Tax Credits Can Be a Tool of Education Reform in Virginia

Article Published in The Virginian-Pilot (Norfolk, VA)

Much hoopla attended the release of President George W. Bush’s education reform plan Tuesday, as well it should have. The former Texas Governor made accountability for results in K-12 schooling the cornerstone of his presidential campaign.

But a day earlier came a vote in the Finance Committee of the Virginia House of Delegates that may signal the kind of rethinking of education policy that will outweigh whatever Capitol Hill does with Bush’s ideas for how federal education aid should be spent.

The reasons are basic: The federal government accounts for only 6 percent of spending on the nation’s schools. And because the U.S. Constitution does not specify education as one of Washington’s responsibilities, the Tenth Amendment reserves the real clout over schooling to the states and the people.

With its 12-11 vote approving $500 tax credits for contributions to charitable organizations providing scholarships for students choosing private schools, the Finance Committee finally changed the focus of the reform debate in Virginia. The committee had been the graveyard of education tax credits in recent years, but now the measure sponsored by Delegate Jay Katzen of Warrenton at least will receive debate by the full House.

The credit would enable Tuition Organizations to award private scholarships of up to $3,100 per year to Virginia’s neediest students, with smaller stipends possible for the less needy.

Political observers believe this measure faces tough sledding in the powerful Senate Finance Committee, but who knows? Members of that panel are justifiably concerned about the recent downturn of state revenue but perhaps they will be receptive to the reality that school choice can be a net revenue winner for the state. Every child accepting a $3,000 scholarship to transfer to a private school is one less child the state and local governments must provide for at a price tag of $7,200 per pupil.

Far from being a drain on state coffers, a tax credit eventually could produce a net revenue windfall for the state if enough families opted to educate their children in the private sector. Such a trend would also reduce crowding in public schools and bring about small class sizes, which the teacher unions tout as essential to quality education.

That’s the same dynamic that has operated for many years in higher education, with the General Assembly awarding Tuition Assistance Grants to students attending private colleges and universities. That relieves the state of sizeable capital costs, and helps preserves a healthy private sector and education-consumer choice.

The same dynamic can work for K-12 education. In fact, faced with the prospect of 100,000 new students by 2010, Utah is looking at education tax credits as a way to save the government major outlays. Sponsors of a $2,500 credit for families who choose private schools hope this would shift to the private sector up to one-half the cost of handling the boom in school-age population. “We need to get our children taught on someone else’s nickel,” said Rep. John Swallow.

Universal tax credits are becoming an alternative to much-demonized vouchers for many in the school-choice movement. They allay the fear of libertarians and some conservatives that publicly funded vouchers – which go to parents but wind up in private-school coffers – would result in government meddling in private institutions. A tax credit simply leaves more money in private hands to make choices about schooling.

Arizona’s pioneering use of $500 tax credits for donations to scholarship organizations shows what Virginia could expect. Adopted in 1997, the Arizona plan first had to withstand court challenges, which it did. But now there are 34 private-tuition charities in the state, up from just two before the credit was enacted. More than 7,000 students benefited from private scholarships amounting to more than $13 million during the 1999-2000 school year.

Former Arizona lawmaker Trent Franks, a Phoenix businessman, says the program has brought about improved communications between public and private schools, and parents and teachers. Since families gained this option, the proportion of parents saying they are satisfied with their public schools has risen from 26 percent to 38 percent.

“I would encourage opponents to look at what is happening in Arizona,” he told a recent gathering in Richmond. “We are in no way trying to hurt public education.”

To argue that public schools are hurt when patrons have other choices is to argue that monopolies work best. That’s not the lesson America’s entrepreneurial economy teaches.

Robert Holland is a senior fellow at the Lexington Institute.