Tag Archives: ALEC

Happy Valentine’s Day…NOT!

Cross-posted from RestoreReason.com.

On this Valentine’s Day, I thought I’d ask, when it comes to our public schools students in Arizona, “who loves you baby?”  Yesterday, I was listening in on the AZ House Education Committee meeting. There were many bills on the agenda, but I was primarily interested in HB 2394; empowerment scholarship accounts [ESAs]; expansion; phase-in. I wasn’t hopeful the bill would die, as its companion bill SB 1431, had already been given a due-pass by the Senate Education Committee. As expected, HB 2394 followed suit on a 6–5 vote as did HB 2465, which will allow all students eligible for an ESA account to remain on the program until age 22 and for up to $2,000 a year to be put into a 529 savings account.

The passage of these bills, along with the companion ones in the Senate, demonstrate the disdain many GOP legislators have for our district schools and, for the underpaid educators who toil within. This, because ESAs divert more general fund revenue per student to private schools than district schools receive. As reported by the Arizona School Boards Association, an ESA student, on average, costs the state general fund $1,083 more in grades K–8, and $1,286 more in grades 9–12 than a district student. This is in part because there are many school districts that enjoy a fair amount of locally controlled support in the way of overrides and bonds. The state therefore, is relieved of providing equalization funding to them, but when students leave to go to private schools, all the funding must come from the state general fund. ESA students also receive charter additional assistance funding of roughly $1,200 per student, which district schools do not receive. Turns out that the claim of voucher proponents that they save the state money, is not just “alternative facts” but totally untrue. And, although voucher proponents love to claim there is no harm to district schools when students take their funding and leave, the truth is that about 19 percent of a districts costs are fixed (teacher salaries, transportation, facility repair and maintenance, utilities) and can’t be reduced with each student’s departure. Continue reading

Ooops, there it is!

Cross-posted from RestoreReason.com.

We knew it was coming and awaited it with dread. And, drumroll please…crash goes the cymbal! Yes, here it is, this year’s attempt to exponentially expand Arzona’s voucher (Empowerment Scholarship Accounts, or ESA) program. Of course, the American Legislative Exchange Council’s (ALEC) chief water carrier for Arizona, Senator Debbie Lesko, R-Peoria, is the one proposing the expansion. Lesko claims the expansion of ESAs will “not lead to a mass exodus of children from public schools.” I, for the most part, agree with that statement since Arizona parents have made it clear district schools are their choice with 80% of students attending district schools and another almost 15% in charter schools.

But, to infer a massive voucher expansion will have no negative impact on district schools is disingenuous at best. No matter how slowly students may attrit from district schools, each student’s departure leaves behind a 19% budget shortfall. That’s because there are numerous fixed costs (teacher salaries, facility maintenance, utilities, buses, etc.) that cannot be reduced student by student. The siphoning of dollars from our district schools has been steadily increasing and just exacerbates an already inadequately resourced system.

This isn’t the first year the Legislature has attempted to expand the voucher program. In fact, they’ve been successful in expansions every year since the ESA program was launched in 2011. This isn’t even the first time a full expansion has been attempted, with a very similar proposal going down in flames last year due to public outcry and a perceived conflict with securing voter approval of Prop. 123. This year though, Lesko has sweetened the deal by requiring the testing of students attending private schools on vouchers. She says she “doesn’t personally think this requirement is necessary,” but obviously is trying to defuse the argument from voucher opponents that there is no accountability or return on investment for vouchered students. Continue reading

Is It Really School’s Choice?

Representative Vince Leach, R-SaddleBrooke, recently replied to a constituent’s concern about SB1279, Empowerment Scholarships; expansion; phase-in, with:

“You are correct in assuming I am in favor of this bill.  Rather than a long, rambling explanation of my position, I simply refer you to the linked research paper: http://www.edchoice.org/research/2015-schooling-in-america-survey/. Please refer to page 27.  It reveals what I believe most people have missed in the school choice discussion.  And that is, while about ~85% of student attend public schools, given the choice, only ~36% would choose to attend public schools.  SB1279 is narrowly defined, it specifies that qualified student includes a child who meets the family income eligibility requirements for free or reduced price lunches under the National School Lunch and Child Nutrition Acts, rather than the specified educational scholarship. IT is for these reasons and many more that I support this bill.” Continue reading

AZ again at bottom in “50 States Report”

Cross posted from RestoreReason.com.

