choice history

The rise of tax credits: How Arizona created an alternative to school vouchers — and why they’re spreading

PHOTO: U.S. Department of Education

With its recent adoption of a tax credit scholarship program, Illinois became the 18th state to adopt an innocuously named — but highly controversial — policy that critics have described as a “backdoor voucher.”

In some sense, the description is apt. But by injecting a middle layer into the government’s support of private school tuition, tax credits help avoid some of the legal and political obstacles that have dogged efforts by advocates, like Education Secretary Betsy DeVos, to promote school choice through vouchers.

Perhaps as a result, more students now use tax incentive programs than vouchers to attend private schools in the U.S. A federal tax credit is also seen as the Trump administration’s favored approach for promoting school choice at the federal level, though its immediate progress looks increasingly unlikely.

The 20-year history of this approach offers insights into why it has taken hold: resistance to legal challenge; limited government oversight, appealing to among free-market advocates of school choice; and a more politically palatable branding than vouchers.

This is far better than vouchers — it is easier to pass and easier to uphold,” Trent Franks, a conservative activist and now a U.S. congressman, said in 1999 after Arizona’s state supreme court upheld its tuition tax credit program. “I think this is the direction the country will go in.”

He proved largely right.

The number of students participating in private school choice programs over time, including tax credits (green) and vouchers (orange). (EdChoice)

Arizona’s pioneering approach

The first tax credit program was passed in Arizona in 1997. Arizona’s constitution, like most other states’, bars public dollars from going to religiously affiliated schools. Proponents knew any plan to promote private school choice would likely end up in court.

So they landed upon an ingenious approach that would make the initiative more likely to survive legal challenge. Instead of issuing vouchers for private school tuition — like Milwaukee had done since 1990 — the state would outsource that role to nonprofits. Those groups would get their money from donations, encouraged by generous tax credits.

It worked like this: An individual could donate up to $500 to a nonprofit, then get a tax cut for the exact amount they donated. The nonprofit would take the donated money and use it to offer tuition stipends — essentially vouchers — to families who met certain conditions. That system allows the state to promote the tuition subsidy, losing $500 in revenue for each maxed out donation, without paying for it directly.

Arizona’s program has since grown, and the state has created a number of other tax credit programs. (This approach is distinct from programs that give individual families tax breaks for educational spending on their own children; Illinois has had such an initiative since 2000, while Minnesota has had one since 1955.)

Arizona’s and of Milwaukee’s policies look similar. In both places, students can receive a subsidy to attend a private school, and it comes at the expense of state revenue. But crucially, in Arizona, the government never had the money to begin with.

“The point was in part to ensure that these were not government-run programs,” Lisa Graham Keegan, who was Arizona’s school superintendent when the tax credit program passed, told Chalkbeat. “Those scholarships are completely separate, both for legal reasons and for philosophical reasons.”

Tax credits: the legal survivors

Private school choice across the country have been inundated with legal challenges, but tax credits have proven remarkably resilient.

Although voucher programs have continued to grow and were upheld by the U.S. Supreme Court in 2002, they have also faced legal challenges in state courts. Colorado’s top court, for example, struck down a voucher program in 2015. (The case is currently being reconsidered in light of a recent Supreme Court decision.)

But tax credits have never ultimately lost in state or federal court, prevailing in Arizona, Alabama, Florida, Georgia, New Hampshire, and the U.S. Supreme Court.

Tax credits “grew up as a result of saying we need a different vehicle than vouchers in states that have legal issues,” said Robert Enlow, the president of EdChoice, an Indianapolis-based group that backs both vouchers and tax credits. (EdChoice is a funder of Chalkbeat.)

Often, cases have been thrown out before substantive arguments can be made, amounting to a win for the programs: Some courts have ruled that private organizations or individuals do not have legal standing to challenge tax credits, since they aren’t government expenditures.

That was the decision in the 2010 Supreme Court case Arizona Christian School Tuition Organization v. Winn, in which the majority said equating government spending and tax credits was “incorrect.”

“When Arizona taxpayers choose to contribute to [scholarship organizations], they spend their own money, not money the State has collected,” Justice Anthony Kennedy wrote.

Light regulatory touch proves a blessing and a downside

To Arizona conservatives skeptical of both regulation and the education establishment, the system had an additional benefit.

