The Friedman Foundation for Educational Choice

Advancing Milton and Rose D. Friedman's Vision of School Choice for All Children

Public Rules on Private Schools: Measuring the Regulatory Impact of State Statutes and School Choice Programs

Released: 5/30/2014

Author(s): Andrew D. Catt

Is regulatory creep a fate that awaits all school choice programs? With the number of those programs doubling over the past five years, the need for context and understanding is critical.
 
This report provides a framework for understanding the impacts of state government statutes regulating private schools, regulations distinct to a given school choice program, and any regulatory growth over a program’s lifespan. Examining school choice programs in operation for at least a few years provides important context and comparisons for policymakers considering additional regulations on current programs, as well as for school choice advocates pursuing new or expanded programs.
 
 
In recent years, several scholars have conducted research on private school regulations, in each case breaking new ground for observations. However, those researchers limited their scope to cross-sectional treatments of the regulatory environment at a single point in time—analytical snapshots—which do not show where regulations started and how those statutes got to where they are today.
 
This project establishes a database created specifically to track and evaluate state statutes regulating private schools before and after the enactments of 23 school choice programs in 12 states. The database contains not only the current state statutes applying to private schools in those states but also earlier versions of each state’s private school statutes as they existed before the enactment of the private school choice programs (“Pre-Choice”). The 355 Pre-Choice regulations represent nearly 62 percent of the 575 total regulations examined for this project, including 130 regulations in the first year of the programs’ implementation (“Year 1”) and 90 regulations in the following years (“Years 2+”) (see table below).
 
The author attempts to address several core questions:
  • How do the regulatory environments before the enactment of private school choice programs compare to the regulatory environments brought about by those programs?
  • To what extent do private school choice programs change the existing relationship between state governments and private schools?
  • What types of regulations burden private schools the most? Has the nature of the regulatory burden changed over time?
This report proposes a new way to measure and evaluate private school regulations. As part of this project, a new rating scale was created that qualitatively assigns an “impact score” (ranging between -3 and +3) to each regulation within the relevant statute and its subparts. That symmetric scale is applied uniformly across all categories of private school regulations, with an eye toward minimizing subjectivity and arbitrary scoring as much as possible.

Because this report provides important context and comparisons for policymakers considering regulatory frameworks for new and current programs, a set of policy recommendations and considerations are provided:
  • Avoid reinventing the wheel by establishing empirically-driven thresholds and see if the private school sector is already meeting those thresholds before determining if any additional regulation is necessary.
  • Ensure a recommended regulation is not already in place for private schools and, if there are some already in place with similar objectives, consider any overlap.
  • Take into account the oversight roles of accreditation agencies and associations to see if there is some measure of oversight and accountability already in place.
  • Consider legislatively mandated costs to private schools in fiscal impact calculations.
  • Ensure all schools, regardless of type or sector, can be reimbursed for substantial costs associated with regulations.

Programs

Autism Scholarship Program

Enacted 2003 • Launched 2004

Ohio students on the autism spectrum may receive vouchers for education services from a private provider, including tuition at a private school. After participating students receive education services, they apply to the state for reimbursement of expenses.

Carson Smith Special Needs Scholarship Program

Enacted 2005 • Launched 2005

Most Utah students who have disabilities are eligible to receive vouchers to attend private school. However, participation is limited by the amount of money appropriated to the $3.75 million program fund.

Choice Scholarship Program

Enacted 2011 • Launched 2011

Indiana’s Choice Scholarship Program allows students in low- and middle-income families to receive vouchers to attend private school.

Cleveland Scholarship & Tutoring Program

Enacted 1995 • Launched 1996

Parents in the Cleveland Metropolitan School District can receive vouchers to send their children to private school or public schools bordering the school district. No more than half of new recipients may be students previously enrolled in private schools.

Educational Choice Scholarship Program

Enacted 2005 • Launched 2006

Ohio students attending chronically low-performing public schools are eligible for “EdChoice” vouchers to attend private schools. The cap on available vouchers is 60,000.

