A bill before state legislators seeks to create a $10 million tax credit program, which supporters contend will incentivize philanthropic giving toward K-12 private-school scholarships.
Of the $10 million, $6 million would go towards public school grants, while $4 million would fund K-12 scholarships worth up to $7,000 each in year one.
Local lawmakers are split on the measure, with Rep. Johnny Rye (R-Trumann) indicating he supports the bill and Rep. Monte Hodges (D-Blytheville) voicing opposition.
Rye notes the money is coming from private donations in the form of a tax credit.
“At this point, I don’t see any problem with it,” Rye said.
Hodges argues private schools do not have the same accountability as public schools.
“According to the Department of Finance and Administration, this bill diverts more than $10 million in public funds to unaccountable private schools,” Hodges said. “The legislation also allows that amount to grow exponentially in subsequent years. Public funds should not be diverted to private schools without the same oversight and accountability mandated for public schools. Taking a test and an audit does not compare to the accountability measures in public schools to ensure adequate education is delivered.”
To be eligible for the private-school scholarships, students must be transferring from an Arkansas public school and have a household income at or below 200 percent of federal poverty guidelines.
Others eligible for the scholarships would be foster children, those with special needs, and students from military families or who have had a parent killed in the line of duty.
The scholarship funds can be used for tuition and fees at an approved private school, educational materials, tutoring services, testing fees, fees for afterschool or summer educational programs, and specialized services or therapies.
Also, if enacted, the bill would allow for up to $6 million in grants to public schools serving low-income student populations, for things like technology enhancements, upgrading ventilation systems, social programing, professional development and equipment for special education. The money could not be spent on salaries.
In a flier, proponents argue the Child Academic Opportunity Scholarship and Grant Act “creates new opportunities for Arkansas to harness the power of private philanthropy to improve educational opportunities for low-income and at-risk students.”
Opponents contend some schools would lose money, taking money off the top of the budget. The fiscal statement says, “The analysis assumes that districts will lose the full foundation funding amount for students who leave, or $7,018.”
“Arkansas public schools are mostly funded by a combination of state and local monies,” the fiscal statement reads. “The amount of state and local funding is based on foundation funding for each student and determined by a funding matrix. The state’s funding formula first determines the total amount of funding needed. Districts must raise a portion of these funds via property tax, and the state provides the remainder to meet the foundation amount. When a student leaves a district, total revenue will decrease by the foundation amount, plus any add-ons associated with the student. Because local revenue is fixed, the revenue reduction will take the form of savings for the state equal to the foundation funding for that student.”
Laurie Lee board member of the Reform Alliance, said, “a one-size-fits-all education system” is antiquated and students and teachers both benefit from the bill.
She said every child zoned for a particular school might not be a good fit for it, and teachers have to teach to a variety of students.
Lee said superintendents are opposed because they “want to keep the kingdom.”
The sponsor, Rep. Ken Bragg (R-Sheridan), said the bill is currently in committee and the required fiscal analysis was just received.
“It’s geared toward lower income kids whose needs are not being met,” he said.
Bragg said a contributor could make a donation to either the private school scholarship fund or public school fund. Both types of funds would be managed by non-profit student support organizations, which would be audited annually.
Students will be tested as they are in public schools, according to Bragg.
Bragg said he isn’t disparaging public schools, adding in general they do a good job, though there are students who need a different type of instruction than those districts can offer.
He noted those eligible will be sent a list of approved private schools who wish to participate, and they would then apply to the school of their choosing.
Bragg pointed out families with higher income can attend private schools if they wish, while poverty-stricken families do not have the means to attend schools that could benefit them.
Bragg acknowledged when a student leaves a public school, that school will lose the state funding for the student. However, he said the state will save money because it won’t be funding that student.
Bragg said the state would save about $3,000 per year when considering the income loss of $7,000 in tax credits.
“At worst, it’s a wash,” Bragg said of the financial piece.
Hodges has several concerns with the proposal.
“Private schools are not held to the same standards and requirements as public schools, including universal student enrollment, budget transparency, and open board meeting laws,” Hodges said. “Standards and accountability are in place to ensure the education and protection of our students. There is significant and compelling research showing that voucher programs do not improve student achievement. HB1371 moves students between schools. There is nothing in the bill describing what will be done differently in the receiving schools to promote student achievement.”
Hodges contends vouchers leave behind many disadvantaged students because private schools may not accept them or do not offer the unique services they need.