The Network for Public Education (NPE), a public education advocacy group headed by the Nation’s preeminent public education expert and advocate, Diane Ravitch, released their “A 50 State Report Card” today. As the name indicates, the report card grades the 50 states and the District of Columbia on six criteria: No High Stakes Testing, Professionalization of Teaching, Resistance to Privatization, School Finance, Spend Taxpayer Resources Wisely, and Chance for Success. Letter grades from “A” to “F” were then averaged to create the overall GPA and letter grade for each state.

I was proud to note the study was conducted with the help of Francesca Lopez, Ph.D. and her student research team at the University of Arizona. They assisted in the identification of 29 measurable factors that guided the ratings of the six criteria and created a 0-4 scale for ratings and then evaluated each state on the 29 factors. The graders were tough, with only 5 states earning an “A” grade and no state’s overall grade exceeding a “C.”

Not surprising to anyone who keeps up with Arizona public education, the state ranked 48th, but I assume only because Arizona begins with an “A.”   Arizona’s grade of 0.67 earned it an overall “F”, numerically tying it with Idaho and Texas (in 49th and 50th place), just above Mississippi. Continue reading

Why Ducey’s Promise to Lower Taxes is a Lie

During Governor Ducey’s inaugural address in 2015, he indicated that he would not support higher taxes with: “prosperity moves, and as taxes go up, it moves away. Gone as well are jobs, people and companies that found a better welcome someplace else.” Likewise, during his 2016 State of the State address, he bragged about lowering taxes and assured Arizonans that he will “lower taxes this year. Next year. And the year after.” Yes, he has been consistent about his promise to lower taxes and even to do away with the state income tax. He obviously subscribes to the GOP mantra of supply-side (some call it trickle-down) economics.

The basic theory of supply side economics is that marginal tax rates and less government regulation will help business expand and create more jobs. The Laffer Curve, named after Arthur Laffer, is a central theory of this philosophy and posits that lowering tax rates generates more economic activity eventually leading to more tax revenue. Proponents of this philosophy include the Koch-brothers-financed American Legislative Exchange Council (ALEC), Americans for Prosperity, and the Wall Street Journal’s editorial board. They claim that the nine states without personal income taxes are outperforming the rest of the states and that their success can be easily replicated in those states that abandon their income tax.   The non-partisan Institute on Taxation and Economic Policy (ITEP) however, says that Laffer focused on “blunt aggregate measure of economic growth” to support his contention. The truth says ITEP, is that states with personal income tax, even those with the highest rates, are experiencing as good, or better, economic conditions than those without. Still, there are plenty of examples of governors who insist on leading their states down the proverbial rabbit hole.

Take Governor Sam Brownback for example. When he took the reins in Kansas, he dropped the top income-tax rate by 25%, lowered sales taxes and created a huge exemption for business owners filing taxes as individuals. Now, five years after doubling downhis state lags in job creation, tax revenue is far short of expectations and bond and credit ratings have been downgraded.

In Oklahoma, Governor Mary Fallin and the GOP-led Legislature enacted a quarter-point reduction in the top income tax rate two years ago and corporate tax breaks when oil crude prices were riding high. Oklahoma’s Republican Treasurer Ken Miller, who advocates for revenue-neutral tax cuts, blamed his GOP colleagues for the now “self-inflicted” crisis. Miller said: “Common sense dictates that until the state proves it can live within its means, it really should stop reducing them, yet some ‘thinkers’ continue to advocate eliminating the state income tax – even arguing that the state’s largest funding source and be vanished without a replacement and still fund needed teacher pay raises.” To Arizonans I ask: “sound familiar?”

In Wisconsin, Governor Walker enacted several permanent tax cuts just as the national recession ended and state revenues began to climb. His speech this year to ALEC was all about how his “big, bold reforms took the power out of the hands of big government special interests.” What he didn’t say is that his reforms produced only about half of the jobs he promised and resulted in delayed debt payments and deep cuts to education to balance the budget.

