School Choice Generates Big Savings for Schools and Taxpayers

In February, Governor Corbett delivered his second budgetary address. In similar fashion, the Governor revealed another plan to balance the public ledger without imposing tax increases on the existing sluggish economy.

Since the inception of the new budget plan, the Treasury has reported higher than anticipated revenues. Consequently, the Senate recently passed a proposal that restores funding to basic and higher education and several other social health programs. While the Senate proposal is balanced, the increased spending relies on additional transfers from last year’s balance and the rainy day fund.

For lawmakers who are committed to providing funding and relief for public education, there is a public policy alternative which would free up another $500 million. Expanding Pennsylvania’s successful Educational Improvement Tax Credit (EITC) is a feasible legislative proposal that can salvage public school budgets while avoiding tax hikes and increasing educational opportunities for tens of thousands of students.
The EITC, enacted in 2001, is a partnership between parents, businesses and scholarship organizations. The program allows businesses the ability to donate to pre-approved scholarship organizations in exchange for a tax credit of 75 percent of their donation amount against what they owe in taxes. Scholarships are then dispersed to income qualified families so that they may send their children to the school of their choice.

The EITC generates a savings to both the school district and taxpayer as each scholarship student leaves all state and local funding behind. Retaining the same funding with fewer students increases the amount spent per pupil. Current per pupil spending is more than $14,000. This is fourteen times more than the average $1,040 award given through the EITC scholarship. When multiplying the per pupil savings of $13,260 from school choice by the more than 38,000 students receiving scholarships, statewide savings equate to more than $512 million each year.

The success of Pennsylvania’s EITC program resulted in seven other states implementing similar programs. With a cap of $75 million for donations, the supply of scholarships can simply not keep up with demand. In Philadelphia alone, there were more than 95,000 applications for only 7,700 scholarships. The evidence shows that parents are demanding choice and seeking better educational outcomes for their children.

While the Senate budget proposal increases funding primarily for higher education, the General Assembly has an opportunity to yield big savings for basic education in addition to providing additional scholarships for parents to send their child to the school of their choice. By doubling the $75 million cap to $150 million, public schools will gain an additional $500 million in savings. Expanding the program is a practical solution as the current cap is already more than double the $30 million in the 2001-02 school year.

While Harrisburg certainly has a spending problem, cutting expenditures alone will not be enough to achieve a balance between the Commonwealth’s financial woes and budget priorities. The General Assembly must introduce meaningful reforms that maximize efficiency and save taxpayers money. Expanding the Educational Improvement Tax Credit must become a legislative priority for this upcoming budget year.

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