Ep. 150: Choice in the States – Virginia with Chris Braunlich

November 21, 2019

The president of the Thomas Jefferson Institute discusses the state’s tax-credit scholarship program and predicts what is on the horizon for school choice in Virginia.

Jason Bedrick: Hello, and welcome to another edition of EdChoice Chats. This is our state policy series. I’m Jason Bedrick, the director of policy at EdChoice, and today I am joined by Christian Braunlich, the president of the Thomas Jefferson Institute in Virginia. Chris, welcome to the program.

Chris Braunlich: Thank you. Glad to be here.

Jason Bedrick: So, today, we’re going to be talking about Virginia’s Education Improvement Scholarship Tax-Credit program. Can you tell us a little bit about how this works?

Chris Braunlich: Well, like a lot of tax credit programs, it works fairly simply. An individual or a company makes a donation to an approved scholarship foundation, or SGO as it’s referred to in a lot of the rest of the country. In return for that, they receive a 65% state tax credit, and that organization is required to give at least 90% of that donation in scholarships to eligible K-12 students.
Eligibility is defined as 300% of poverty, or in the case of a student with disability, 400% of poverty, so it’s fairly broad in some areas. 300% of poverty would make you pretty rich in the state, but in most areas, it would make you truly at risk.

Jason Bedrick: Right. So, for context, 300% of poverty is about $75,000 for a family of four.

Chris Braunlich: For a family of four, right.

Jason Bedrick: And so, for those with special needs, which is 400% of federal poverty, that’s actually closer to $100,000 for a family of four, so it is significant, more than half the population is actually eligible.

Chris Braunlich: About 90 something. Right. Yeah. It was a good program and we designed it to be as expansive as possible, but really to be able to hone in on the folks that are genuinely in school systems that have imploded badly in the state.

Jason Bedrick: It was enacted in 2012 and then launched in 2013. Could you tell us a little bit about the history of how this program was enacted?

Chris Braunlich: Well, the first tax credit or voucher bill we could find was back in the 1990s. That was the first effort to see something passed. It was killed in the General Assembly through a death of a thousand cuts. They put so many regulatory restrictions on it that the bill sponsor finally just pulled it, which is a tactic that I’m sure our adversaries use a lot and one I expect they may use in the future if the composition of the General Assembly changes.

But it really got going in the early 2000. Delegate Chris Saxman had been an education choice advocate and managed to get a bill passed in the House of Delegates to the surprise of everyone in the country, frankly, and got it passed by a fairly significant margin and was then defeated in the Senate.

It was in 2012 when things came together. Delegate Jimmy Massey, who was also a choice advocate but also had a background in Wall Street finances, was able to explain how the dollars worked, how they flowed and how it was going to be revenue neutral, and was able to explain that sufficiently that a lot of folks who were skeptical, a lot of conservative Republicans who just frankly some of them don’t believe in tax credits at all for anything, were able to understand that this was not going to cost the state money. The unusual confluence here was that it was during a two-year period, which is, in looking at it, I think the only two year period in which the house of delegates, the State Senate, and the governor’s office were all controlled by the same party. The last time that it happened was back in the early 1990s.

Governor Bob McDonald had some sit downs with people and attempted to ratchet it up. We started at a 90% tax credit, we worked our way down to 70%. There were three state senators, Republican, who would not go with any further above 65%, so we were stuck there. That’s been an inhibitor in the program. But you take what you can get at the time you can get it if it’s not going to be fatal, and it has certainly hasn’t been fatal for the kids that are getting assistance.

Jason Bedrick: Why was that a sticking point? Why 65 and not 70?

Chris Braunlich: There are just recalcitrant members of the Senate Finance Committee who took the position that we shouldn’t be doing this. They are in areas that have decent school systems. They didn’t see the need for it. In some cases, they were concerned that money would flow to this program instead of other programs that they cared about, and so they didn’t want to go too high. And for whatever reason, 65 was their max.

Jason Bedrick: And now, you said that that a sticking point was that it had to be revenue neutral and that there was a legislator who was able to explain how this actually works because a lot of people—

Chris Braunlich: The point he made was that it saves the state money.

Jason Bedrick: Saves money even, right. A lot of these programs, people look only at one side of the equation. They see a 65% tax credit and they say, “OK, so that means that for every student who’s getting a scholarship, that’s coming from a reduction in state revenue.”

Chris Braunlich: Right.

Jason Bedrick: How does it actually work? What’s the other side of the ledger?

