A School Choice Nose in the National Tent


Presumably, this proposal would greatly enhance Rhode Island’s tax credit scholarship program:

While most of the K–12 educational-funding and -policy decisions are appropriately housed in the states, an innovative new policy idea would allow the federal government to play a constructive role in expanding educational opportunity in America. U.S. Secretary of Education Betsy DeVos has unveiled a proposal for Education Freedom Scholarships, with corresponding legislation introduced by Senator Ted Cruz and Representative Bradley Byrne. The plan would invest $5 billion annually in America’s students by allowing individuals and businesses to make contributions to in-state, non-profit Scholarship Granting Organizations (SGOs) that provide scholarships to students. Contributors would receive a non‐refundable, dollar‐for‐dollar federal tax credit in return for their donations. No contributor would be allowed a total tax benefit greater than the amount of their contribution, and not a single dollar would be taken away from public schools and the students who attend them.

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The program would actually be administered through the state, which puts Rhode Island at an advantage because we’ve already got such a program going.  Of course, it would be even better if Rhode Island expanded its own program in the ways suggested, here, notably by allowing individuals, and not just corporations, to contribute.

  • Joe Smith

    Ah..I had to go back and read a post like “Don’t Believe That We Aren’t Paying for Corporate Crony Subsidies” when you write “not a single dollar would be taken away from public schools and the students who attend them”

    Interesting how in this case corporate welfare is considered “innovative” but in the case of tax breaks to create jobs it’s considered “crony capitalism”.

    After all, the donating businesses are often “double dipping” (getting both federal and state tax breaks) and the SGOs both by the cap and their approved status lend to only certain private schools (and only certain businesses) getting the benefit.

    While it’s technically true “not a single dollar is taken from a public school”, you note in the aforementioned post that the Raimondo “corporate welfare” promise of the job creation incentive is borne by other taxpayers and the other “non-favored” businesses. Huh. In this case, the loss in tax revenue has to be borne by the rest who don’t get the tax deduction slot. I fail to see how your argument against corporate welfare somehow magically changes when it gets applied to subsidizing private schools, individual families, and select “winning” businesses.

    All for an activity that can be done without the incentive. First, the SGO are mostly religious (3 of the 4) so individuals could get a tax deduction anyway by simply making a restricted donation (all these schools I bet are eligible). Second, *nothing* stops a business with a charitable mindset from doing the same – of course *without* the nice tax break that again, has an opportunity cost imposed on the rest of public.

    Ah, you say, unlike the mythical “jobs” argument, we’re either (1) saving money by moving a student from a *failing* school to a private school or (2) solving a public policy problem with better use of public subsidization. You wrote in another post “The standard for government activities shouldn’t be that it was better than nothing, but that it was better than the thing it displaced.”

    So, what does this public subsidy displace? Well, in reality, we don’t know. It may simply mean the state raises other sources of revenue and/or cuts (yes, I know, more the first) something. But let’s take the point of “saving” public schools by moving a student to private school.

    Well, besides the marginal versus average cost point, there is nothing that requires the scholarships go to a *current* public school student. It can simply be another source of financial aid to a current private school student. Second, there is no accountability that the student or school show academic progress better than – as you note – what is displaced. Third, while there is some income cap (250% poverty), that is not universal standard nationally (GAO report noted families with as much as $138K got scholarships) and also is left up to the SGO with no standard for enforcement.

    Now, if this is a private transaction between donor, family, and private school, that’s not the public’s issue. Ah, but you want the state to pay for some of this now.

    Let’s finally add the other items you rightly raise in attacking corporate welfare – insider connection, favoring the few at the expense of others, and harm to existing competitors. RI caps the overall amount – and wow, it gets “sold out” in the first hour the window is open.

    So, who determines which businesses get the “lottery” ticket? Why does the catholic church get 50%? Second, the winning business can use this break without any oversight. For example, the business owner may not qualify, but that $5,000K “scholarship” he can give to a favored employee (for which the owner gets the tax credit) is an advantage. In the case of the 4th SGO, it’s the school itself running the SGO (oh, yes, the “can’t be” just your school rule is overcome by throwing one small bone to another school) and gave a $40K scholarship to someone.

    How do we know that wasn’t simply a kickback? Look, donate $40K to us so we can give a SGO scholarshp and (wink wink) your kid will get a $40K tuition scholarship from us. You get the tax break so on net your net price is lower. Oh, and since the SGO can take 10% “off the top”, this school is getting a nice little fee for doing something that can be done already – except now the taxpayer is subsidizing this “fundraising” instead of the private school.

    Or..how do we know the private schools that compete athletically with the publics in the RIIL aren’t using SGO to get around the “no athletic scholarship” public rule since the SGO have no oversight in terms of the allocation (except the self regulated income check of the family) so it wouldn’t fall under the no athletic aid scrutiny (hey, it’s not us, it’s some nice business and (wink wink) it just happened to go to the athletes).

    Why does the public have to subsidize something that can be done already in the private sector? I might buy your argument if the scholarships were going to current, disadvantaged public school students in failing schools. Ah..but the private schools get to pick and choose who they take and who gets the benefit – exactly the cronyism you rail against when it comes to the public dime.