Bill addresses problems with tuition tax credits - East Valley Tribune: Opinion

Bill addresses problems with tuition tax credits

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Posted: Saturday, February 27, 2010 3:22 pm | Updated: 3:26 am, Sat Oct 8, 2011.

Rep. Rick Murphy: What often gets lost in all of the rhetoric of the administrative side of school tuition organizations (STOs) is that at its core, these programs benefits kids — kids whose needs go beyond our public education system, kids whose parents choose the right school with the right fit so that their children will learn and flourish.

Last fall, I had the privilege of chairing a special Arizona House or Representatives committee organized to review the state’s individual scholarship tax credit program. We conducted three public meetings, all of which were designed to assess the fiscal and educational impacts of the program and the efficiencies of administrative processes of school tuition organizations, or STOs.

In December 2009, we completed our analysis of the program, and with bipartisan support, the committee adopted a list of 22 recommendations that we feel will dramatically improve the program. HB2664, as passed by the House Ways and Means Committee, represents all of the committee’s recommendations.

Rep. Rick Murphy

When the committee began its work in the fall, there were several published reports critical of the tax credit program. The main criticisms centered on a lack of accountability and transparency. What the critics failed to mention is that in the 1990s, Arizona was a trailblazer in the area of school choice, and it is not surprising that other states have improved on what we started. In fact, it would be surprising if there was nothing to fix after 10-plus years.

HB2664 includes significant statutory modifications intended to strengthen reporting and auditing requirements of the STOs. For example, HB2664 requires that all STOs with revenues of more than $1 million conduct an annual financial and compliance audit that must be submitted to the Arizona Department of Revenue. STOs with revenues of less than $1 million must also conduct a financial review for submittal to the Department of Revenue. In conjunction with added enforcement authority to the Department of Revenue, these new requirements will add a much deeper level of transparency to the program.

Additionally, the published reports asserted that the majority of award scholarships were made to wealthy families with no financial need. In order to gauge the policies and practices of STOs statewide, the committee conducted a survey to which 96 percent of all STOs responded. The survey results contradicted published reports — 90 percent of the STOs consider financial need when awarding scholarships. The STOs further reported that two-thirds of all scholarship dollars are awarded to children whose families would qualify as “low income” as measured by the federal free and reduced-price lunch program. This ratio is based on the incomplete data now available. Once the additional information required by HB2664 is collected, that ratio will increase.

Finally, the committee addressed the issues of “swapping” and “earmarking” through clear and precise prohibitions of both practices. The strong and decisive language of the committee’s recommendation clearly demonstrated the members’ opinions that these practices are not to be tolerated by administrators of the tax credit program. In fact, the language in the bill requires STOs to publish notice to that effect on their Web sites and any printed material.

What often gets lost in all of the rhetoric of the administrative side of this program is that at its core, this program benefits kids — kids whose needs go beyond our public education system, kids whose parents choose the right school with the right fit so that their children will learn and flourish. In our first committee hearing, we heard from parents who told us that without the tax credit program, their children would have floundered. I’m happy that we were able to address these much-needed reforms, but I am extremely proud to support a program that gives parents the tools necessary to ensure their children are healthy, happy and prosperous.

Rick Murphy is the chairman of the House Private School Tax Credit Review Committee.

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