“The point was in part to ensure that these were not government-run programs,” said Graham Keegan, and additionally that “these don’t become government dollars.”

Nationwide, tax credit scholarship programs appear less regulated than voucher programs, some of which require private school students to take state tests or for schools to undergo financial audits.

Free-market oriented supporters “see ‘neovouchers’ as much less likely to be regulated and have restrictions — the government strings attached — than a traditional voucher law,” said Kevin Welner, a University of Colorado professor who wrote a book on the rise of tax credit programs and is generally critical of them.

A 1998 essay published by the Mackinac Center, a conservative Michigan think tank, made this case explicitly: “Tuition tax credits also create very different effects than vouchers. … Vouchers are more likely to be viewed as a rationale for regulating the entity that receives the subsidy.”

This has played out in practice. One analysis compared several voucher programs to a number of tax credit programs and found that, in almost all cases, vouchers were more regulated. Most tax credit systems had few, if any, financial reporting or disclosure requirements. (Notably, Florida’s program, the largest in the country, was the most regulated tax credit initiative.)

Many tax credit programs do not require participating students to take state exams, and if they do, the tests are rarely comparable to the assessments taken in public school. This means that while voucher programs have been widely studied, there is little research on the effect of receiving a tax credit scholarship.

Supporters of this approach argue that such requirements discourage private schools from participating.

Limited oversight, however, has proven something of a political liability, insofar as it has allowed for financial malfeasance. National media have drawn attention to how one prominent politician and advocate for Arizona’s program was also able to profit personally from it, for example.

“I think [limited regulation] is a feature that has some bugs,” said Enlow of EdChoice. “We need to have transparency. The programs, like Florida, which are very transparent and very open to data collection, I think are very important.” He declined to name any tax credit programs that, in his view, lacked sufficient transparency.

The use of the tax code has also raised another concern: Under some tax credit systems, “donors” can actually earn a profit by taking advantage of both state and federal tax breaks.

Selling tax credits

How exactly to brand tax credit programs has been the subject of fierce debates. Opponents have called them “neovouchers” and “voucher schemes,” while supporters sometimes portray them as entirely distinct from vouchers.

Tax credits tend to poll better than vouchers, and Welner thinks that may be because it’s less clear to most people what they are.

“People’s eyes get bleary and they tune out when people start talking about tax credits,” he said. “That helps to avoid a situation where they respond to it the same way they respond to a voucher proposal.”

Tax credits are essentially a tax cut, which can be a selling point for some, especially conservatives. Advocates sometimes also downplay the costs of tax credits to the government.

“Is it foregone revenue? Sure, but it doesn’t mean it’s the state’s revenue,” said Enlow.

The distinctions between vouchers and tax credits, though, may ultimately matter less to lawmakers in states where they are being debated. In Illinois, critics connected tax credits to vouchers, and Democrats were largely opposed to the tax credit initiative that ultimately passed.

“In my experience the arguments have been the same whether it’s a tax credit bill or a voucher bill when you’re talking with legislators,” Enlow said. “There’s some nuances, but it’s still the same.”

Correction: An earlier version of this piece misstated the name of a free-market Michigan think tank, which is the Mackinac Center.

Superintendent search

Newark superintendent finalists make their pitches to the public

Clockwise from top left: Sito Narcisse, Andres Alonso, A. Robert Gregory, and Roger Leon.

The four candidates vying to become Newark’s next superintendent each claimed to be the best person for the job during a much-anticipated forum on Friday.

The two-hour event at Science Park High School was the public’s first opportunity to hear from the finalists — who include two Newark natives and two outsiders — and its last before the city school board is expected to vote for their choice on Tuesday. Whoever is chosen will become the first full superintendent to lead the system since it was returned to local control this year after a decades-long state takeover.

The finalists are former Baltimore city schools chief Andres Alonso; Newark Interim Superintendent A. Robert Gregory; Newark Assistant Superintendent Roger Leon; and Sito Narcisse, chief of schools for Metro Nashville Public Schools in Tennessee. They were selected by a seven-person search committee who considered candidates from across the country.

Each finalist was given 30 minutes on Friday evening to introduce himself and describe his qualifications for the high-profile position. Unlike some districts, the school board did not interview the candidates during the public event. (Instead, they were scheduled to hold closed-door interviews on Saturday.) And the roughly 200 audience members were not allowed to ask questions.

