Scholarship bill clears committee

April 11, 2019

Ray Carter

Legislation expanding an education program that has helped children across Oklahoma passed out of the House Appropriations and Budget Committee late Wednesday.

Senate Bill 407, by Sen. Dave Rader and Rep. Jon Echols, would increase the amount of tax credits that can be issued to those donating to programs that give private-school scholarships to low-income and special-needs children or donate to programs supporting traditional public schools.

Echols, R-Oklahoma City, urged legislators to support the bill, saying, “Lives are changed as a result of this scholarship.”

The beneficiaries of tax-credit scholarships are mostly low-income students, but also include children with autism, kids struggling with drug addiction, abused children, and homeless youth. Children from all those groups have been able to attend private schools that provide both an education and services targeted especially to those populations thanks to the tax-credit scholarship program.

Rep. Ryan Martinez, R-Edmond, said he has been present when families have received a tax-credit scholarship and described those events as inspiring.

“I can confirm that these are families that, when I’ve had these opportunities, otherwise are just trying to better their lives, and deserve that right as far as I’m concerned,” Martinez said.

Critics say the tax credit essentially diverts money from public schools. But independent research has shown otherwise when it comes to the scholarship tax credit.

For two years Jacob Dearmon and Russell Evans, professors at the Meinders School of Business at Oklahoma City University, have analyzed the scholarship side of the program and compared the “tradeoff of foregone tax revenue and foregone per pupil expenditures.” Their most recent study concluded Oklahoma government saved $1.39 for every dollar in tax credits issued in the 2017-2018 school year.

After accounting for all local, state and federal dollars expended on public schools, Dearmon and Evans found $2.91 in school spending was saved for every dollar issued in tax credits. Those savings are generated even if one-fourth of scholarship recipients would have still gone to private school without the program. Even after accounting for state revenue technically “lost” to the tax credits, the program still saved the state money. The authors wrote that “under every reasonably construed scenario the program performs better than break-even.”

“The only thing this bill can do is put money into the public schools,” Echols said. “If a student takes advantage of the private-school side of the opportunity tax credit, no money leaves the public school system.”

The portion of the program providing tax credits for donations to initiatives that support public schools has not undergone outside analysis, but it is generally understood to involve a minimal reduction in state revenue.

Echols’ bill would raise the amount of tax credits that can be issued to $15 million annually for the scholarship portion of the program and $15 million for the public-school side, for a total of $30 million per year. The legislation also includes reporting requirements and expands the public-school part of the program so all school districts can benefit. Currently, only smaller, rural schools can participate in that part of the program.

If the proposed maximum of $15 million in tax credits were issued for the public-school side of the program, Echols said the public system would get $30 million in total new funding.

“It is an injection of far more than the $15 million,” he said.

Echols noted the individual tax credit offered through the program can be used by anyone with $1,000 in tax liability, a group that includes most middle-class families. When asked why the tax credit for businesses was set at $100,000, Echols said the program is designed to encourage giving to education.

“We’re competing with other tax credits,” Echols said, noting the scholarship tax credit must be more appealing to businesses than other credits. In many instances, he said the question is not whether business donors are going to get a tax break, but what tax break they will use.

“We’re encouraging those businesses to invest in education in the state of Oklahoma as opposed to making investments in other tax credits,” Echols said.

Several members of the committee, mostly Democrats, peppered Echols with questions that often pertained to technical aspects of the program. Rep. Forrest Bennett raised both philosophical objections and logistical concerns, but conceded the program has benefited deserving families.

“This is interpreted by many as a situation in which we are trying to do right by a few at the expense of many,” said Bennett, D-Oklahoma City.

He also argued tax-credit derived funds would not be a reliable source of money for public schools.

“This is up to charitable contributions,” Bennett said. “These schools are not going to be able to guarantee that they’re going to get the same charitable contribution every year.”

But Rep. Charles Ortega, R-Altus, said a public-school superintendent in his district has used the tax-credit program to fund needed improvements and wrote Ortega urging him to expand the program.

The bill passed the committee 16-13 and now advances to the House floor.

“We’ve got something in here that helps children,” Echols said. “That’s the bottom line.”