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GOP-led panel hears testimony on STO program

Members of a Republican-led committee met for the first time on Oct. 14 to examine possible weaknesses of a state law designed to make private schools more accessible to children from low-income families.

Most of the public testimony came from parents praising the program.

Arizona allows individuals and couples to make tax-deductible contributions to private school-tuition organizations that, in turn, award scholarships that allow students to attend private schools.

Created in 1997 and revised several times to expand its use, the law has survived a challenge in Arizona courts from opponents who claimed the tax credit equates to state support of private religious schools while draining tax dollars from public education.

The program has drawn scrutiny recently after media reports showed a lack of safeguards to prevent contributors from earmarking contributions to school-tuition organizations to benefit specific students.

The East Valley Tribune reported loopholes that have resulted in some organizations pocketing money that was intended for scholarships. Critics of the program say the Arizona Department of Revenue has little or no authority to punish offending scholarship providers.

Rep. Tom Chabin, a Democrat from Flagstaff, said wealthy parents have used the tax credits to send their children to private schools, even though they could afford the tuition without any assistance.

Chabin, a member of the Ad Hoc Committee on Private School Tuition Tax Credit Review, said strong politic support from lawmakers and the public would make it impossible to rescind the law, “even if I were Speaker (of the Arizona House of Representatives) tomorrow.

Support for the program was on full display before the committee chaired by Rep. Rick Murphy, a Peoria Republican who broadly announced the committee’s intention was to improve the law – not to debate its merits.

Rosalinda Perez, a parent from Rio Rico, said the program has allowed her sons to attend Lourdes Catholic School in the border city of Nogales. She said the school creates a safe, happy environment for her sons, while also engendering a respect for education.

“They’re eager,” she said. “Well, not eager to do their homework, but they do it because they know it is their responsibility.”

Other parents credited the program for helping their children with learning disabilities, while others noted the law spared them from making difficult family decisions.

“I’d have to choose who to send and who not to send,” said Luis Rocha, a Tucson father of four children who attend Our Mother of Sorrows Catholic Church and School.

The law prohibits parents from making contributions to benefit their own dependants. But, criticism arose after the Tribune detailed how the law can be circumvented by parents who make earmarked contributions to benefit children of their neighbors, friends or family.

Chabin referred to the practice as “donor-directed contributions,” and questioned the Arizona Department of Revenue’s chief economist Georganna Meyer about the reporting requirements of school-tuition organizations and what can be done to punish groups that sidestep the law’s intent.

Meyer responded that the department has no regulatory authority over tuition organizations, except for the ability to deny the processing of an individual tax credit.

Meyer said she tracks statistics on the number of donations received and the total amount of cash received from individuals taking advantage of the tax credit.

But, she said, “There may be STOs out there that I may not (know about).”

According to the department’s statistics, individuals contributed $55 million to school-tuition organizations in 2008. Right now, individual contributions are capped at $500, while couples filing joint tax returns can contribute $1,000.

Murphy said the committee would hold a second meeting in November and announced that Arizona’s recognized school tuition organizations would be sent a questionnaire to assess their scholarship criteria.

Chabin, who seized upon the difference between the individual-tax and corporate-tax tuition programs, said he looks forward to the opportunity to question school-tuition organizations.

The tax-credit program for businesses allows deductions for contributions to school-tuition organizations. It contains a built-in requirement that scholarships can be awarded only to students from families that earn less than 185 percent of the household-income level required to qualify for free or reduced-price school lunches. That requirement’s rough equivalent is $75,000 per family of four.

“We have to recognize that there are problems with the STO system and we need legislation to fix it,” said Chabin, who said he has voted against every bill to expand the program since he became a lawmaker.

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