Breaking Bad: Tax-Credit Scholarships aka NeoVouchers

Is it possible to compare the AMC show Breaking Bad to the latest goings on with Neovouchers? I started watching Breaking Bad last month, and I am only 3 episodes from catching up to the rest of the world. So let’s give it a try.

First. What is a Neovoucher? NEPC:

Tax-credit voucher programs–dubbed “neovouchers” in a recent book by the University of Colorado’s Kevin Welner–provide a non-refundable tax credit to individuals or corporations contributing to non-profit corporations, which then distribute the money to students attending private schools. These neovouchers (often called “scholarships” in the state laws) now exist in seven states–Arizona, Florida, Georgia, Indiana, Iowa, Pennsylvania, and Rhode Island.

Edit 2/3/13: Kevin Welner emailed:

Since I wrote that passage you quote at the outset, 4 additional states have adopted these neovoucher policies: Louisiana, New Hampshire, Oklahoma, and Virginia.  Best bets for this upcoming session would be Idaho and Mississippi (in addition to Texas, of course).

Creative accounting is the rule of the day over at our part time legislature (Gus would be so proud). Look at these Texas hijinks. Beyond a “sunnier” outlook for the Texas budget, what exactly did that Statesman article say? What we do know for sure is that Texas Legislature was a $5.4 billion hit man over the last two years because public schools are not a priority over at the capitol (Strangely, Texas has $8 billion zipped in clothing bags stored underneath the capitol). Anyways, I laid out this background on the Texas Legislature financial meth because it is the exact same approach that Sen. Patrick has in mind for funding vouchers.

The Texas Constitution clearly denounces the appropriation of state funds for sectarian purposes in Section 7 of the Texas Bill of Rights:

No money shall be appropriated or drawn from the Treasury for the Benefit of any sect, or religious society, theological or religious seminary; nor shall property belonging to the State be appropriated for such purposes.

The Texas Constitution also directly addresses the use of school funds for sectarian schools in Article 7, Section 5(c):

The available school fund shall be applied annually to the support of the public free schools. Except as provided by this section, the legislature may not enact a law appropriating any part of the permanent school fund or available school fund to any other purpose. The permanent school fund and the available school fund may not be appropriated to or used for the support of any sectarian school.

So how does Patrick avoid the Texas constitution? Here is how he reportedly wants to do it…

This year, the conservative push for “school choice” is stronger than ever, and the new chairman of the Senate Education Committee is its lead proponent. It’s important that vouchers, which are grants of state money to parents who want to move their students from public to private schools or who have already done so and want help in paying the bill, are no longer the favorite “school choice” financing vehicle. “Tax-credit scholarships” are preferred. That’s what Education Committee chairman Sen. Dan Patrick, R-Houston, apparently wants. Start with an existing tax, in this case the state franchise tax, and let taxpayers, in this case Texas businesses, pay some of it to a non-profit organization that awards private school scholarships. The business gets a tax credit, the student goes to private school, and the school gets at least part of its normal tuition paid by the non-profit.

Since the funds were not drawn, but given by businesses, not taken from Treasury, because they were redirected, before they arrived, in the fund.  Is it just me, or do these tax credit scholarships appear to be a creative and legal form of money laundering for vouchers to avoid the Texas constitution? Heisenburg would be proud.

What do Neovouchers accomplish? NEPC:

Last year, the first careful analysis of neovoucher outcomes was released–the official evaluation in Florida–and found that the students receiving the neovouchers performed no better (and perhaps worse) than comparable public school students.

The Friedman reports reviewed by Huerta claimed that implementing these programs would result in a net financial saving to the states. They base their conclusions, Huerta observes, on assumptions about the sensitivity of public school revenues and expenditures to enrollment declines, as well as assumptions about a pent-up demand for publicly funded private school choice and the nature and degree of supply and demand pressures. Professor Huerta tests all these assumptions and finds them to be largely groundless and frequently at odds with established research. In fact, Huerta notes that the reports’ use of research is largely confined to work from advocacy groups like the Friedman Foundation itself. He observes that this “insular approach further calls into question the validity of the new reports’ conclusions.”

And, so. The research on Neovouchers says, A) They don’t save states money and B) They don’t increase achievement. Neovouchers sounds like Walter White and Jesse Pinkman’s modus operandi— the plan always sounds good, but it never works out well in the end.

Edit 2/4/13: Thanks to Karen from Houston for digging up a New York Times piece on how Neovouchers backdoor money. Some quotes:

This school year alone, the programs redirected nearly $350 million that would have gone into public budgets to pay for private school scholarships for 129,000 students, according to the Alliance for School Choice, an advocacy organization.
While the scholarship programs have helped many children whose parents would have to scrimp or work several jobs to send them to private schools, the money has also been used to attract star football players, expand the payrolls of the nonprofit scholarship groups and spread the theology of creationism, interviews and documents show. Even some private school parents and administrators have questioned whether the programs are a charade.
Most of the private schools are religious. Nearly a quarter of the participating schools in Georgia require families to make a profession of religious faith, according to their Web sites. Many of those schools adhere to a fundamentalist brand of Christianity.
The programs are insulated from provisions requiring church-state separation because the donations are collected and distributed by the nonprofit scholarship groups.
A cottage industry of these groups has sprung up, in some cases collecting hundreds of thousands of dollars in administrative fees, according to tax filings. The groups often work in concert with private schools like Gwinnett Christian Academy to solicit donations and determine who will get the scholarships — in effect limiting school choice for the students themselves. In most states, students who withdraw from the schools cannot take the scholarship money with them.
Public school officials view the tax credits as poorly disguised state subsidies, part of an expanding agenda to shift tax dollars away from traditional public schools. “Our position is that this is a shell game,” said Chris Thomas, general counsel for the Arizona School Boards Association.
In 1997, Arizona’s Legislature adopted the first tax-credit scholarship program.
For school choice advocates, the genius of the program was that the money would never go into public accounts, making it less susceptible to court challenges. Representative Trent Franks, an Arizona Republican and former state lawmaker, is credited with the idea of routing the donations through nonprofit organizations. “The teachers’ union called it fiendishly clever,” Mr. Franks said during a recent interview.


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