The Oklahoma Parental Choice Tax Credit is one of the most robust school-choice programs in the United States. But a new report notes slight modifications to the program could make it even more impactful and incentivize the creation of new private schools to serve more families across the state.

In his report, “What the Education Choice Movement Can Do Next: Personal-Use Tax Credits for K–12 Education,” Matthew Ladner, senior advisor for education policy implementation in the Center for Education Policy at The Heritage Foundation, declared that Oklahoma’s tax-credit program is the “most robust personal-use education tax credit to date.”

But he warned that some provisions of the program may deter new private schools from launching in Oklahoma, which artificially restricts opportunities for Oklahoma families. While more than 160 private schools are currently participating in the Oklahoma Parental Choice Tax Credit program, Ladner noted more are needed—and new private schools must be part of the mix.

“Oklahoma covers 68,577 square miles in land area, so 160 participating private schools is only one for every 480 square miles in the state,” Ladner wrote. “The state’s population of course is not distributed evenly throughout the state, but for context: Oklahoma has more than 1,700 public schools. The relative scarcity of private schools in the state makes the onboarding of new private schools crucial to the success of the program. Educators could create new private schools, especially in areas in which demand exceeds supply.”

The Oklahoma Parental Choice Tax Credit Act provides refundable tax credits of $5,000 to $7,500 per child to help Oklahoma families cover the cost of private school tuition. The lower a family’s income, the larger the tax credit.

The program is capped at $150 million in tax credits in 2024. The cap gradually increases to $250 million by 2025.

However, Ladner noted that parental demand could easily exceed supply under those limits.

That has already proven to be the case in year one of the program.

According to the Oklahoma Tax Commission, roughly 36,000 applications were submitted for the school-choice program in its first year. But 5,600 applicants were rejected because the $150 million cap was quickly reached.

As more families become aware of the program, demand is expected to increase. While existing private schools are looking to expand their capacity to serve a growing population of students, parental demand in some parts of Oklahoma could lead educators to launch new private schools.

But new schools may be deterred from entering the field due to the financial uncertainty created when students could be denied tax credits due to the cap being hit, Ladner noted.

He recommended that Oklahoma policymakers either eliminate the program cap or create an automatic “escalator” that raises the cap limit by a set amount when parental demand is poised to exceed available tax credits.

Ladner noted that Florida has an escalator clause for a similar program. Under that law, whenever demand consumes 90 percent of available credits, the program cap is automatically increased by 25 percent.

Providing a similar safeguard in Oklahoma will ensure that new private schools can launch without the fear of sudden student withdrawal due to families qualifying for, but not receiving, their child’s tax credit if the cap is reached.

“An uncapped credit or a credit with a larger cap with a robust, demand-driven escalator would also provide greater certainty to those wishing to either create new private schools or to expand existing facilities,” Ladner wrote.

He also recommended that Oklahoma policymakers allow the credit to go to students attending private schools that are in the process of obtaining accreditation, rather than only those that are already accredited.

Because accreditation can be a multi-year process, Oklahoma’s current program effectively discourages the creation of new private schools since students at those schools would not qualify for the credit during the initial years of operation.

“If the Oklahoma statute allowed private school tuition from either accredited private schools, private schools in the process of seeking accreditation, or private schools simply recognized to operate by the state, it would give new private schools an opportunity to get off the ground and compete with existing private schools, district schools, and charter schools,” Ladner wrote.

By maximizing the benefit of the Oklahoma Parental Choice Tax Credit so that more families can use it and more schools can serve students, Ladner noted that Oklahoma policymakers would also be increasing financial efficiency.

While the maximum tax credit offered through the school-choice program is currently $7,500, that’s far less than the per-pupil taxpayer spending in traditional public schools in Oklahoma.

According to Oklahoma State Department of Education data from the Oklahoma Cost Accounting System, public school district expenditures in 2023 totaled $9,538,453,992, and enrollment in the 2022-2023 school year totaled 701,066 students. That means Oklahoma public schools had an average of $13,605 per student that year.

“If Oklahoma parents hit the tax-credit cap in the third year of the program, the credit would educate more students than Oklahoma’s highest-funded school district (Oklahoma City),” Ladner wrote, “but would only provide a funding amount equal to approximately 56 percent of the Oklahoma City district’s budget.”