Student Scholarship Organizations
Under the law, corporate and individual taxpayers donate to student scholarship organizations and then claim a tax credit equal for the donation. The program allows donors to student scholarship organizations to claim a state tax credit of up to $2,500 for married couples. Corporate donors can claim a credit worth up to 75 percent of their income tax liability.
The money goes to non-profit SSOs, which then dole out scholarships to students. SSOs may keep a small portion of the proceeds for administration. The program isn’t regulated by the Department of Education, but the SSO have some minimal reporting requirements to the Georgia Department of Revenue.
The tax credits totaled $58 million this year and were used up within three weeks. SSOs and private schools promote the tax credit program and urge parents to donate. Supporters have sought to increase the cap to $100 million a year, but legislation doing so failed to garner enough support during the 2014 General Assembly session.
The Atlanta Journal-Constitution reported in 2009 that some organizations were diverting scholarship money to students already attending private schools, turning it into a private school voucher program. The law was changed last year to require that most students have to have attended public school for at least six weeks before receiving the private school scholarship. Students enrolling in private pre-kindergarten, kindergarten and first grade are exempt, as are students already receiving the scholarship at the time the law went into effect.
A controversial state program that offers tax credits to people who fund private school scholarships is unconstitutional and robs public schools of much-needed financial support, a lawsuit filed by Georgia parents Thursday argues.
The group, backed by the Southern Education Foundation, says the student scholarship tax credits violate both the state constitution and tax laws by, among other things, providing indirect public funding to religious schools, giving donors illegal benefits and allowing a school program to be run by private groups.
The program has both passionate supporters and equally passionate critics. Backers say it is an important step toward giving parents greater choice in where their children attend school. Opponents say it provides a boost to private, often religion-affiliated schools while draining money from the public education system.
Steve Suitts, vice president of the foundation backing the suit said more than $280 million has been “diverted” to an “unregulated system of support for private schools” with no oversight from the state Department of Education since the program started in 2008. By giving out tax credits, the state loses revenue that could be spent on public schools.
“This has been a costly, failed experiment that is operating contrary to the state constitution,” said Suitts whose Atlanta-based organization advocates for education equity. “It is time to end it once and for all.”
But Jim Kelly, an education law attorney and founder of the Georgia GOAL Scholarship Program, said, “There are thousands of families benefiting from this program. Why, after six years, are they so interested in disrupting and abolishing a program based on claims that have already been asked and answered in state and federal courts since the early 2000s?”
The program allows donors to student scholarship organizations to claim a state tax credit of up to $2,500 for married couples. Corporate donors can claim a credit worth up to 75 percent of their income tax liability. Statewide the limit is $58 million worth of income tax credits for donating to scholarship organizations.
Those organizations then hand out scholarships to students to attend private schools. SSOs and schools promote the tax credit program and urge parents to donate. It was so popular this year that the $58 million tax credit cap was met in a few weeks and advocates pushed unsuccessfully for it to be raised to $100 million.
More than 13,000 scholarships were awarded in 2012, the last year for which statistics were available.
State Rep. Earl Ehrhart, R-Powder Springs, who formed one of the scholarship groups and is one of the authors of the scholarship law, said it was always intended to be a sort of private school voucher program - providing public assistance to help parents send their children to private schools. However, vouchers have long been a politically touchy topic, so the scholarship programs works instead as a kind of indirect support mechanism for private school students.
The program has been controversial in other ways.
The program was originally seen as a way to help public school students escape failing schools. But the Atlanta Journal-Constitution reported in 2009 that a loophole in the tax credit law allowed students at some private schools to become eligible for the scholarships by merely filling out paperwork enrolling in public schools without ever intending to attend. By “enrolling,” they became public school students and eligible to get scholarships to the private schools they had been attending.
In 2011, the AJC reported that the program, which is not regulated by the state Department of Education, mandated minimal reporting and that the Department of Revenue released almost no information on how the money was spent. A year later, the paper reported that three officers of one of the student scholarship organizations were paying themselves $175,000 for part-time work because the law allowed them to keep up to 10 percent of donations for administration. They gave themselves 60 percent raises in one year.
The lawsuit calls the tax credit program a “scheme” that allows SSOs to operate “essentially free from state regulation, in direct violation of the Georgia Constitution which specifically spells out that public authorities or public corporations must administer all educational assistance programs.” While some low-income students get scholarships, the lawsuit says the program allows the organizations to give tuition money to students from families who can afford private schools. It says some schools in the program are hostile to gay students.
The lawsuit also argues the Georgia constitution doesn’t allow the state to give out tax credits to benefit “educational assistance programs” or for the program to be administered by non-profits. It says the program grants an illegal “gratuity” to donors and illegal assistance to religious institutions because many of the schools involved are faith-based schools.
Barry Hubbard of Fulton County, who has two grandchildren attending public school in Cobb County, is among those challenging the program.
Cobb, like many districts in Georgia, has struggled financially as the downturn depressed the value of property, reducing the amount it yields in tax revenue for schools. At the same time, the state government has cut funding.
“They’ve been stretched pretty thin,” Hubbard said.
Eliminating the private school tax credit program could help address that, he argues.
“Public schools in this state have been underfunded since the economic downturn and continue to be underfunded under this current governor,” Hubbard said. “Public money should go to public schools and not to private or parochial schools. The state constitution doesn’t permit the state to give money to private schools with a religious affiliation.”
Kelly of GOAL said most of the issues raised by the lawsuit have long been settled. A five-vote conservative majority on the U.S. Supreme Court in 2011 threw out a legal challenge to an Arizona tax-credit program that channeled funds to religious schools. In 2002, the justices upheld a Cleveland program that allowed publicly financed “vouchers” for parents to send their children to private institutions.
Robin Lamp, a single mother from Stockbridge who has had two daughters on GOAL scholarships, called the program “life-changing.”
Her oldest daughter is about to graduate from Eagle’s Landing Christian Academy with top grades and plans to attend Clayton State University to study nursing.
Lamp said she works five part-time jobs to support her family. She said her oldest daughter was struggling with revamped math in public schools and needed a change.
“I am a firm believer in my responsibility to get my children an education,” Lamp said. “I was not asking for a handout, I was looking for options because I wanted my children to have an education that was better than Common Core or new math.
“This program has changed my life,” she said.
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