Program Overview:
Pennsylvania has two tuition tax credit programs: the Opportunity Scholarship Tax Credit (OSTC) and Educational Improvement Tax Credit (EITC) Together they provide $125 million for vouchers.
The EITC program was created in 2001 and provides a tax credit to corporations who donate to Scholarship Organizations (SOs) that provide private school vouchers for low-income students. It also provides funding for pre-K and “Educational Improvement Organizations.”
The OSTC program was created in 2012 and provides a tax credit to corporations who donate to SOs that provide private school vouchers to low-income students living in “low-achieving” school zones.
Seventy-six percent of the funds for the OSTC and EITC go to religious schools. In 2014-2015 religious schools received $95 million through the program. These schools are not required to meet the same (or any) accreditation requirements or curriculum standards as public schools.
The state allows the SOs to keep up to 20% of the donations for their overhead.
Main Findings:
Rural areas have little to no access to the programs:
In 2016-17, 40 counties did not have a single OSTC “scholarship organization” (non-profit intermediary that receives and disburses for vouchers contributions from businesses who receive tax credits). Thirty counties have no scholarship organization (SO) linked with the EITC program.
The EITC and OSTC programs lack accountability:
“Schools that receive EITC and OSTC scholarships are not required to report on student’s progress or to provide other information documenting school quality. In fact, state legislation prohibits the Department of Community and Economic Development from asking for information on achievement of EITC voucher students.”
Neither the EITC nor the OSTC programs require students using "scholarships" to take any tests to measure academic achievement.
The programs do not provide data on the socio-economic, racial, or ethnic characteristics of voucher recipients, making comparisons between similarly-situated students impossible.
The state does not collect information on how the money is being spent by the private schools or the SOs. And, although SOs are required to file form 990s, a 2011 investigation found that many SOs failed to file the form 990s or if they did, provided insufficient information.
The EITC and OSTC programs profit the wealthy:
“Pennsylvania allows scholarship organizations to keep up to 20% of the funding that they receive, compared to only 3% in a similar program in Florida. In Arizona, which allows SOs to keep 10% of the funding, extraordinary examples of personal enrichment have been documented, including by a legislative leader who draws $125,000 annually as Executive Director of an SO and owns businesses paid over two-thirds of a million dollars by that same SO in 2014. Does that happen in Pennsylvania? We don’t know.”
Corporate donors can “triple dip” by receiving a state tax credit, a state tax deduction, and a federal tax deduction, allowing them to get back more in tax breaks than they provide in contributions – essentially allowing corporations to turn a profit.