Opportunity Denied: To Meet Demand, Tax Credit Scholarship Caps Must Expand
On June 22, Gov. Wolf signed a budget that included a $25 million expansion of Pennsylvania’s Educational Improvement Tax Credit (EITC) program. This will allow up to 15,000 additional students to receive scholarships. While helpful, the recent expansion falls far short of the demand for scholarships. 52,857 student tax credit scholarship applications were denied last year—52 percent of all applications. Proposed legislation in the House and Senate would resolve this problem by annually increasing tax credit caps by 25 percent if 90 percent of available credits are used.
Summary of Pennsylvania’s Tax Credit Programs
Each child deserves an education that fits their unique needs. For hundreds of thousands of low to moderate-income Pennsylvania students, tax credit scholarships have offered an educational lifeline. But arbitrary tax credit caps on these immensely popular programs limit the supply.
Graphic:Tax Credit Scholarships FY 2016-17
- A $10 million increase in 2017-18 brought EITC K-12 credits to $85 million.
- The 2018-19 state budget includes a $25 million increase for EITC K-12 scholarships, matching the second largest increase in the EITC program’s history. This will serve up to another 15,000 students.
- In total the EITC and Opportunity Scholarship Tax Credit (OSTC) programs now provide $210 million in tax credits.
Graphic:Budgeted Tax Credit Scholarship Amounts FY 2018-19
Tax credit scholarships aren’t just good for students, they also benefit taxpayers. In fact, EITC alone saved taxpayers more than $1 billion from 2002-2014, according to an EdChoice audit.
Nearly 53,000 Student Tax Credit Scholarships Denied in 2016-17
State records show that 52,857, or 52 percent of all student scholarship applications, were rejected in (FY) 2016-17.
Graphic: Pa Tax Credit Scholarship Demand Outpaces Supply
Scholarship organizations distribute scholarships in 65 of 67 PA counties.*
Graphic: Scholarships Awarded by County
Automatic Escalator: How to End Waiting Lists
Like Pennsylvania, Florida enacted tax credit scholarships in 2001. The two states followed similar paths until 2011, when Florida adopted an automatic escalator that increases the tax credit cap by 25 percent when at least 90 percent of available credits are used the previous year. Florida now awards twice as many student scholarships as Pennsylvania and their average scholarship amount is significantly higher. This year’s $25 million EITC increase is likely to resolve just one-fourth to one-third of the surplus demand.
Graphic: Automatic Escalator Impact
- If the EITC cap increases by $25 million each year, the EITC would not reach Florida’s current (2018) level of funding until 2041.
- If the program cap increases by 10 percent each year, the EITC would not reach Florida’s current (2018) level of funding until 2035.
- An automatic escalator, as proposed in SB 1204 and HB 2530 could match Florida’s current (2018) level of funding by 2026.
Program caps are trapping tens of thousands of students in schools that don’t meet their unique needs. The best way to ensure no more students get left behind is to promote automatic escalator legislation.
*Editor's note: An earlier version stated that 59 counties have scholarship organizations.