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Losing Credit

How tax-credit scholarships use public dollars to pad the coffers of private schools, all in the name of diversity.

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The new school year is in full swing. Inevitably the excitement of the first few weeks gives way to the daily routine of classes. And as in years past, many young Richmonders are taking those classes in underperforming public schools.

Meanwhile, families with sufficient means can send their children to private institutions to take advantage of superior instruction, facilities and educational opportunities.

In what ostensibly was an effort to bridge the gap between these two drastically different school landscapes, the General Assembly passed legislation this year creating a tax credit scholarship program. The law allows individuals and corporations to donate to nonprofit scholarship organizations and receive 65 percent of the donation as a credit against their state taxes. The scholarship organizations, in turn, are charged with distributing the funds to private schools as scholarships for eligible students.

The scholarships allow some public-school students the chance to switch to private schools, which, in theory, would give them a shot at a better education, save taxpayers money and improve public schools through free-market competition. The house bill even had bipartisan sponsorship. As one sponsor asked in a Richmond Times-Dispatch editorial, "What's not to like?"

It turns out, there are — potentially — several things not to like. Similar laws in other states have proved controversial and open to abuse.

To begin with, it's no coincidence that other states have tax credit scholarship laws very much like Virginia's. That's because the American Legislative Exchange Council provided model legislation to serve as the basis for such programs.

The council, sometimes known by the acronym ALEC, is a corporate-backed printing press for conservative legislative blueprints used in statehouses across the country. The group lobbies for stringent voter identification and stand-your-ground gun laws, among other measures. Backlash over the Trayvon Martin case — George Zimmerman defended killing Martin as a right under the Florida's shoot-first law, supported by the council — led to an exodus of corporate sponsors, including Kraft, Pepsi and Wal-Mart. Suffice it to say the council isn't generally noted for championing community-friendly causes.

As with any initiative, it's worth taking a look at who stands to benefit financially from the new law. Beyond private schools themselves, the scholarship organizations probably have the greatest financial stake in the new program. Virginia's law stipulates that the groups must disburse at least 90 percent of donations as scholarships, reserving only 10 percent for administrative costs. Yet, a study of Georgia's tax credit program by the Southern Education Foundation shows that, despite a 90-percent disbursement requirement identical to Virginia's, the four scholarship organizations for which records were available in 2009 distributed only 39 percent of the tax revenues they received as scholarships.

Additionally, the funds that were distributed as scholarships didn't all end up helping public-school students transfer to private schools as initially advertised. Because of the language of Georgia's law requiring only that scholarship recipients enroll in public schools rather than attend public schools, families were able to exploit the program by enrolling their children in public schools to gain scholarship eligibility with no intention of having them attend.

According to a video transcript in the Southern Education Foundation report, one of the Georgia law's sponsors acknowledged that the eligibility language was "deliberately put in there" to allow children already enrolled in private schools to claim the scholarships, a loophole that contradicts the premise of providing choice to students in struggling public schools.

The eligibility language in Virginia's law, that students must be "enrolled in … public schools for the year prior to receiving a scholarship" seems to suggest that students must actually attend public schools for a year to receive a scholarship, but is still unsettlingly similar to Georgia's law in its use of enroll rather than attend.

What's more, Virginia's law permits pupils "eligible to enter kindergarten or first grade" or who were "not a resident of Virginia during the preceding school year" to claim the scholarships. This means children who never planned to attend public schools are eligible.

A broader complaint was voiced by residents in Arizona, who claimed that the state's scholarship program was unconstitutional because it provides government funds to religious institutions. After the taxpayers filed suit, the case eventually made it to the U.S. Supreme Court, which found that taxpayers didn't have a right to challenge the law because the complaint related to tax credits rather than government spending. So, in a sense, the scholarship organizations are laundering tax money to make payments to religious schools constitutionally permissible.

Not everyone sees the credits as a bad thing. An admissions officer at a local private school tells me that the scholarships could be a valuable tool in their efforts to increase diversity, something that's been particularly difficult in this economic climate.

But whatever potential the law has as a positive force, it's clear from the experiences of other states that proper transparency and oversight are needed to make sure it serves its stated end of educational improvement.

Furthermore, it's essential that introducing tax credit scholarships is part of a sincere conversation about improvement, and not abandonment, of Richmond's lowest-performing schools. S

Brent Merritt is a local writer who works in marketing.

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Opinions expressed on the Back Page are those of the writer and not necessarily those of Style Weekly.

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