Pa. Tax Credit Scholarships

Summary

Pennsylvania awarded almost 63,000 K–12 scholarships, and the average overall scholarship increased to over $2,500 for the 2020–21 school year.
In 2020–21, K–12 students in Pennsylvania submitted almost 139,000 scholarship applications, the highest on record. Unfortunately, the state denied over 76,000 student scholarship applications because of arbitrary program caps.
The state also waitlisted $156.3 million in business donations to the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) scholarship programs in 2020–21.
State lawmakers should increase scholarship caps and implement an “automatic escalator” to provide more students with access to a high-quality education.

Pennsylvania’s scholarship programs

Pennsylvania’s EITC and OSTC are state tax credit programs that give thousands of low- to middle-income students access to high-quality schools of their choice.
Students can apply for scholarships through local scholarship organizations in the fall for the following school year.
- Scholarship applicants must be below the household income limit of $105,183 and $18,514 for each dependent;^[1] furthermore, OSTC applicants must also live within the attendance boundary of a low-achieving school.^[2],[3]
- While no state agency collects income information regarding students, Simple Tuition Solutions—one of the largest application processors in the state—show an average household income of $64,000 for EITC and $52,000 for OSTC.^[4]
In the spring, businesses and individuals can donate to over 200 scholarship organizations across the state and receive a 75 percent (1-year commitment) or 90 percent (2-year commitment) credit on their state income taxes.^[5]

Increasing Demand for Scholarships

New numbers—obtained by the Commonwealth Foundation from the Department of Community and Economic Development (DCED) through Right to Know Requests—reveal the current impact of Pennsylvania’s tax credit scholarship programs.

In 2020–21, K–12 students submitted 138,538 scholarship applications, 1,120 more than the previous year and the highest on record.
Scholarship organizations awarded 62,507 K–12 scholarships in 2020–21, slightly up from the previous year’s 61,767. Students now attend school on an EITC or OSTC scholarship in all 67 counties.^[6]

In 2020–21, the average K–12 tax credit scholarship was $2,534, or $333 more per scholarship compared to the previous year.

While Pennsylvania’s tax credit scholarship programs provide transformative opportunities to thousands of students, state caps limit the programs’ impact.

In 2020–21, Pennsylvania denied a record of 76,031 K–12 student scholarship applications—almost 55 percent of applications—because of state caps. The state waitlisted 380 more students compared to the year before.
The state also waitlisted a record $156.3 million in donations to EITC and OSTC scholarships, up from $116 million the year before.

Reform: End the Waiting List for Scholarships

The success of the EITC and the OSTC programs gained an unprecedented $125 million program increase in the 2022–23 budget. This expansion has opened opportunities for approximately 31,000 more students to receive scholarships to the academic environment that best fits their needs. Yet, the numbers show waiting lists persist with an ever-growing demand.

In 2023, state lawmakers should help end the waiting list of student scholarships by increasing program caps by $150 million.
Furthermore, Harrisburg should approve an “automatic escalator” which would allow the tax credit scholarship programs to grow with student need. Proposals, such as Senate Bill 527 introduced last year, would increase each program by 25 percent annually when 90 percent of available tax credits are allocated in the previous year. Florida has a similar escalator for its tax credit scholarship program and, as a result, can serve more students seeking educational alternatives.

^[1]Pennsylvania Department of Community and Economic Development (DCED), “Educational Improvement Tax Credit Program: Organization Guidelines and Application for Scholarship and Educational Improvement Organizations,” (Harrisburg: September 28, 2022), https://dced.pa.gov/download/eitc-organization-guidelines/?wpdmdl=84187.

^[2]Pennsylvania Department of Community and Economic Development (DCED), “Opportunity Scholarship Tax Credit Program (OSTC),” accessed December 12, 2022, https://dced.pa.gov/programs/opportunity-scholarship-tax-credit-program-ostc/.

^[3]Pennsylvania Department of Community and Economic Development (DCED), “Opportunity Scholarship Tax Credit Program: Low Achieving Schools,” accessed December 12, 2022, https://www.education.pa.gov/K-12/Opportunity%20Scholarship%20Tax%20Credit%20Program/Pages/default.aspx.

^[4]“K–12 Tax Credit Scholarship Income,” Simple Tuition Solutions (2021), accessed December 12, 2022, https://infogram.com/eitc-ostc-average-incomes-1hzj4o3wrwyvo4p?live.

^[5]Pennsylvania Department of Community & Economic Development (DCED), “Scholarship Organizations: List of Scholarship Organizations Effective 01/01/2021 – 12/31/2021 (EITC),” accessed December 12, 2022, https://dced.pa.gov/scholarship-organizations/.

^[6]Due to a lack of individual student data, we are unable to quantify the possibility of students applying to multiple scholarship organizations. Additionally, the number of supplemental Economically Disadvantaged scholarships was not available.