Pa. House OKs expansion of EITC program
Educational tax credit funds could increase by $100 million
HARRISBURG — On a day when supporters of the program were celebrating the birthday of the state’s Educational Improvement Tax Credit, those supporters had a bit more to celebrate as state lawmakers advanced legislation to significantly increase funding for the tax credit program.
Eighteen years ago, on May 7, 2001, Pennsylvania became the first state in the nation to pass an education tax credit aimed at corporations. The EITC provides companies with a credit for donations to nonprofit scholarship or educational improvement organizations.
Currently, the program receives $110 million in funding for tax credits, but legislation — House Bill 800 — approved by the state House of Representatives last week seeks to increase that funding by $100 million, as well as an automatic escalator for program funding.
The escalator would raise the EITC scholarship funding cap by 10 percent, whenever 90 percent of the tax credits were claimed in the prior year.
HB800 also would increase the maximum annual household income for scholarship eligibility by $10,000, to $95,000 from $85,000. It would require a scholarship organization to spend at least 90 percent — the current threshold is 80 percent — of its donations on scholarships and education programs.
The vote was 111-85 to send the bill to the Senate.
Noting that state spending on public education is at historic levels, with more than $12 billion committed to public schools annually — up nearly 40 percent from 2011’s base total of $9 billion — HB800’s prime sponsor, House Speaker Mike Turzai, R-Allegheny, said providing $100 million to the scholarship program, which annually has to turn away nearly as many students as it helps due to funding limitations, is an appropriate use of state dollars.
“In return for this great investment in public education, Pennsylvania boasts many of the best public schools in the nation, providing immense benefit to our students and our communities,” Turzai said. “But, we know when it comes to education, one size does not fit all. For a variety of reasons unique to each individual, these great public schools are not always the right fit for every child or for every family. This is why the EITC program is performing so well and why it needs to grow.
“In the 2016-17 school year, through the EITC program combined with the Opportunity Scholarship Tax Credit, more than 50,000 students were able to receive a scholarship to attend the school of their choice, but another 52,000 applications were denied due to current limits on the programs’ size and household income requirements,” Turzai said. “There is an equally unmet need among donors, with too few tax credits available for the many wanting to give. As of January 2019, businesses had applied for $180 million in tax credits beyond the current caps. With a limit of $210 million, the program’s annual budget is far too low, accounting for less than 2 percent of the state government’s appropriation for education.
“School choice is not an alternative to a great public school system; it’s a necessary complement,” he said.
House Democrats, for the most part, railed against the spending increase, arguing the $100 million would be better spent on public schools — or other programs they argued need additional funding — but even a few Democrats suggested they could support a funding increase.
“There’s a litany of other programs in our budget that require additional financial resources,” said Rep. Mike Carroll, D-Luzerne. “I hope, I hope, we’re as eager to have a conversation about additional funds for those lines of the budget as we are to have a conversation about EITC.”
Carroll called the HB800 vote “the first budget vote” of the 2019-20 budget season, and even Republicans acknowledged the final decision about EITC funding will be resolved as part of the upcoming state budget negotiations.
The other big player in those budget negotiations sounded concerns similar to those of many House Democrats.
“Governor (Tom) Wolf’s priority is ensuring available resources go toward public schools, which still face serious problems with underfunding and inequity,” Wolf spokesman J.J. Abbot said in an email. “Governor Wolf would be hesitant to increase funding for business tax credits at the expense of funding desperately needed to go into the classroom.”
While some House Democrats suggested they might otherwise support HB800, there was universal opposition from the caucus with regard to the bill’s automatic escalator, which some said — given the program normally spends all of the money appropriated for it — could increase the program appropriation to more than half a billion dollars in 10 years.
A few within the Democratic Caucus also questioned the increase of the maximum household income for program eligibility purposes, to $95,000, arguing the increase will benefit wealthy households when the program is intended for low- and middle-class income families.
When the program was created in 2001, families with one child and a household income of $60,000 or less qualified for the EITC, with an additional $10,000 allowance for each additional eligible student and dependent household member.
The most recent measure of median family income in Pennsylvania for 2017, as measured by the U.S. Census Bureau’s American Community Survey, is $75,949.
