If K-12 education funding in Arizona were a patient brought into the trauma center, it would be a “code red” situation. K-12 education funding in Arizona is in dire straits. Arizona public school budgets have suffered deep cuts, so deep that teacher vacancies can’t be filled because both new and experienced education professionals choose not to work in Arizona.
With such vast shortfalls, why is so much money being pulled from the state general fund (which is the main source of public school funding) and going to private schools through individual and corporate tax credits? These tax credit dollars are funneled through donations to Student Tuition Organizations (STOs) which, after keeping a 10 percent administrative fee, provide “scholarships” to students attending private schools.
The original concept was to provide support to financially disadvantaged or special needs students to expand their access to other schools. Individual and corporate donors would be incentivized to provide the money for these “scholarships” via the tax credit programs.
Unfortunately, that is not how the programs have evolved.
Since 1998, private schools have received over $800 million of taxpayer money through STOs, with $140 million in 2014 alone. Remember, the STOs keep 10 percent of this amount (over $80 million since 1998) to cover administrative costs. Also, only a small fraction of these scholarship recipients are financially disadvantaged or special needs students. A majority are from families with incomes well above 185 percent of the poverty level. Finally, although each individual is limited to a $528 annual contribution, there are no limits to the total amount of money contributed to STOs.
These tax credit programs shift tax dollars meant to fund a public resource (K-12 education) to private enterprises. Looking at this through another example, consider public transportation. Our public tax monies pay for public transportation options (buses and light rail). Granted there are also nominal fees funding them as well. Would a similar proposal granting tax credits for the purchase of a vehicle to taxpayers who choose not to utilize public transportation be considered appropriate? If a tax credit such as this were available, the future of public transportation funding would be bleak.
This is exactly what is happening to public education funding in Arizona. If these tax credit programs are allowed to grow unchecked, funding for our public school system will continue to erode at an alarming rate.
In addition to allowing STOs to collect bloated administrative fees and the practice of awarding these “scholarships” to students without demonstrated financial need, there are several more problems with these programs. Individual taxpayers can suggest to the STOs an intended recipient of the “scholarship.” This loophole introduces the potential for abuse. Families can agree to suggest their friends’ children as recipients, further eroding the purpose and intent of these programs. Finally, the “switcher” program allows a doubling of the tax credit, creating another way to divert money from public schools.
Last legislative session, several legislators and I introduced a package of bills to address these issues with the private school tuition tax credit programs. The bills would have:
1. Capped at five percent the administrative fee that STOs can collect for serving as a middle man in transferring these millions of dollars between donors and private schools
2. Ensured that the large majority of taxpayer money for these programs went to students of families with income at or below the poverty level
3. Limited the switcher tax credit “scholarship” to a single year only
4. Prohibited a donor from suggesting a particular beneficiary, reducing the potential for abuse
Unfortunately, these reforms did not pass, and funding for our public schools continues to be threatened.
Our public schools need adequate funding to provide the education and opportunity that Arizona’s kids deserve. Education is a proven avenue that leads to opportunities through which students can improve their lives socially, emotionally, and financially. If these private school tax credit programs are left unchecked, the future of our public school system is in jeopardy.
— Dr. Randall Friese, a Democrat, is a state representative for Legislative District 9.