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Article published: Feb 21, 2005
Tuition bill more about taxes than education

The bill known as Put Parents in Charge has been in a House committee for more than a month, but it's not in the education committee; it's in the ways and means committee.

"This is a revenue bill more than an education bill," said state Rep. Gene Pinson, R-Greenwood, who asked to have his name removed as a sponsor.

Advocacy groups are fighting vociferously over the bill, which creates tax credits for private school tuition and allows for the creation of scholarship-granting organizations.

Tax credits are dollar-for-dollar reductions in the amount of tax owed. Currently, the credit could be up to 80 percent of the state's per pupil expenditures, although Speaker Pro Tem Doug Smith, R-Spartanburg, the bill's sponsor, said plans are in the works to change the credit to 51 percent of per pupil expenditures, which would better track the average cost of private schools.

Most private schools cost about $3,300 to $3,800, he said. Wilson Hall's average tuition is $4,000.

The per pupil expenditure would only take into account state spending, not local or federal spending on education.

Because the credit is nonrefundable, parents can't take more of a credit than the amount of taxes they owe. If they owe $1,000 in taxes, they could only take a $1,000 credit, even if they paid more in tuition.
More than 68 percent of state income tax returns in 2002 had tax liabilities of $1,000 or less, with 31 percent having no tax liability at all.

Parents can only take the credit if they have $75,000 or less in taxable income.

Taxable income is the money that's taxed after deductions are subtracted.

Parents whose children qualify for free or reduced lunches could take a credit for the entire per pupil expenditure.

State Rep. Ronald Townsend, R-Anderson, the chair of the House education and public works committee, supports the idea of tax credits for parents of students enrolled in private schools. But he has questions about the impact of the scholarship granting organizations on the state's bottom line.

There are no dollar limits on how much credit people or corporations can claim for donating to scholarship granting organizations, he said, so corporations could wipe out their state tax liability by giving money to such an organization.
Townsend asked how the state will make up for those lost revenues, which fund everything from law enforcement to public health agencies.

The tax credits won't affect other agencies at all, Smith said. The scholarship-granting organizations can only keep 5 percent of the money for administrative purposes and must give away the rest of it in the form of scholarships within a 12- to 15-month period after they receive the money. If they don't, they have to give the money to the state.

The goal is to encourage those who can afford it to donate money to the scholarship-granting organizations, Smith said.

Townsend and Smith have different interpretations on who would be eligible to receive those scholarships. Smith said only children whose parents have less than $75,000 in taxable income would be eligible, but Townsend doesn't see any such requirement in the bill.

Townsend also questions why the bill has a $75,000 taxable income ceiling. Other states have set the ceiling much lower, he said, at about $35,000. In 2002, 95 percent of the state income tax returns had taxable incomes of $75,000 or less.

Although the bill is being pushed as a way to help low-income children, Townsend said he's "not sure that's an accurate statement."
Pinson is also suspicious of the scholarship-granting organizations.

"There's money to be made in this ball game," he said.

The scholarship-granting organizations are going to be a moneymaker for somebody, he said, but he hasn't yet figured out who.

"There's just so many unanswered questions on this whole bill," he said.

Support for the bill is eroding quickly, said state Rep. Murrell Smith, R-Sumter. Although many legislators support the concept of tax credits for tuition, many are developing serious reservations about this particular bill, he said.

State Rep. David Weeks, D-Sumter, said he's talked to supporters visiting the Statehouse and many don't completely understand the bill.

"It sounds good, 'Put Parents in Charge,' it's got a nice ring to it," he said.

But people don't understand the income limits or the fact that the credits are phased in over five years. Children who are already in private schools won't be immediately eligible for the credits or scholarships.

"A lot of folk are under the impression they're going to get money," Weeks said.

Since the bill is waiting in line behind the budget, it will be several weeks before the committee looks at it, and it could change quite a bit in form, Weeks said.

Despite the growing concern in the Statehouse about the implications of this bill, Weeks said, it could prompt legislators to look at developing school choice inside the public school system.

"As long as the funding stays within the public school system, I think we can be creative," Weeks said.

Contact Staff Writer Leslie Cantu at lesliec@theitem.com or 803-774-1250.