School Choice Battles Are Brewing: Tax Incentives for School Choice

Across the nation, some battle lines are being drawn between teacher unions and politicians over and what some call education reforms. Last week, hundreds of Kentucky public school teachers called in sick to protest a bill that would restructure the state’s exorbitant pension fund. The mass “sick leave” protest forced six Kentucky school districts to close. This week, Bluegrass State public school teachers are planning to hold another protest if a proposal that would establish the state’s first school choice program passes the legislature.

House Bill 205 would create a tax-credit scholarship (TCS) program, which would allow individuals and businesses to fund educational scholarships for special-needs, foster, and low-income children to attend private schools.  To incentivize donors to the program, individuals and businesses would receive a substantial tax deduction.  The TCS program would cap total donations at $25 million in its first year.

Kentucky school administrators and teachers claim the TCS program would drain school districts of money for salaries and pensions. Fiscal analysis of the bill estimates the state’s general fund could lose up to $21 million in fiscal year 2019–20. However, the analysis does not calculate potential savings due to scholarship children transferring from public schools to private schools. Typically those savings are typically overblown.

Nebraska is also considering a TCS bill this legislative session. The “Opportunity Scholarships” program would operate similarly to the proposed Kentucky TCS. If passed into law, the Opportunity Scholarships program would permit individuals and businesses to donate to scholarship funds  for children of low-income households in exchange for a tax credit of 50 percent.  The total cap on donations would be $10 million in the initial year, with possible cap increases in subsequent years. If enacted, the TCS program would be the Cornhusker State’s first school choice program.

TCS programs are the  flavor of the month  in regards to school choice in the nation, with 23 programs in 18 states and more than 1.2 million scholarships granted. TCS programs are extremely popular because they enhance educational outcomes and reduce the taxpayer burden on out-of-control education costs.

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