Taxes go straight to private schools

Gov. Rauner's 'tax credit scholarship' program allows millions in state revenue to be diverted to Catholic schools and other private institutions

 Gov. Bruce Rauner signed the "tax credit scholarship" program as part of a new state law radically altering the state's education funding formula. (One Illinois/Ted Cox)

Gov. Bruce Rauner signed the "tax credit scholarship" program as part of a new state law radically altering the state's education funding formula. (One Illinois/Ted Cox)

By Ted Cox

A new state program is getting around laws banning public money from going to religious schools and has already diverted $31.5 million in taxpayer funds to so-called scholarships, according to a story run last week by Chicago Public Radio.

Longtime education reporter Linda Lutton ran a story on "12 Things We Should Have Known About Illinois's New Private School Scholarships" on WBEZ 91.5-FM stating that the state's new "tax credit scholarship" program — adopted a year ago as a compromise to get Gov. Bruce Rauner to sign a bill radically altering the state's education funding formula — is providing "neo-vouchers" to students at Catholic schools and other private institutions.

"This is something the public really isn't aware of and doesn't understand because of the way it was done," said Kathi Griffin, president of the Illinois Education Association.

After Gov. Bruce Rauner vetoed an original change in the state education funding formula a year ago, and the state House failed to override it, legislators passed a new bill with the tax credit scholarship attached at the 11th hour. According to Griffin, it was "tagged to a school-funding bill at the last minute and was not transparent at all. It did not allow the public to have any comment on it."

Rauner immediately embraced it, as did Chicago Cardinal Blase Cupich, and Rauner signed it into law.

The program set a budget of $100 million — up to $75 million in tax credits, awarded at 75 percent of the scholarship amount — and, as the school year starts, it has already diverted $31.5 million in tax revenue from state coffers, according to the story's findings.

The IEA thinks that money would be better spent elsewhere.

"Any time you have anything that takes money away from public schools, it's something we're going to oppose," Griffin said.

She pointed out that, even with last year's change in the education funding formula, Illinois is not meeting its constitutional obligation to be the "primary" funder by contributing more than 50 percent of school budgets.

"We're not meeting that, and yet we're putting in a program that's taking away money when we're not supporting public schools across the state as we should," Griffin added.

Any time you have anything that takes money away from public schools, it’s something we’re going to oppose.
— IEA President Kathi Griffin

According to Lutton, the program gets around laws banning public investment in religious schools by never actually collecting the money. Instead, the scholarships are considered tax credits. In contrast to tax deductions, which reduce the amount of an individual's taxable income, tax credits count against an individual's actual taxes owed. Instead, that money is being sent directly to private schools, capped at a maximum of $1 million a person.

The effect is so akin to controversial school vouchers that the scholarships are being called "neo-vouchers," according to Lutton, who also finds that many go not to new students but those who've already been enrolled.

"It is definitely a backdoor way of allowing vouchers," Griffin said.

The program was touted as a way to benefit low-income students, but according to Lutton and Griffin there is little to document that.

"This was being promoted under the umbrella of how it's going to help low-income kids," Griffin said. "Well, if you're a rich person, are you going to donate to a low-income poverty school? Or are they going to finance the Wilmettes of the world that have private schools?

"Are these vouchers going to go to low-income kids, or are they going to be given to kids that are already at those parochial schools?" Griffin added. "Right now, there's no way for us to even know what student is getting these scholarships. Are they really being used with the intent the General Assembly thought they were going to be used?"

Lutton found that at some Catholic schools the scholarships weren't going to new students, but to students already enrolled. She also determined that 28 percent of scholarships were going to students who do not qualify as low-income.

Rauner's office did not respond to a request for comment.

Yet Empower Illinois, a statewide agency created last year to administer the scholarships and already the largest in the program, took issue with those charges. Spokeswoman Cassie Lipin said Lutton used a methodology looking at students who qualified for free or reduced-price lunch. Lipin said there are students who don't qualify for that, but whose families still qualify for public-assistance programs like food stamps.

"These are not wealthy families," Lipin said. "The fact is that Illinois’s program prioritizes low-income students. Empower Illinois’s scholarship recipients’ median family income is $30,000 and the median family size is four. That’s 122 percent of the federal poverty level."

She added that "while donors can get a $1 million tax credit, the median donation to Empower Illinois is $3,000, which is far from the donation amount of the millionaires and billionaires that opponents of the program classify as its donor base."

It should be noted, however, that "median" is not "average." It means half of the donations are below $3,000, half above — a handful quite a bit above, according to Lutton, who reported that "eight wealthy Illinois taxpayers have made donations of at least $1 million," and "their contributions make up 24 percent of the program funds."

According to Lutton, 18 states allow tax credit scholarships, but Illinois launched with an unusually large four-year pilot program. Up to 5,600 Illinois students will attend private school thanks at least in part to the scholarships, while the maximum personal scholarship of just under $13,000 is "the most generous scholarship amount in the country."

Lipin, however, countered that there are elements written into the law to temper excesses. "While Illinois’s 75 percent credit puts it in the middle of the pack among tax credit scholarship programs nationwide, its prohibition on donors taking federal deductions actually decreases the power of the tax credit," she said. "When taking this into account, Illinois’s program is closer to the bottom of the pack when it comes to the power of its credit."

Griffin, for one, wasn't buying it.

"It's just wrong," she said. "This is a program that takes from the poor and gives to the rich. It's kind of like a reverse Robin Hood.

"We have to continue to work on that funding for all of our kids," she added, "not just a select few."