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THE TAX-CREDIT
SCHOLARSHIP
AUDIT
edchoice.org/ScholarshipAudit
BREAKING DOWN
EDCHOICE.ORG
School choice advocates have always
used the savings potential of choice
programs as a positive selling
point...
EDCHOICE.ORG
Since the creation of the first
modern school choice program in
1990, 30 empirical studies have
examined the ...
EDCHOICE.ORG
Of those studies, 27 find school
choice programs save money.
SAVE MONEY
EDCHOICE.ORG
Three find the programs they
studied were revenue neutral.
SAVE MONEY NEUTRAL
EDCHOICE.ORG
No empirical study ever
conducted has ever shown
negative fiscal effects.
SAVE MONEY NEUTRAL LOSE MONEY
ZERO
EDCHOICE.ORG
But still, that wealth of evidence hasn’t
stopped school choice critics from
claiming otherwise.
...in many s...
EDCHOICE.ORG
They say, simplistically, that school
choice drains money from the public
school system.
EDCHOICE.ORG
Context is helpful for
evaluating such claims.
EDCHOICE.ORG
For all the controversy around school choice programs, the reality
is that their costs amount to drops in a b...
EDCHOICE.ORG
But that rhetoric
obscures an important
fact: A public school
is also relieved of
costs for any student
switc...
EDCHOICE.ORG
By not acknowledging such
variable cost savings, opponents
implicitly argue that all public
school costs are ...
EDCHOICE.ORG
By that logic: If
there were no
savings when a
public school’s
enrollment
declines…
NO CHANGE
IN COST
EDCHOICE.ORG
…then when
public schools
take on more
students, their
costs wouldn’t
increase either.
NO CHANGE
IN COST
EDCHOICE.ORG
Of course, that is
not the case.
EDCHOICE.ORG
Indeed, school officials will
argue in front of their state’s
appropriations committee
for more funding when ...
EDCHOICE.ORG
The truth is, the reduction in a school district’s funds
when kids leave using school choice programs is usua...
EDCHOICE.ORG
Also, when school
choice students
leave their district,
that district keeps
federal and local
funds.
FEDERAL
...
EDCHOICE.ORG
Colleges and
universities do
not keep any
funds—public
or private—when
students transfer.
PELL
GRANTS
PELL
GR...
EDCHOICE.ORG
You read that right.
EDCHOICE.ORG
Public K–12 education is the only
known enterprise in American
society where service providers keep
a portion...
EDCHOICE.ORG
Whether school choice critics want
to admit it or not…
EDCHOICE.ORG
School choice programs
save money.
EDCHOICE.ORG
But how much?
EDCHOICE.ORG
In 2014, we estimated the cumulative
savings generated by America’s school
voucher programs over two decades....
EDCHOICE.ORG
This year, we continued that analysis
by doing the same for seven states’
tax-credit scholarship programs,
wh...
EDCHOICE.ORG
These types of school choice programs
differ from school vouchers in
how they’re funded.
EDCHOICE.ORG
Tax-credit scholarships programs
allow individuals and businesses
to reduce their state tax liability
by maki...
EDCHOICE.ORG
For a tax-credit scholarship program to
result in savings, this must be true:
DISTRICTS'
VARIABLE
SPENDING PE...
EDCHOICE.ORG
There are two other factors we took into
account, which are explained in more
detail in the report:
The propo...
EDCHOICE.ORG
To determine a tax-credit scholarship
program’s net fiscal impact, use the
following equation:
Net Fiscal Imp...
EDCHOICE.ORG
We did the math.
EDCHOICE.ORG
Our low-end estimate* reveals students
have saved states and districts
$1.7 billion, or $1,647 per student,
u...
EDCHOICE.ORG
Yep, that’s the low end.
EDCHOICE.ORG
The high-end estimate* shows tax-credit
scholarships have saved $3.4 billion, or
$2,974 per student.
*assumin...
EDCHOICE.ORG
These savings are most commonly
captured by either the public school
districts or the state treasury, which c...
EDCHOICE.ORG
But what actually happens to those
savings is anyone’s guess.
EDCHOICE.ORG
State governments don’t do
much, if anything, to track
where those savings go.
EDCHOICE.ORG
But that doesn’t mean that
savings aren’t there.
Wondering about your state’s education
spending? Check out individual program
breakdowns and more in the full report at
ED...
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Breaking Down The Tax-Credit Scholarship Audit

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In 2014, we calculated the cumulative savings generated by America’s K–12 school voucher programs over two decades. This year, we continued that study by doing the same for seven states’ tax-credit scholarship programs, which cover 93 percent of total scholarships awarded to date. These types of school choice programs differ from school vouchers in how they’re funded, however. Flip through this Slideshare to learn how tax-credit scholarships are different from school vouchers and what the fiscal effects of these programs have been for state governments, school districts and taxpayers.

