No Accountability in Existing State Program Funneling Tax Credits to Private Schools

HARRISBURG, Pa., April 7, 2011 /PRNewswire/ -- Despite receiving roughly a third of a billion dollars in taxpayer funds over the past decade, a state program that funds scholarships for students attending private and religious schools lacks fundamental accountability measures.

The Keystone Research Center made this finding in a new report assessing the state's decade-old Educational Improvement Tax Credit (EITC) Program. View the report, No Accountability: Pennsylvania's Track Record Using Tax Credits to Pay for Private and Religious School Tuition, at http://keystoneresearch.org/EITC-accountability.

The report is designed to help guide a growing debate around a plan to offer taxpayer-funded vouchers to all low-income school-age children for tuition at private and religious schools — and what accountability measures will be put in place in such a voucher program.

"With no educational or financial accountability in EITC scholarships for private school tuition, the state is simply not ready for a new voucher program with a price tag to taxpayers that is at least 10-times as big," said Stephen Herzenberg, PhD, the report's author. "Policymakers instead should focus on strengthening accountability in the EITC."

No Accountability in EITC

The EITC program was launched in 2001-02 and is administrated by the state Department of Community and Economic Development (DCED).

It diverts business tax revenue to organizations that provide scholarships for K-12 students to attend private and religious schools. (It also funds tax credits for contributions to preschool and pre-kindergarten scholarships, but this report focuses on accountability in the K-12 scholarships only.)

Corporations can receive an EITC tax credit on charitable contributions to a Scholarship Organization — 75% for a one-year contribution and 90% for a multi-year commitment. In other words, taxpayers are paying for 75% to 90% of all funds received by Scholarship Organizations. Corporations can receive credits worth up to $300,000 per year, with the program's cost capped at $60 million.

As of July 1, 2011, a family of four earning up to $84,000 per year will be eligible for an EITC scholarship.

The report found that schools benefiting from the EITC scholarships are not required to report on student progress or document school quality. Students receiving the scholarships are not required to take tests, and the state collects no data on their progress. In 2005, the Legislature prohibited DCED from requesting "any other information" beyond that explicitly provided for in statute.

The report also found that there is little or no financial information on organizations that receive voucher tax credits and distribute scholarships. Experiences in Arizona indicate that a lack of financial accountability opens the door to the misuse of public funds.

Public schools and their students, meanwhile, face both comprehensive financial accountability and increasing levels of educational accountability — and it has paid off. The percent of students scoring "below basic" has been cut in half over eight years.  Three quarters of Pennsylvania students are now on grade level based on 2009-10 PSSA test results. Pennsylvania was the only state that improved in all categories at all grade levels from 2002 to 2008, according to the independent, non-partisan Center on Education Policy.

"We have seen significant student progress in public schools over the past decade," said Dr. Herzenberg, who serves as Executive Director of the Keystone Research Center. "When it comes to EITC students, it is impossible to assess how well they are doing."

The Second Largest School District in Pennsylvania

In 2009-10, the EITC program provided scholarships to 38,000 students to attend private and religious schools. This is 10,000 more students than in the state's second-largest school district, the City of Pittsburgh.

"In effect, the EITC program is the second largest school district in the Commonwealth," Dr. Herzenberg said.

The report found that the EITC program primarily serves large urban areas of the state, especially in southeastern and south-central Pennsylvania, and in Pittsburgh. Twenty-two counties do not have a single Scholarship Organization and another 16 have only one.

"The geographical distribution of the EITC Scholarship Organizations mirrors the geographical distribution of private and religious schools in Pennsylvania, and also provides an indication of where taxpayer funds would go under a new voucher program as well," according to the report.

The report lists the number of Scholarship Organizations for each county and also has maps that show where these organizations are and the geographical distribution of all private schools in Pennsylvania.

A Big Concern for School Vouchers Plan

The findings of this report have implications for legislation to create a large new program to provide vouchers to low-income students who attend private schools. Under current proposals, all students from households earning up to 130% of the federal poverty level would qualify for vouchers by year three.

Dr. Herzenberg said the lack of accountability in the EITC program should be a major concern for Pennsylvanians as policymakers debate this expanded vouchers program.

"This lack of accountability might be less of a concern if we had evidence that private and religious schools do a better job of educating students," Dr. Herzenberg said. "But a large body of research shows that private school vouchers do not improve educational outcomes."

The Keystone Research Center is a nonprofit, nonpartisan research organization that promotes a more prosperous and equitable Pennsylvania economy. Learn more: www.keystoneresearch.org.

SOURCE Keystone Research Center