Hundreds Lose Their Georgia Tax Credit Scholarships

August 4th, 2014 by 16 Comments
MIKE KLEIN Editor, Georgia Public Policy Foundation
MIKE KLEIN
Editor, Georgia Public Policy Foundation

By Mike Klein

Carlethia Ingram easily could have become one more lost teenager, no real background, no real future. Her mother died four days after the birth of her youngest sister. For ten years Carlethia and two sisters lived with their grandmother in Savannah public housing until Barbara Ingram passed away last year. “When their grandmother died we kept them,” said Anthony Phillips. “No court has ever said they belong to you. It just happened.”

Phillips and his wife Donna are retired U.S. Army officers. Anthony owns a logistics company and serves on the World Trade Center Savannah board of directors. Donna Phillips is a dentist and board member at Ramah Junior Academy, a small Christian academy that was a large part of Carlethia Ingram’s life through ninth grade when she transferred to Savannah Christian Prep.

All three sisters – Carlethia, Parisian and Brandis – were able to attend private Christian schools, in part, because they received Arete Scholars Fund awards that covered tuition and other costs. That was last year; this year is different. This year Arete significantly reduced its scholarships, the Academy could lose perhaps 20 percent of its returning students and more than two-thirds of last year’s instructional staff left because of financial viability questions at the 100-year-old school.

The Arete Scholars Fund and about thirty other organizations participate in the state’s tax credit scholarship initiative. In the simplest description, individuals and corporations can take a state income tax dollar-for-dollar credit up to maximum allowable amounts by donating funds to help students attend eligible private schools. The program is managed by the state Department of Revenue and there lots of rules. It serves a fraction of one percent of K-12 children statewide.

The General Assembly created the tax credit scholarship program in 2008. The original amount was fixed at $50 million; the cap grew slowly and now is fixed at $58 million. Public support for this school choice approach has overwhelmed the program, especially the past three years.

The 2012 tax credit was reached in mid-August. This year’s budget cap was reached in mid-January. The turbo-charged calendar has frustrated thousands of individuals who were unable to contribute to the participating scholarship organizations. Also, corporations that desire to contribute find it very difficult to project whether their Georgia income tax liability will enable them to make use of the tax credit they receive for their contribution.

“Our problem is when the fiscal year ends for corporations,” said Arete executive director Derek Monjure. “Some of the bigger donors we have, their fiscal year ends in January. They’re closing their books, haven’t done their tax estimations yet and the cap’s already been met.” Reality has tempered expectations this year: “It kills me,” Monjure said about Arete’s inability to expand or fund even last year’s number of students served.

While Lisa Kelly, President of Georgia GOAL Scholarship Program, the largest student scholarship organization, or SSO, in Georgia, understands the difficult position created by the early expiration of the cap poses for a few large corporations, she is more concerned about the thousands of individual taxpayers and owners of smaller “pass-through” entities who want to participate in the program. “Taxpayers love this program and the legislature should be considering how to empower even more individuals to support the educational choices of parents from throughout the state.”

GOAL, in cooperation with its 125 participating private schools, and Arete focus their scholarship awards primarily on low-income students from throughout Georgia. In 2013, Arete awarded 720 scholarships worth $4 million and GOAL awarded 3,676 scholarships worth $13.1 million.

This is the fourth year of Ramah Junior Academy’s partnership with Arete. “At one time we had 80 percent of our students on the scholarship,” said Michelle Moore, executive office staff member and a Ramah student when she was growing up in Savannah “back in the Eighties.”

Last year’s $5,800 Arete maximum award for a Ramah student was trimmed to $2,500 this year. The cost to attend Ramah ranges from $3,845 for a pre-K student to $5,460 for students who are in ninth or tenth grade. Ramah enrolled 125 students last year. About 100 are enrolled for classes that start August 11, and registration remains open. Ramah has a $600,000 budget.

“Most of the parents can’t afford it,” said Willie Walker, Ramah’s new principal who has been on the job since the middle of July. “We’ve tried our best to give them a major discount so they can still bring their children to the school. Some of them still can’t afford it. We want them here. We know they will do well here because they’ve done well in the past.”

About the Georgia Tax Credit Scholarship Law

Enacted by the 2008 General Assembly, the Georgia Qualified Education Expense Tax Credit Program increases overall education funding by millions of dollars every year. It also means families that choose to participate devote much more of their state tax obligation to learning.

Here’s how the credit helps children: About one-third of each state income tax dollar is invested in K-12 public education. Therefore, a family that pays $1,500 in state income tax contributes about $500 to education. But if that same family participates in the state tax credit scholarship program it will invest a much higher percentage and more actual dollars into education.

For example, let’s presume that the same family contributes $500 to tax credit scholarships. The family still owes $1,000 in state income tax and one third or about $330 will later be invested in K-12 public education. The family now has an $830 total education commitment which means the family will contribute 55 percent of its entire state tax obligation to education.

The $58 million cap is fixed and will not change unless the General Assembly and the state’s executive leadership decide it should change. About 13,000 K-12 children receive tax credit scholarship assistance, a micro number compared to Georgia’s 1.8 million estimated students.

One way to help the many students who saw their scholarships reduced or eliminated this year is to increase the cap. One idea would increase the cap from $58 million to $100 million. About 10,000 more students could be served. That would modestly improve the current model which is little more than a pilot project.

Tax credit program supporters say their goal is clear: Improve school choice options.

“Families are in educational distress in our state,” said Kelly at Georgia GOAL which provides tax credit scholarships to 5,000 students. “Why should only a small fraction of low and middle-income parents be given access to better opportunities for their children? When a program is working it grows in popularity. That is happening here, with taxpayers, with excellent private schools and with deserving families. Let’s grow this wonderful program.”

About Similar Tax Credit Laws Nationally

Twenty-three states and the District of Columbia currently offer some version of an education tax credit scholarship, according to the Friedman Foundation for Educational Choice. Brand identity varies with tax credit scholarship, opportunity scholarship, educational credit, and even town tuition program among many names that are used to identify this school choice option.

Florida is the national leader with a $286 million tax credit budget cap compared to $58 million this year in Georgia. Florida imposes a $4,880 maximum scholarship award, according to the Friedman Foundation, whereas Georgia stipulates an award may be paid up to $8,983 but that figure is misleading. Georgia GOAL has awarded more than 16,500 scholarships since 2009; the average value for each grant is $3,783. The statewide average scholarship amount in 2012 (latest data available) was $3,388.

Arete has awarded 3,260 total scholarships in four years and due to its financial challenge this year, Arete says it was unable to help about 300 eligible families. Arete has also begun to shift its fund raising focus with more emphasis on a different mix of corporate and individual donors. “It hasn’t been a focus,” said Monjure. “It needs to become a focus.”

Footnote

As I was nearly finished writing this article, my phone rang. It was Willie Walker at Ramah Junior Academy. He asked whether I knew anyone who might be able to pay registration fees for some of their students. “They can’t afford the fee,” Walker said. We shared an idea and he began making calls, looking for Samaritans who would pay registration fees for students they don’t even know.

Learn more in this Foundation YouTube Channel video!

Additional Resources

Arete Scholars Fund

Friedman Foundation for Educational Choice

Georgia GOAL Scholarship Program

Georgia Tax Credit Program FAQs

Ramah Junior Academy

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