Panel OKs smaller rise in scholarship tax credits,

Cap on scholarship program will rise to $65M in new bill.

A program that lets taxpayers erase some of their debt to the state if they earmark the money for private school tuition would grow by $7 million a year under new amendments by Georgia lawmakers.

The annual cap on the tax credits for scholarships program is $58 million, but that rises to $65 million under the latest version of House Bill 217.

The legislation by Rep. John Carson, R-Marietta, passed the House of Representatives with a larger increase of $100 million over six years, but the Senate Finance Committee on Monday pared that back before passing the bill for a vote by the full Senate.

The tax credits have helped thousands of children attend private schools — 13,555 in 2015 alone, and in recent years the maximum contribution level has been reached on the first day of availability. But there are nearly 1.8 million public school students in Georgia, and critics of the tax credits say they divert money available for other government spending, such as support of public schools. Public schools get $166 million less than they should under the state education funding formula.

Some also criticize the level of transparency with the program and even question its legality.

Georgia taxpayers sued in Fulton County Superior Court in 2014, alleging it is unconstitutional to spend state tax dollars on the program because some schools that receive money are religious. The Georgia Supreme Court heard arguments in January and is expected to issue a decision sometime this year.

One member of the Senate Finance Committee said he thinks the program is unconstitutional, and a majority of senators at Monday’s hearing had another concern: the amount of the fees kept by the private organizations that administer it.

Taxpayers pledge money — up to $1,000 for an individual, $2,500 per married couple and $10,000 for shareholders or owners of businesses (except “C” corporations, which can contribute up to three quarters of their state tax debt) — to specific private schools and get a tax credit for the amount. The money passes through nonprofit scholarship organizations, which assign it to students. These organizations can keep up to 10 percent as fees.

“This room wouldn’t be full if people weren’t making money,” said Sen. Renee Unterman, R-Buford, at Monday’s packed hearing. “There are people making money off of this.”

More than two dozen scholarship organizations reported giving students $47.6 million for private school scholarships in 2015 while taking in about $58 million, according to the latest figures from the Georgia Department of Revenue. The organizations don’t have to publicly report their fees — something this legislation would change — so it’s unclear how much of that $10 million difference they retained for fees versus for past or future scholarship costs.

The fees have been controversial for years. A half decade ago, The Atlanta Journal-Constitution used federal tax records and interviews for a report on six-figure salaries at the student scholarship organizations. The committee voted to reduce the allowable fees to 3 percent of proceeds, which also was controversial. Carson, the bill’s chief sponsor, said that would kill the program, and Sen. Hunter Hill, R-Atlanta, said it would result in “pushing out all of the smaller players.”

The Georgia GOAL Scholarship Program, Inc., by far the largest, took in $16.2 million (and disbursed $15.7 million) in 2015. Seven others also had revenues in the millions of dollars but most took in six figures or less, with some reporting less than $1,500.

The Senate committee’s handiwork is unlikely to be the final word on the tax credit program. Assuming it is approved by the full Senate, it will likely wind up in a conference committee for negotiation with members of the House over the changes to the version they approved. “This,” said Sen. Chuck Hufstetler, R-Rome, the Finance Committee chairman, “is not going to be the final form.”