Viewpoint & Quick Facts on HB 808 - Scholarships for Children in Failing Urban School Districts

Last school year over 42 percent of the students who started public high school in the City of St. Louis failed to graduate. In that same school year (2005-2006) nearly one quarter of the students who started public high school in Kansas City failed to graduate. In one grade level after another students in these districts tested poorly on statewide assessments. Neither district is fully accredited by the state of Missouri.

The Missouri State School Board has decided that things have deteriorated so badly in St. Louis that a special committee will now oversee the City’s school board. The Commissioner of Education, Dr. Kent King, told the St. Louis Post-Dispatch recently that “Considering all of the circumstances in this school district – declining academic performance, precarious finances, constant turmoil in the leadership, and the negative findings of the special advisory committee that we named – I think it is time for the state to take action.”

At a recent public hearing, public school representatives assured committee members that new plans were being developed to improve the academic performance in City of St. Louis and Kansas City. But school parents testified that they could not wait four or five years for promised public school reform. They talked about the lack of discipline in the schools, sixth graders being handcuffed and eighth graders who could not read. One parent, observing how so many drop out and end up in prison, said “You don’t need to read to shoot a pistol.”

These parents are calling attention to a fundamental principle: every child should have the opportunity to obtain a quality education. This is a matter of social justice. To accept substandard education for the poor is to accept growing inequality where wealth and power are increasingly held in the hands of the few at the expense of the many.

HB 808 would offer scholarships so families could choose another public school or a private school for their child. Critics argue this will only help those children who obtain scholarships, but this thinking is shortsighted. Faced with competition from school choice programs, public schools perform better. For example, Harvard University economist Caroline Hoxby examined the school choice program in Milwaukee, Wisconsin and found that fourth grade student achievement improved the most where public schools faced more competition from school choice programs. (The Institute for the Transformation of Learning at Marquette University has prepared a review of school choice research. Visit: www.itlmuonline.com/_incoming/ITLSCSurvey2005.pdf.)

By now it must be clear that money alone will not solve the problems in our urban areas. Public investment is needed but it must be used in a new and creative manner. Just pouring taxpayer money into the same system and expecting a different result is a definition of madness. And all Missouri taxpayers pay for this madness. According to one recent study, in 2005 high school dropouts – and there a lot of them in the City of St. Louis and Kansas City - cost the state of Missouri 71 million dollars, or about $4,000 per dropout annually. High school dropouts are twice as likely to be incarcerated as high school graduates. High school dropouts are also more likely to access social services which are financed by state tax dollars. (See “The High Cost of Failing to Reform Public Education in Missouri” at http://www.friedmanfoundation.org/MO_web.pdf).

Faced with these facts, many point to the wider social and economic problems plaguing urban cores and argue that you can’t blame the public schools alone Obviously, there is truth in this statement. Three out of ten St. Louis students are homeless at some point each school year. A recent report named St. Louis the nation’s most dangerous city. Education inevitably suffers in this environment. Children fearing for their safety are not too concerned about their multiplication tables. Two years ago the legislature slashed Medicaid health coverage for working parents. How sick mothers are to help their children with their homework was not considered. All of this is true, but it does not follow that we should give up on educating children in these areas.

What is needed is a comprehensive strategy to eradicate poverty in our urban cores. Both parental choice programs and public school reform must be a part of this effort. So, too, must be policies creating greater access to health care and other essential services. Rather than pitting public schools against parental choice programs, we should use whatever tools will work as we seek to fix the educational crisis facing school families in urban areas. Every day we delay another child’s hope for an education is lost.

Quick Facts on HB 808

HB 808, sponsored by State Representative Carl Bearden (R-St. Charles), establishes the “Betty L. Thompson Scholarship Program” to offer K-12 scholarships to students from low-income families residing in the City of St. Louis and Kansas City public school districts for attendance at qualified schools, which may include public schools outside these two public school districts or nonpublic schools meeting certain requirements. The legislation authorizes taxpayers to claim tax credits for contributions to “educational assistance organizations” that offer the scholarships. Tax credits may also be claimed for contributions to “public school foundations” that secure donations to benefit public schools.