For the full Tax-Credit Scholarship Audit report, visit http://www.edchoice.org/ScholarshipAudit.

Published in: Data & Analytics
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Breaking Down The Tax-Credit Scholarship Audit

  1. 1. THE TAX-CREDIT SCHOLARSHIP AUDIT edchoice.org/ScholarshipAudit BREAKING DOWN
  2. 2. EDCHOICE.ORG School choice advocates have always used the savings potential of choice programs as a positive selling point for policymakers.
  3. 3. EDCHOICE.ORG Since the creation of the first modern school choice program in 1990, 30 empirical studies have examined the fiscal impact of school choice on taxpayers.
  4. 4. EDCHOICE.ORG Of those studies, 27 find school choice programs save money. SAVE MONEY
  5. 5. EDCHOICE.ORG Three find the programs they studied were revenue neutral. SAVE MONEY NEUTRAL
  6. 6. EDCHOICE.ORG No empirical study ever conducted has ever shown negative fiscal effects. SAVE MONEY NEUTRAL LOSE MONEY ZERO
  7. 7. EDCHOICE.ORG But still, that wealth of evidence hasn’t stopped school choice critics from claiming otherwise. ...in many states, including Pennsylvania and South Carolina, the wealthy can reap millions, while public schools continue to face deep cuts. The research on Neovouchers says, A) They don’t save states money and B) They don’t increase achievement. These and other state tax subsidies collectively funnel more than $1 billion in public funding toward private schools every year. - Randi Weingarten, AFT - Professor, California State Sacramento - ITEP
  8. 8. EDCHOICE.ORG They say, simplistically, that school choice drains money from the public school system.
  9. 9. EDCHOICE.ORG Context is helpful for evaluating such claims.
  10. 10. EDCHOICE.ORG For all the controversy around school choice programs, the reality is that their costs amount to drops in a bucket when compared with states’ budgets for K–12 education. AZ FL GA IA IN PA RI $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 0 Total Tax Support in SY 2014 Total Revenue, All Sources Millions $121M Total Tax Support as Percent of State’s Total K–12 Educational Costs, SY 2014 $286M $58M $12M $7M $68M $2M $2,289M $27,647M $12,150M $6,195M $17,818M $26,073M $8,294M 1.5% of Total Revenue( ) 1.1% of Total Revenue( ) 0.3% of Total Revenue( ) 0.2% of Total Revenue( ) 0.1% of Total Revenue( ) 0.2% of Total Revenue( ) 0.1% of Total Revenue( )
  11. 11. EDCHOICE.ORG But that rhetoric obscures an important fact: A public school is also relieved of costs for any student switching to private school. $ $ $ $ $ $ Variable Cost Savings
  12. 12. EDCHOICE.ORG By not acknowledging such variable cost savings, opponents implicitly argue that all public school costs are fixed.
  13. 13. EDCHOICE.ORG By that logic: If there were no savings when a public school’s enrollment declines… NO CHANGE IN COST
  14. 14. EDCHOICE.ORG …then when public schools take on more students, their costs wouldn’t increase either. NO CHANGE IN COST
  15. 15. EDCHOICE.ORG Of course, that is not the case.
  16. 16. EDCHOICE.ORG Indeed, school officials will argue in front of their state’s appropriations committee for more funding when their enrollment increases.
  17. 17. EDCHOICE.ORG The truth is, the reduction in a school district’s funds when kids leave using school choice programs is usually similar to the reduction in that school district’s funds when kids move from one public school district to another. OLD DISTRICT NEW DISTRICT PUBLIC SCHOOL PRIVATE SCHOOL CHANGE IN FUNDS( ) CHANGE IN FUNDS( )
  18. 18. EDCHOICE.ORG Also, when school choice students leave their district, that district keeps federal and local funds. FEDERAL LOCAL (No Change) FEDERAL LOCAL $ $ $ $
  19. 19. EDCHOICE.ORG Colleges and universities do not keep any funds—public or private—when students transfer. PELL GRANTS PELL GRANTS TUITION REVENUE TUITION REVENUE STATE APPROPRIATIONS STATE APPROPRIATIONS $ $ $ $ $ $
  20. 20. EDCHOICE.ORG You read that right.
