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State Scholarship Tax Credit Program Would Help Low-Income Students

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Study Finds State Scholarship Tax Credit Program Would Provide Opportunity to Tens of Thousands of Low-Income Students

Program would either save money or be revenue neutral

BOSTON – A Scholarship Tax Credit (STC) program tailored to Massachusetts’ needs could expand educational opportunity for thousands of students from low-income families and either be revenue neutral or save the commonwealth money, according to a new study jointly published by Pioneer Institute and Cato Institute.  The authors found, importantly, that the program would likely not run afoul of so-called anti-aid amendments to the state Constitution.

Giving Kids Credit: Using Scholarship Tax Credits to Increase Educational Opportunity in Massachusetts

In “Giving Kids Credit:  Using Scholarship Tax Credits to Increase Educational Opportunity in Massachusetts,” authors Ken Ardon and Jason Bedrick propose a state tax credit worth 90 percent of the amount a corporate or individual taxpayer donates to a qualified scholarship organization.  The organization would then use the money to provide scholarships for students whose family income is below 200 percent of the federal poverty line.  Families would use the money toward the cost of attending non-public or out-of-district public schools.

The average scholarship size would be $4,100 in year one and increase to $4,400 by year five.  Twelve states including New Hampshire, Rhode Island and Pennsylvania already have STC programs and almost 200,000 students are being educated through them.

The paper includes a Foreword written by Patrick Wolf, Professor of Education Policy and 21st Century Endowed Chair in School Choice in the Department of Education Reform at the University of Arkansas. Wolf has been involved with most of the key evaluations of private school voucher programs over the past 15 years.

The authors cite a literature review finding that the overwhelming majority of choice programs produce positive outcomes such as improved test scores and higher rates of high school graduation and college attendance.  The same review revealed that competition from choice programs almost always results in improved academic outcomes in public schools.

“The affluent already have choices,” said co-author Jason Bedrick.  “They can afford to move to communities with high performing district schools or send their children to private schools.  The only option for most low-income families is the district school to which their children are assigned.”

Statewide, nearly two-thirds of students score Advanced or Proficient on MCAS tests.  But that number is only about 40 percent in the commonwealth’s 10 poorest cities.

A review of private schools in Springfield, Fall River, New Bedford, Brockton and Lynn – the five poorest of Massachusetts’ 10 largest cities – found an average tuition of $4,470 for kindergarten, $4,173 for grades 1-5, $4,510 for grades 6-8 and $9,125 for high school.

“Together with financial aid, average scholarships of $4,100-$4,400 would make educational opportunity a reality for tens of thousands of low-income children,” said co-author Ken Ardon.

STC programs conserve money if savings from fewer students attending public schools outweigh the drop in revenue as a result of tax credits.  The authors estimate that the program they propose would save $41 million in year one and savings would grow to $222 million by year five.

A 2009 study found that Arizona’s STC program saved between $2 and $4.50 for every dollar of forgone revenue.  A 2010 study found Florida’s program saved $1.44 for every lost dollar of state tax revenue and in 2012 Pennsylvania’s program was found to save $512 million while only reducing revenue by $40 million.

The Massachusetts Constitution contains two anti-aid amendments, one promulgated by the Know-Nothing Party in the early 1850s.  The amendments, a vestige of 19th century-style anti-Catholic bigotry, block the commonwealth from supporting private or parochial schools.

Arizona also has anti-aid amendments similar to the ones in the Massachusetts Constitution, but that state’s Supreme Court held that the STC program does not violate them.

The U.S. Supreme Court has ruled that money is not public until it has “come into the tax collector’s hands.”  That never happens under an STC program since donations go from the taxpayer to a qualified scholarship program, which then distributes the money to low-income families.

About the Authors

Ken Ardon received a Ph.D. in economics from the University of California at Santa Barbara in 1999, where he co-authored a book on school spending and student achievement. He taught economics at Pomona College before moving to Massachusetts, and from 2000 to 2004, Dr. Ardon worked for the Commonwealth of Massachusetts in the Executive Office of Administration and Finance. Since 2004, he has been an assistant professor of economics at Salem State University. Dr. Ardon is a member of Pioneer Institute’s Center for School Reform Advisory Board.

Jason Bedrick is a policy analyst with the Cato Institute’s Center for Educational Freedom. Bedrick has extensive policy research experience, including detailed legislative development and analysis. He previously served as a legislator in the New Hampshire House of Representatives and was a research fellow at the Josiah Bartlett Center for Public Policy, where he focused on state education policy. Bedrick received his Master’s in Public Policy, with a focus in education policy, from the John F. Kennedy School of Government at Harvard University. His thesis, “Choosing to Learn,” assessed the scholarship tax credit programs operating in eight states including their impact on student performance, fiscal impact, program design, and popularity.

Patrick Wolf is Professor of Education Policy and 21st Century Endowed Chair in School Choice in the Department of Education Reform at the University of Arkansas. He has led or assisted with most of the key evaluations of private school voucher programs over the past 15 years, including recent studies of programs in Washington, DC, and Milwaukee, Wisconsin, as well as the new statewide program in Louisiana. A 1987 graduate of the University of St. Thomas in St. Paul, MN, he received his Ph.D. in Political Science from Harvard University in 1995.

About Pioneer

Pioneer Institute is an independent, non-partisan, privately funded research organization that seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited and accountable government.