Knowing there is always more than one way to skin a cat, some Alabama legislators are always looking for new ways to sneak more money away from public schools.
This time it was by allowing taxpayers to use tuition to private schools as a tax break, thus taking more money away from the Education Trust Fund.
Fortunately this effort failed, thanks in large measure to hard work by the non-profit Alabama Arise and their strong lobbying effort. (Several education groups also jointed in this battle, but not all. And that is a story for another time.)
Here is what Arise said about their effort:
Arise members just helped save millions of dollars a year for Alabama’s public schools! A few weeks ago, we sounded the alarm about HB 251, sponsored by Rep. Ken Johnson, R-Moulton. At that time, the bill included language that would have allowed Alabamians to use education savings accounts known as 529 plans to receive a state income tax break on money used for K-12 private school tuition.
Hundreds of Arise members sprang into action. They flooded the Senate with emails and phone calls opposing this misguided plan to turn 529 plans – originally designed to encourage long-term college savings – into vehicles to subsidize private schools at the expense of public education.
This proposal had been speeding toward enactment – but Arise members helped stop it in its tracks. This week, the Senate amended HB 251 to remove the provisions that would have created a tax break for private school tuition. The House agreed to that change Thursday and sent the bill to Gov. Kay Ivey – without the language that would have cost the Education Trust Fund millions of dollars a year.
This win for public schools across our state couldn’t have happened without our members. It was proof once again that when everyday folks speak up together for what’s right, we can get results. Thank you so much to all of you who helped defeat this proposal, and to all of you who continue to support Arise’s work to build a better Alabama for all.
Unfortunately, the news was not so good for taxpayers and educators in Arkansas as you see below:
Last week in special session, the Legislature speedily approved changes to Arkansas law to grant a tax break to people who send their children to private school, proving that they care more about their fanatical devotion to “free market” education than to their constitutionally mandated duty to “ever maintain a general, suitable, and efficient system of free public schools” (Arkansas Constitution, emphasis added).
The private school need not meet any standards. You may send your kids to one of the prestigious Little Rock academies where, they say, 100% of their graduates go on to college, or you may send them to a small church school in rural Arkansas with 11 students and not one certified teacher, or any of the range of possibilities in between.
These schools may not have student diversity, offer a challenging curriculum, boast highly qualified teachers, provide enrichment or extracurricular activities, or serve special needs children. Despite this roundabout subsidy from the state, these schools are not required to take or pass any tests, provide adequate facilities, or show student progress. Under the new law if you send your children to a private school, good or bad, you will be eligible to write off up to $10,000 of income for each child, potentially saving yourself $2,000-$3,000 in taxes.
How did this happen? Arkansas lawmakers were aligning Arkansas tax code to recent changes in the federal tax code with respect to so-called 529 Savings Plans.
These 529 Savings Plans were created in 1996 as an incentive for people to save for their children’s college education. As created, an individual could set up an account and put as much as $14,000 a year in it tax-free, with no penalty unless the money was withdrawn early or for some purpose other than the beneficiary’s qualified post-secondary education. The idea was that over an 18-year period, a family could save up enough for college at most four-year institutions.
However, as part of the Trump administration’s drive to elevate “school choice” and the “free-market competition” model for education, in the January 2018 tax code overhaul 529 plans were given a new purpose and much broader scope.
Now instead of being a college savings instrument, 529 plans can be a means of funneling K-12 private school tuition costs through an account that makes them tax-free. Where before an early withdrawal meant paying income tax and penalties on the deposits, now the funds can be deposited and withdrawn after only 30 days (or sooner if allowed by the three-person regulating committee), with the deposited amount–up to $10,000–being deducted from the account holder’s adjusted gross income, therefore, non-taxable.
The 529 bill (or Act 8 of the Second Extraordinary Session of the 91st General Assembly), being purely a tax break for families that send their children to private schools, is not by any means as pernicious as the hard-fought SB746 from last year’s regular legislative session, which ultimately failed. That bill set up tax-free “education savings accounts” that were eligible for use in K-12 private schools, virtual schools, and home schooling. It even included extra incentives for moving students from public schools to private schools. Some lawmakers have vowed to bring this bill back in the 2019 session, making Act 8 just the “foot in the door” to eventually achieving a full-out voucher system.
So why are the new 529 accounts bad for Arkansas and what do they say about the Arkansas Legislature?
1. While not qualifying as a true voucher program, the director of advancement of a prestigious private school admits that “it’s an option that mostly affects affluent families.” It’s not a benefit that would be available to the nearly 24% of Arkansas children who are below poverty level.
2. It is expected to cost more than $5 million in state revenue in just the first year, in addition to setting up additional bureaucracy to run the program.
3. They turn what has been a savings program into what looks like a glorified money laundering scheme to create large chunks of tax-free income for wealthy families.
4. They promote and validate unregulated private-school choices that may not be serving children well. Some legislators never met a “choice” they didn’t like except the state’s highly regulated and accountable public education system.
5. The Legislature has money to give tax breaks for private school tuition but none for additional pre-K slots, teacher raises or affordable health care for teachers, or full funding for the special education catastrophic fund. They have established and generously added to charter school facilities funding while the public school facilities fund is woefully underfunded, even though public schools are held to a high standard that makes building new facilities very expensive.
Thanks again to Alabama Arise for their hard work.