“Private schools getting vouchers should be required to take any students that want to attend,” he said.
Lee acknowledged private schools would remain autonomous and have the ability to accept or reject students, though she said private schools sign up for the program if they are interested.
Hodges believes the bill would take money from public school programs.
“Arkansas is a mostly rural state, with the public school system being much more than just an education provider,” Hodges said. “Including providing meals to the community during the recent pandemic. Most students will not have access to this program without dividing out scarce resources in rural areas. The section of HB1371 about grants for public schools is merely diverting taxes that already go to support essential state services, including public schools, to a grant program only available to certain school districts.”
According to the fiscal impact statement, the proposal would generate an estimated net benefit for the State General Fund of $2.3million for FY 2021, and there would be an estimated net fiscal benefit for school districts of $773,000, with no impact on local property taxes.
“We estimate that scholarships would be awarded to 900 students,” the fiscal statement reads. “Given the requirements to be enrolled in public school prior to entering the program, the analysis assumes all students would be “switchers”(i.e., students who would enroll in public schools without any financial assistance from the tax-credit scholarship program). These students offset program costs for the state. State impact: The state would experience an estimated cost to fund tax-credit scholarships equal to $4.0 million in tax credit disbursements for charitable donations, or 0.1 percent of total expenditures for the state’s public school system. This would be completely offset by $6.3 million in reduced state expenditures for public schools. After factoring this savings, we estimate a net fiscal benefit to the state of $2.3million, or $2,600 per student scholarship. Impact on local property taxes: Local property tax levies are determined by property value assessments and set independently of the number of students in a school district. Thus, students who use a scholarship and leave their public schools will not affect local property taxes unless they also residentially move out of a district. School district impact: Local public school districts would experience $6.3 million in reduced revenue. This reduction would be completely offset by an estimated $7.1million in reduced variable costs for students who would have enrolled in district schools without the scholarship program in place. Thus, there will be an estimated net benefit for district schools of $773,000, or about $900 per student participating in the program. Break-even switcher rate: Switcher is defined as a student who would enroll in a district school if the scholarship program is not in place as opposed to enrolling in private school, home school, or other non-public school settings. Switchers represent fiscal savings for the state and district schools. For the program to generate savings for the state, at least 80%of program participants would need to be switchers.”
On Tuesday researchers from the University of Arkansas Office for Education Policy and EdChoice, a nonpartisan nonprofit, refuted the Department of Finance and Administration’s legislative impact statement about HB1371, which would create the Arkansas Child Academic Opportunity Scholarship and Grant Act, as an “incomplete picture.”
“The DFA fiscal note provides an incomplete picture of the likely fiscal impact of HB1371 because it only includes the cost of the program without regard for potential savings,” said Marty Lueken, director of EdChoice’s Fiscal Research and Education Center. “When students leave public schools via a scholarship program, it reduces educational costs for public school districts and generates savings for taxpayers.”
As written in HB 1371, the program would require all eligible students to be enrolled in public school prior to entering the program. When students leave a school district for any reason, total expenses for that district decreases by the foundation amount ($7,018 per student), plus any categorical or grant funding associated with the student. Because local revenue is fixed, any reduction in district costs resulting from HB 1371 would accrue to the state as savings.
Lueken and Josh B. McGee, associate director of the Office for Education Policy, recently released a fiscal impact statement that takes into account these potential savings. Their analysis estimates that the net fiscal impact of the scholarship program on the state would be $2.3 million in savings, and the net fiscal effect on districts would be a positive benefit of about $770,000.
DFA’s statement projected $465,000 in administrative costs exceeds the costs actually incurred in other states, even though those states don’t have the extra benefit of nonprofits administering the scholarships and grants.
For example, Arizona appropriated up to 3% of ESA amount for admin costs in FY 2012 (the program’s first year), which amounted to $47,280. The state appropriated $200,000 in FY 2013, and $240,000 in FY 2014 and FY 2015 ($200,000 for state DOE and $40,000 for the State Treasury). Mississippi set aside $180,000 for administrative costs and had $99,000 in unused funds in FY 2018 and $33,000 in FY 2020.
“In these states, a state agency is running the program whereas Arkansas’s program would be run by nonprofit orgs and only overseen by a state agency,” said Jason Bedrick, director of policy at EdChoice. “Other states are running much larger programs at less than half [DFA’s projected] cost, so it should take Arkansas even less than that to merely provide oversight.”