Legislature Ready to Tackle Bills on School Tax Credits

Posted on February 17, 2003 | Type: In the News | Author: Robbie Sherwood
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Nearly a dozen education-related tax credit bills could revamp donations for schools, affecting campuses and tax returns across the state.

Arizonans can earn tax credits if they donate money for tuition at private schools or extracurricular activities at public schools. But the string of proposed laws could create an entirely new landscape.

If House Bill 2421 passes, the donations that now can be used only for extracurricular activities could be used for classroom instruction.

And Senate Bill 1263 would allow corporations to earn tax credits of up to $100,000 for their donations to school tuition organizations.

Another, Senate Bill 1355, would create a $250 individual income tax credit for teachers who purchase school supplies for the classroom.

"We still don't pay teachers what we should be paying them," said Sen. Gabrielle Giffords, D-Tucson. At the same time, many teachers are spending their own money to try to increase classroom standards.

"You see teachers paying hundreds of dollars out of their own pockets for paper, markers, furniture, all sorts of stuff," she said. "Teachers that do that should receive some reimbursement."

The bill could have a tough road ahead, though. Improved pay for teachers is in vogue, but with the state facing a massive budget deficit, the price tag might be hard to swallow.

According to the state Department of Revenue, if all public schoolteachers took the maximum credit allowed, state income tax revenue would drop by an estimated $14 million. The reduction would hit the general fund.

That estimate doesn't include charter schools, private schools or substitute teachers who are eligible to use the credit. Six of the education tax credit bills will be heard today by the Senate Education Committee. Other bills also have been filed in the Legislature, including one in the House that would offer a $1,500 tax credit for those who home-school their children.

The education tax credit bills may be popular with lawmakers because they can put more money into classrooms without raising taxes. The Arizona School Boards Association, though, is against the idea, saying tax credits are bad public policy. Inequity is a major concern, with the wealthy districts receiving the majority of the money.

Still, interest remains very high in the tax credits, Phoenix accountant Robert Hockensmith said.

In the past, teachers could get some relief when they spent their own money on supplies. They had to exceed 2 percent of their household income to get a deduction. Now they get the $250 carrot.

"It's a very good change in the law," he said, to give folks some money back.

Other bills, though, would try to rein in the credits.

Senate Bill 1240 says that people can take a tax credit for donations to private schools or public schools, but not for both.

Another, Senate Bill 1297, would push accountability. Before March of every year, every school tuition organization would have to report the name, address and social security number of each taxpayer who made a contribution. The organizations also would have to report names and social security numbers of the children who received tuition grants or scholarships, and the schools they attended.

Sen. Mark Anderson, R-Mesa, is sponsoring the corporate tax credit bill on behalf of the Goldwater Institute, a conservative-leaning think tank that backed previous school tax credits and school-choice measures.

Anderson believes the credit could save the state money, or at least not cost it any. Scholarships from the credit would be limited to low-income students transferring from public to private schools, and would be capped at 75 percent of the state's per-pupil funding average of about $4,500, Anderson said.

He acknowledges that scholarship tuition organizations may end up with more money for scholarships than there are slots available at private schools for less than $3,400. Elite parochial schools such as Brophy College Preparatory have tuition of about $6,000 a year, although the credit is close to the tuition of several private elementary schools, said Rep. Steve Yarborough, R-Chandler, who directs one of the state's largest school tuition organizations.

"As a hard-core school choice advocate, I support the bill, but one of my concerns is, if you have a family that's already free-lunch qualified and you give them a scholarship that's less than tuition, it's a fairly empty gesture," Yarborough said.

The bill now would cap the tax credits at $50 million. But Anderson has an amendment to start the cap at $10 million a year and phase it in by $10 million a year, to make sure the credit works as advertised.

Sen. Ken Cheuvront believes it would be impossible to know if the private tuition organizations are spending the scholarship money in the manner required by the bill. Cheuvront is sponsoring a bill to require stricter reporting to the Department of Revenue of who now gets scholarships and in what amount, so claims that the tax credits save state money can be proved.

"The bottom line is, we can't afford to send any more public money to private schools at a time when we have a $1 billion hole in our general fund," said Cheuvront, D-Phoenix. "We are cutting public education enough as it is. This would just give special interests a new vehicle to not give the state its fair share."

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