Denise Crawford, a parent who attended the forum, said that community members should have been part of the search committee, which included three school board members and four people appointed by the mayor and the state education commissioner. But Tafshier Cosby, whose son attends a Newark charter school, said Friday’s event offered the public a chance to hear each candidate’s vision for the 35,000-student Newark Public Schools system.

“Whoever has the best plan for moving NPS forward,” she said, “that is who I’m rooting for.”

Below are highlights from each candidate’s remarks in the order that they spoke on Friday.

Sito Narcisse

PHOTO: Sara Mosle
Sito Narcisse

As an outsider, Narcisse promised to become part of the community if he is hired.

“My wife and I will be living in the city,” he said, adding that he would shop at the local grocery stores and attend a local church. “So I’ll have a vested interest.”

Narcisse, who is the son of Haitian immigrants, has overseen schools in five different districts in four states. He was a principal in the Pittsburgh and Boston school systems, and a top official in two large Maryland school districts.

In 2016, he became the second-highest-ranking official chief in the Metro Nashville system, which includes 169 schools serving 88,000 students. He recently applied to become superintendent of a Florida district, but was not selected.

If he led Newark, he said he would push to pay teachers and classroom aides more and would be open with the public about how he allocates funding. He also vowed to hire Newark residents for positions within his administration.

“I will not be doing things to you,” he said. “I will be doing things with you.”

Andres Alonso

PHOTO: Sara Mosle
Andres Alonso

Before he became a New York City school official and later the chief of Baltimore City Public Schools, Alonso spent 12 years teaching in Newark schools.

Now, he wants to return to where he started.

“This is the job I always wanted,” he told the crowd. (He was recently in the running to become Los Angeles’ superintendent, but said he withdrew when the Newark position became available.)

A Cuban immigrant, Alonso said he arrived at school in Union City, New Jersey when he was 12 not knowing how to speak English. He went on to study at Columbia University and Harvard, where he is now a professor in the Graduate School of Education.

From 1987 to 1998, he taught in Newark at a school for emotionally disturbed students and at Peshine Avenue Elementary School. During that period, he gained legal custody of one of his students.

In 2007, he became CEO of the Baltimore city school system, where he closed many low-performing schools, oversaw the expansion of the charter-school sector, and tied teacher pay to their performance. During his six years as schools chief, he said he had “an extraordinary relationship” with the teachers union and with parents.

On Friday, he said that former Mayor Cory Booker and former state education commissioner Christopher Cerf had asked him in 2012 to run Newark’s school system. He turned down the job, he said, because he did not want to carry out a premade “blueprint” for the district. (Instead, Cerf became superintendent.)

Now that the district is back under local control, Alonso said he is ready to lead it.

“I want to come full circle,” he said. “I think I could help the system immensely.”

A. Robert Gregory

PHOTO: Patrick Wall
A. Robert Gregory at the unveiling of a new science-education center this month.

Gregory attended Harriet Tubman Elementary School in Newark before his family moved to Pennsylvania, where he eventually went to college and majored in education. At his college graduation, his grandmother urged him to return to his hometown.

“She whispered to me, ‘Come back home, the kids need you,’” said Gregory, whose father was a longtime Newark principal.

Gregory taught at Harold Wilson and Camden middle schools in Newark before founding American History High School, a well-regarded magnet school. In 2015, he was promoted to assistant superintendent of high schools and, last June, Cerf named him deputy superintendent. When Cerf stepped down in February, Gregory became interim superintendent.

In that role, he has increased spending on bilingual and special education and negotiated a contract that raises the wages of school cafeteria workers, security guards, and custodians, he said during his presentation. He also supported students who joined in a national school walkout to call for stricter gun laws, and he is planning a conference next month where teachers will be able to share classroom ideas.

“I am the educator,” he said, “who vows to work toward restoring trust while galvanizing this city around one common goal: high-quality education for all.”

Roger León

PHOTO: Sara Mosle
Roger León

León began by emphasizing his deep Newark roots and ties to each section of the city.

He said he was born in the Central Ward, lived in the South Ward, grew up in the East Ward, visited his godparents in the North Ward, and met his first good friends in the West Ward.

“The journey of Newark has been my journey,” said León, whose parents were Cuban immigrants.

