Corporations could set aside $10 million in taxes next year for scholarships so children from poor families could transfer from public to private schools under a bill that passed its first significant test at the Legislature on Thursday.
Republican lawmakers hope to expand Arizona's popular tuition tax credit for private and parochial school scholarships to corporations, an idea that failed two years ago when the state was in a deeper fiscal crisis. Senate Bill 1176 passed the Senate Finance Committee 5-2 Thursday.
A similar bill is also moving through the House but hasn't had its first hearing yet.
The new scholarships would be available only to poor children now attending public schools, unlike the current tax-credit-funded scholarships, which largely subsidize students already enrolled in private schools.
"This bill does great things for school choice and opportunities for children in Arizona, and it does it in a very fiscally responsible way," said Sidney Hay of Advocates for School Choice, a national advocacy group based in Phoenix. "We are confident this bill will save the state money."
Hay cited a recent Goldwater Institute study that contends private-school tuitions are, on average, below the amount the state spends per pupil on public schools.
Under the bill, a corporation could divert $10,000 of its state income-tax liability each year to scholarship tuition organizations.
The tax credit would be capped at $10 million but would be allowed to expand by $5 million a year for 10 years, topping out at $55 million.
The Arizona Education Association, a union that represents 30,000 public schoolteachers, opposes tax credits, especially when they divert money from a school system that the union believes is underfunded.
"We believe there are many, many choices already available to parents through open enrollment and charter schools, and we believe tax credits are a bad form of public policy," said Jennifer Daily, lobbyist for the association. "Where do you stop when you start putting these things in the tax code?"