Tax-credit scholarship programs are the gifts that keep on giving

During this season of giving, imagine if California taxpayers could give the gift of a better education to thousands of deserving children.

Today, a variety of parental-choice scholarship programs nationwide, including tax-credit scholarships, empower parents to send their children to the schools of their choice. Such programs allow individuals or businesses to claim credits against their state income taxes for charitable contributions to nonprofit, tax-exempt organizations that award scholarships.

In 1997, Arizona became the first state to enact a tax-credit scholarship program. As of 2009, there are nine tax-credit scholarship programs in seven states. Most of these programs serve targeted student populations, including children who are low income, in failing public schools, have special needs or are from the foster care system.

Nationwide, tax-credit scholarship donations amounting to nearly $255 million enabled nonprofit organizations to award nearly 107,000 scholarships in 2009.

Nonprofit scholarship-granting organizations can be started by community groups, philanthropic organizations or any other group.

In 2009, a California tax-credit scholarship program was proposed, but defeated. It would have allowed taxpayers to claim credits worth up to 50 percent of their state tax liability for donations to charitable nonprofit 501(c)(3) organizations that distribute scholarships to students from low- and middle-income families.

A leading myth about tax-credit scholarship programs is that they hurt state and public school budgets. Empirical evidence shows otherwise. The Florida Tax Credit Scholarship Program is the country’s largest. Average private school scholarships are less than $4,000, and they enabled nearly 29,000 low-income and minority children to attend more than 1,000 private schools statewide last year.

Surrounding public schools improve in terms of student math and reading performance on the state standardized tests because they have to compete with private schools for students.
And, because private schools cost less than traditional public schools, the state saves money. The Florida Legislature found that for every dollar spent on the scholarship program, “taxpayers saved $1.49 in state education funding.”

With improved student performance — and a stunning 49 percent annual return on investment — tax-credit scholarship programs are gifts that keep on giving. In 2011, California’s new class of legislators should craft a tax-credit scholarship program for all children in the Golden State.
 
Vicki E. Murray, Ph.D., is the education studies associate director and senior policy fellow at the Pacific Research Institute for Public Policy in Sacramento.

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