Why students benefit when scholarship organizations serve all schools

The resistance to a proposed requirement that state-approved nonprofits provide scholarships to students attending any eligible private school has taken on an unusual fervor in Georgia. Some highly respected national education reformers recently described it as both a “threat to a growing and successful type of educational choice” and “contrary to our nation’s founding ideals.” One even called it “the nuclear option.”

In Florida, we welcome it as part of the law.

Florida’s Tax Credit Scholarship, now in its 14th year, stipulates that scholarship organizations “must allow an eligible student to attend any eligible private school and must allow a parent to transfer a scholarship during a school year to any other eligible private school of the parent’s choice.” The intent is obvious. It gives low-income parents an easier shopping experience among the 1,600 participating schools and a smoother path to the one that best meets their children’s needs. After all, one of the program’s core principles is to empower parents.

This is not to argue that the serve-all-schools approach is the only possibility, but the Florida experience certainly belies the apocalyptic claims of opponents in Georgia. The scholarship this year serves 78,154 students with tax-credited contributions totaling $447.3 million. As such, it’s nearly 10 times the size of the Georgia scholarship and is often viewed as a national model. No nuclear fallout so far.

To be sure, the programs in Georgia and Florida differ in a key respect. Georgia allows individuals to make contributions against their income taxes. Florida, which has no individual income tax, extends scholarship tax credits only to corporations. That difference explains why many successful scholarship groups in Georgia have organized around schools and churches. Those community ties and membership lists allow scholarship organizations to bundle lots of small individual contributions.

Not surprisingly, some of those organizations are built around clusters of faith-based schools that are tied together by a common religion or even by secular schools with a common educational philosophy. As such, a state law requiring organizations to grant a scholarship to any eligible student for any eligible school might put a Catholic group in the position of funding scholarships to schools of different faiths or no faith at all.

That kind of imposition should not be taken lightly, but to view it as an unacceptable infringement on the mission of a nonprofit (or a violation of “freedom of conscience”) is to distort a basic reality here. Like Georgia GOAL and my employer Step Up For Students — the largest scholarship organizations in their respective states — most scholarship organizations were created specifically to carry out state tax credit scholarship laws. Those laws specifically define the educational objectives of the program and the processes that state-approved scholarship organizations must follow to legally receive 100 percent tax-credited contributions. No nonprofit is coerced into participating.

Objections to requirements that scholarship organizations serve all schools are based largely on free market and libertarian theory, except the focus seems to be on the wrong market. For those who view choice and competition as stimulants to educational progress, the key market interaction is between families and schools.

The scholarship organizations are merely an instrument of funding and administration. In fact, economist Milton Friedman’s vision of a dynamic education marketplace was premised on the government handing out the money to any child to use at any school. Scholarship organizations played no role. In the absence of a pure Friedman-esque system in which families have a total choice in where to send their children, scholarship funding organizations help channel private donations to families who might not otherwise be able to afford private school tuition. This gives them choices they might not otherwise have.

Resistance to a serve-all-schools requirement may undermine this goal. In Georgia, these kinds of arguments are contributing to a political stalemate that has left the tax credit cap frozen at $58 million for five years straight and limited options for families. What’s more, in the past three years, hundreds of students, and possibly more, have lost scholarships because their own scholarship organization ran out of money, and others refused to serve them at the schools they were attending.

Given the annual attrition rates for scholarship enrollment, no existing student should lose a scholarship even if the funding is flat. If all parents could be assured of receiving scholarships that meet their children’s needs, regardless of which organizations fund them, they might find greater stability and continuity of educational choice.

What makes this debate so disconcerting is that it mostly represents a showdown between and among 32 scholarship operators in Georgia, and the emotion seems entirely too caught up in concerns about protecting market share. It has even led factions to fight an additional scholarship program, fueled by corporate contributions, that would draw from some of the lessons in Florida and create more opportunities for disadvantaged children. Corporate contributions, which as essential for the long-term growth of the scholarship, are currently being squeezed out because individual contributors are able to meet the deadlines faster. So why oppose a separate program for company contributions? How could more options harm children?

These scholarships are about educational opportunity, which is reason enough for scholarship organizations to always put children’s needs first.

School Choice, Tax Credit Scholarships