Scholarship credit providing value to students and state

HAVING faced multiple years of budget shortfalls, lawmakers need to maximize every dollar available. A recent report shows the Oklahoma Equal Opportunity Education Scholarship Act has done just that. It’s a tax break that allows lowerincome students to attend private schools, and has effectively increased available public school dollars.

Enacted in 2011, the act provides state income tax credits to those who donate to scholarship funds that help mostly low-income students attend private schools. A new report by Jacob Dearmon, director of the Center for Data Analytics at the Meinders School of Business at Oklahoma City University, and Russell Evans, executive director of OCU’s Steven C. Agee Economic Research and Policy Institute, analyzes the program’s financial impact on state resources.

Under the program, scholarship donors receive a tax credit equal to 50 percent of one-time donations and 75 percent for multi-year donations. The credits are capped at $100,000 for qualified business donors, $2,000 for taxpayers filing a joint tax return, and $1,000 for individual tax filers. The program has a $5 million annual cap on credits that can be issued.

The tax credit scholarships must go to students who are either members of an Oklahoma household with annual income below 300 percent of the freeand-reduced-lunch eligibility guidelines, live in the attendance zone of a school designated as “in need of improvement” by the state Department of Education, or have been identified as having a learning disability.

The program funded 396 student scholarships in the 2013-2014 school year and has grown to 1,459 scholarships in the 2016-2017 school year at an average award of $1,012 each.

Dearmon and Evans compared the amount of foregone tax revenue with money the state would have otherwise spent educating scholarship recipients. Their analysis assumed 75 percent of the mostly lowincome scholarship recipients would have otherwise attended a public school if not for the program, a conservative assumption based on analyses conducted in other states.

Based on public data, they peg total per-pupil spending in public schools at $8,093 per student from all funding sources (federal, state and local) and estimate 48 percent, or $3,885 per pupil, comes specifically from state sources.

In 2016, the state provided $3.4 million in scholarship tax credits. Yet had 75 percent of scholarship recipients attended public schools, the state would have spent $4.2 million educating those students. That’s a net gain of $824,487 for the public school system.

Once you account for spending from all sources, public schools would have spent more than $8.8 million educating 75 percent of scholarship recipients. That means the tax credit program has freed up more than $5.4 million net in the public school system.

The tax credit program has allowed some of Oklahoma’s neediest children to leave bad schools and attend private schools. This alone is a victory. Icing on the cake is that the program increases available funds in public schools, and it shows why lawmakers should not only increase the size of the scholarship tax credit program, but enact additional school choice measures.