“Please remember the parents of these students are paying taxes like everyone else while their children get no educational benefit for it,” said Rep. Mike Jones, R-York, of families who choose to pay to send their children to private schools while still paying taxes for their local public schools. He also noted 245,000 students enrolled in public schools benefit from EITC scholarships.
Additionally, Jones suggested the EITC helps save money for public school districts that would otherwise have to accommodate more students if those students were not attending private schools.
“If those students attended public schools, like those students who came from the Catholic schools that closed (a few years ago), our enrollment would jump by 14 percent,” Jones claimed. “If you think overcrowding is an issue now, imagine what would happen if enrollment jumped 14 percent. If you think a $100 million increase in EITC is a lot, imagine instead an increased cost to our public schools of $2 billion to $3 billion each year. This is a huge cost saver to public schools.”
Democrats challenged Jones’ claim, with Rep. Mike Sturla, D-Lancaster, arguing: “Even if there’s going to be 50,000 kids back into the school system, it’s not like you need to build 10 new schools, with 5,000 kids in each school. They come in multiple grades. They come in 500 different public school locations, school districts, with multiple buildings. So you add one or two kids per classroom, and it doesn’t change the bottom line in that school or that school district one cent.”
Some Democrats suggested the tax credit represents an abdication of legislative spending oversight, and that the credits are being used to send children to religious-based private schools, which those lawmakers see as an inappropriate use of taxpayer dollars.
One particular statement by a Democrat about religious-based private schools – which characterized those schools as discriminatory — earned Turzai’s verbal disdain.
Listing the many private schools — several of them Catholic schools — just in the Philadelphia community that educate children from that community, Turzai stated of the children served, “And guess what, most of them aren’t Catholic.”
“Discriminatory? How outrageous (a claim) for people who care about educating children of all backgrounds, and provide them with a safe haven,” said a visibly angered Turzai. “To dismiss them as discriminatory, to act as if these good individuals don’t care about each and every child in the Commonwealth of Pennsylvania – I’m sorry, one size does not fit all. Period.”
Prior to Turzai’s floor remarks, Rep. Elizabeth Fiedler, D-Philadelphia, when listing some of her “many concerns” about HB800 — which she described as “horrifying” — said, “Schools receiving EITC money can discriminate against children with disabilities and on the basis of religion.”
Reaction to the HB800 vote by the state’s largest teachers union — which has maintained its opposition to the funding increase — was quick, and declared the policy to be something most Pennsylvanians don’t need or want.
“Adding $100 million in new tax credits to the EITC program to benefit a limited number of students does not reflect the current needs and priorities of ordinary Pennsylvanians,” said Pennsylvania State Education Association President Rich Askey in a statement. “The EITC program has received hundreds of millions of dollars since it started, but a lack of accountability and transparency means policymakers have little information to evaluate if the program is working.”
Askey, who also questioned the proposed increase of the maximum household income, concluded, “Lawmakers should carefully consider whether a major expansion of an unaccountable tax credit program should come ahead of other priorities, like increasing salaries for Pennsylvania’s lowest-paid teachers to address a growing teacher shortage.”
The conservative-leaning Commonwealth Foundation, an EITC and HB800 proponent, offered a reaction counter to the one made by PSEA’s Askey, stating that 71 percent of likely Pennsylvania voters, in a 2017 poll conducted on behalf of the Commonwealth Foundation by McLaughlin & Associate, said they supported expanding tax credit scholarships, though the question did not specify the amount of the increase.
Commonwealth Foundation president and CEO Charles Mitchell touted the vote in a statement as a commitment “to providing parents a choice in how and where their children are educated” and as “providing educational opportunity regardless of a student’s ZIP code, a principle Governor Wolf has repeatedly said he supports.”
Noting that Wolf, as part of his 2018 budget address, argued that a student’s ZIP code shouldn’t determine the type of education they get, Mitchell added: “Wolf may soon have the chance back up these words with action. EITC scholarships enable students in some of Pennsylvania’s lowest-income areas to move beyond their ZIP code assigned public school and access an education that better fits their needs.”
The state’s Opportunity Scholarship Tax Credit program — which provides tuition assistance in the form of scholarships to eligible students residing within the boundaries of a low-achieving school to attend another public school outside of their district or nonpublic school — was appropriated $50 million during the current budget year; HB800 does not affect the OSTC.