Chris Braunlich: Well, the other side of the ledger is that the organization, the scholarship foundation has to give 90% of it to a student… You either have to be already in the public schools or new to the state, in other words, you came from out of state, or you were in kindergarten or first grade. Statistically, most of those kids that have been receiving those scholarships have been previously in public school, so the state’s cost of educating that child has been taken off the table.

Yes, we’re losing, let’s say, $5,000 in state tax credit, but we’re also losing $5,000 plus and in state costs for educating their child. The scholarship itself, the scholarship from any scholarship foundation, is limited to the amount that the state would be paying for that child’s education in that school division in which they live.

We have a huge variance in our state funding. Some jurisdictions in the state, the wealthier jurisdictions in the state, get maybe $2,000 a child from the state. Poorer jurisdictions get $7,000-8,000 from the state. That ultimately made it kind of a focus on low income kids because $2,000 wasn’t going to help people very much. In essence, for every dollar you took away from state revenue, you took a dollar away from state expense, at least a dollar.

Jason Bedrick: Right. And so, what is the average scholarship value these days?

Chris Braunlich: The average scholarship value these days, it’s a little over $3,000. I would say it’s probably closer to $3,400. The question is how you compute it, because we actually have some kids who go to a scholarship foundation. Let’s say state funding is, let’s take the average, $4,500, they may get $2,000 from one scholarship foundation and they may get $2,000 from another scholarship foundation and $500 from the third scholarship foundation. So, technically, that’s three scholarships but only one child. So, I personally prefer to use when I can find the statistic and make it work, the average scholarship money per child, which I think is a little higher. It’s about $3,500.

Jason Bedrick: OK. But still significantly less than what the state would have been paying per pupil for the lower income students?

Chris Braunlich: It is significantly less than what the state would have been paying per pupil. They rarely want to consider that delta between what the state is saving and what the, what the actual scholarship is.

Jason Bedrick: Right. There seems to have been a rather significant growth in the program. I know that in the first year it was operating, there were only 46 scholarships that were issued, but in 2018, there were more than 4,000.

Chris Braunlich: Right. Number of scholarships now, we’re probably about 4,500-4,600 scholarships and probably about 4,300-4,400 students this year. And so, there’s been significant growth. We are hobbled frankly by that 65%. Corporations like to invest. Corporations look at this sort of thing as a business decision and if it’s not 90 or a 100%, they start to pull back. We have very little corporate money coming in, C corporation money coming into our scholarship programs. We had one that withdrew at some point because they said, “It’s just not enough.” On the other hand, we get a significant amount of revenue from just individuals in the state that are looking to see kids get a good education and see kids get an education that reflects their values. That’s been helpful on that side.

Jason Bedrick: And for context, some of states that have the larger scholarship programs, are states that have 100% tax credits like Florida and Arizona, and even Pennsylvania, which is second only to Florida. They have a 75% tax credit. But if you pledge to give a tax credit two years in a row, that bumps up to 90%, and so you’ve got a very significant investment on the part of corporations that they’re willing to fund scholarships for literally tens of thousands of students in each of these states.

Chris Braunlich: Well, and we made a stab at that configuration as well, when the bill passed and actually when we tried to amend it in the subsequent year, but it did not fly with the honored members of the General Assembly, so it didn’t go.

Jason Bedrick: So, what sort of rules and regulations are on the program? Are there any regulations on the private schools?

Chris Braunlich: We are pretty good. To be an accredited private school in Virginia, the state takes no role at all. The accreditation process is left up totally to the Virginia Council for Private Education, which is the affiliate of the National Cape Organization. They accredit other organizations that accredit schools. The only real requirement, schools do have to submit … All students fundamentally have to take a nationally norm test. If they are an accredited school, they don’t have to take a nationally norm test, but the private school accreditation process that they’ve set up requires them to take a nationally norm test. Fundamentally, everybody has to take a nationally norm test. All those scores are sent into the State Department of Education. There is some effort to crosswalk it, but there’s a lot of gaps in that because of the privacy issues that exist with classes that have less than 10 or 15 kids in them.

Other than that, they meet the civil rights requirements, they meet the health requirements. They meet all the requirements that are typical for a private school. we’ve been fortunate that the state imposes very few regulatory burdens on the private schools or the foundations. There was a great deal of paperwork because the state has not been willing to invest in online sign up so to speak. If you go to Florida for example, or I think Georgia, you can go online, you can find out exactly how much your tax credit is available to you and you can do it. Here in Virginia, it’s paper and PDF files flying back and forth by email. One of the things that we’ve been urging him to do as this program grows is to relieve the burden on human beings in the offices and do things more with a greater view towards the use of technology, but they haven’t been willing to make that investment.

