with it.”

The state Senate has yet to take it up the EITC expansion, and Corbett wants to see it rolled together with vouchers and a series of academic and financial reforms to the state’s charter school system….

This year, more than 90,000 students are enrolled in charter or cyber charter schools, and an additional 38,000 students take advantage of the EITC to defray the cost of a private education. Another 20,000 students are being home schooled this year.

So it’s happening, and it has been happening for ten years.  People who say we have to stop vouchers have already lost.

Please take away this lesson: vouchers already exist under another name.  The real question is: how much public money will the state take out of other budgets and put into EITC and/or vouchers?

Maybe all the talk abut vouchers is just a diversion, and the real action is taking place around the EITC budget.

I’ll stop here and write more on vouchers soon.