School Choice Saves Money

New report identifies $144 M in savings from Educational Improvement Tax Credit

HARRISBURG, PA — Giving parents and children school choices saves taxpayers’ money. This is the finding of a new report from the Indianapolis-based Milton and Rose D. Freidman Foundation. The report, Education by the Numbers: The Fiscal Effect of School Choice Programs, 1990-2006, touts the taxpayer savings of school choice programs across the nation, including Pennsylvania’s Educational Improvement Tax Credit (EITC) program.

The EITC offers corporate tax credits for donations to approved scholarship and educational improvement organizations. The cap on EITC credits for FY 2006-07 is $59 million—$36 million for approved K-12 scholarship organizations, $18 million for educational improvement organizations, and $5 million for Pre-K scholarships. The scholarship must be awarded to low to moderate-income families to be used for tuition at the school of their choice.

Released one day after a rally in Harrisburg for the 6th birthday of the EITC program, in which parents and students celebrated the benefits they receive from the program, the Friedman Foundation report touts the fiscal benefits of school choice. The report estimates that the scholarship portion of the EITC has saved taxpayers a net of $144 million since 2001:

  • An estimated 154,000 students have received a scholarship through the EITC program, including 32,000 in the 2006-07 school year.
  • The EITC has provided tax credits totaling $161 million for donations to scholarship organizations since FY 2001-02.
  • Assuming a mere 30% of students would have returned to district schools in absence of the scholarship, school districts saved an estimated $305 million in instructional expenses.
  • In other words, for every $1 dollar in EITC tax credits, school districts save at least $1.89 in instructional costs.

“The educational and social benefits of the EITC for parents and families have long been known, but this analysis quantifies the benefits for taxpayers as well,” said Matthew Brouillette, president of the Commonwealth Foundation, “By giving parents choices to find better or safer schools for their children, we will also save on the cost of educating kids in our Commonwealth.”

This EITC program is very popular among parents, but supply is not meeting demand. The cap on scholarship donations has been reached shortly after the application period began in each of the last six years. Thus, businesses willing to donate are denied a tax credit under the cap on the program, and hundreds of low-income families are denied a scholarship.

Despite bi-partisan support for the EITC, Governor Rendell’s proposed budget calls for only a $1.4 million increase in the cap on tax credits. However, proposals in both the House and Senate would increase the EITC more substantially. Senator Jane Orie (R–Pittsburgh) has introduced SB 680 (along with 20 cosponsors) which would increase the EITC cap by $20 million—a $12 million increase in donations for scholarship programs. Representative Mario Civera (R–Upper Darby) introduced HB 1283 yesterday with 80 cosponsors, which would increase the EITC cap by $50 million—to $109 million total.

“Continued expansion of the EITC is critical to the improvement of public education in Pennsylvania,” stated Brouillette. “Over 14% of Pennsylvania students attend non-public schools, and more would, if they had the financial means to do so. Yet students at non-public schools receive short shrift in the state budget—as school districts receive 200 times the EITC scholarship cap.”

Brouillette continued, “Not only would an EITC expansion encourage the private sector to continue providing educational services and offer low-income families greater choices in education, it would save school districts—and taxpayers—substantially from higher property taxes. The EITC helps to reduce the need for new school buildings, reduces overcrowding, reduces class size, and reduces instructional costs in school districts—saving almost twice as much as what we put into the program.”

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EDITORS NOTE: The report, Education by the Numbers: The Fiscal Effect of School Choice Programs, 1990-2006, can be found at

The Commonwealth Foundation is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.

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