Kentucky State Capitol

The Kentucky General Assembly will soon take up legislation to provide generous tax credits to individuals and businesses who make donations for organizations that grant scholarships to private K-12 schools.

Advocates of the legislation say it will increase the choices of schools for low-income or special-needs students in Kentucky, citing similar tax credit programs in 17 other states, including Indiana.

However, critics argue that such tax credits will further drain resources away from public schools, at a time when K-12 public education is already in danger of facing cuts in the two-year budget that must be approved in this year’s session of the Kentucky General Assembly.

House Bill 134 and Senate Bill 36 would allow donors to certified scholarship granting organizations – such as the Catholic Education Foundation — to receive a tax credit worth 95 percent of their donations, with a $1 million limit for individual donors and a $25 million annual cap on such tax credits statewide.

To be eligible for these private K-12 scholarships, a family’s income may not exceed 200 percent of the level for reduced-price school lunches, and over half of the scholarship recipients must be eligible for free lunch.

State Sen. Ralph Alvarado, R-Winchester, the lead sponsor of SB 36, told IL that his bill would soon sub the language of HB 134, partly to fix a loophole in which individuals could have made a profit off of using both state and federal tax credits for their donations.

He said he hoped the bill would provide new opportunities for low-income families or families with developmentally disabled children that currently don’t have the financial means to send their children to private school.

“We’re not saying that public schools are bad… a lot of people do very well with public schools and parents are happy, that’s great,” Alvarado said. “But there are some parents who would like a choice. (Public schools) may not fit their child’s needs or what their family wants, so this at least gives them a choice.”

However, critics of the legislation have described this effort as a way to institute “backdoor vouchers,” with the progressive Kentucky Center for Economic Policy recently describing the bills as “thinly disguised private school vouchers that shift resources from public services to private schools.”

KCEP noted that the Legislative Research Commission’s fiscal scoring of a similar bill last year found that it would cost the state $76.3 million by its sixth year, adding that children from a family of four making an annual income of over $91,000 – $20,000 more than Kentucky’s median income – would be eligible for the scholarships.

“Especially at a time when Kentucky can’t afford to pay for school buses and school facilities improvements or keep up investments in Family Resource and Youth Centers, textbooks and other instructional materials, the legislature should reject proposals to hand over a growing pot of money to private schools and for tax subsidies to wealthy individuals,” wrote Anna Baumann of KCEP.

Sen. Ralph Alvarado, R-Winchester | Photo via LRC Public Information

Alvarado disputed such a characterization of his legislation, saying that he believes it will save the state money and overwhelmingly benefit students from low-income families.

Citing a fiscal analysis by Ed Choice Kentucky – the advocacy group that has pushed such legislation over the past three years – showing the bill would generate $1.5 million in savings for the state, Alvarado adds that “a lot of people that are against it act like it will take something from schools, but we’re not.”

“It’s not just a $25 million hack out of the budget,” says Alvarado. “There is a savings for the taxpayer. Other states have shown that when they’ve done this, it helps private schools, and it helps public schools, as well. They realize savings, they get more efficiency out of it.”

Alvarado added that while the fiscal analysis of Ed Choice shows budgetary savings from the bill, the official scoring would be done by the LRC, which is not yet complete. The bill was scheduled for a hearing in the Senate Education Committee last Thursday, but was pulled at the last minute by its chairman Sen. Max Wise, who cited the lack of a fiscal note as the reason.

If the LRC does not show budgetary savings from the bill, Alvarado conceded that it “will be a much tougher sell” to legislators, as they are tackling a two-year budget this session in which nearly all government services and departments are expected to face major cuts.

Gary Houchens, who was appointed as a member of the Kentucky Board of Education in 2016, is a public supporter of the scholarship tax credit legislation, along with the Catholic Education Foundation of Louisville, which would likely become one of the most-utilized certified scholarship granting organizations.

The bills’ sponsors in the House and Senate are all Republican except for Rep. Dennis Horlander, a Democrat from Louisville, which has the state’s highest population of private Catholic schools.

“I co-sponsored this legislation, and did as well last year, because I think it helps those families who have children attending schools where this would apply,” said Horlander in a statement to IL. “I know it would help many who live in my legislative district.”

Alvarado said there was no date set on when the legislation would be taken up in committee or which chamber would do so first, but school choice advocates are planning a rally and day of lobbying in Frankfort on Jan. 25.

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Joe Sonka
Joe Sonka is a staff writer at Insider Louisville focusing on government, politics, education and public safety. He is a former news editor and staff writer at LEO Weekly and has also freelanced for The Nation and ThinkProgress. He has won first place awards from the Louisville Metro chapter of the Society of Professional Journalists in the categories of Health Reporting, Enterprise Reporting, Government/Politics, Minority/Women’s Affairs Reporting, Continuing Coverage and Best Blog. Email him at [email protected]