Tax-credit scholarships could ease school funding burden

Gov. Chris Christie has proposed freezing $475 million in education spending to help shrink New Jersey’s $2.2 billion budget deficit, focusing on school districts with budget surpluses. (“Deep budget cuts carry economic risk for N.J.,” Feb. 14.) This plan raises concerns about punishing fiscally responsible school districts. It also raises the specter of higher local property taxes when New Jersey can least afford it.

More of the county’s millionaires once called the Garden State home, but times have changed. The state turned a $98 billion net influx of household wealth into a $70 billion net outflow over the past decade, according to a new Boston College study. But adopting a policy embraced by two states favored by New Jersey’s well-heeled tax refugees could help families of all socioeconomic backgrounds.

A tax-credit scholarship program could achieve even better savings in a more fiscally responsible way, while expanding education options for families and introducing competitive pressure for all New Jersey schools to improve, benefiting students now and years from now.

New Jersey’s public school system receives nearly one out of every four dollars the state spends — more than Medicaid and more than higher education, public assistance, corrections, and transportation combined. At nearly $17,000 per student, New Jersey is also a grade-A public-school spender.

For all that money, a majority of New Jersey fourth- and eighth-graders are not proficient in reading or math on the National Assessment of Educational Progress, also known as the Nation’s Report Card. But even this disturbing average doesn’t tell the whole story.

Only around one in five low-income New Jersey students is proficient in math and reading. Alarming numbers of students who are not poor (whose family incomes make them ineligible for the federal national school lunch program) are also not proficient in the basics. Fully, 51 percent of non-poor New Jersey students are not proficient in reading, while 42 percent of non-poor students are not proficient in math. Ratcheting up spending likely won’t improve matters much, either.

Over the past decade, New Jersey’s per-student spending growth has outpaced enrollment growth by about 3-to-1, with spending increasing almost 33 percent in real, inflation-adjusted terms compared to an 11 percent increase in student enrollment. Such poor productivity is unsustainable, and now is the time to adopt a tax-credit scholarship program.

The program would let taxpayers claim a credit against their state income taxes for charitable contributions to nonprofit scholarship-granting organizations. This reform is garnering growing bipartisan support in New Jersey and nationwide. Nine programs in seven states allow individuals and businesses to make such tax-deductible contributions. Those states include Florida and Pennsylvania, which are experiencing an influx of New Jersey transplants.

As of the 2006-07 school year, the estimated savings to budgets in five states with six operational tax-credit scholarship programs exceeded $250 million combined. Those savings could be even higher by eliminating contribution caps, student eligibility limits and donor restrictions. If New Jersey adopted such a tax-credit scholarship program, a $500 million savings could be achieved with only 3 percent of public-school students using scholarships worth $5,000 to attend private schools.

Under this scenario, there would be an upfront revenue loss, as with any tax credit, of $215 million. This would be more than offset if New Jersey students could use $5,000 tax-credit scholarships — more than three times less than what the state spends to educate them in public schools — to attend private schools instead. Not having to educate 3.1 percent of students in public schools would save the state nearly $722 million, for a net annual savings of more than $506 million.

Scholarship amounts could be pro-rated according to family income and size and still generate ongoing savings without punishing fiscally responsible New Jersey school districts or taxpayers struggling to make ends meet.

Vicki E. Murray is the Women for School Choice project director at the Independent Women’s Forum in Washington and associate director of Education Studies at the Pacific Research Institute in Sacramento, Calif.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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