Educational Improvement Tax Credit

Enacted 2001 • Launched 2001

Pennsylvania provides tax credits for corporate contributions to Scholarship Organizations (SOs), nonprofits that provide private school scholarships, or Educational Improvement Organizations, nonprofits that support innovative programs in public schools. Tax credits are worth 75 percent of the contribution; however, a 90 percent credit can be claimed if the corporation commits to two consecutive annual contributions. In either case, the maximum tax credit is $750,000 per company. Credits are awarded to companies on a first-come, first-served basis until the cap is reached. The total amount of tax credits is limited to $100 million.

Empowerment Scholarship Accounts

Enacted 2011 • Launched 2011

Arizona’s Empowerment Scholarship Accounts (ESA) program allows parents to withdraw their children from public, district, or charter schools and receive a portion of their public funding deposited into an account with defined, but multiple, uses, including private school tuition, online education, private tutoring, or future educational expenses. In the 2013-14 school year, eligibility expanded beyond the original pool of students with special needs to students assigned to public schools or school districts with a “D” or “F” letter grade, children of active-duty military members, and youth adopted from the state’s foster care system.

Florida Tax Credit Scholarship Program

Enacted 2001 • Launched 2001

Florida provides a tax credit on corporate income taxes and insurance premium taxes for donations to Scholarship Funding Organizations (SFOs), nonprofits that provide scholarships for low-income students and children in foster care and offer funds for transportation to public schools outside a child’s district. Businesses get a dollar-for-dollar tax credit for SFO contributions, with total credits capped at $286.25 million. Unused credits can be carried forward to the next fiscal year.

Georgia Special Needs Scholarship Program

Enacted 2007 • Launched 2007

The Georgia Special Needs Scholarship Program allows any student with a disability whose parents are unhappy with their assigned public school to receive a voucher to attend private school.

John M. McKay Scholarships for Students with Disabilities Program

Enacted as a Pilot Program 1999 • Expanded 2000

Florida’s John M. McKay Scholarships for Students with Disabilities Program allows public school students with disabilities or 504 plans to receive vouchers to attend private schools or other public schools.

Jon Peterson Special Needs Scholarship Program

Enacted 2011 • Launched 2012

Ohio parents of children with special needs enrolled in public schools are able to receive vouchers to pay for private school tuition and additional services at private therapists and other service providers. Vouchers can be used at public providers (i.e., school districts) if the district chooses to accept voucher students. The number of vouchers available is capped at 5 percent of the students with special needs statewide.

Lexie’s Law Corporate Tax Credits

Enacted 2009 • Launched 2009

Arizona allows corporations to receive tax credits for donating to School Tuition Organizations (STOs), nonprofits that provide private school scholarships to children with special needs and students who are currently, or have been at any time, part of the Arizona foster care system. The total credits claimed cannot exceed $5 million in a given year.

Lindsey Nicole Henry Scholarships for Students with Disabilities

Enacted 2010 • Launched 2010

Any Oklahoma student with special needs currently in public school is eligible to receive a voucher to attend private school.

Louisiana Scholarship Program

Enacted 2008 • Launched 2008

Louisiana’s statewide voucher program is available to low-income students in low-performing public schools. Prior to 2012, eligibility was limited to students in specific districts and parishes.

Low-Income Corporate Income Tax Credit Scholarship Program

Enacted 2006 • Launched 2006

Arizona provides a credit on corporate income taxes for C-Corporations for donations to School Tuition Organizations (STOs), nonprofits that provide private school scholarships. STOs receiving donations for this program must award scholarships to low-income students. Corporate taxpayers contributing to STOs may claim a tax credit equal to the full amount of their contribution. The program is limited to a total of $35.8 million in available tax credits per year, a figure that is allowed to rise 20 percent annually.

Milwaukee Parental Choice Program

Enacted 1990 • Launched 1990

Milwaukee families earning up to 300 percent of the federal poverty guidelines qualify to receive vouchers. Once a student receives a voucher, that student is able to keep it, regardless of his or her family’s future income. Voucher students are allowed to attend any participating private school in the state.

