Even though supporters have long claimed that the Alabama Accountability Act was created to help kids, some of us have maintained that it was always more about tax breaks than education. Now with changes in Federal tax code, that contention is even more true as you see in this article in the Montgomery Advertiser.
The article points out:.
“With changes made by the federal tax overhaul, high-income taxpayers have been on a search for ways to make up the major decrease in deductions that can be claimed. The Alabama Accountability Act appears to be one answer.
Passed into law in 2013, legislators set a cap of $30 million, up from the $25 million for two years, that can be donated under the AAA. In 2017, the cap wasn’t hit until the last day of the year and in the previous years, the cap wasn’t hit at all.
But in 2018, that cap was hit by March 1, six times faster than the year before. Warren Callaway, executive director of Scholarships for Kids, one of the largest AAA scholarship providers serving Alabama, and Frank Miles of the Department of Revenue said this was because of the federal overhaul.
Ads promoting lucrative tax benefits of donating under the act have been circulated throughout the state, as well as in many of the 17 other states with similar tuition tax credit programs, said Carl Davis, research director of the Institute on Taxation and Economic Policy, a non-profit, non-partisan research organization.
For example, the Alabama Opportunity Scholarship Fund, one of the state’s seven Scholarship Granting Organizations, writes on its website’s donor page that with the new tax laws, “… news and research organizations as diverse as The New York Times, The Washington Post and the Tax Foundation point out that taxpayers now have even more incentive to donate to a qualified scholarship-granting organization such as the Alabama Opportunity Scholarship Fund.”
The particular change that is impacting these programs is the cap on state and local tax deductions, known as SALT deductions. Previously, there was no limit on the amount of SALT that taxpayers could claim as a federal tax deduction. With the overhaul, they now can claim just $10,000.
To make up for that loss, taxpayers are scrambling for other means to boost their deductions. With a donation to the AAA, taxpayers gain a dollar-for-dollar tax credit on their SALT, up to $50,000, and can then claim their donation as a federal tax deduction as well. The result is a tax cut greater than the actual donation.
“Accountants and private schools in Alabama and around the country have really embraced these tax credits as a federal tax shelter,” Davis said, adding that, “It is a savvy financial decision, but it has little to do with actual charity.”
Generally, he said, charitable deductions only offset part of the cost of donating. A high-income person making a $100 donation to a nonprofit might get $37 back on their federal forms and $5 back on their state forms and the other $58 would come out of the donor’s pocket. While under the AAA, a donor’s full donation is subtracted from his/her state income tax liability, leaving the state to “foot the bill in its entirety, in the form of reduced revenue collections.” And if the taxpayer receives a federal deduction as well, a $100 donation under the AAA can lead to more than $100 in tax cuts.
Based on Davis’ calculations, if nothing is changed, the “worst-case scenario” is that donations totaling $30 million under the AAA could trigger $41 million in combined state and federal tax cuts. This means that, rather than making a financial sacrifice, donors would walk away with an $11 million gain for themselves.
“Unless the IRS does something about this,” Davis said, “this is really just free money to anyone who has a high enough income and is getting good tax advice.”
As we say in Red Level, the cat is out of the bag.
Reporter Krista Johnson with the Montgomery Advertiser does a fine job with this article in pointing out some of the realities of the Alabama Accountability Act.
Initially touted as being all about “helping poor kids stuck in failing schools by their zip codes” Johnson points out that time has proven this is not the case at all.
She says: “Of the 4,132 children who received a scholarship in 2016 through the accountability act (the most recent data available), 983 were zoned to attend one of the state’s 76 failing schools, a rate of about 24 percent.”
However, it should be pointed out that though 983 are “zoned” for failing schools, this does not mean they were attending a failing school. A student may have attended a private school for years, but if they live in a neighborhood zoned for a failing school, they go in this category. So we have no way of knowing how many kids who were actually going to a failing school got scholarships. This is just another example of how little accountability is in the accountability act.
“…some education experts believe all schools using public funds should be required to abide by the same standards as public schools, but the 151 private schools qualified to serve students through the act aren’t.”
This flaw was highlighted several years ago when the University of Alabama tried to compare how well students going to private schools though AAA were performing. While the conclusion was that there was very little difference in performance in public and private schools, the researchers pointed out that since private schools use far more tests than public schools, any comparison is difficult.
“The money that goes toward the act would otherwise go toward Alabama’s Education Trust Fund. At more than $6 billion annually, some argue the $30 million in state income tax diverted away from the public school system by the act is insignificant, while others argue the act takes more than that from public schools.
“You’re talking about one half of 1 percent of the entire education budget,” Sen. Marsh said about the price of the act, which he says is “helping families that are trapped.”