A Science Park High School graduate, León went on to coach the magnet school’s renowned debate team for eight years. He later taught middle-school algebra before becoming principal of Dr. William H. Horton School and then University High School of the Humanities.

He has been an assistant superintendent for 10 years. If he becomes schools chief, León said he would invest in attendance counselors and mental-health services for students. He also said he would encourage students to travel abroad, and would make sure that parents have different types of schools to choose from.

His past accomplishments are evidence “of how high we will go, how fast we will get there,” he said, and “of how we will learn and do it together.”

concurrent enrollment

New state law forces Denver to change course on its ‘early colleges’

PHOTO: Denver Post file

A change in state law meant to rein in the cost of Colorado high schools that allow students to stay longer to earn college credit has forced the Denver district to slow down its expansion of the model.

District officials were proposing adding another “early college,” as the schools are known, to the seven that already exist in Denver Public Schools. But on Thursday, Antonio Esquibel, the district’s executive director of early college who submitted the application to open the school, confirmed he was withdrawing it.

“With the change in statute, it will force us to have to rethink what early college is and what it should look like in Denver Public Schools,” Esquibel said.

Denver’s seven early colleges are:

  • Southwest Early College (charter)
  • CEC Early College
  • West Early College
  • Denver School of Innovation and Sustainable Design
  • Dr. Martin Luther King Jr. Early College
  • High Tech Early College
  • Manual High School

The school board was scheduled to vote on whether to approve the school, temporarily called Denver Early College High School, at a meeting Thursday night. It could have opened as soon as 2019, either as a brand new school or a replacement for a low-performing school. The application said it would “provide all students the option to enroll for an additional one to two years to obtain credits leading toward or culminating in an associate’s degree.”

But the change in state law essentially prohibits early college students from staying in high school for a fifth or sixth year for the sole purpose of taking free college courses.

A bill lawmakers approved earlier this month defines early colleges as schools where students earn an associate’s degree or at least 60 college credits alongside their high school diploma. The bill specifies that the curriculum “must be designed to be completed in four years.”

Lawmakers in the Colorado House and Senate passed the bill, but it has not yet been signed into law by the governor. Denver district officials did not testify against it publicly.

Lawmakers wanted to change the law because they feared the early college model would become too expensive. Currently, the state pays for early college students who stay in high school for a fifth or sixth year at the regular per-pupil rate, which varies by district. In the case of Denver Public Schools, it’s $7,939 per student this year, according to state budget analysts.

There are currently 20 early colleges in Colorado, up from five in 2009. While only 315 students this year were in their fifth or sixth year, trends indicated that number would grow. Last year, there were 224 students in a fifth or sixth year. In 2013, there were only 84.

Denver’s proposed early college was based on a six-year model. At a presentation to the school board last week, Esquibel said most Denver students would likely earn just 12 college credits during their first four years of high school, and then stay for a fifth and sixth year earning 24 credits each year to get them to a total of 60, which is typically how many credits a student needs to earn an associate’s degree.

Most students in Denver’s early colleges are students of color from low-income families who are on track to be the first in their families to go to college, Esquibel said.

“Unfortunately, our students of color don’t have as much access or opportunity to take college courses or, for that matter, enroll in a college,” he told the board. “So the concept of an early college was created specifically for that reason: to buck the trend.”

School board members praised the idea.

“We have these age-old timelines that, for some reason, this is how we believe young people should go through school,” said board president Anne Rowe. “What you’ve been able to do is really push the model. … That out-of-the-box thinking is so important.”

Given the impending change in state law, Esquibel said he and other district officials will spend the next several months figuring out how to make the early college model work in four years instead of six. The leaders of other Colorado early colleges have said most of their students complete the requirements in that time, and Esquibel said Denver officials have been studying early colleges in Texas whose students do it in four years.

“It’s a little daunting, but we’ve seen schools across the country doing it,” he said.

Esquibel said he hopes to re-submit the application for a new early college in the fall.

The district will have to reconfigure its six existing early colleges, as well, he said. (The seventh early college is a charter school.) However, high school juniors and seniors currently enrolled and planning to stay for a fifth or sixth year won’t be affected by the bill. It allows districts to receive full state per-pupil funding for those students in the 2018-19 and 2019-20 school years.