  21. 21. EDCHOICE.ORG Public K–12 education is the only known enterprise in American society where service providers keep a portion of people’s money even after those people have determined they no longer want those services.
  22. 22. EDCHOICE.ORG Whether school choice critics want to admit it or not…
  23. 23. EDCHOICE.ORG School choice programs save money.
  24. 24. EDCHOICE.ORG But how much?
  25. 25. EDCHOICE.ORG In 2014, we estimated the cumulative savings generated by America’s school voucher programs over two decades. Source: www.edchoice.org/research/the-school-voucher-audit $1.76 BILLION
  26. 26. EDCHOICE.ORG This year, we continued that analysis by doing the same for seven states’ tax-credit scholarship programs, which cover 93 percent of total scholarships awarded to date. 1.2 MILLION SCHOLARSHIPS
  27. 27. EDCHOICE.ORG These types of school choice programs differ from school vouchers in how they’re funded.
  28. 28. EDCHOICE.ORG Tax-credit scholarships programs allow individuals and businesses to reduce their state tax liability by making a private donation to a nonprofit organization that provides students scholarships to attend private schools of their choice.
  29. 29. EDCHOICE.ORG For a tax-credit scholarship program to result in savings, this must be true: DISTRICTS' VARIABLE SPENDING PER STUDENT NET SAVINGS PER STUDENT DISTRICTS' TAX REVENUE LOST PER STUDENT( () )>
  30. 30. EDCHOICE.ORG There are two other factors we took into account, which are explained in more detail in the report: The proportion of scholarship students who switched (or were likely to switch) out of public schools vs. those who already were in (or were likely to attend) private schools even without the assistance of the scholarship Some programs allow students to receive multiple scholarships.
  31. 31. EDCHOICE.ORG To determine a tax-credit scholarship program’s net fiscal impact, use the following equation: Net Fiscal Impact = (p x C x E) - (t x E) p = percentage of scholarships given to public-to-private school switchers C = average variable cost to educate a student in public school E = total number of program participants t = average amount of tax credits awarded per program participant So (p x C x E) represents the total savings to the state and districts because students left public schools, and (t x E) represents the total cost to operate the program.
  32. 32. EDCHOICE.ORG We did the math.
  33. 33. EDCHOICE.ORG Our low-end estimate* reveals students have saved states and districts $1.7 billion, or $1,647 per student, using tax-credit scholarships to attend private schools. *assuming a very conservative 25 percent of scholarships went to multi-scholarship students and a fixed 60 percent of recipients were public-to-private switchers
  34. 34. EDCHOICE.ORG Yep, that’s the low end.
  35. 35. EDCHOICE.ORG The high-end estimate* shows tax-credit scholarships have saved $3.4 billion, or $2,974 per student. *assuming 10 percent of scholarships went to multi-scholarship students and state-specific rates for public-to-private switchers
  36. 36. EDCHOICE.ORG These savings are most commonly captured by either the public school districts or the state treasury, which can use them to do any number of things: invest in other priorities such as law enforcement or healthcare, reinvest in public schools, build reserves, and/or lower taxes. lower total state spending,
  37. 37. EDCHOICE.ORG But what actually happens to those savings is anyone’s guess.
  38. 38. EDCHOICE.ORG State governments don’t do much, if anything, to track where those savings go.
  39. 39. EDCHOICE.ORG But that doesn’t mean that savings aren’t there.
  40. 40. Wondering about your state’s education spending? Check out individual program breakdowns and more in the full report at EDCHOICE.ORG/ScholarshipAudit To contact the author, EdChoice's Director of Fiscal Policy and Analysis Marty Lueken, email marty@edchoice.org.

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