Panel refuses to limit who gets scholarships for private schools

PHOENIX -- A House panel refused Monday to limit who can get scholarships for private and parochial schools that are paid for with money that otherwise would go to the state.
On a party-line vote, Republicans who control the Ways and Means Committee said they see no reason to limit these scholarships to families that meet certain income criteria. Rep. Rick Murphy, R-Glendale, said the Legislature should not be deciding who benefits and who does not.
And the panel also refused to preclude parents who send their children to these schools from getting their friends and relatives to make donations to scholarship organizations with a "recommendation'' that the cash to go to a specific child. More to the point, the organizations that get the cash are free to honor that recommendation.
Both issues are significant because it isn't a simple matter of people giving away their own money.
Under the law first approved in 1997, donors get a dollar-for-dollar credit on their state income taxes for what they provide to the scholarship organizations. That means every dollar that goes to sending a youngster to a private or parochial school is one less dollar going into the state treasury.
There are a lot of dollars involved: In the most recent tax year, Arizonans diverted more than $55 million.
While defeating the two changes offered by Rep. Tom Chabin, D-Flagstaff, the panel actually agreed to expand the law to allow donors to get an even larger credit. Under HB 2664 individuals would be permitted to reduce their state taxes by $750 each year, up from $500; the figure for couples filing jointly is double.
Chabin said all these changes will do is take money away from public schools and increase the size of the state deficit. But Murphy said there is "plenty of data'' to show that the reverse is true.
He said that $55 million diverted in tax credits is far less than what it costs to educate a child in public schools. Murphy said that if scholarships help students move from a public school to a private school, that actually saves money for the state.
Chabin, however, said that assumes all of the youngsters in those private and parochial schools would otherwise be in public schools.
"Very wealthy people who would send their children to private schools, no matter what, are getting the benefit of tax credits,'' he said. Chabin said the law -- and in particular the lack of any cap on the income of recipient families -- simply allows them to defray some of what they would pay on Arizona taxpayers.
That also goes to the issue of the "recommendations.''
The legislation bars scholarship organizations from awarding funds based solely on recommendations of donors. And the organizations can't facilitate or encourage parents, who cannot get tax credits for their own youngsters, to instead "swap'' credits with parents of other youngsters.
But they remain free to honor those requests. Chabin said that's wrong, saying there is no reason that donors should be able to even suggest who should get the funding.
He proposed making recommendations illegal, a move he said would ensure that scholarships are awarded based on need.
"I think that's excessive,'' Murphy responded.
Rep. Debbie Lesko, R-Glendale, agreed that income restrictions and prohibitions against the consideration of recommendations are both unnecessary and go counter to the real intent of the scholarships.
"I totally believe that they give parents another choice in education,'' she said.
The legislation, which now goes to the full House, does make some changes in the law designed to provide greater oversight of the whole scholarship system.
That includes a requirement for the organizations to detail how many of the scholarships awarded go to families whose income is below 185 percent of what qualifies students under federal regulations for free or reduced-price lunches. That is the standard Chabin unsuccessfully tried to make part of the legislation.
That translates out to about $63,000 a year for a family of three.
Chabin said there is precedent for what he proposed. He pointed out that a similar tax credit available to corporations requires the money donated by them to go to those who meet that income requirement. And it also bars corporations from making recommendations.
Murphy said, though, the will of the majority is that there be no such limits on individual income tax credits.