Scholarship critics notably silent on millions in tax credits
April 17, 2019
This year, legislation has advanced to expand the Oklahoma Equal Opportunity Education Scholarship Act by raising the cap on tax credits used to attract private investment in public schools and in private-school scholarships.
Opponents argue tax credits reduce available state funding for schools. But those same critics have been largely silent when it comes to a host of other tax-credit measures that involve at least $116 million in combined fiscal impact on state tax collections.
When Senate Bill 407, by Sen. Dave Rader and Rep. Jon Echols, was scheduled for a hearing in House committee, the Oklahoma State School Boards Association and the Cooperative Council for Oklahoma School Administrators sent an e-mail to their respective members.
It declared, “Increasing tax credits robs the state of potential revenue.” The groups said passage of tax-credit legislation “could make it more difficult to sustain and increase education funding.”
The email also directed recipients to a blog post from the Oklahoma Parent Legislative Action Committee that declared, “Oklahoma must conserve its tax base and invest all available revenue in critical core services including public education,” rather than approve the education tax credit.
Yet the state’s legislative website shows roughly 30 tax-credit measures, involving millions of dollars, have been filed with many advancing through the Legislature this year.
House Bill 2095 extends a tax credit for “clean-burning” motor vehicles that is currently set to expire in 2019. HB 2095 maintains the credit through 2026. Up to $20 million in credits could be issued annually. It passed the Oklahoma House of Representatives on an 89-5 vote, a margin indicating no organized opposition from the groups who say they oppose SB 407’s tax credits because of alleged indirect impact on available funding for schools.
SB 746 creates an income tax credit for software or cybersecurity employees, allowing up to $5 million in credits annually. It passed the Senate 40-5 and 26-0 in the House Appropriations and Budget Committee.
Senate Bill 797 extends a tax credit for investments in clean-burning motor vehicles to 2026 at an estimated cost of $7.9 million per year. It passed the Senate on a 37-3 vote and the House Energy and Natural Resources Committee on a 16-0 vote.
SB 826 creates a $3,000 income-tax credit for the purchase of an electric car and a $1,500 credit for buying a hybrid vehicle. The bill would have an impact of up to $8 million per year. It passed the Senate on a 28-11 vote.
Several bills have been filed to make the state’s earned income-tax credit “refundable.” Under those measures, many filed by Democrats, if the tax credit is larger than an individual’s tax liability, the taxpayer is directly paid the difference. According to legislative fiscal analysis, the earned income-tax credit bills would reduce state revenue by $25 million annually.
Another measure, House Bill 2511, would provide an income-tax exemption of up to $25,000 annually for doctors in rural areas, which would reduce state income tax collections by $870,000. It passed the House 98-2 and the Senate Finance Committee 9-0.
The biggest tax-credit break filed this year may be House Bill 2502, which provides an income-tax credit for teachers to offset the cost of certain classroom expenses. Fiscal estimates show it would reduce state income by $51 million per year. It passed the House 96-0.
While HB 2502 provides a tax break to teachers, and could therefore be considered an indirect funding increase for education, SB 407’s supporters note the same is true of expansion of the Oklahoma Equal Opportunity Education Scholarship Act, which provides $15 million in tax credits to people who donate to public-school programs.
Yet OSSBA and CCOSA dismissed that benefit, declaring, “Making it easier for public schools to benefit from the tax credit program isn't a substitute for funding …”
Legislative leaders and the governor have said school funding will increase this year regardless of any tax-credit measures.
The Center for Independent Journalism asked officials at OSSBA and CCOSA if they have been critical of any tax credits other than SB 407, and specifically what each organization’s stance is on the earned income tax credit, the tax break for teachers’ expenses, and the tax credit for electric vehicles.
In a written response, Shawn Hime, executive director of the OSSBA, declined to explicitly address those three bills, but said OSSBA “monitors all bills that could affect the state’s revenue picture and the state’s ability to fund core services, including public education.” However, Hime indicated the group’s general opposition to the aforementioned bills, including the teacher tax break. Hime said it is “absolutely accurate that OSSBA’s general philosophy is that tax credits are a poor substitute for proper funding of core state services, including public education. Our primary legislative focus is continued advocacy for a long-term funding plan for public education ...”
Pam Deering, executive director from CCOSA, did not respond to the request for comment. CCOSA’s website and social media postings appear to contain no reference of opposition to the vast majority of tax-credit bills that would reduce state tax collections.
Some lawmakers say it makes little sense to oppose SB 407 because of supposed financial impact even as the state has numerous other tax credits that support causes that are arguably less deserving.
In a recent post on Facebook Rep. Kyle Hilbert defended SB 407, saying, “The fact is though, that tax credits do exist. Because of that, regardless of whether or not this program exists, people with the disposable income to do it are going to invest their money in programs that give tax credits. We have many programs that promote historic rehabilitation, affordable housing, renewable fuels, etc. Why not have an incentive to invest in public education? Under current statute, such an option does not feasibly exist. This bill fixes that.”
Hilbert, R-Bristow, noted that under SB 407, someone who gives $1,000 to the school band could now “double their donation and be only out the same amount of money in the long run. If they make a $2,000 donation, the band receives double its money and the donor receives a $1,000 tax credit so that they are still out the same $1,000 in the end. For school foundations, they can leverage this tax credit to double their donations virtually overnight.”
He said six school superintendents in his district “have all expressed to me that they see the positive that can come from this for public schools.”
Rader notes SB 407 stands apart in another important way: It has undergone third-party review. That review “came out and said that this tax credit actually benefits the state,” said Rader, R-Tulsa. “It doesn’t come out even. It doesn’t come out as a minus. It comes out as a plus.”
Jacob Dearmon and Russell Evans, professors at the Meinders School of Business at Oklahoma City University, analyzed the private-school scholarship side of the Oklahoma Equal Opportunity Education Scholarship Act and found Oklahoma government saved $1.39 for every dollar in tax credits issued in the 2017-2018 school year.
That’s in contrast to most other tax-credit bills filed this year, where Rader said lawmakers will “have to wait a little while” before it is known if those bills work as advertised.
In addition to benefiting the state’s bottom line, Rader said the tax-credit scholarship program is accessible to a wide range of Oklahomans and “doesn’t pick a winner.”
“People are giving their private dollars here to help people they don’t even know,” he said.
SB 407 supporters say the bill’s critics miss the mark not only because those critics haven’t vocally opposed other tax breaks, but also because SB 407 has proven benefit for state finances and education in general.
“We know it’s good for children,” Rader said, “and it doesn’t hurt the state of Oklahoma—period.”