ALLOWABLE TAX CREDITS:

Taxpayers – both individuals and businesses – can claim a state income tax credit in an amount equal to 65 percent of the amount the taxpayer contributed during the tax year to an educational assistance organization or a public school foundation. No taxpayer can claim a credit on behalf of their dependent and, in the case of a business, on behalf of the business’s agent’s dependent. Any amount of the taxpayer’s contribution subtracted from federal adjusted gross income shall be added back in determining Missouri adjusted gross income (this is to prevent the taxpayer from claiming both the state income tax credit and a federal tax deduction for the same contribution). The cumulative amount of tax credits that may claimed by all taxpayers in a single year is 40 million dollars.

ALLOCATION OF TAX CREDIT REVENUES:

The director of the Missouri Department of Economic Development is required to ensure that funds generated through the tax credit program established pursuant to HB 808 are allocated as follows:

• At least 80 percent for educational assistance organizations to provide scholarships to eligible students to cover all or part of the tuition and fees at a qualified school and that at least 15 percent of the recipients are students receiving special educational services with an individualized education plan;

• No more than 20 percent for public school foundations to be used to benefit public schools.

ADMINISTERED BY DEPARTMENT OF ECONOMIC DEVELOPMENT:

The Missouri Department of Economic Develop is to administer the tax credit program established pursuant to HB 808. The department must certify educational assistance organizations and public school foundations and then provide oversight of these organizations. The department may conduct a financial review or audit when there is evidence that fraud has been committed. The department may bar an educational assistance organization or public school foundation from participating if the department establishes intentional or substantial failure to comply with the requirements of the program.

SCHOLARSHIPS FOR URBAN POOR:

Eligible Students:

To be eligible for a scholarship a student must meet these criteria:

• Be a member of a household whose parents’ total annual income in the year before an educational scholarship is received is no more than 135 percent of the level that would qualify the student for a reduced price lunch under the National School Lunch program (for a family of four, income may not exceed $49,950);

• Have a GPA of 2.5 or lower on a 4 point scale;

• Was eligible to attend a public school in the semester before an educational scholarship is received, or is starting school in this state for the first time; and,

• Reside in the City of St. Louis school district or the Kansas City school district.

A student who receives a scholarship shall remain eligible, regardless of household income, until the student graduates from high school or reaches twenty-one years of age. However, the educational assistance organizations created in the bill to provide the scholarship assistance are required to check the household income level of scholarship recipients at least once every three years and may require a sliding scale of descending scholarship amounts if the household income level exceeds 300 percent of the level that would qualify a student for a reduced price lunch under the National School Lunch program.

Amount and Uses of Scholarships :

The scholarships made available by educational assistance organizations are not to exceed an average of $5,000, which amount will be annually adjusted for inflation based on the Consumer Price Index. The scholarships may be used to cover all or part of the tuition and fees charged by a qualified school (more on qualified schools below), or other approved educational expenses, including supplemental services such as private tutors, textbooks, transportation to a public or nonpublic school outside the eligible student’s resident school district.

Public School Right of First Acceptance:

Scholarship students, except home school students, must initially select a public school in any district that is neither unaccredited nor provisionally accredited and which is located adjacent to the City of St. Louis public school district or the Kansas City public school district, or within twenty miles of a qualified student’s place of residence if such public school district has opted to accept qualified students by a majority vote of the district board. Such a district has the “right of first acceptance of the qualified student.” If the district declines to accept the applicant, then the applicant may select from other qualified schools, such as a nonpublic school.

Qualified Schools:

A qualified school that can accept scholarship students is defined as either a public elementary or secondary school located in Missouri that is outside the City of St. Louis or Kansas City public school districts, or a nonpublic elementary and secondary school located in Missouri that complies with certain requirements set out in the bill.

Nonpublic schools must comply with all state laws that apply to nonpublic schools in regards to criminal background checks and must exclude from employment any person prohibited by state law from working in a nonpublic school. Nonpublic schools must also comply with all health and safety laws or codes that apply to nonpublic schools, hold a valid occupancy permit if required by their municipality, and certify that they will not discriminate in admissions on the basis of race, color, national origin, religion, or disability.

Along with all qualified schools, nonpublic schools must require their scholarship students to take the appropriate statewide assessments, except for students with individualized educational plans that specify that such an assessment would not be appropriate. The assessment is to be administered by the home public school district and the qualified school shall use scholarship funds to reimburse the district for administering the assessment. Assessment results must be provided to parents of each scholarship recipient.

