Fierce Debate over Proposed Tuition Tax Credits in South Carolina

For the second year in a row, South Carolina governor Mark Sanford has introduced his “Put Parents in Charge” bill, which would establish a state system of tuition tax credits for parents who send their children to private or parochial schools, or home-school them. The tax credit, which proponents insist is very different from a voucher system because it does not take money directly from public school coffers, has generated fierce opposition from South Carolina’s education community, as well as the National PTA, National School Boards Association, and others who challenge that claim. These groups assert that voucher and tuition tax credit programs strip resources from schools, hamper accountability, and help middle-class students while hurting the low-income students whose schools most need reform. Many observers note that South Carolina is being watched closely by advocates and opponents of tuition tax credits across the country, and predict that the outcome of the battle in South Carolina may have national implications.

The Proposal

The tax credit plan, as outlined by Governor Sanford, would give taxpayers a dollar-for-dollar credit on private and parochial school tuition costs for up to approximately 80% of total costs, or no more than about $3,500 per student. Families earning up to $75,000 of taxable income per year would be eligible for the tax credit. Families with incomes too low to garner the tax break would be eligible for tuition scholarships from Scholarship Granting Organizations, which would receive tax credits for their contributions to student tuition. Individuals could also receive tax credits for contributing to these organizations.

Because the maximum tax credit is only half of the average per-pupil expenditure in public schools in the state of South Carolina, advocates claim that there would be a net gain for public schools, which would continue to receive the other half of that per-pupil grant without the responsibility or costs of educating that student. However, opponents of the proposal have strenuously argued that such reasoning misrepresents the actual cost to schools of the plan.

The Opposition

Education activists have long criticized tuition tax credits, vouchers, and other efforts to divert school funds out of the public school system. Numerous studies have debunked the notion that switching to private and parochial schools markedly improves the performance of students that leave the public schools. Additionally, a plan such as South Carolina’s, which would allow private and parochial schools to reject applicants, would discriminate against the Limited English Proficient and low-income students who most need the additional resources that are being funneled into these “school choice” programs. The National PTA has quoted prominent education advocate, and CEO and chairman of IBM, Lou Gerstner as saying,

It’s either very naïve, or enormously risky, to think we can abandon the public school system, and replace it with some alternative…The objective is not to build a few special schools or help a few, or even a few thousand, selected children. To help all the children—and that must be our objective—we have to begin with a commitment to fix our problem, not wire around it.

Education organizations such as the South Carolina School Boards Association (SCSBA), the South Carolina Association of School Administrators (SCASA), and the South Carolina Education Association (SCEA) have launched a vigorous campaign to debunk the claims of tuition tax credit supporters. While a report released by the South Carolina Policy Council (SCPC) was responsible for many of the claims that the tax credit would actually save schools money, an analysis commissioned from an economic consulting firm by the SCSBA and the SCASA has found those numbers to be scientifically dubious, and questioned the SCPC researcher’s methodology. Their analysis finds that schools are far more likely to lose money under the tax credit plan, primarily because the vast majority of education funds go to teacher salaries and benefits, costs that are certainly not reduced by one or two pupils leaving each classroom. The report also notes that addressing per-pupil funding using a statewide average neglects those property-poor districts that are disproportionately dependent on state funding, and would thus suffer substantial losses from a tuition tax credit plan.

Further opposition to this proposal comes from The State, a leading South Carolina newspaper based in Columbia that has printed a series of opinion articles, entitled “Our Children, Our Schools,” that pointedly denounces the plan and its proponents. The State has criticized the governor, lawmakers, and South Carolinians for Responsible Government (SCRG), an organization funded mostly by out-of-state supporters that appears to be the most vocal proponent of the “Put Parents in Charge” Act. The paper further defends South Carolina’s public schools from the unrelenting criticism of choice proponents, noting remarkable reforms that have taken place and the need to adequately fund those schools before penalizing them with a school choice plan. The paper has also noted that the tax credit would not come directly from the education budget, but from the state’s general fund, which would likely lead to cuts in numerous other government services upon reduction of income tax revenue.

Arguments made against the tuition tax credit proposal have garnered great attention, and in fact inspired the legislature to amend the bill in an effort to reduce the impact on public school budgets. However, in doing so the per-pupil credit became smaller, further prejudicing the tuition credit against low-income students.

The Big Picture

Tuition tax credit proposals have been floated in states such as Missouri and Utah, and each proposal has met with furious debate. In Utah a study of the fiscal impact of the tax credit plan was initially touted by school choice advocates, only to be seriously discredited by opponents who questioned its accuracy and scientific rigor. Despite vocal opposition, South Carolina has been the most significant target for national school-choice energy and money, as the state is considered a “test case” for the larger debate on tuition tax credits.

The majority of South Carolina’s poor, black students live in rural areas without private or parochial school options available. They also attend grossly underfunded schools. The state’s inadequate and inequitable school funding formula, which systematically denies these children a decent education, has been the subject of the Abbeville v. State school funding lawsuit. The trial recently concluded, and the trial court’s ruling is expected in June. Education advocates point to the reforms that might emerge from this lawsuit as the type of progress needed to truly improve South Carolina’s schools for all its students.

Prepared by Nelly Ward, March 14, 2005