February 9, 2021 Analysis of Tax Credit Scholarship Academic Outcomes and State Income Participation Requirements PUBLIC FUNDING across the UnitedPUBLIC States FUNDING

RI

PRIVATE

PUBLIC PRIVATE PUBLIC

BACKGROUND:

Members of the House of Representatives introduced HB142, a bill that would expand the state’s existing tax credit scholarship program, the Qualified Education Expense Tax Credit (QEETC) program. HB142 would increase the state’s cap on tax credits issued for donations to scholarship-granting organizations from $100 million to $150 million annually, despite no evidence or publicly-available information showing improved academic outcomes among students receiving scholarships. The proposed expansion of the QEETC program would also raise the maximum tax credit doled out to donors to $25,000—a 250 percent increase from the original $10,000 limit.

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STATES WITH ONE TAX CREDIT SCHOLARSHIP PROGRAM

Alabama Nevada Georgia RI Illinois South Dakota Montana

STATES WITH TWO TAX CREDIT SCHOLARSHIP PROGRAMS

Florida

STATES WITH THREE OR MORE TAX CREDIT SCHOLARSHIP PROGRAMS

STATES WITH PUBLICLY-AVAILABLE REPORT(S) FOR THEIR TAX CREDIT SCHOLARSHIP PROGRAM(S)

Alabama Kansas South Carolina Arizona Nevada South Dakota New Hampshire Virginia Indiana Oklahoma Iowa Rhode Island

04.523.00014 • [email protected] • SouthernEducation.org • Follow us on social media 2 TAX CREDIT SCHOLARSHIPS DO NOT a norm-referenced assessment, 74 percent (110 IMPROVE ACADEMIC ACHIEVEMENT students) either decreased or maintained the same score after participating in the Nevada Opportunity Scholarship Program.3 • In the 23 years tax credit scholarship (TCS) programs have existed, very little scientific research has • Because many tax credit scholarships lack surfaced showing TCS recipients experiencing evaluation and comprehensive reporting significant academic improvements by enrolling in requirements, there is a dearth of research in this a private school instead of their local neighborhood area. Research on school vouchers, however, is the public school. Out of the 24 TCS programs closest comparison that exists due to the nature nationwide, only three programs—the Exceptional of public funds (or benefits in this instance)being Needs Scholarship in South Carolina, the Florida similarly used to pay for private school tuition. Tax Credit Scholarship program, and the Nevada Comprehensive studies have shown that no clear Opportunity Scholarship Program—produced academic advantage exists for students attending state reports with public academic assessment private schools with vouchers compared to similarly results. Both in the 2016-2017 and 2017-2018 situated students attending public schools. In fact, years, students participating in South Carolina’s tax in some states such as Louisiana4 and Indiana5, credit scholarship program experienced a decline participation in voucher programs had negative in reading results and made no gains in math.1 In effects on student achievement. Florida, the 2019 report issued by the state revealed that students who did not participate in the Florida INCONSISTENT TCS INCOME ELIGIBILITY Tax Credit Scholarship program are better off STANDARDS AND OTHER ISSUES academically than students who participated, and scholarship recipients did not experience any gains • Eight of the 24 tax credit scholarships currently 2 in math or reading. A 2018 report on the Nevada operating in 19 states, including in Georgia, have Opportunity Scholarship Program shows that out no family income threshold to determine student of a group of 149 scholarship recipients who took eligibility, while four more programs have a threshold

04.523.00014 • [email protected] • SouthernEducation.org • Follow us on social media 3 above a six-figure annual income for students living improve transparency and accountability for the in family households of four. For example, a student QEETC program.8 living in a family of four earning up to $142,913 in Oklahoma is eligible to receive a TCS to attend a PROGRAM REPORTING INCONSISTENCIES private school.6 • The majority of states report neither academic • It is inequitable to provide tax breaks to individuals achievement nor the racial or ethnic makeup of who donate money so that students from affluent student participants. Reporting requirements are families can attend private schools. It effectively inconsistent, leading to widely-varying availability reduces the government’s annual tax revenue and of data regarding student performance, student siphons funding away from research-based school eligibility, family satisfaction, discrimination, and improvement efforts for students from low-income other critical information to help assess the impact families who remain in the public school system. of TCS programs. For example:

• In New Hampshire, participating families are paying • Only three of the 24 TCS programs publish an average of $3,249 each in out-of-pocket tuition any academic achievement data associated expenses annually to be able to pay for their private with student participants; and school tuition.7 This amount does not include fees related to transportation, extracurricular activities, • Of the 17 total TCS programs with state etcetera—which will create an additional burden for reports, five do not disaggregate program low-income families. data by race or ethnicity.

• In Georgia, a January 2021 report from the State Auditor’s office found that the state’s oversight mechanism for the QEETC program was insufficient, and that the state needed additional measures to

04.523.00014 • [email protected] • SouthernEducation.org • Follow us on social media 4 • Some federal and state lawmakers hope to advance TCS programs despite their inconsistent and unclear effects on student achievement and global understanding of student participants.

