A Scholarship Tax Credit Program for Colorado
IP-2-2013 (February 2013)
Author: Ben DeGrow
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Executive Summary
Scholarship tax credits increase the opportunity for K-12 students to access non-public educational options. Such a tax code modification increases the incentive for persons and businesses to contribute funds to qualified non-profit scholarship granting organizations. In turn, the organizations use most of the incoming funds to assist low- and middle-income families with private school tuition expenses.
Currently, 11 states operate a total of 14 different scholarship tax credit programs. No two programs are alike, with different criteria for student eligibility, scholarship sizes, limits on the size or value of tax credits, and requirements for scholarship organizations. Though research has been limited, strong evidence exists that such programs yield academic and competitive benefits, generate a positive fiscal impact on the state, and improve parental satisfaction. No scholarship tax credit program has been overturned by a state or federal court.
Colorado has a great need to adopt a scholarship tax credit program. Important measures of achievement and attainment, especially among disadvantaged groups, continue to lag below expectations. Even the highest-performing schools do not serve every student well. Parents should be empowered to choose different educational settings that serve their children’s needs.
By harnessing the power of voluntary contributions, a scholarship tax credit program could open the doors of learning opportunity for thousands of Colorado students with no negative fiscal impact on the State. A model program would provide dollar-for-dollar tax credits to persons and businesses that contribute to qualified non-profit organizations that provide scholarships for K-12 non-public school tuition, as follows:
- All children from families with incomes at or below 300 percent of federal poverty level should be eligible for a scholarship
- To promote cost savings, scholarship eligibility during the program’s first three years also should be limited to students previously enrolled in public school, incoming kindergarteners, and students already receiving a privately-funded scholarship
- The maximum scholarship amount should be set at 50 percent of state average Per Pupil Revenue for K-8 students and 60 percent of PPR for high school students
- The program should operate without a total annual program cap
- The program should limit credits for individual contributions to 50 percent of the taxpayer’s liability
- Participating non-profit organizations must abide by basic financial accountability standards and must disburse at least 90 percent of their funds as scholarships, though the General Assembly also could consider a relaxed standard for startup organizations
Colorado policymakers should give careful consideration to providing many of the state’s families an important benefit through the adoption of scholarship tax credits.
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[...] The report recommends a host of ideas for positive changes in urban high schools. Many of them are worthy options. But I’d also like to request a new state-level policy that would help give greater hope for success to a number of students trapped in tough school environments. I’m talking about a scholarship tax credit program for Colorado. [...]
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