In North Carolina, with all three branches of government now securely under GOP control, money saved from cutting safety net programs wasn’t reinvested into education, job training or infrastructure, but given to the wealthy and corporations in the form of tax breaks. In September, the NC legislature signed a budget into law that provides $400 million in income tax cuts to be offset by taxes on repair, installation and maintenance services.  Alexandra Sirota, who studies tax policy for the NC Justice Center said the affect of the lower taxes “is a huge revenue loser” and that “the revenue losses aren’t fully accounted for in the next few years.”

At the root of it all are ALEC’s questionable economic and fiscal assumptions and faulty analysis. Specifically, these policies include deep cuts in income taxes, particularly for affluent households and corporations; a repeal of state income and estate taxes; and a shift in state revenues from graduated-rate income taxes to sales taxes that are much higher than what exist today. They also include the end of various state-based tax credits for low-income working families; a Taxpayer Bill of Rights (TABOR) that would impose rigid constitutional limits on state revenues and spending; requirements that state legislatures garner two-thirds or other “super-majority” votes to raise any taxes or fees; and other mechanisms to reduce the funds available to finance public services. ALEC also pushes the repeal of state personal and corporate income taxes, which typically provide one-third to one-half of a state’s funding for schools, health care and other services. Finally, ALEC and its supporters fail to acknowledge that public services such as education or infrastructure are important to a state’s long-term prosperity.

Mainstream economic research though, shows that state taxes average less than one percent of a business’ total costs. Extensive economic research indicates that tax-funded public services like education, health, transportation, and public safety are more important for attracting businesses and jobs.  In fact, Paul O’Neill, former CEO of Alcoa and President George W. Bush’s first Secretary of Treasury said: “[As a businessman] I never made an investment decision based on the Tax Code…[I]f you are giving money away I will take it. If you want to give me inducements for something I am going to do anyway, I will take it. But good business people do not do things because of inducements, they do it because they can see that they are going to be able to earn the cost of capital out of their own intelligence and organization of resources.” Robert Ady, of Ady International has assisted in countless business site locations. He says that “subsidies cannot make a bad place good.” Good places are competitive because their long-term business basics (labor, materials, marketing, overhead, and transportation) are solid. As Greg LeRoy, founder and director of Good Jobs First, said in his book The Great American Jobs Scam, “any subsidies are icing on the cake, but the cake is already baked.”

Yet, Governor Ducey insists on following the ALEC playbook with his plan to eliminate state income tax. During his gubernatorial campaign, he promised not to postpone a $225 million corporate tax cut to be phased in over three years. To the Arizona Tax Research Association, Ducey bragged about signing legislation to index the state’s income tax brackets ensuring salary increases that don’t outpace inflation don’t bump earners into higher tax brackets. Ducey claimed it was “an important first step in our mission to reduce income taxes in the State of Arizona every year.”

Stay tuned for the second half of this post in which I’ll explain why I claim Governor Ducey’s promise to lower taxes is a lie. Small spoiler alert…he may be committed to reducing INCOME taxes, but there is WAY more to this story.

$82,996 is low income…REALLY?

Kudos to Arizona Representative Doug Coleman, R-Apache Junction, who has introduced HB 2063 to cap the limit for corporate donations to School Tuition Organizations.  His bill looks to cap the “year-over-year limit at 2 percent or inflation for the Phoenix metropolitan area” for corporate donations.  501(c)(3) tax-exempt organizations, these STOs allocate at least 90% of their annual revenue to tuition awards for students to use to attend qualified schools.  Proponents claim STOs allow underprivileged students the opportunity to attend private schools they would otherwise not have access to.  Critics however, note that these corporate credits don’t truly serve the “low-income” population.

According to Arizona law, the current definition of “low-income” for this credit is a “family of four with an annual income of $82,996.”  Given that the median household income for an Arizona family of four in 2014 was $50,068, that annual income really can’t be legitimately defined as “low income.”  Jonathan Butcher, of the Goldwater Institute, said: “The eligibility is set up to help students no matter where they are in their life and where their family is,” he said. “The scholarships seem to be pretty modest, often around $2,000. Families can use the scholarships to get close to where tuition may be.”

