Unfulfilled Promise of Arizona Tuition Tax Credits

FOR IMMEDIATE RELEASE: March 25, 2002

Contact: Nathan Richter or Tracy Duckett at PFAW Foundation

Email: [email protected]

Phone Number: 202-467-4999

New Analysis Shows 76 Cents of Every Dollar of Lost Tax Revenue Flow to Students Already Enrolled in Private Schools

Both the Arizona Supreme Court and state political leaders have cited the state’s 1997 tuition tax credit law as a major vehicle for expanding educational options for low-income students in public schools. But an analysis released today by researchers at Arizona State University found that the law appears to overwhelmingly benefit middle-class and wealthy parents—parents whose children, in many cases, were already enrolled in private schools.
Over three years (1998-2000), the Arizona law diverted $74 million in public tax resources to primarily benefit middle- and upper-income families, according to the analysis by the university’s Education Policy Studies Laboratory (EPSL). Moreover, EPSL Assistant Director Glen Y. Wilson writes in the analysis that, due to the tuition tax credit law, “public schools’ finances are stretched further and their ability to educate their remaining students is weakened.”

Very little is known about the private schools that Arizona students are using tuition grants to attend. Private schools—unlike public schools—are not required by state law to administer state exams, release financial statements, or report academic scores to parents and the public. In addition, private schools need not comply with many state or federal civil rights laws that prohibit discrimination, for example, on the basis of religion, gender or disability.

Lisa Graham Keegan, the state’s former superintendent of public instruction, has led a chorus of praise for the tuition tax credit program, calling the Arizona law “a primer for success.” When the state Supreme Court voted narrowly to uphold the law’s constitutionality, it wrote in its 3-2 decision that the program was likely to make “private schools more accessible” to low-income families. However, the EPSL analysis shatters the notion that the law primarily benefits disadvantaged students.

EPSL’s Wilson noted that for every dollar of foregone tax revenue spent over the Arizona law’s first three years, only 19 cents is estimated to have gone to students who moved from public to private schools. In other words, as much as 76 cents of every dollar apparently went to families whose children were already enrolled in private schools. Five cents of each dollar were absorbed by administrative costs. The EPSL analysis amplifies the concerns raised about the Arizona law last September in a report by People For the American Way Foundation (PFAWF).

“Even if the tuition tax credit law were doing what its backers said it would, it would act as a huge drain on funds that could otherwise be devoted to Arizona’s public schools, where roughly nine out of 10 school-age children attend,” said PFAWF President Ralph G. Neas. “But this analysis demonstrates that very little of this tax money is reaching the people whom supporters claimed it would reach—low-income families with children in public school.”

Even were the law to direct most of its benefits to low-income families, Neas noted that Arizonans would be in no position to know whether tuition tax credits are ‘buying’ a better education for children because very little is known about the performance of private schools.

According to the EPSL analysis, a variety of factors make the Arizona law unlikely to serve significant numbers of low-income students. First, the average tuition grant under the law ($856 in the year 2000), according to EPSL, covered barely one-quarter of the cost of the median private elementary school’s tuition and less than one-fifth of the median private secondary school tuition. Second, tuition isn’t the only barrier faced by low-income families that might seek a private school for their children. Other barriers are frequently posed by transportation, admission exams, religious affiliations, and additional fees for books, uniforms and school activities.

Arizona ranks dead last out of the 50 states in a key measure of school funding adequacy and 39th out of 50 in school funding equity. These rankings were reported recently by Education Week. The $74 million that was diverted by the tuition tax credit law (1998-2000) could have been used to provide better and more equitable funding to the state’s public schools.

EPSL’s analysis offers words of caution to other states where legislators are considering enacting or expanding tuition tax credit laws. “An open-ended, indeterminate program that diverts tax revenue away from the state treasury may not be prudent,” Wilson wrote, “especially in times of fiscal need.”

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