Catholic schools look to tax credits to save them

Catholic schools look to tax credits to save them

As close to 2 million Catholic school students prepare to return to class in the coming weeks, leaders of some cash-strapped systems are hoping for a Hail Mary: That lawmakers will adopt or expand tax credit scholarship programs that they say will stem the tide of school closings, but which

As close to 2 million Catholic school students prepare to return to class in the coming weeks, leaders of some cash-strapped systems are hoping for a Hail Mary: That lawmakers will adopt or expand tax credit scholarship programs that they say will stem the tide of school closings, but which critics contend give tax breaks to the wealthy while diverting funds from public schools.

Specific programs vary in details, but generally, this is how they work: Individuals and companies donate to approved scholarship programs. When they do their taxes, they can deduct a portion of that donation from their tax bill. The scholarships are awarded to students to cover tuition and related costs at independent, non-public schools.

Tax credits are more valuable than traditional tax-deductible donations; the donations lower the amount of money a business or individual pays taxes on, whereas tax credits reduce the amount of taxes owed. One proposal in New York would allow donors to deduct $1 million from their tax bill in exchange for a $1.3 million dollar donation to a private scholarship organization.

But while Catholic schools in some states have been benefiting from a tax credit scholarship program for more than a decade, others are having a difficult time convincing lawmakers to get on board.

In New York, Catholic leaders teamed up with Democratic Gov. Andrew Cuomo to push for a tax credit scholarship program earlier this year.

In that proposal, businesses and individuals are eligible for a credit of 75 cents per dollar donated, up to $1 million per year. The program is capped at $150 million statewide, meaning that once that number is reached, individuals and businesses can still donate to scholarship programs, but will not receive a tax credit. In addition, families earning less than $60,000 annually would receive a tax credit of $500 per child in order to offset private school tuition.

James Cultratra, the director for education at the New York State Catholic Conference, the lobbying arm of the Catholic Church in that state pushing for the program, said the issue comes down to fairness for parents.

“For an increasing number of families, the pressure to sustain both taxes for public schools and tuition for the education of their own children is unsustainable, and without some assistance from lawmakers, more and more families will be forced to enroll their children in public schools at a far greater cost to taxpayers,” he said.

He estimates that the 480,000 students enrolled in nonpublic schools in New York – just less than half of whom are in Catholic schools – saves New York taxpayers billions of dollars each year.

But public school teacher unions disagree, and say that the program is simply a tax break for the wealthiest New Yorkers.

“This tax credit is just another scheme to reward billionaires,” Michael Mulgrew, president of the United Federation of Teachers, said in a June statement. “It gives them the power to send money to their favorite private schools and takes a big chunk out of their tax bill. At the same time, it drains money from public schools.”

The Archdiocese of New York has closed 50 Catholic schools in the last five years alone, and has said another two dozen could be on the chopping block due to rising personnel costs.

Cultrara said the tax credit scholarship program could “stop the hemorrhaging, stop the bleeding,” and rejected claims that the program diverts taxpayer money from public schools.

“It’s not taxpayer money, it’s private money. It’s an incentive for people to give a portion of their dollars they would otherwise give to the state in taxes, but redirect it to either a private school or scholarship organization,” he said.

Despite intense lobbying from Cuomo and other backers of the program, it failed to win support in the State Assembly. But New York’s Cardinal Timothy Dolan said in a statement the fight isn’t over yet.

“We are disappointed that, once again, we have come up short, but we will redouble our efforts next year to make this common-sense bill become law. We remain ever more committed to the principle of parental choice in education,” he said.

Enrollment in US Catholic schools peaked in the 1960s with more than 5 million students, and in the last 20 years, more than 1,500 Catholic schools have shuttered. Supporters say that without an infusion of funds – either in the form of vouchers or tax credit scholarship programs – the very future of Catholic education in this country is at risk.

Tax credit scholarship programs aren’t new, and 13 states currently have some version of the program on the books, according to the National Conference of State Legislatures, though the amount the states set aside to fund the programs vary widely. Florida’s program, created in 2001, is set to increase its cap to more than a half a billion dollars next year, while Nevada’s, created earlier this year, is capped at $5 million.

Church leaders estimate that Catholic schools save taxpayers about $20 billion per year by keeping students out of public schools even as their parents pay all or most of their tax bill, a portion of which supports public education. And proponents say the programs avoid the tricky question of church/state separation that often accompanies voucher programs, since the money is never in state coffers to begin with.

Courts seem to agree.

Courts in both North Carolina and Florida ruled earlier this summer that the programs in their respective states were constitutional, and the New Hampshire Supreme Court said the same last year.

But Randi Weingarten, president of the American Federation of Teachers, called the programs “backdoor voucher schemes that have no evidence of improving education.”

Plus, she continued, “as we just saw in the New York battle, the tax credits proposed by Gov. Cuomo were a giveaway to wealthy individuals or corporations who already had a tax deduction for their donations to subsidize private or religious schools. These tax credits can add up to hundreds of millions of dollars a year, which should fund proven programs in public schools that lawmakers profess they can’t afford.”

But with the election of some governors who support so-called right-to-work laws, some Catholic advocates see an opening for programs in their states.

In Illinois, for example, recently elected Gov. Bruce Rauner has made education reform a top priority, and as he locks horns with teacher unions, Catholic leaders continue their years-long push for a tax credit scholarship program.

The Archdiocese of Chicago announced last fall that seven Catholic schools wouldn’t reopen this year, and it sees an infusion of scholarship money as one way to offset rising costs.

The proposal in Illinois would fully reimburse donors, with a statewide cap of $200 million. Like in New York, the proposal includes a provision for donations to public schools, as well, and would double the $500 tax credit families receive for education purposes.

The Catholic Conference of Illinois is part of a coalition pushing the proposal, but it is unlikely to be taken up by lawmakers this year.

In states where tax credit scholarship programs currently exist, Catholic leaders say that they’ve proven to work and help families afford tuition.

Pennsylvania launched a program in 2001 that allowed some businesses to receive up to $200,000 in tax credits annually for donations to scholarship programs, with a state cap of $100 million dollars. In 2012, a similar program aimed at underperforming public school districts was launched, with a state cap of $50 million.

“A very good number of students attend our Catholic schools today because the Educational Improvement Tax Credit gives their family the opportunity to do that,” said Amy Hill, communications director for the Pennsylvania Catholic Conference. “I don’t think there’s a single Catholic school in Pennsylvania that doesn’t have a few to a whole lot of students who benefit from that program.”

In 2012, facing steep declines in enrollment, close to 50 Catholic schools were shuttered in the Archdiocese of Philadelphia, however.

The Catholic Conference is pushing lawmakers to expand both programs, increasing the caps to $170 million and $80 million, in order to meet the demands of businesses that wish to donate, Hill said.

“The tax credits are scooped up early and more businesses want to take advantage of it. We’re putting our full force behind” expanding them, she said.

If Illinois and New York join the ranks of Pennsylvania, Florida, and New Hampshire remains to be seen, but advocates say the best bet lies in targeted campaigns with sympathetic lawmakers.

Sister Dale McDonald, director of public policy for the Arlington, Virginia-based National Catholic Educational Association, said members have more luck in State Houses than ballot boxes.

“If it goes to a ballot, it’s hard much harder to get something than if it goes through the legislative process. There’s too much well-funded opposition,” she said.

She said that without an infusion of money, such as from tax credit scholarship programs, Catholic schools risk straying from their missions.

“It’s becoming increasingly more difficult for those with a modest- to low-income to afford Catholic education,” she said. “Without some kind of support for parents, we would become an elitist school system. That’s really the writing on the wall.”

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