Jason Bedrick: You mentioned a nationally norm. What’s the difference between those tests and, let’s, say the state accountability test?

Chris Braunlich: Well, the state accountability tests, the standards of learning specify half of what a child is expected to know. If you’re in third grade, you’re expected to be able to do this, this, this, and this. Those tests test that. The nationally norm tests are not content-based tests, so that they aren’t necessarily testing what the state is saying you should know, they’re testing things and measuring you against other students in the country.

Jason Bedrick: And so, whereas the state test is going to be fairly prescriptive in terms of content, and so if that had been mandated, then the private schools would essentially have to design their curriculum similar to what the public schools already provide.

Chris Braunlich: Right.

Jason Bedrick: But for families who are looking for something different, they would be out of luck. But the nationally norm tests, they allow a much greater degree of freedom for the private schools and they can choose among them a menu of different tests and find the one that most aligns with what they’re already doing based on what they believe is in the best interest of the children they serve.

Chris Braunlich: Right. And to be candid, there’s no desire on anybody’s part to require schools to give the state tests to students that are receiving the scholarships. The state is concerned about security and the schools, the private schools have no desire to have their students take state tests, even as a measuring obligation. Again, that’s one of the things where I think we may be ahead of much of the rest of the country because schools, because have that kind of freedom and parents have that kind of freedom.

Jason Bedrick: Now, you had mentioned, speaking of parents, the scholarship foundations. If a family wanted to look into this program and possibly sign up their child, where would they go? How would they apply?

Chris Braunlich: Well, the easiest, I mean frankly, we have far too many scholarship foundations. We’ve got something like 30 and about 24 of them are actually giving out money. Unfortunately, many of them are specifically affiliated with particular schools. Some of the schools do not want to be a part of this program out of their own sort of sense of independence, so we’ve only got about 175 participating schools, and there’s more like about 400 private schools in the Commonwealth of Virginia. They would first have to inquire the school that they’re planning to attend to ask whether or not they participate in the program. I get weekly calls from parents that are looking for scholarship assistance, but they want to send their child to a school that doesn’t participate. We put the school in touch with a scholarship foundation that might be appropriate, but they often they just take the view we don’t want to get involved with any paperwork with the government.

Jason Bedrick: That’s interesting, because in Florida, you’ve got more than two thirds of the schools participate. In Arizona, it’s close to 100%. What’s making some of these private schools reluctant to participate?

Chris Braunlich: Inertia is always the biggest factor in everything everybody does. We’ve never done it. We don’t want the paperwork. It’s extra effort. It’s also the case that many of the scholarship foundations we have are faith-based. There are two Catholic foundations, two Jewish foundations. There are multiple Christian evangelical foundations. A couple of them are very big, American Christian Schools. Association of Christian Schools International is a nationwide operation. They are able to operate here as well offering scholarships. There are Mennonite scholarship foundations. Because it is a factor of the fact that we’re only 65%, because corporations were not interested at 65%, scholarship organizations in schools looked at it and said, “We need to go to the people that most care about the values that are taught in the schools,” and they therefore set up foundations that tended to appeal to donors that looked at that and said, “This is important to me. I’ll donate to it.”

Jason Bedrick: Now, there’s been some recent changes to the program. What did the legislature do this year?

Chris Braunlich: Well, one of the things, last year, we proposed a bill that would have expanded the program to pre-K students. It did not pass. It did pass this year. It does take effect July 1st. Virginia does have a state pre-K program. You have Head Start, you have Virginia Preschool Initiative. But that Virginia Preschool Initiative requires two things. First, it requires local school systems or governments to have space, and secondly it requires that the local government has to, has to do a matching fund. Consequently, there are thousands of students. Officially it’s 7,000. In reality, I think it’s much more than that who are not preschool students that are not receiving services. In addition, all of the studies that had been done of pre-K services have compared the government program to people that are not in the government program, but has not had any effort to sort of parse out whether or not which is more effective: a government pre-K program or private pre-K program as you as the child gets older.

We proposed expanding the program for two or three reasons. One, there are kids that are underserved. They are not being served, and they are low-income students, and they need the assistance when they get to kindergarten or first grade. Even our private schools, they same notation. A student that comes to them not having had any pre-K experiences is behind when they get into a private school, kindergarten or first grade. We proposed that we expand this program to allow the scholarship foundations to offer scholarships to students attending preschool, or who would be attending preschool four-year-olds. We were vividly opposed last year by the Virginia Education Association, but it was fascinating. We would go into a liberal, democratic pro-education legislator’s office and they would tell us, “Oh, this sounds like a good idea to me.”

