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May 1st, 2018

Tax Credit Scholarship Program – The Facts

First of all, we want to thank each of you for your commitment to Christian Education and the emphasis you place on your students first. We realize the sacrifices the administration, office staff, teacher aides, and teachers make to provide a strong academic learning environment that is centered on Truth and spreading the Good News.

Over the last several weeks, we have all seen what is happening in our public schools across the state. Overall, we agree that teachers are underpaid in this state, and we pray this will be rectified quickly. We also recognize that personnel at Christian schools in this state are further underpaid by at least 10-20% compared to the teacher in the public school system. Again, we thank you from the bottom of our hearts for pouring into your students’ lives and having an impact that has an eternal value!

Over the last week, ACSTO has seen the attacks in news publications and on social media that suggest scholarship tax credits somehow have contributed to issues relating to public education funding in Arizona. This is a false narrative that the opponents of school choice want people to believe.

The truth is that scholarship tax credits help public school funding. The average cost to taxpayers for district and charter public school students is about $9,500 per year from all sources (state general fund, federal funds, local property taxes).  This information comes from the 6/26/2017 Joint Legislative Budget Committee report, “Overview of K-12 Per Pupil Funding for School Districts and Charter Schools.

According to the most recent Arizona Department of Revenue (ADOR), School Tuition Organization Tax Credits in Arizona Summary of Activity: FY 2015/2016 report, the following information was derived:

  • 352 Private Schools receive tax credit scholarships
  • The Average Original Tax Credit Scholarship – $1,724.00
  • The Average Overflow Tax Credit Scholarship – $1,360.00
  • The Average Low-Income Tax Credit Scholarship – $2,165.00
  • The Average Disabled/Displaced Tax Credit Scholarship – $4,696.00

The average scholarship from individual and corporate scholarship tax credit sources is roughly $2,500 per student. Corporate source funded scholarships are slightly above the average and individual funded ones slightly below.

As you can see, the average scholarship ($2,500) is far less than what the public/charter schools receive ($9,500) on a per student basis in funding, this is savings to the tax payer at the expense of parents with children in private schools. If all of the students enrolled in Private schools were to enroll in the public school system it would cost the State of Arizona more than half a billion dollars to educate these children. There would not be enough schools, classrooms, teachers, or resources available. For each child enrolled in a private school, the state of Arizona and School Districts are saving money. There are at least 50,000 students enrolled in private schools, which is a very conservative estimate.

According to the ADOR FY 2015 and FY 2017 Annual Reports, the following information about tax payers and tax credits was obtained for FY 2015, which is the most recent information available:

  • 2015: 3,227,067 Individual Tax Filers
  • 92,554 contributed to the Individual Tax Credit program (3% of all tax payers)
  • Of the 92,554, 41,532 also contributed to the Overflow Tax Credit program (2% of all tax payers)
  • 168,752 contributed to the Public School Tax Credit Program (6% of all tax payers)

There is an erroneous belief by some that the STO program takes money from the general fund. The truth is that the U.S. Supreme Court ruled in ACSTO v Winn that the donations made to STOs are private funds, not state funds, which means that the money never belonged to the state in the first place.

The bottom line is that scholarship tax credits are a benefit to the state budget. They are part of the solution – not part of any funding problem.

Please let us know if you have questions and we will continue to provide you with as much information as possible that you can share with your supporters, staff, and families.