Keep Crony Capitalism Out of Georgia’s School Choice Movement

December 12th, 2014 by 2 Comments

By Jim Kelly and Ben Scafidi

Georgia has one of the more popular K-12 tuition tax credit programs in America, which is funded by the private contributions of approximately 18,000 individual taxpayers and 200 corporate taxpayers, who receive a state income tax credit for their contributions.

These contributions are made to qualified student scholarship organizations (“SSOs”) that provide scholarships to eligible students, most of whom are from low- or middle-income families. Surveys indicate they are overwhelmingly satisfied with their private school choices.

In the case of the Georgia GOAL Scholarship Program, the state’s largest SSO, 93 percent of scholarship funds have been given to students who transferred from a public school to a private school, or who entered school for the first time and used a GOAL scholarship to enroll at a private pre-K4 or kindergarten program instead of a public school. Of course, even without a scholarship, some of these first-time students may have attended a private school. On the other hand, had a scholarship not been available, some of the 7 percent of the scholarship recipients who, as permitted by the law, were enrolled in first grade at a private school, may have had to enroll in a public school.

In 2013, when the SSOs in Georgia awarded a total of 13,270 scholarships averaging $3,517 per recipient, what was the fiscal impact on taxpayers? The Fiscal Research Center at Georgia State University (“FRC”) recently released an analysis. It found that if, in any year, SSOs award 14,286 scholarships with tax credit scholarships equal to $3,500 per student (87 percent of whom have “switched” from public schools to private schools) taxpayers would save $16.3 million annually by not having to educate those students in public schools.

Had the FRC had not underestimated the total per pupil expenditure for a public school student by $1,503, this figure would be much higher. A detailed critique of the FRC report is available at www.georgiapolicy.org.

Despite the substantial taxpayer savings, some school choice advocates are promoting legislation to create a competing K-12 tuition tax credit program, to which only corporations could contribute, that would limit scholarships to only low-income families, and would impose onerous government testing, evaluation and reporting requirements on private schools. Perhaps crony capitalism is spreading from the commercial marketplace to the education marketplace.

In a crony capitalist system, success in business depends on close relationships between businesses and government officials. It is often exhibited by favoritism in the distribution of special tax breaks or other forms of state interventionism. Unfortunately, in the national school choice arena, it appears as though a few individuals and their corporate partners are preventing, or seeking to displace K-12 tuition tax credit programs, like the one in Georgia, that have generated unprecedented public support from thousands of individual taxpayers.

Consider Florida, where one SSO partners with a few corporations to dominate the State’s K-12 tuition tax credit program. Of course, since Florida has no individual state income tax, that is understandable. But what about Alabama, where the same operator of the Florida program and former Alabama Governor Bob Riley have created a SSO that, instead of encouraging individual taxpayers to become a vital part of the educational choice movement, is securing large contributions from only a few big corporations? In Alabama, in 2013, only 25 corporate contributors devoured $17.8 million of the total $25 million of tax credits that were available for contributions to SSOs, thereby depriving thousands of Alabama citizens of the opportunity to exercise compassion toward their neighbors and participate in building better communities.

During the upcoming legislative session, Georgia lawmakers will consider whether to significantly raise the annual $58 million cap on K-12 tuition tax credits, which will be gone within the first few days of 2015. Alternatively, some lawmakers may introduce legislation that, instead of raising the cap so that thousands more Georgians could participate, would create a separate $25 million program to which only corporations could contribute, with a $2.5 million limit per corporate contribution.

This means 10 large corporations, most of which would likely be based in the Atlanta area, could claim the entire $25 million cap. Alternatively, if Georgia lawmakers increase the cap on the existing program by $25 million, then 10,000 more married couples in Georgia could contribute the maximum $2,500 they are permitted to contribute each year.

Let’s hope Georgia lawmakers choose compassionate community building over crony capitalism.

 


Jim Kelly is the Founder of Georgia GOAL and Ben Scafidi is GOAL’s Director of Education Policy and is a professor of economics at Kennesaw State University. Both are senior fellows at the Georgia Public Policy Foundation, an independent think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (December 12, 2014). Permission to reprint in whole or in part is hereby granted, provided the author and their affiliations are cited.

2 thoughts on “Keep Crony Capitalism Out of Georgia’s School Choice Movement

Leave a Reply

Your email address will not be published. Required fields are marked *

The Foundation’s positions are well thought out and are often ahead of their time.

State Senator Jack Hill more quotes