School Choice Tax Credits Reduced in New Budget

by Steve Haner

The famous phrase about no one’s life, liberty or property being safe while the legislature sits probably arose after somebody got burned by an out-of-control conference committee. It just happened again to Virginia’s private schools, who had a popular scholarship tax credit program chopped Wednesday.

The Education Improvement Scholarship Tax Credit (EISTC) is available for donations to support free or reduced tuition for the lowest income Virginia students, those who otherwise would never have a way into a private school. It dates back to Governor Bob McDonnell (R). 

Out of the blue, a language provision appeared in the House Bill 30 conference report to reduce the statutory cap on annual EISTC awards from $25 million to $12 million, with the remainder allocated instead to the Neighborhood Assistance Tax Credit. That $12 million is then earmarked for “education proposals for approval by the Superintendent of Public Instruction.”

So, $13 million from the private educational realm is transferred back to the public schools’ control. A statute was simply overridden by the small group of conferees, who then wrapped it in a must-approve omnibus bill not subject to amendment. As you already know, the conference report has now passed.

You can smell the tar being warmed and hear the fence rails being whittled as advocates for school choice demand that the money be restored by Governor Glenn Youngkin (R). He can seek an amendment to that final bill or veto the entire item, which would restore the status quo ante.

From the conservative group Middle Resolution’s member alert:

Virginia Democrats ran Virginia for the past eight years and ​they refused to allow any expansion of education choice. Additionally, they tried to repeal the EISTC, targeted for low-income children. Now there is an attempt to essentially remove 50% of the potential funding for children who deserve a chance to go to a better school.

Never has there been more interest in providing education opportunities for all children following the disastrous Covid shutdown. And for children who have little to no choice and need assistance, those opportunities are now being reduced or eliminated in this biennial budget.

We urge you to contact Governor Youngkin’s office TODAY and urge him to restore the full funding for the Education Improvement Scholarship Tax Credit program. It’s time to stand up for every child in the Commonwealth and bring true educational freedom to Virginia.

And from the Thomas Jefferson Institute president Chris Braunlich:

The program is under fire in the budget conference report, negotiated in secret and approved by the General Assembly (it could not be amended on the floor). An amendment that was snuck in cuts the program to $12 million, even though it was growing at 20 percent a year and offering educational opportunity to thousands of students across Virginia….

I do not believe Governor Youngkin was aware the General Assembly was going to do this. I know Lt. Governor (Winsome) Earle-Sears was not aware.

The tax credit offered is quite generous, 65% of the donation. Give $1,000 to one of these funds (and I support one, I should note), and you get a $650 credit on your state income tax.  A credit is better than a deduction as you can claim it even when you take the standard deduction. You also get full value on a credit unlike a deduction ($57.50 back on $1,000 donated).  So the $1,000 donation costs you only $350, even less if you can also take a federal deduction.

The tax credit has to be applied for through the school, but the paperwork is easy. The school I support, Anna Julia Cooper Episcopal, serves the most challenged Richmond area neighborhoods and every student it has benefits from the scholarship program, it claimed in its appeal for calls to the Governor.

The entire $25 million allotment has not been used in prior years, but more than $12 million was used in 2021. The plans were to expand the promotion efforts as part of the coming move toward more school choice. Set the cap below the level of utilization and the tax credits could be prorated smaller.

Prior to its unexpected appearance in the final conference report, the idea of reducing the EISTC cap apparently was not under discussion. The only bill and related budget amendment from a member dealing with it I could find was to increase the cap a bit. This proposal also mentioned both tax credit programs, EISTC and Neighborhood Assistance, but seeking to increase both. It passed the Senate but failed in the House.

No proposal to reduce EISTC was in either the House or Senate budgets as they passed in March and were handed off to the conferees’ gentle ministrations.

But a conference committee is a power unto itself, not limited to the parameters of either original bill. People who know the process often intentionally wait until then to make their move, handing their ideas quietly to staff or a legislator, leaving no trail. The same people now energized would have been all over the conferees had they known. So nobody told them.