Tuition Tax Credits: A Tax Subsidy for Private Schools

The Universal Tuition Tax Credit (UTTC) would allow individuals and corporations a tax credit for all or part of the tuition they pay for students attending private schools. Proponents claim this will relieve pressure on public schools by providing an incentive to send students to private schools.

The Select Few

Tuition tax credits only benefit students who are fortunate enough to be accepted by a private school and who are able to afford the remainder of the tuition. Unlike public schools, private schools can be very selective, excluding students with special needs or low academic performance. Additionally, private schools do not provide the same services many students depend on in the public schools, like transportation to and from school, and free textbooks and supplies.

Public Schools

Utah public schools serve the entire community. America’s public education system provides the foundation upon which our democratic nation thrives. Taxpayers without children support public schools, and so should parents with children in private schools. Even if some students leave the public schools for private schools, most fixed costs will remain. This means that if tax dollars are cut to benefit a select few, the rest of us will be forced to cover the remaining costs.

Private Schools

Private and religious schools are great options for some students and parents. However, it is not fair to promote and subsidize private and religious instruction with public dollars. In this era of increased school accountability, it is also counter-productive to fund a system that is not held to any public accountability standards. While many states have large private school sectors without government subsidies, Utahns have overwhelmingly chosen public schools for their children. In fact, in over half of Utah’s 40 school districts, not one parent has chosen to send a student to private school.

Conclusion

Over 97 percent of Utah students attend public schools. Instead of diverting scarce education dollars to programs for a select few, we should focus our efforts on providing our public schools with the resources they need to reduce class sizes and implement some of the recommendations found in recent state and federal legislation. Utah’s public schools achieve remarkable success with less than remarkable funding. Imagine what they could do adequate funding. Good public schools with caring teachers and high standards will create learning opportunities that leave no child behind.

Additional Tuition Tax Credit Information

Utah Cost Savings Myth

TTC proponents base the cost savings argument entirely on the following assumption: If the amount of the credit is less than the education costs associated with each student then the system saves money by exporting education costs to the private school. That simple equation may be true – but only if certain circumstances are incorporated into the analysis:

• Before any savings are realized the fixed costs associated with the tuition tax credit need to be covered. 
• Tuition tax credits need to increase private school enrollment sufficient to produce the intended savings.

Fixed Costs

For purposes of this analysis the term “fixed costs” involves two components. The first area involves those costs associated with paying the credit to people who are already attending private schools. Any credit payment for students already attending private schools or for students who would attend private schools regardless of the credit is a direct expenditure with no associated savings. (In fact, some more cynical observers would argue that payment for existing attendees is actually the primary motivation for the tuition credit.)

It is estimated that approximately 3% of the nearly 500,000 school age students currently attend private schools. That estimate means that 15,000 students would be eligible for the credit. A credit amount of $2000/student means that there is a fixed cost of $30 million dollars (15,000 X 2,000). In other words, before any savings occurs there is an immediate outlay of $30 million. System-wide savings occurs only when this $30 million is covered.

One critical point must be addressed: Some advocates have indicated a desire to apply the credit initially only to kindergarten and/or first grade. The credit would then continue for those students as they progress within the school system and a new group of 1st graders would be added each year. Advocates of this position appear to advance the premise that such an approach eliminates payments for existing private school students.

This approach does not eliminate the fixed $30 million cost. All it does is spread the cost over a period of time. Eventually the full cost of payments for existing private school students must be covered. Any other position operates on the assumption that there would be no students entering private schools except those induced by the tax credit – a position that is obviously false.

The second fixed cost component concerns those operational costs that exist regardless of the number of public school students. It is difficult to ascertain with any precision what those costs would be. Determining that amount is somewhat problematic although conceptually valid. For example: A reduction of a single student from a school of 500 will not meaningfully reduce any school operational costs. There would not be a reduction of faculty, administration, etc. due to a single student leaving the school.

However, it must also be stated that direct state funding for education via the uniform school fund is done on a per student basis. Local school funding provides financial support for physical facilities. In short, there would be legitimate savings (after covering the initial $30 million outlay) with individual enrollment decrease. It may not be the entire amount stated by credit supporters

Savings Potential

Proponents of credits have used a variety of numbers for the education costs for public school students. However, the most commonly used figure is approximately $4000. That amount appears to correlate to basic O&M costs on a per student basis.

The question is how many additional private school students would be required to cover the tuition credits fixed costs. Simple arithmetic would indicate that an additional 15,000 students now in public school would need to leave for private schools before the fixed costs are covered. In other words, current private school enrollment would need to double before any savings are realized. (Note: This is a static number and does not incorporate any natural private school enrollment growth.)

Taxes and Product Demand

The use of state taxes as a means of creating or enhancing demand for products/services is less than stellar in actual performance. Federal taxes may have an impact in some instances, but as instruments of social policy state taxes have a very limited track record.

