Day school tax credits face a legal challenge

Day school tax credits face a legal challenge

Appeal of Arizona law could have impact on NJ legislation

The Jewish Day School of the Lehigh Valley benefits from a corporate tax-credit program in Pennsylvania. Photo courtesy Jewish Day School of Lehigh Valley
The Jewish Day School of the Lehigh Valley benefits from a corporate tax-credit program in Pennsylvania. Photo courtesy Jewish Day School of Lehigh Valley

The centerpiece of efforts to create public support for Jewish day schools and other private schools in New Jersey is the Opportunity Scholarship Act.

The act aims to allay church and state conflicts by allowing corporations state tax credits for funding scholarships at private and parochial schools.

The act was endorsed in a recent report by a NJ gubernatorial commission, which came down strongly in favor of public support of private schooling.

“The section of the report supporting tax credits for scholarship programs is especially important,” said Gov. Chris Christie, in announcing the findings of a panel set up by his predecessor, Jon Corzine. “Many states provide such tax credits, and we support providing them here in New Jersey, as well. They would immediately expand the scholarship assistance available to poor and working families, and with it the educational opportunities available to their children.”

And yet a survey of such programs in other states suggests mixed results, including a constitutional challenge headed to the United States Supreme Court.

Not mentioned in the 53-page report by the Governor’s Study Commission on New Jersey’s Nonpublic Schools is the experience of a similar tax credit program in Arizona, first put into law in 1997.

In 2008, the law was declared unconstitutional by the state’s Supreme Court. It ruled unanimously that the statute was diverting state funds for private or religious schools.

The following year, a three-judge panel of the Ninth Circuit United States Court of Appeals agreed. In their decision, the federal judges stated that “Arizona’s tax-credit funded scholarship program lacks religious neutrality and true private choice in making scholarships available to parents.”

The U.S. Supreme Court will hear the case after it reconvenes in October. Eight states, including New Jersey, have filed amicus briefs in support of the Arizona law.

Howie Beigelman, deputy director of public policy at the Orthodox Union and a member of the NJ commission’s staff, is optimistic about the Arizona program’s chances before the high court.

“With this Supreme Court, our side is looking good,” he told NJ Jewish News.

In 2009 testimony before an Arizona state legislative committee studying the program, the OU cited the Jewish Tuition Organization, a program of the Jewish Federation of Greater Phoenix. Working through the Arizona Tax Credit Program, the JTO allows individuals and corporations to donate to a need-based day school scholarship fund and receive a one-to-one tax credit from the state.

“In other words, you can pay your taxes to the State of Arizona or to the JTO,” according to the federation’s website.

According to an OU statement, the program benefits families in need.

“For lower and moderate income families, this after-tax expense [of private-school tuition] can be a difficult burden, especially in difficult economic times,” the OU asserted. “The school tuition organization run by the Jewish Federation of Greater Phoenix is one of the top in the state, and it helps many in need.”

But analyses by the state’s Department of Revenue and its leading newspaper, The Arizona Republic, showed that faith-based schools received 93 percent of the $54 million given to scholarship programs, with most of that tuition assistance going to students already enrolled. Indeed, the newspaper reported on affluent parents who “swap” tax-credit donations to a scholarship organization, naming each other’s child as recipients.

Beigelman points to safeguards in the NJ version that give priority to low-income children attending a “chronically failing” public school or participating private school.

“There are plenty of Jewish people, especially depending on the number of children they have, who are earning at or below the poverty level,” he said.

The act would have an immediate impact for families in Lakewood, Elizabeth, and Passaic — home to large Orthodox communities — where many public schools are designated as “chronically failing.”

Beigelman also sees the wider day school population benefitting from the scholarship programs. “Anyone in a day school paying full tuition subsidizes those less able to pay,” he said. Under the act, there will be “less of a need to spread that cost to other families.”

And even if the tax credits didn’t help the Jewish community, they’d still be a good idea, said Beigelman: “This helps people who are in bad schools, whether or not they are Jewish. That’s a Jewish value no matter what.”


While not mentioning the Arizona challenge, the governor’s commission did cite tax credit programs in Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Minnesota, New York, Pennsylvania, Ohio, and Rhode Island.

In Florida, businesses are given dollar-for-dollar tax credits for the non-public school scholarships they provide to students whose family incomes are 185 percent of the federal poverty level. The $118 million program included more than 1,000 schools.

Kevin Welner, a professor of education at the University of Colorado in Boulder, refers to such tax credits as “neovouchers.”

“States like Florida that attempt to target the neovouchers to more needy families do appear to have avoided the worst abuses of Arizona,” he told NJJN in an e-mail interview. “But the research on who receives the neovouchers, whether that receipt has any affect on student outcomes, and what the systems cost or save states is very, very sketchy and preliminary.”

Since 2001, Pennsylvania has provided $30 million in business tax credits to corporations under a program called Educational Improvement Tax Credit. It allows corporations to offset portions of their state taxes by giving to non-profit organizations, which in turn provide scholarship and non-public school improvement programs.

The 45,000 student recipients came from families with annual incomes of less than $60,000.

Wythe Keever, a spokesperson for the Pennsylvania State Education Association, which represents 191,000 of the state’s public school teachers, told NJJN, “We oppose tax credits for non-public school ‘tuition.’”

“We believe that public funds should go to public schools,” he added. But Keever said the program has not undermined public school funding “due to its limited scope. But by the same token, neither has it been proven to have raised student achievement.”

Ellis Rosenberg, coordinator of Hebrew and Judaic Studies at the Jewish Day School of the Lehigh Valley in Allentown, said the program has been very helpful to his multi-denominational institution, which serves 82 children from pre-kindergarten through eighth grade.

“We charge between $10,000 and $11,000 [per year]. About one-third of our families would absolutely not be able to go to our school without scholarships, and the EITC makes that possible,” he said.

In New Jersey, the Opportunity Scholarship Act (S-1872/A-2810) would create a five-year pilot program. The Assembly version has been referred to the Assembly’s Commerce and Economic Development Committee, and supporters hope the legislature will take action on the bill in a special summer session. The Senate version of the bill met with unanimous approval in the Senate Economic Growth Committee in May and remains in the Senate Budget and Appropriations Committee.

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