Phoenix-According to an AP report, Senate Appropriations Chairwoman Ruth Solomon (D-Tucson) has proposed suspending tax credits for donations to scholarship organizations along with tax credits for extracurricular activities, arguing the state could save $45 to $50 million. Goldwater Institute executive director Darcy Olsen disputes the wisdom-and the purported cost savings-of suspending the scholarship tax credit.
"Don't throw the baby out with the bath water," says Olsen. "The tax credit for extracurricular activities is of questionable value. But for a struggling student, a scholarship is a life preserver, not a luxury. Scholarships must be sustained, not suspended."
Suspending the scholarship tax credit could destroy educational opportunities for thousands of students. Olsen explains, "Without scholarships, up to 20,000 students may be forced back into overcrowded public-school classrooms where they stand a high risk of academic failure. Scholarships give children a chance to obtain a first-rate education-a chance Solomon's proposal would destroy."
According to Olsen, Solomon's savings estimates reflect a fundamental misunderstanding of the costs and benefits associated with the scholarship tax credit. From 1998-2000, the state lost an estimated $33.1 million as taxpayers took the tax credit for donations to scholarship organizations. However, as parents used the scholarships to transfer their children out of the public schools into private ones-and hence off the public dime-the state's financial obligations were reduced concurrently, and taxpayers saved money.
The best available projections show the scholarship tax credit has been revenue neutral and should save taxpayers tens of millions of dollars as the program expands. In a study released March 26, Olsen found that expanding the scholarship credit to businesses could send more than 22,000 students eligible for the free- and reduced-lunch program to privately run schools at an annual savings of $53 million.
"The legislature should address the deficit by reining in wasteful spending on unnecessary programs," says Olsen. In a forthcoming report, Goldwater Institute scholar Stephen Slivinski finds more than $230 million in wasteful and duplicative programs that can be eliminated from the current budget. These cuts would go much further toward a balanced budget than Solomon's assault on Arizona's scholarship program.
Olsen agrees with Solomon regarding the tax credit for extracurricular activities, which cost the state an estimated $41.3 million from 1998 to 2000. Suspending the extracurricular credit for one year could save the state an estimated $17.5 million, using figures for 2000 (the last year for which revenue data is available).