Senator Del Marsh sponsored the bill in 2013 and has steadfastly defended it. His statement above is classic legislative double speak because he knows that the entire education budget includes monies for both K 12 and higher education–plus a LOT of other stuff. For instance the most recent education budget has $2.8 million in it for the legislature, $58.4 million for the commerce department, $6.9 million for examiners of public accounts, and on and on. So his one-half of one percent is not the real number..
“In Marsh’s opinion, the act is working well — with participating schools having a stricter performance expectation than public schools, he said.”
If there are facts to support this opinion, I have not seen them.. In fact, as this new study points out, private schools DO NOT outperform public schools.
“The act states that participating private schools need to be accredited or gain accreditation within three years of signing up to participate. Because of this, 57 schools were removed from the list in June due to failing to meet the accreditation deadline.”
As we pointed out in an earlier post, some of these schools had been allowed to participate in the program for five years without accreditation which undercuts the supposed concern some legislators express about school performance.
There is no doubt in my mind that AAA has been beneficial to some students. But at what price to the 730,000 students starting back to school right now? We have now diverted $147 million from the Education Trust Fund since 2013 for private school scholarships, That is enough to give every elementary classroom in Alabama an additional $9,000.
The most damning fact about AAA is that though it requires the state department of education to identify the bottom six percent of all schools as failing–it does not lift a finger to help any of them improve. In other words, we tell them how bad they are, then we turn our back on them.
Or put it another way, when it comes to children in Alabama, we do not believe in the Golden Rule.
There are now 57 fewer private schools on the list of those approved to get vouchers for student tuition through the Alabama Accountability Act because of a lack of accreditation. Ten of them had been unaccredited since joining the program in 2013.
Today schools have three years to become accredited. As of June 11, five unaccredited schools are still on the list of participating non-public schools compiled by the Alabama Department of Revenue. They have yet to meet the three-year deadline.
AL.com has an extensive article about what is taking place. Go here.
At present the state shows there are seven scholarship granting organizations (SGO) in Alabama. However, as of the March 31, 2018 quarterly report for each, only four had active scholarship students. The largest, with 1,639 scholarships, is Scholarships for Kids in Birmingham. Next, with 1,593 students, is Alabama Opportunity Scholarship Fund, also in Birmingham. Two others only had a total of 101 scholarships as of March 31.
According to AL.com, AOSF had 135 students at schools being dropped for lack of accreditation. A spokesman for Scholarships For Kids said they only had eight.
Irony: Within the last few months, Montgomery Mayor Todd Strange, interim state superintendent Ed Richardson and new state superintendent Eric Mackey have been very outspoken concerning the possibility of the Montgomery school system losing accreditation However, none of them expressed concern that six non-accredited Montgomery private schools had 54 students on scholarships being paid for by money diverted from the state’s Education Trust Fund.
So if public school students go to non-accredited schools it is bad. But that standard must not apply to private schools
Loving lists and rankings as we do, recently AL.com ran two articles showing the Alabama high schools with the best and worst ACT scores. See them here and here.
Did we learn anything we don’t already know? Nope. Once again we have a stark reminder that if you have good students who come from homes that value education and invest in their children, you get great school performance. It’s the lesson University of Alabama football coach Nick Saban has taught for years. He’s built the nation’s top college football program by consistently recruiting the best players in the country to his football team.
In the last 10 years, one national recruiting service says Saban had the No. One class seven out of ten years.
But the public, politicians and even some in the education community WILL NOT FACE REALITY. So the mayor of Montgomery says if we will just replace the local school board and bring in charter schools, everything will magically get better. Senate pro tem Del Marsh says if we will take money from public schools to give vouchers to private schools, our problems will go away. Even interim state superintendent Ed Richardson compared scores at Montgomery’s LAMP magnet high school to those at Lee high school to try to make a point by comparing apples and oranges.
The second highest ACT scores in Alabama came from Mountain Brook High school. They averaged 27.3. Why? As much as anything because 85 percent of the residents of Mountain Brook have either an undergraduate or graduate degree from college. On the other end of the spectrum, only ten high schools have a lower ACT average than Vigor in Mobile’s Prichard community. But only ten percent of Prichard citizens have one or more college degrees.
The best measure of understanding both school and student performance is poverty, more specifically, the percent of students who get free/reduced school lunches. Of the 1,051 students at Mountain Brook high, NONE get free/reduced lunches. Of the 622 Vigor students, 463 get free/reduced lunch.
When you run the numbers on the 20 top ACT high schools in comparison to the bottom, you see that the collective free-reduced rate for the top schools is 17.8 percent, compared to 73.1 percent at the other end of the spectrum. But we continue to ignore this 55 point gap and act like one size should fit all.
