••• Education •••

Myths and truths about tax credit scholarship programs

The only true school choice program in Kansas is the tax credit scholarship program. Kansas is one of 21 states across the nation that has adopted this method of giving families and students educational choice options. As in all school choice options, there is much misunderstanding and many myths about a tax credit scholarship program. What follows is an explanation of tax credit scholarship programs in general and those specific to Kansas.

Truth – how tax credit scholarship programs work.

In general, individuals and/or businesses contribute money to a scholarship granting organization (SGO) as an IRS-designated 501c3 organization. The SGO then grants scholarships for students who meet eligibility requirements to attend private school. In turn, those who contribute the money get a tax credit against their state income tax liability.

In Kansas, tax credit contributions can be up to $500,000 per individual/business, with an annual statewide cap of $10 million. The tax credit given to the contributor is 70% of the contribution. The average scholarship is just over $4,600, with a scholarship cap of $8,000.

The program was initiated in 2014, expanded to more eligible taxpayers in 2017, and now makes any K-8 student who qualifies for free- or reduced-price lunch eligible to receive a scholarship. This last round of changes was made in the 2021 legislative session. There are some basic requirements on the SGO to ensure proper accounting, the schools themselves, and smaller requirements on student eligibility.

Myth – tax credit scholarship programs take money from state coffers.

It is a commonly incorrect belief that tax credit scholarship programs take money away from the state. The truth is the dollars that fund tax credit scholarship programs are never in possession of the state. In Kansas, the tax credit scholarship is but one of over 40 income tax credit programs, according to the Kansas Department of Revenue.

Myth – tax credit scholarship programs are unconstitutional because they give taxpayer dollars to religious schools.

That is another commonly held falsehood. First of all, tax credit scholarship programs have passed constitutional muster. In 2021, the U.S Supreme Court upheld Arizona’s program on the basis that the money used to fund the program is not state money. Justice Anthony Kennedy wrote that those opposing the program “assume that income should be treated as if it were government property even if it has not come into the tax collector’s hands. That premise finds no basis in standing jurisprudence. Private bank accounts cannot be equated with the Arizona State Treasury.” Since the programs are funded with private dollars, opponents haven’t a legal leg to stand on.

Truth – tax credit scholarship programs can be used for a variety of educational purposes.

Since the programs are privately funded and are creations of state governments, tax credit scholarship programs are generally targeted toward special populations. Many states have programs directed at special needs students. In Kansas, as in several other states, eligibility is based on income thresholds.

Myth – tax credit scholarship programs create a financial hardship for the public schools.

According to EdChoice, maximum funding for the Kansas program amounts to a mere 0.15% of total K-12 spending.

Truth – the Kansas tax credit scholarship program provides a quality alternative for Kansas families.

The program has grown exponentially since it was launched in 2015. In the 2021-22 school year 1,067 students received scholarships. The scholarships amounted to more than $3.5 million. Recipients were enrolled in 80 private schools.