Tax Credit Scholarships: Pennsylvania is Falling Behind

Tax credit scholarships are one of the fastest growing school choice options. These programs allow businesses or individuals to receive a tax credit for donations to approved K-12 scholarship programs. Pennsylvania got the ball rolling by introducing the Educational Improvement Tax Credit (EITC) in 2001. The Opportunity Scholarship Tax Credit (OSTC), aimed at students in low-performing schools, was added to the mix in 2012.

By launching the first corporate tax credit scholarship program in the nation, Pennsylvania established itself as a leader in educational choice. Unfortunately, the program has not kept pace with demand, and we are rapidly losing that mantle of leadership. 

Florida – which also launched its program in 2001 – is now the undisputed leader in tax credit scholarships. Florida and Pennsylvania followed a similar path in terms of available scholarship funds for the first decade, although Pennsylvania’s scholarship numbers were higher each year. Things changed in 2011, when Florida adopted an automatic escalator that increased the tax credit cap by 25 percent whenever at least 90 percent of available credits were used the previous year. Florida now awards scholarships to twice as many students as Pennsylvania and their average scholarship amount is significantly higher.

While the size of Pennsylvania’s tax credit programs surpasses most other states, our programs are largely stagnate while other programs are growing.

• Arizona’s Low-Income Corporate Income Tax Credit Scholarship Program was enacted in 2006 with a $10 million cap and 20 percent automatic escalator. Today, the cap is $74 million and the number of children receiving scholarships has more than doubled.
• Georgia Gov. Nathan Deal recently signed legislation that nearly doubled the cap on tax credits for private school scholarships – from $58 million to $100 million. With nearly 14,000 students served under the current limit, this increase will make educational choice available to thousands more.
• Iowa has a much smaller tax credit scholarship program, but newly passed legislation increases the program cap from $12 million to $13 million per year while expanding income eligibility.

Other school choice options are also on the rise. Following the devastating effects of Hurricane Maria, Puerto Rico is embracing educational opportunity. The Free School Selection Program will empower almost 10,000 students with vouchers to attend the school of their choice; more than 15,000 will be eligible in the second year of the program.

As Pennsylvania faces ever-increasing education spending, expanding school choice options is a terrific way to educate more children at a lower taxpayer cost. EITC and OSTC scholarships average $1,600 and $2,400 respectively. Education Savings Accounts (ESAs), as proposed in Senate Bill 2, would average a little over $6,000. Meanwhile, overall per student spending in Pennsylvania is rapidly approaching $18,000.

Widespread consumer choice is the norm in nearly every aspect of society today. Education is the exception. We know one size does not fit all children when it comes to education, which is why choice is expanding throughout the country. By expanding education tax credits and enacting Education Savings Accounts, Pennsylvania can reclaim its title as a leader in educational choice.