In the case of tuition credits the question is what type of demand for private school services exist within Utah? If there were huge pent-up demand that would be immediately impacted by a partial subsidy of tuition costs, then significant enrollment increases may be possible. However, there is no empirical evidence to support that premise, and in fact, many believe that the current private school providers would simply increase tuition to take advantage of a new imbalance between supply and demand.

Rather, a more logical conclusion is that parents who deem private schools important have likely already made the necessary sacrifices, financial and otherwise, to enroll their children in private schools. For individuals who are not already committed to private schools, it is unlikely that a partial tuition subsidy would in and of itself induce behavioral changes. The decision to attend private schools also involves other factors such as peer groups, the geographic location of the private school, transportation costs and other lifestyle issues.

Some Facts and Figures

• According to the Sutherland Institute, the cost of tuition and books for Wasatch Front private secondary schools (1997-98) ranges from $4,350 to $11,300 per year. If the tax credit were $1500, the average taxpayer would have to earn over $45,000 per year just to qualify for one full credit. This means the UTTC is designed to help those who need help the least.
• It would cost the state $19 million to fund a tuition tax credit just for the current number of students enrolled in private schools in Utah. Experts say that in 10 years, tuition tax credits could cost Utahns an additional $29 million a year in lost revenue to public schools. Although schools are receiving more money from the state than they were 10 years ago, the percentage of the total state budget going to education has decreased dramatically.
• Ten years ago, the ratio of school-age dependents to adults was 48 to 100. Today, there are 10 fewer dependents per 100 adults, and the dependency ratio is projected to remain at 38 to 100 for the next 30 years (Governor’s Office of Planning and Budget). This means Utah will have more taxpayers per school age dependent to pay for the projected student enrollment growth.

Conclusion

The Utah debate over private school credits has incorporated one novel twist by focusing on the concept of direct budget savings as a rationale for support. That argument is valid only if there is a significant demand for private schools that will be triggered by the existence of the credit. There is no evidence to support this premise.

One of the difficulties of this debate in Utah has been the lack of any actual legislation. As such, the debate inevitably centers on concepts rather than actual legislative language. When confronted with the revenue loss issue some proponents simply state that the “bill is not written in that fashion”. However, there is simply no constitutionally permissible (equal protection issues) or administratively viable (you have no means of knowing who they are) means of distinguishing between those students who are already in private schools or would attend due to other reasons and those students enticed by the existence of the tax credit. As such, all private school students covered by the legislation are entitled to the credit. Any payment for students already in the private system represents a direct revenue loss. There are no savings until that loss is covered.

Last year’s debate over the tuition tax credit proposal found in Senate Bill 34 ultimately came down to a plea by a legislator supporting the bill to set aside reservations and engage in a “grand experiment”. Utah’s children and their public schools are far too valuable to be subjected to financial experimentations, especially when similar experiments in Arizona and Florida have been unsuccessful. 

Permanent School Funds Created From the Proceeds
of School Trust Grants
FY 2005

Paper by Margaret R. Bird*

Permanent school funds, derived from school trust lands, have $38 billion dollars invested to support public schools. There is little awareness of the existence of these lands or funds by educators or the public. Few understand that 134 million acres were once granted by Congress and states for schools.

No serious research into these funds, their investment, or their impact has occurred since an exhaustive study, by Dr. Fletcher Harper Swift of Columbia University, was published in 1911. This information is an attempt to give an updated snapshot of where eighteen of the state funds are a century later.

Originally 134 million acres of land were granted by Congress or by the original thirteen states to support schools. At one time every state in the nation had either school trust lands or school funds or both. Today, school lands exist in only 24 states. Eighteen states were gracious in providing information, Utah being one of the states.

Origins of the School Lands and Permanent Funds

Embedded throughout the history of the United States, yet understood by few, is the concept of land grants for the support of education. Early founding documents of the nation, as well as the founding compact for each state known as the statehood or enabling act, dealt extensively with these land grants for education. On May 20, 1785, the Continental Congress adopted an ordinance that provided for the survey and sale of the unsettled lands stretching to the Pacific Ocean. The territory was to be divided into townships, each six miles on a side. Each township was to be subdivided into 36 one-mile square lots, which are called sections today. Lot 16 was reserved “of each township, for the maintenance of public schools within the said township.”

In 1850, Congress granted two sections per township for education. It was, however, in 1894 that Utah, Arizona and New Mexico received four sections because their arid lands might be less able to support schools. In all, over 134 million acres were set aside for the support of schools. Every state in the nation had either lands or permanent funds or both.