THE TROUBLING RACIAL HISTORY OF PRIVATE

• The origins of school privatization programs are rooted in efforts to avoid desegregation. Southern state legislatures passed more than 450 bills from 1954 to 1964 to avoid desegregation and fund a system to fund private schools with public dollars.9 From the mid-1960s to 1980, in the peak of the era of court-ordered school desegregation, private school enrollment in the South grew by more than 200,000 students.10

• As a region, the South’s public schools are 23 percent Black,11 but its private schools are only 12 percent Black.12 Sixty-six percent of private schools in the South are white, while 43 percent of students in the South’s public schools are white.

EXISTING TAX CREDIT SCHOLARSHIP PROGRAMS

State Program Funding Eligibility Requirements Assessments and academic outcomes

Alabama Education Scholarship A student whose family qualifies for the None of the publicly available reports Program federal free and reduced-price lunch are disaggregated by race/ethnicity. (FRPL) program ($47,638 for a family They are forms displaying amounts of four in 2019–20) is eligible to receive paid and compliance with eligibility a scholarship. Once a student receives requirements. a scholarship, the family’s income may not exceed 275 percent of the federal poverty level ($70,813 for a family of four in 2019–20).

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State Program Funding Eligibility Requirements Assessments and academic outcomes

Arizona Original Individual None On page 14, the report shows that a Income Tax Credit plurality (39 percent) of scholarships Scholarship went to families with an income greater than 342.25 percent of the federal poverty level. The report does not disaggregate by race or show any academic information.

Low-Income A student living in a family of four with a The publicly available report shows the Corporate Income Tax total household income $88,129 or less growth of the program, participating Credit Scholarship is eligible to receive this scholarship. for schools, and amounts disbursed. The this scholarship. report does not disaggregate by race or show any academic information.

Switcher Individual None On page 23, the report shows that Income Tax Credit nearly 60 percent of scholarships went Scholarship to families with an income greater than 185 percent of the federal poverty level. The report does not disaggregate by race or show any academic information.

Lexie’s Law for None On page 41, the report shows that Disabled and nearly 60 percent of scholarships went Displaced Students to families with an income greater than 185 percent of the federal poverty level. The report does not disaggregate by race or show any academic information.

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State Program Funding Eligibility Requirements Assessments and academic outcomes

Florida Florida Tax Credit A student living in a family of four with The 2019 report for the program Scholarship Program a total household income of $66,950 finds that students who did not or less is eligible to receive this participate in the program are better scholarship. off academically; former Florida Tax Credit (FTC) students who returned to public schools performed at the 37th Florida percentile in ELA and the 36.6th Florida percentile in math, while other subsidized meal-eligible public school students who never participated in the FTC Program performed at the 43.7th Florida percentile in ELA and the 42.2nd Florida percentile in math. The typical FTC student also did not experience any gains in math or reading.

Hope Scholarship None The publicly-available report for this Program program’s participating students and families does not delve into academic outcomes.

Georgia Qualified Education None There is no publicly-available report for Expense Tax Credit the Qualified Education Expense Tax Credit program.

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State Program Funding Eligibility Requirements Assessments and academic outcomes

Illinois Invest in Kids A student living in a family of four with a There is no publicly-available report for Program total household income $77,250 or less the Invest in Kids Program. is eligible to receive this scholarship. Once a student receives a scholarship, a family of four may earn up to $103,000 for the duration of the scholarship or scholarship renewal while retaining eligibility.

Indiana School Scholarship A student living in a family of four with a The publicly-available report for this Tax Credit total household income $95,275 or less program does not delve into academic is eligible to receive this scholarship. outcomes.

Iowa School Tuition A student living in a family of four with In the 2016-17 year, only 69 percent of Organization Tax a total household income $103,000 participating students’ financial need Credit or less is eligible to receive this was met through scholarships, leaving scholarship. up to 31 percent of families to cover the out-of-pocket expenses of attend- ing a private school. The report does not disaggregate by race or show any academic information.

Kansas Tax Credit for Low A student living in a family of four with a The publicly-available report for this Income Students total household income $33,475 or less program does not delve into academic Scholarship Program is eligible to receive this scholarship. outcomes.

Louisiana Tuition Donation A student living in a family of four with There is no publicly-available report for Credit Program a total household income of $64,375 the Tuition Donation Credit Program. or less is eligible to receive this scholarship.

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State Program Funding Eligibility Requirements Assessments and academic outcomes

Montana Tax Credits for None There is no publicly-available report Contributions to for the Tax Credits for Contributions Student Scholarship to Student Scholarship Organizations Organizations program.

Nevada Educational Choice A student living in a family of four with a The publicly-available report for this Scholarship Program total household income $77,250 or less program’s participating students and is eligible to receive this scholarship. families does not delve into academic outcomes.

New Hampshire Education Tax Credit A student living in a family of four with a In the 2018-2019 school year, reports Program total household income $77,250 or less is show that 413 students received schol- eligible to receive this scholarship. arships, and 259 parents responded to a survey about the scholarship. Survey respondents revealed that they are col- lectively paying $841,648, or an average of $3,249 each, out-of-pocket in tuition expenses annually to be able to pay for their private school tuition. This amount does not include fees related to trans- portation, extracurricular activities, etc. —which will create an additional burden for low-income families. Oklahoma Equal Opportunity A student living in a family of four with a The publicly-available report for this Education Scholarships total household income of $142,913 or program’s participating students and less is eligible to receive this scholarship. families does not delve into academic outcomes.