And as we would walk out the, the Virginia Education Association lobbyist would be there. They would go in after us. And when we went back a week later, we’d discovered that somehow the legislator had changed their minds. Don’t know how that happened. But I think a lot of those legislators pushed back at the VEA and they were relatively silent this year. They also had some of their own issues. There was legislation that was working its way through that was going to end some of the monopolistic practices they had with local school divisions to open it up to alternative teacher associations. They became very engaged in that and not on the pre-K.

So, long story short, we did expand it. It is eligible to students that are not able to receive services at Head Start or preschool. It does have more regulation than probably we would have liked. It does have certain standards such as pupil-teacher ratios, such as continuing education for the teacher in the classroom. But in talking to the schools that already offer preschool, they’re already offering that anyway, so it wasn’t a great burden and it’s something that was necessary to get it passed.

They are right now establishing the guidelines for that. We’ve been trying to track that carefully because the way you kill a program is by overregulating it and we wanted to make certain that that did not happen here. We don’t think that’s going to happen. We’ve seen the initial guidelines. We’ve sent in our comments and we’ve had conversations with the staff. I think that even some of the early childhood education associations were supportive of this program because those for whom the priority is genuinely helping early pre-K students with early childhood education. They were on board. It was the ones who had other agendas that opposed us, and I think that was instructive for an awful lot of folks.

Jason Bedrick: Where do you think Virginia is going to go next in terms of educational choice? What’s just over the horizon?

Chris Braunlich: Well, our elections are this November. If party enrollment is a proxy for school choice, and it’s not, because there’s a lot of suburban Republicans who don’t like school choice. But if that’s a proxy for support in the program and the General Assembly changes, there’s one vote majority’s in each house. Our concern is that after this November, we may see an effort to unwind this. This is a program that does in fact have a sunset on it for 2029. The General Assembly established some time ago that all tax credits would have a sunset. At the least, we think it’s in danger there. At the worst, we think it could be in danger in the short term, even sooner. My real concern is that there will be a series of new regulations coming out of the state department of education on this. That will make it less attractive to private schools and less attractive to parents who want to give their kids some assistance.

We’ve already gotten some hints of that in terms of additional paperwork being required of schools and the scholarship foundations, and we’re tracking that very closely because that’s my real concern. My real concern is that, as it has happened in other states, the legislature decides they want to do a study, and as you said at the beginning of this, they’ll only look at one side of the fiscal equation and not the other side and determine, “Oh, this is costing us millions of dollars. We’re going to have to end the program.” I think that’s the real danger, that a change in composition this November will lead to some devastating reversals. And even among Democrats, the Democratic Party in Virginia was once a very pro-business party. Governor Doug Wilder, who was the first African-American governor, was a fiscal conservative. He went in and he slashed things all over the place. They don’t exist now. The Democratic Party has moved left. There’s a chance that they will take control of the General Assembly in November. It’s not partisan to say they are less likely to be supportive of educational choice initiatives.

Jason Bedrick: This, I think, speaks to one of the reasons it’s so important that these programs achieve scale. I mean first and foremost, because you want to be helping as many families as possible provide their child with an education that works for them. But also, it seems that the larger programs are more politically sustainable.

We see that, for example, in Florida and in Pennsylvania, there will be Democrats that vote to support the program because they know that these are programs that are supporting and supported by a large number of their constituents. So, when these programs reach scale, they do actually become much more bipartisan and actually I think even less polarizing when people see, “Oh, you know what? We have this program, there’s a large number of students who are participating, but we still have public schools in the state and the public schools are still doing well.” Or actually in the case of, we look at data coming out of Arizona and out of Florida, we see that the public schools are actually even doing better after the advent of expanded choice and competition. I think that both the success of the program and the political sustainability of the program depends on a critical mass of students participating.

Chris Braunlich: Absolutely right. I mean, it was not the reason we expanded this to pre-K, but it is an unintended consequence that it will expand the pool of parents who are exposed to educational choice and the number of people that are in the program. You know, an answer to the question, does school choice help public schools or private schools, the answer is always yes. It helps both.

Jason Bedrick: Right. My guest today has been Christian Braunlich of the Thomas Jefferson Institute. Christian, thank you for coming on.

Chris Braunlich: Thank you. I appreciate the opportunity.

Jason Bedrick: Don’t forget you can subscribe to Ed Choice on SoundCloud, iTunes and Stitcher. You can follow us on social media @edchoice, and sign up for our email on our website edchoice.org thanks for listening.