Kids Face Loss Of Millions In Scholarship Money Under “Education Governor”

Under current Pennsylvania law, it is solely the responsibility of the Department of Community and Economic Development (DCED) to release Educational Improvement Tax Credits (EITC) and the Opportunity Scholarship Tax Credits (OSTC) to the approved business applicants. The Commonwealth of Pennsylvania is currently withholding $150 million in credits, threatening the future of schools and programs that serve our most vulnerable student populations.

The governor’s Department of Community and Economic Development, which administers the programs, insists it has no legal authority to release the money during a budget impasse. A member of the House Appropriations Committee, Jim Christiana (R-Beaver), calls the Department’s rationale a “complete lie.”

“Not administering the programs by not authorizing the credits is like saying people don’t have to pay taxes because we don’t have a budget,” Christiana said. “The programs don’t go out of existence because we don’t have a budget.”

Rep. Cris Dush (R-Indiana), a strong proponent of the tax credit programs, says they work because “the money is targeted where businesses know it will be effective.” 

The successes of the programs, and the callousness of the governor’s political expediency, are measured by the looming consequences of doing without them. One official with the Philadelphia Archdiocese predicted they would have to close some schools because without the scholarship money, a majority of families of the students simply won’t be able to afford to attend.

In Pittsburgh, the Diocese raises approximately $3 million a year through the EITC program and $2 million a year through the OSTC program, said Ronald Bowes, assistant superintendent for public policy and development for the Pittsburgh Diocese. Bowes added that it’s unlikely the students would be able pay their tuition without the scholarships. “Some of these kids are very, very poor,” Bowes told the Pittsburgh Post-Gazette.

The trouble is the money doesn’t lapse into next year. The kids will be left empty handed when businesses close their books for the year.

What’s more, Christiana, Dush, and Rep. Seth Grove (R-York) noted recently that the administration has had no trouble authorizing the spending of $30 billion of state and federal tax dollars on hundreds of other programs during the budget impasse. This is money spent with no legislative authority and little transparency.  Only $4 billion of expenses have been reported on PennWATCH, Pennsylvania’s online portal to information regarding state expenditures and revenue.

The three lawmakers managed to dig up some of the unreported spending through the state’s open records law.

This is some of what they found:

• $1,275 paid by the Department of Health to a catering company;

• $600,000 for subscriptions to publications for state agencies;

• $500,000 in membership dues for Wolf administration employees;

• Millions of dollars for legal services fees, information technology expenses, advertising and travel expenses.

But nothing for EITC/OSTC.

“These education tax credit programs are outside of the General Fund and therefore are not part of Governor Wolf’s state government shutdown,” said PMA President David N. Taylor. “Pennsylvania’s EITC/OSTC programs are best-in-the-nation models that have enjoyed bipartisan support over multiple administrations. Governor Wolf and DCED have taken these scholarships hostage, endangering the students, families, schools, and education improvement organizations that depend on them. Even worse, by refusing to allow donors to apply their credits, the administration is delegitimizing EITC/OSTC and making it less likely employers will participate in the future.” 

The EITC began in 2002 with a $30 million appropriation, and with the addition of the OSTC in 2012 under Governor Tom Corbett, the programs grew to $150 million. Through the EITC businesses have contributed $983.5 million and under OSTC $106.8 million. (For a full accounting of the programs see the tables below.) Given the breadth and success of both programs, few wonder both programs have won the support of lawmakers from both parties and from rural and urban areas.

The refusal to release EITC/OSTC funds could cause ongoing, irreparable harm to tens of thousands of business entities and individuals. In the near future, businesses may find themselves unable to make contributions during their current tax year should the granting of the current credits be unlawfully delayed. Scholarship organizations and educational improvement organizations that depend upon a timely and predictable cycle of tax-credited contributions may find themselves unable to meet the expectations of disadvantaged students – effectively shutting them out of the programs they need most.

The money for EITC/OSTC will be released if a budget is approved, according to Wolf’s Secretary of Policy and Planning, John Hanger, who briefed business leaders at the PMA headquarters this week. However, this artificial crisis must be brought to an immediate close. These funds are not a part of the budget battle being waged in Harrisburg. We urge Governor Wolf to act swiftly in releasing EITC/OSTC funds.

EITC:

  • $983.5 mil contributed by businesses since 2001
  • Business applications approved since 2001: 32,410
  • Scholarship organizations: FY 14/15 = 273
  • Pre-kindergarten scholarship organizations: FY 14/15 = 195
  • Educational improvement organizations: FY 14/15 = 821
  • Scholarships awarded since 2001: over 450,000 (does not include 14/15 school year scholarships)
  • ~40,000 scholarships are awarded each year
  • 67 counties participate
  • Household annual income cannot exceed $75,000 plus $15,000 for each dependent member of the household. 

OSTC:

  • $106.8 million contributed by businesses  
  • Business applications approved since 2013: 2,000  
  • Opportunity scholarship organizations: FY 14/15 = 185
  • Scholarships awarded: 8,916 (does not include 14/15 school year scholarships)
  • 36 counties participate
  • Students living within the attendance boundaries of a low-achieving school, as determined by the Pennsylvania Department of Education, are eligible to receive a scholarship if their household’s annual income is no greater than $75,000 plus $15,000 for each dependent member of the household.  
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