Oklahoma Equal Opportunity Education Scholarships

Enacted 2011 • Launched 2013

Oklahoma provides tax credits for donations to Scholarship Granting Organizations (SGOs), nonprofits that must spend a portion of their expenditures on private school scholarships for low-income students in an amount equal to or greater than the percentage of low-income students in the state. The allowable tax credit is 50 percent of the amount of contributions made during a taxable year, up to $1,000 for single individuals, $2,000 for married couples, and $100,000 for corporations. The program is capped at $5 million, of which $3.5 million is dedicated to private school scholarships with a separate $1.5 million in tax credits available for donations made to organizations that distribute “educational improvement grants” to public schools. Each donor category (individual and corporate) may use up to $1.75 million of the $3.5 million cap. If donations exceed the statewide cap in a given year, the Oklahoma Tax Commission will allocate the tax credits to individuals (or corporations) on a pro-rata basis. If individual donations fail to meet the $1.75 million cap while corporate donations exceed the cap, the unused individual credits can be allocated to corporations (and to a separate tax credit for public school improvement grants), and vice versa.

Original Individual Income Tax Credit Scholarship Program

Enacted 1997 • Launched 1997

Arizona provides a credit on individual income taxes for donations to School Tuition Organizations (STOs), nonprofits that provide private school scholarships. In the 2014 tax year, individual taxpayers contributing to STOs may claim a dollar-for-dollar credit of up to $528, and married couples filing jointly may claim up to $1,056. The amount an individual can claim for a credit increases each year by the amount the Consumer Price Index changes.

Qualified Education Expense Tax Credit

Enacted 2008 • Launched 2008

Georgia provides dollar-for-dollar tax credits for donations to Student Scholarship Organizations (SSOs), nonprofits that provide private school scholarships. Individuals may claim up to $1,000, and married couples filing jointly may claim up to $2,500. An individual who is a member of an LLC, a shareholder of an S-Corporation, or a partner in a partnership may claim up to $10,000 of their tax actually paid as a member, shareholder, or partner. Corporate taxpayers may claim up to 75 percent of their total tax liability. The program is capped at $58 million in tax credits per year.

School Choice Program for Certain Students with Exceptionalities

Enacted 2010 • Launched 2011

Louisiana allows students with certain exceptionalities who live in eligible parishes to attend schools of their parents’ choosing that provide educational services specifically addressing their needs. Eligible students are defined generally as those with special needs who have Individualized Education Plans but who are not in accelerated or gifted and talented programs.

School Scholarship Tax Credit

Enacted 2009 • Launched 2010

Indiana’s School Scholarship Tax Credit program allows individuals and corporations to claim a 50 percent tax credit for contributions to approved Scholarship Granting Organizations (SGOs), nonprofits that provide private school scholarships. There is no limit on the dollar amount of the tax credit that can be claimed, although the total amount of tax credits awarded statewide is limited to $7.5 million.

School Tuition Organization Tax Credit

Enacted 2006 • Launched 2006

Iowa provides a credit on individual income taxes for donations to School Tuition Organizations (STOs), nonprofits that provide private school scholarships. The credit is worth 65 percent of the donation’s value, which also is limited by a statewide cap. A maximum of $12 million in tax credits is available. Each STO is able to grant tax credits to its donors up to its share of the statewide limit, with each STO’s share determined by the enrollment at the schools it serves. Corporate donations are able to constitute up to 25 percent of the $12 million cap.

Tax Credits for Contributions to Scholarship Organizations

Enacted 2006 • Launched 2007

Rhode Island provides a credit on corporate income taxes for donations to Scholarship Granting Organizations (SGOs), nonprofits that provide private school scholarships. Tax credits are worth 75 percent of the contribution, or 90 percent if donated for two consecutive years and the second year’s donation is worth at least 80 percent of the first year’s donation. The total amount of tax credits is capped at $1.5 million. Each corporate donor can receive only $100,000 in tax credits each year, and cannot use surplus donations in one year to generate tax credits in future years.

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