States receiving the grant from Congress received it in their statehood act. In order to receive the granted school lands, the state had to agree not to tax federal lands within its border. Those untaxed federal lands within a state remain a significant tax burden and a drain on education budgets today. Untaxed federal and state lands comprise about half or more of Utah.

The statehood or enabling act, which granted school lands and may specify that the proceeds from the lands be used to create a permanent school fund, is the federal part of the bilateral compact with each state. The state’s part of the solemn bilateral compact was the original state constitution. The United States District Court for the District of Utah has held:

The state school land grants were not unilateral gifts made by the United States Congress. Rather, they were in the nature of a bilateral compact entered into between two sovereigns. In return for receiving the federal lands Utah disclaimed all interest in the remainder of the public domain, agreed to forever hold federal lands immune from taxation, and agreed to hold the granted lands, or the proceeds therefrom, in trust as a common school fund. Thus, the land grants involved here were in the nature of a contract, with a bargained-for consideration exchanged between the two governments.

The school lands are either leased or sold to generate revenue. Today lands are leased for every economic activity that occurs on private lands – convenience stores, oil and gas production, habitat protection, coal mining, commercial developments, malls, industrial parks, home sites, timber harvesting, etc.

Effective school community councils consist of parents and professionals working together to address the needs of students. Some of the councils’ activities are required by rule and law, but most are simply an expression of community-spirited individuals trying to do what they know must be done to help students succeed. In the sections that follow, you will find a collection of checklists or guides that offer council members some direction in forming, conducting and managing the process of school improvement. The first of these guides, “School Community Council Compliance Standards”, identifies and explains the activities and procedures required by state law as well as by rules established by the Utah State Board of Education. Additional guides are in development and will be available shortly. These guides will contain statements and brief descriptions of “best practices”, or recommended strategies for school community council members to follow as they strive to assist one another in their important work.

To view the School Community Council guide, click here.
More information and a copy of applicable laws are available at www.schoollandtrust.org

In 1986, as a follow-up to the highly publicized report, A Nation At Risk, the Carnegie Task Force on Teaching as a Profession issued its findings in A Nation Prepared: Teachers for the 21st Century. The Carnegie report asserted that world-class schools required a world-class teaching force and the assurance of a quality teacher in every classroom. The Task Force noted that while many excellent teachers were already working in schools, their efforts often went unrecognized and unrewarded, and even worse, their knowledge and skills often were under-utilized. Underscoring the need to recognize and reward quality teaching, the Task Force called for the establishment of a national board for advance certification. The following year, the national Board for Professional Teaching Standards (NBPTS) was created.

From the start, NBPTS concentrated its energies on defining outstanding teaching. As North Carolina Governor James B. Hunt, Jr., founding chair of the BBPTS, asserted, “Improved student learning depends on one thing to start with—a quality teacher.” To this end, the mission of the National Board is: to establish high and rigorous standards for what accomplished teachers should know and be able to do, to develop and operate a national voluntary system to assess and certify teachers who meet these standards, and to advance related education reforms for the purpose of improving student learning in American schools.

National Board Certification (NBC) offers the teaching profession a way to define and encourage exemplary teaching. NBC is an advanced teaching credential that goes beyond state licensure and is a challenging professional development experience. NBC is a symbol of professional teaching excellence that is awarded to teachers whose performance meets National Board standards, as demonstrated through a series of assessments that involve both school-site and assessment center activities.

Teachers are central to all aspects of the National Board’s efforts. Teachers comprise a majority of the NBPTS board of directors. They influence all facets of the National Board’s work, form standards-setting to assessment development, including the scoring of all candidate performances. As such, National Board standards for exemplary teaching, and the NBC assessments that demonstrate attainment of those standards, are developed by teachers for teachers—not imposes by those outside the profession.

The purpose of National Board Certification is to improve student learning by strengthening teaching. To this end, the National Board has defined the knowledge, skills, and accomplishments that characterize teaching excellence. Through its assessments, the National Board identifies teachers who meet high and rigorous standards and communicates what accomplished teachers should know and do.

For more information please visit the NBPTS Web Site.

The Utah Education Association believes the learning standards established for students at each grade level should be clearly articulated and understood by educators, parents, and students. The UEA also supports ongoing assessment of student performance and sharing this information on student progress with parents, policy makers, and others.

• Assessments of student performance should be directly linked to the CORE curriculum- to the lessons educators teach and the texts and materials they use.
• No one assessment measure alone should be used to measure a student’s performance.
• A variety of assessment types should be used to measure progress.

The primary purposes for assessment and uses of the data are:

1. To give educators information which allows them to adjust their practice to meet the needs of each student.
2. To help students and their parents identify the student’s strengths and needs.
3. To measure the effectiveness of teaching programs and strategies.

• Educators, who work with students every day, must be involved in developing assessment systems and must have timely access to the results.
• Implementation of a comprehensive assessment system must be fully funded.

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