And speaking of ridiculous, let’s look at our old friends the Alabama Accountability Act and A-F school report cards in relation to the ranking of schools by ACT scores. Again, we find the info they churn out is totally worthless.
AAA requires that each year we declare the bottom six percent of all schools in the state are “failing.” Common sense then says that the 20 high schools with the worst ACT scores should all be failing. But what does AAA have to do with common sense? Of the bottom five, AAA says that only ONE of them is failing.
What about the A-F school report cards that claim we have 103 F schools in Alabama? Surely all the bottom 20 high schools must be an F. Well, not exactly, Only five of them are. On the other hand, all of the 20 top high schools must get an A. Again, not exactly. Only six of them got an A when scores were handed out last February. And according to A-F, Grissom high in Huntsville, which is only outranked by five schools in the state, is ranked a C.
As David Mathews points out in Is There A Public For Public Schools? we will only make significant education progress in some places when we understand that community building and education go hand-in-hand.
That is the real lesson of looking at rankings of ACT scores. Unfortunately, those who cry the loudest for education change don’t make the effort to understand what numbers tell us.
By and large the legislature passes laws and seldom looks back to see what impact they are having. Which seems a HUGE mistake to me. The Alabama Accountability Act passed in 2013 being a prime example.
So from time to time I visit the Alabama Department of Revenue web site where they post info about AAA. It’s always an interesting read.
For instance, you find a list current through Feb. 22, 2018 that shows there are now 204 private schools which have signed up to participate in this program that gives vouchers to students to attend private schools. (This does not mean 204 schools have gotten scholarships, just that many have said they would take them.)
The state indicates if these schools are accredited or not. Of the 204, 69 of them are NOT accredited. That’s 33.8 percent. AAA started in 2013 and 12 of the non-accredited schools have been that way since 2013. One has to ask why we allow this to happen? Why are we diverting money from the Education Trust Fund that may go to a school that has had five years to become accredited, but hasn’t? Is this really looking out for the best interest of the young folks of this state?
For instance, the Alabama Opportunity Scholarship Fund, one of the state’s scholarship granting organizations (SGO), reported that at the end of 2017, they had students at 114 private schools. By my count, 166 of these scholarships are at 27 non-accredited schools.
The Department of Revenue keeps track of how much money is given to SGOs each year. From 2013 through 2017, the total amount is $116,617,919.
Remember that each one of these dollars gets a one for one tax credit from the state. Which means we have now diverted $116 million from the Education Trust Fund for private school scholarships.
Today there are 396,711 elementary students (K-6) in Alabama. So over the past five years we have diverted $294 from ETF for each one of these students. That is $7,000 per elementary classroom.
I visit a lot of elementary schools. I see a lot of classrooms. I don’t know a single elementary teacher who would not have jumped at the chance to have an extra $7,000 for her classroom since 2013.
In this legislative election year, we need to let every candidate, incumbents and challengers alike, know what is going on.
After months and months of preparation the grand finale of Alabama public high school football kicks off this weekend with the first round of playoff games. By Saturday night (Nov. 11), 208 teams will have played 104 games.
And the 2017 football team will be over for 104 teams. Cheerleaders will store away pom poms, band uniforms go to the cleaner a final time and tales about touchdowns and fumbles and caught passes will become memories in young minds.
(Interestingly enough, some private schools choose to play in a public school league, whereas some do not.)
Of the 208 schools competing this weekend under the auspices of the Alabama High School Athletic Association, 21 of them are private. There is one in the largest classification, 7A; none in 6A; two in 5A; six in 4A; six in 3A; three in 2A; and three in1A.
Since the Alabama Accountability Act began providing vouchers for private school scholarships in 2013, many have wondered if there are instances where scholarships are being used to boost athletic programs.
The most recent quarterly reports (July -August-September 2017) for the five active Scholarship Granting Organizations have just been posted on the Alabama Department of Revenue web site.
These show that there are now 3,458 students across the state on scholarship. Of these, 967 went to students “zoned” to attend a “failing school.” (Remember this does not mean these students had previously attended a failing school, they were just zoned to attend one. They may have well been enrolled in a private school for several years.)
Now back to football. Of the 21 privates schools competing in the public school playoff, only 11 of them have received scholarships. (Four of them do not participate in the AAA program, and six that do have no scholarships.)
This means 11 schools competing this weekend have students on scholarships, a total of 362. Of these, 147 went to students “zoned” for failing schools. It is noteworthy that 307 of these scholarships went to only five schools. The sole private school competing in 7A got 125 scholarships. One competing in 4A got 48 and one in 3A got 45. One school in 2A got 40 and one in 1A got 49.
Unfortunately there is no way to determine how many scholarships went to athletes, or more specifically football players.
And once again we realize how little “accountability” there is in the Alabama Accountability Act.