The Senate’s 3 percent poison pill for school choice


You have to hand it to Georgia’s Democratic legislators: They’re willing to say they just don’t like the state’s tax-credit scholarships. Republicans, on the other hand, keep coming up with ever-more creative ways to act as if they like the popular program, while working to stunt its growth.

The latest ploy, coming from (where else?) the state Senate, is to harp on the supposedly exorbitant “fees” student scholarship organizations, or SSOs, charge to run the program. People are allegedly “making money” off the scholarships, and our cost-conscious senators are on the case! So they amended House Bill 217 to ensure at least 97 percent of the money SSOs raise goes toward scholarships.

That sounds great, in theory. Who wouldn’t want as much money as possible to go toward scholarships?

Certainly, I do. That’s why I favor raising the cap from its $58 million limit. But it’s worth explaining why a 3 percent limit on “fees” would be crippling.

First, understand why SSOs get to keep any of the money they raise. Start with the fact that, before the tax-credit scholarship program was created, there were no such organizations. The law specifically mandates the existence of SSOs to collect the donations and award the scholarships. What our senators call “fees” are the overhead costs of operating them.

And the program requires significant operation. SSOs not only raise money but solicit scholarship applications, vet the applicants and decide who receives help, and how much. Someone has to do that work. With over 13,000 scholarship recipients in Georgia, it’s a fair amount of work.

Based on the evidence, they do it quite efficiently. Although senators wax concerned about SSOs keeping 10 percent of the funds, the law allows that percentage only on the first $1.5 million an SSO raises each year. It can keep between 5 percent and 7 percent of what it raises above $1.5 million.

Based on figures from the Revenue Department, SSOs collectively could keep as much as 7.8 percent of what they raise. (The actual amount might be lower, but the department does not report it; HB 217 would change that.) Is that high? Low?

Compared to other charities, it’s very low. I reviewed Charity Navigator’s data for the 68 Georgia charities that received its highest rating. The vast majority, 57 out of 68, spent more than 7.8 percent of their revenue on overhead. Just one of the 68 kept its overhead to 3 percent or less. The average for all of them was about 14 percent.

Remember, these charities are rightly considered the most responsible in the state, groups like Habitat for Humanity and United Way. And they spend almost twice as much on overhead as SSOs are already allowed to keep.

Just for kicks, I also looked at what Georgia’s public schools spend on overhead — i.e., everything but instruction. It’s about 33 percent.

But here’s the real question: If senators are truly worried too little money is going to kids on scholarships, why are they insisting on this provision, which would return about $2.5 million a year to the pool, while simultaneously removing a provision to raise the cap by another $35 million over the next several years?

One could be forgiven for thinking their goal is not to improve the program, but to neuter it.



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