One problem with hiding a bill before voting on it, as the Legislature did with the school Accountability Act on Thursday night, is that lawmakers receive limited input on the effect of the bill. In the case of House Bill 84, the result could devastate the already beleaguered Education Trust Fund.
The bill, which will become law Tuesday if Gov. Robert Bentley signs it, creates a two-tier system of tax-funded schools. In addition to public schools, it adds a second tier of private schools that receive tax dollars. The law provides an expansive definition of a “failing” school — about 202 in the state meet the definition, including dozens in north Alabama — and allows students in those schools to transfer to a private or religious school. The private school would receive about $3,500 a year for each student it attracts from a failing school.
The bill also creates a scholarship fund that would make payments to private schools to the extent their tuition and fees exceed $3,500. The scholarship fund has a $25 million cap. It probably will meet the cap, because individuals receive a 100 percent income-tax credit for contributions of up to $7,500. All of the funding in the act comes from the Educational Trust Fund, which is the sole revenue source for public schools and a major funding source for public colleges and universities.
The bill has the potential to devastate the ETF, which has yet to return to pre-recession revenue levels.
The most obvious hit comes from the $25 million scholarship fund. If set up differently, it might be difficult to find people willing to contribute money to a scholarship fund for private schools. The 100-percent tax credit on contributions, however, makes it an excellent tax-avoidance tool. Corporations that contribute will get a tax credit of 50 cents on the dollar.
Every dollar that goes into the scholarship fund comes out of the ETF.
Not all of the $25 million in scholarship funds benefits the students. An unlimited number of not-for-profit entities can distribute the scholarship money, and they get to keep $1.25 million in administrative fees.
The bill places no limit on the tuition charged by the private school. Effectively, therefore, the ETF scholarship could be financing students’ tuition at elite schools charging $20,000 a year. Unlike the public schools with which they will compete, the private schools can borrow money or operate at a loss until they have attracted all the students they want.
A portion of the ETF-funded scholarships must go to students whose families are at 200 percent or less of poverty level, but the portion is tied to the percentage of low-income students in the county, not the failing school’s zone or district. “Eligible student” is at one point defined as only including students from households at 150 percent of median income. If scholarships are limited to “eligible students,” they would be available to households making up to $65,000 a year. On its face, however, the bill does not limit most scholarships to “eligible students.”
Indeed, 25 percent of the $25 million in tax-funded scholarship money can go to families who already are enrolled in a private school.
Even if students currently enrolled in a private school fail to snag a scholarship, they still will get to apply the $3,500 tax credit to their tuition. They become eligible for the credit if they live in a failing school’s zone, even if they have never attended the school. Neither lawmakers nor the state Board of Education have any figures on how many students, already enrolled in private schools, will benefit from a $3,500 ETF voucher to offset tuition.
The law requires the failing public school to provide expensive services for disabled students, even if those students transfer to a private school with their ETF voucher.
Because the vouchers are in the form of tax credits, poor families who do not receive a scholarship will have a significant hurdle in attending private schools. They will not receive the credit, which can include a rebate if their tax liability is less than $3,500, until long after their tuition bill is due at the private school.
Students can use their $3,500 vouchers at parochial schools and, with some limitations, at private schools that do not have accreditation. Private schools that accept ETF-funded scholarship money for tuition that exceeds $3,500 are barred from discriminating against students based on race and other factors, but the law imposes no such restrictions on schools that limit themselves to the ETF-funded vouchers.
No one knows how much the program will cost. The state Department of Education, which did not see the bill until just before it passed, had no idea Friday how many schools are “failing” as defined by the bill. The governor and other lawmakers had widely varying estimates.
The best estimate appeared to be from the office of Senate Pro Tem Del Marsh, which listed 202 failing Alabama schools. Neither Marsh’s office nor the Education Department could provide enrollment numbers for the 202 schools, and until they can there is no way to estimate ETF’s exposure. If enrollment in the schools averages 300 — a wild guess — the ETF could lose up to $215 million a year on the voucher program alone, plus another $25 million for the scholarship program and an unknown amount for vouchers distributed to students assigned to failing schools but already enrolled in private schools.
Discerning the intent of HB84 is impossible because there was no public debate before it passed. If the intent was to harm Alabama’s public schools — both those that are failing and those that are not — it is a brilliant piece of legislation.
Eric Fleischauer can be reached at email@example.com or 256-340-2435.