Pennsylvania’s tax credit scholarship programs are lifelines for thousands of children around the state. At best, these children would be stuck in schools that aren’t meeting their education needs. At worst, these students would be trapped in failing and sometimes violent schools. But these lifelines wouldn’t exist without the tireless efforts of Scholarship Organizations (SOs).
The Education Improvement Tax Credit (EITC) enacted in 2001, and the Opportunity Scholarship Tax Credit (OSTC) program enacted in 2012, allow businesses to receive tax credits for donations to SOs. Every SO is a nonprofit entity that accepts donations from businesses to eligible scholarship programs. According to the PA Department of Economic and Community Development (DCED), there are 260 SOs and 181 pre-kindergarten SOs authorized under the EITC and an additional 190 SOs in the OSTC program.
While BLOCS awarded scholarships to nearly 12,000 students in 2015-16, it received application from another 9,000. Similarly, CFSP turns away around 8,000 applicants each year.
There is quite a bit of diversity among the various Scholarship Organizations. Philadelphia boasts two of the largest SOs in the state – BLOCS (Business Leadership Organized for Catholic Schools) and Children’s Scholarship Fund Philadelphia (CSFP). In 2015-16, BLOCS awarded scholarships to nearly 12,000 students. On average, the scholarships were less than $2,000 each. CSFP awards approximately 2,000 scholarships per year.
Today, every Catholic diocese in Pennsylvania runs EITC/OSTC scholarship programs for local Catholic schools. Many independent private schools operate their own scholarship organizations, and numerous community foundations offer EITC/OSTC scholarships.
These SOs are in the trenches working hard to help students across Pennsylvania access the best education possible. But the state severely limits the good these organizations can do with arbitrary caps on the total amount of available tax credits. While BLOCS awarded scholarships to nearly 12,000 students in 2015-16, it received application from another 9,000. Similarly, CFSP turns away around 8,000 applicants each year. In fact, wait lists are common throughout the state.
There is a relatively simple solution: implementing an automatic escalator for scholarship tax credit caps. In Florida and New Hampshire, an automatic escalator allows the cap on tax credits to increase when a certain percentage of available credits are used the previous year. In Arizona and Nevada, the cap on credits increases each year regardless of usage. Enacting an automatic escalator in Pennsylvania would allow our SOs to reduce waiting lists and help even more students each year.
As a bonus, expanding tax credit scholarship participation will save considerable tax dollars. A study by EdChoice confirmed the EITC program saved taxpayers roughly $1.3 billion from 2002-14. This makes sense considering EITC and OSTC scholarships averaged $1,600 and $2,400 respectively in 2016-17. Meanwhile, overall per student spending in Pennsylvania is rapidly approaching $18,000.
The Scholarship Organizations that enable the EITC and OSTC programs provide an invaluable service to families and every Pennsylvania taxpayer. By removing arbitrary tax credit caps, they can help even more students flourish in the schools that fit them best.
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