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State Program Funding Eligibility Requirements Assessments and academic outcomes Pennsylvania Opportunity A student living in a family of four with There is no publicly-available report for Scholarship Tax Credit a total household income of $90,000 the Opportunity Scholarship Tax Credit Program or less plus $15,842 for each child in Program. the family is eligible to receive this scholarship. Education Improvement A student living in a family of four with There is no publicly-available report for Tax Credit Program a total household income of $90,000 the Education Improvement Tax Credit or less plus $15,842 for each child in Program. the family is eligible to receive this scholarship. Rhode Island Tax Credits for A student living in a family of four with The publicly-available report for this Contributions a total household income of $64,375 or program’s participating students and to Scholarship less is eligible to receive this scholarship. families does not delve into academic Organizations outcomes. South Carolina Educational Credit for None The report shows a consecutive two-year Exceptional Needs decline in Reading assessment results Children Fund between 2016 and 2018 and stagnation in math results during the same period. The report also shows that students in participating private schools score lower on their assessments than do students nationally.

South Dakota Partners in Education A student living in a family of four with The publicly-available report for this Tax Credit Program a total household income of $72,705 program’s participating students and or less is eligible to receive this families does not delve into academic scholarship. outcomes.

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State Program Funding Eligibility Requirements Assessments and academic outcomes

Utah Special Needs None Utah’s Special Needs Opportunity Opportunity Scholarship Program is a tax credit Scholarship Program scholarship enacted in 2020 and launching in 2021. No report on the program currently exists.

Virginia Education A student living in a family of four with The publicly-available report for this Improvement a total household income of $75,300 program’s participating students and Scholarships Tax or less is eligible to receive this families does not offer any academic Credits Program scholarship. outcome data.

*Data comes from EDChoice’s Dashboard

Southern Education Foundation, founded in 1867, is a 501(c)(3) nonprofit organization supported by partners and donors committed to advancing equitable education policies and practices that elevate learning for low-income students and students of color in the southern states. We develop and disseminate research-based solutions for policymakers and grow the capacity of education leaders and influencers to create systemic change.

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References

1 “Report on the Education Credit for Exceptional Needs Children (ECENC) Program: Compliance and Assessment Results for 2017-2018.” SCEOC. South Carolina House Education Oversight Committee. https://www.scstatehouse.gov/reports/EducationOversightComm/ECENC%20 Annual%20Report,%202019.pdf. 2 Kisa, Zahid, Melissa Dyehouse, Marisa Benz, and Carolyn Harrington. “Evaluation of the Florida Tax Credit Scholarship Program: Participation, Compliance and Test Scores in 2018-19” Learning Systems Institute. Florida State University, June 2020. http://www.fldoe.org/core/fileparse. php/5606/urlt/FTC-Report1819.pdf. 3 “Nevada Opportunity Tax Credit Scholarship Program: Fact Sheet.” Office of Student & School Supports. Nevada Department of Education, November 2018. 4 Abdulkadiroğlu, Atila, Parag A. Pathak, and Christopher R. Walters. “Free to Choose: Can School Choice Reduce Student Achievement?” Amer- ican Economic Journal: Applied Economics 10, no. 1 (2018): 175–206. https://doi.org/10.1257/app.20160634. 5 Dynarski, Mark. “On Negative Effects of Vouchers.” The Brookings Institution, July 12, 2017.https://www.brookings.edu/research/on-nega - tive-effects-of-vouchers/. 6 Income Eligibility Guidelines - Oklahoma Equal Opportunity Scholarship. https://osfkids.org/wp-content/uploads/2019/04/2019-20-IncomeEli- gibilityGuidelines.pdf 7 SEF analysis of parent survey and expenditure information in 2018-19 Scholarship Organization Reports in New Hampshire. Parent survey respondents revealed that they are collectively paying $841,648, or an average of $3,249 each, out of pocket in tuition expenses annually to be able to pay for their private school tuition. 8 “Qualified Education Expense Tax Credit and Student Scholarship Program.” Georgia Department of Audits and Accounts, January 12, 2021. http://www.open.ga.gov/openga/report/downloadFile?rid=25619 9 “A History of Private Schools & Race in the American South.” Southern Education Foundation, March 13, 2019. https://www.southerneducation. org/publications/historyofprivateschools/. 10 Ibid. 11 “Enrollment and Percentage Distribution of Enrollment in Public Elementary and Secondary Schools, by Race/Ethnicity and Region: Selected Years, Fall 1995 through Fall 2029,” 2019. https://nces.ed.gov/programs/digest/d19/tables/dt19_203.50.asp. 12 Stephen, Broughman P., Brian Kincel, and Jennifer Peterson. “Characteristics of Private Schools in the ...” National Center for Education Statistics. U.S. Department of Education, June 2019. https://nces.ed.gov/pubs2017/2017073.pdf.

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