Scholarship Tax Credits In Context

Pennsylvania’s Education Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) provide tax credit scholarships to low and moderate-income students. These scholarships are lifelines for tens of thousands of thousands of Pennsylvania children.

The EITC, enacted in 2001, and the OSTC, enacted in 2012, give businesses tax credits for donations to scholarship organizations. But the impact is capped. Thousands of students are waiting in line for scholarship opportunities, and Pennsylvania is falling behind other states in delivering on educational opportunities.

Consider the EITC and OSTC in context of Pennsylvania education funding. The EITC and OSTC provided more than 55,000 PreK-12 scholarships last year. That would represent the second largest school district in Pennsylvania—more than double the city of Pittsburgh. Only Philadelphia, with an average daily membership of 200,000 (this includes students at both district-run and charter schools) serves more students.

But tax credit scholarships serve students at a fraction of the cost. Consider these comparisons, highlighted in the charts below.

• Philadelphia public schools serve four times as many students, but at 30 times the cost, of EITC and OSTC scholarships.
• Pittsburgh public schools serve half as many students, at 5 times the cost, of EITC and OSTC scholarships.

As a percentage of total school district spending last year, EITC and OSTC scholarships represent less than one-half of one percent. In fact, school district fund reserves—which grew to $4.5 billion last year—represent enough to fund the current level of EITC and OSTC scholarships for 33 years.

As a percentage of total school district spending last year, EITC and OSTC scholarships represent less than one-half of one percent. In fact, school district fund reserves—which grew to $4.5 billion last year—represent enough to fund the current level of EITC and OSTC scholarships for 33 years.

 

The chart below shows this disparity—with the EITC and OSTC programs being such almost invisible compared to school district funding.

EITC and OSTC programs educate Pennsylvania children for pennies on the dollar. That is the model of efficiency. What’s more, the EITC alone has saved taxpayers $1 billion, according to an EdChoice audit.

Yet thousands of Pa. kids are turned away each year as demand outpaces supply. More than 17,000 Philadelphia students were denied their first choice last year—from only two of nearly 450 scholarship organizations.

Numerous studies show education choice improves academic outcomes, improves public schools, reduces racial segregation, and improves civic values. Expanding EITC and OSTC and creating education savings accounts is the best way create a thorough and efficient education system for everyone.