All qualified schools must have on record a form signed by the parent or guardian of the scholarship recipient agreeing to the release of the following information to the director of the Missouri Department of Economic Development: the student’s participation as a scholarship recipient and the testing results from the assessments administered by the home district.

As a condition of participation, the parents, guardians and scholarship recipients must agree to abide by the qualified school’s code of conduct and parental involvement requirements unless the school waives these requirements.

Educational Assistance Organizations:

An educational assistance organization is defined as a charitable organization registered in the state of Missouri that is exempt from federal taxation, certified by the director of the Missouri Department of Economic Development, and that allocates all of its annual revenue derived contributions for which the tax credit is claimed, with the exception of an allowable portion for marketing and administration, for educational assistance and which does not provide scholarships to students of only one particular school.

In order to participate an educational assistance organization must:

• Notify the Missouri Department of Economic Development of its intent to provide scholarships to eligible students attending qualified schools;

• Provide an receipt approved by Missouri Department of Economic Development to taxpayers for contributions made to the organization;

• Demonstrate exemption from federal taxation under section 501(c)(3) of the Internal Revenue Code;

• Ensure that 100 percent of its revenue from interest or investments is spent on educational scholarships and that at least 90 percent of its revenues from qualifying contributions (i.e. donations made for which the tax credit is claimed) are spent on educational scholarships;

• Of its remaining revenue from contributions, marketing and administrative expenses shall not exceed 10 percent for the first one hundred thousand dollars; eight percent for the next four hundred thousand dollars; six percent for the next five hundred thousand dollars; and, three percent thereafter.

• “Ensure that one hundred percent of first-time recipients of educational scholarships were not continuously enrolled in a nonpublic school during the previous semester, or that the first-time recipients are eligible for kindergarten:;”

• Distribute scholarship payments four times per year in the form of checks made out to an eligible student’s parents and mailed to the qualified school where the student is enrolled;

• Provide the Missouri Department of Economic Development, upon request, with criminal background checks on all of its employees and board members, and exclude from employment or governance any individual that might reasonably pose a risk to the contributed funds;

• Ensure that the scholarships are portable during the school year from one qualified school to another according to the parent’s wishes;

• Demonstrate financial accountability by: submitting a financial information report that complies with uniform financial accounting standards established by the Missouri Department of Economic Development and is conducted by a certified public accountant; and, having an auditor certify that the report is free of material misstatements; and

• Demonstrate financial viability if it is to receive donations of fifty thousand dollars or more during a school year, by filing with the Missouri Department of Economic Development before the start of the school year a surety bond payable to the state in an amount equal to the aggregate amount of contributions expected to be received during the school year.

Each educational assistance organization must also ensure that qualified schools, excluding home schools and public schools (i.e. nonpublic schools):

• Comply with all health and safety laws or codes that apply to nonpublic schools;

• Hold a valid occupancy permit if required by their municipality;

• Certify that the qualified school will not discriminate in admissions on the basis of race, color, national origin, religion, or disability;

• Provide academic accountability to parents of eligible students by regularly reporting to the parent on the student’s progress.

By June first of each year an educational assistance organization must report to the Missouri Department of Economic Development the information prepared by a certified public accountant regarding their grants in the previous calendar year; the names and address of the educational assistance organization; the name and address of each eligible student who received a scholarship; the total number and dollar amount of contributions received during the previous calendar year; the total number and dollar amount of educational scholarships awarded during the previous calendar year to eligible students; and the percentage of first-time recipients who were continuously enrolled in a public school during the previous year.

Before an educational assistance organization may offer scholarships, it must demonstrate the ability to receive applications and shall have identified potential vacancies in qualified schools as determined by the director of the Missouri Department of Economic Development.

Study of Program:

The Joint Committee on Legislature Research of the Missouri General Assembly is authorized to contract with one or more qualified researchers to evaluate the program created pursuant to HB 808. The study shall assess:

• The level of parental satisfaction;
  
  
• The level of participating student’s satisfaction;
  
  
• The overall impact of the program on public school students and on the City of St. Louis and Kansas City public school districts;
  
  
• The impact on public and private school capacity, availability, and quality of service; and
  
  
• Each participating student’s performance on annual assessments before and after entering the program.