Scholarship Tax Credits re-emerge in the 2020 Session – Prichard Committee for Academic Excellence
Prichard Committee for Academic Excellence

Scholarship Tax Credits re-emerge in the 2020 Session

At a rally in Frankfort this week for “National School Choice Week,” school choice advocates and policymakers called – once again – for Kentucky to adopt scholarship tax credits.

Past legislative sessions have seen proposals that would establish tax credits for individuals and businesses donating funds to a qualified scholarship granting organization to provide financial support to families to send students to private schools or to provide services to students with special needs. The estimated cost to the state General Fund of these past proposals has exceeded $200 million  – ranging from $21 to $50 million annually.

Similar legislation has now been introduced in the 2020 session as both House Bill 350 and  Senate Bill 110.  While official “fiscal notes” have yet to be made available by the Legislative Research Commission, costs to the state General Fund are expected to be similar as prior proposals.  There appear to be revisions to past legislation that could impact total costs, including:

  • Removal of the “Sunset” provision – In prior years, the credit was permitted for a 5-year period. This year’s proposals include no sunset date.
  • Reduces the share of first-time scholarships going to students eligible for reduced-price meals, students with special needs, and students in foster care from 90% of the statewide share of reduced-price meal eligible students to simply a majority.
  • Increase the amount of time a non-public school has to get certified with the Kentucky department of Education from 5 to 8 years in order to participate in scholarship program.

We reviewed the detailed ins and outs of these types of scholarship tax credits in last year’s post.  Suffice it to say the opportunity cost of these credits remains significant.

As noted, costs to the state General Fund of past proposals exceeded $200 million. There is a substantial opportunity cost to enacting such a policy when we already underinvest in the adequacy and equity of our system of public education. To deliver the promise education excellence for every Kentuckian, the Commonwealth must instead reverse years of budget cuts and lost buying power.

Since the Great Recession in 2008, state investments have: declined 33% in our colleges and universities; declined 12% in our K-12 per-pupil base guarantee; and have been inadequate to ensure high-quality early learning opportunities for our youngest children. This declining investment in education – and our future – threatens to reverse the progress Kentucky has made in student success and national rankings.

Moreover, Kentucky remains challenged by persistent income inequality, ranking 44th among the states in the number of residents living in poverty. But we know the answer to these challenges, as noted by the University of Kentucky’s Center for Business and Economic Research in the 2018 Kentucky Annual Economic Report:

“There is one factor that is more important than all the others, and that is education. By investing in it, we can improve household incomes, individual health, and our overall quality of life. The key to Kentucky’s economic future lies in its human capital.”

Which is why we are proposing to increase state investment in education – from early childhood to postsecondary – $1 Billion by 2026.  Kentucky must reinvest, not consider more tax breaks. Tax breaks for which evidence is lacking that this type of intervention is successful in enhancing academic performance.  We most focus on investing in what is needed for all Kentucky students, in every community, to achieve at the highest levels.

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