Problem is, tuition at many private schools is much more than the scholarship amounts and parents are left to cover the rest.  Senator Steve Farley, D-Tucson said “it’s almost impossible for someone who is poor to benefit because even if they get a scholarship, they still have to come up with the rest of the tuition.”  For the 2013/2014 school year, limits were $4,900 for grades K-8 and $6,200 for grades 9-12.  The average corporate tax credit scholarship for students at All Saints’ Episcopal Day School in Phoenix was $9,405.  With the average private school tuition in Arizona for 2015 at $10,236, it is hard for low-income families to bridge the gap.  And, there is no rule to preclude parents from getting multiple scholarships for their child from multiple tuition organizations. The state doesn’t track how common that is.  Senator Steve Yarbrough, R-Chandler, (who profitably runs the Arizona Christian School Tuition Organization), “admits many of the scholarship recipients likely would go to private school without the financial help.”  Unfortunately, it is almost impossible to prove these allegations since the STOs aren’t required to divulge information required to get to the truth.

Representative Coleman’s bill is meant to help ensure the program’s sustainability.  Although Arizona lawmakers placed a statewide $10 million annual cap on the corporate credits, the law allows a 20% per year increase.   Next year, the cap for all private school tuition corporate tax credits will increase automatically to $62 million and by 2030; it will be ten times that amount.  That number is especially significant when one considers that for the last budget year, Arizona’s corporate income tax collections were $663 million, and more than 7 percent of state tax revenues.  One has to wonder where all this money is going and what the diversion away from the general fund does to the state’s ability to operate.

Senator Debbie Lesko, R-Peoria, is against the cap claiming it gives “needy” children opportunities they wouldn’t otherwise have.  She also claims that more money in scholarships means less students in public schools and that ultimately, saves taxpayers money.  This claim only holds water if a student started out in public school before switching to a private school.  A 2009 Arizona Republic article reported that out of the 50,000 private school students, only 7,350 students had been added since the tax-credit program started [in 1998].  Not exactly an indication of resounding success.  The more likely driver for Senator Lesko’s support of this program is the fact that she is the Arizona state chair for the American Legislative Exchange Council (ALEC.)  This Koch brothers-backed, tax-exempt organization works with its corporate members to create model legislation favorable to their corporate interests.  Then ALEC provides these model bills to state legislators to implement back in their home states.  ALEC’s Education Task Force has pushed school choice, vouchers, charters, parent trigger laws and yes, education tax credits.  Along with providing the template for the legislation titled “The Great Schools Tax Credit Program Act” ALEC provides recommendations to state legislators designed to help them “sell” the program to the public.  They acknowledge the model legislation includes “students presently enrolled in a private school” and therefore “reward[s] many families already financing their child’s education.”  They tell legislators to consider limiting “eligibility to students who attended a public school in the last year or are starting school in their state for the first time.” This, they point out, will likely produce “a savings for state taxpayers since a scholarship covering private school costs in many cases will be less than the cost of state support provided to students attending a public school.”

They also recommend to lawmakers that if they “decide to include a statewide tax credit cap in the legislation…language should be added to automatically allow the cap to increase by 25% in any year after 90 percent of the cap was reached in the previous year.”  As for the contribution amount allowed, ALEC states that although a 50% cap is deemed more equitable, making a higher “percentage of a donor’s tax liability eligible” for a credit can make it easier to raise donations.  Higher amounts though they acknowledge, “open the program up to charges that money is being diverted from non-education programs to support private schools.”

The dollar amounts are significant.  For the 2008 tax year, nearly three-fourths of corporations (over 35,500) that filed income taxes in Arizona had the minimum tax liability of $50.  In 2009, there were 54 corporations reducing their state income tax via the private school tuition tax credits, lowering their income tax by over $5.5 million with a carry forward of $1.2 million to reduce future taxes.  Then In 2010, 63 corporations donated $11 million to private school tuition organizations, with 8 donating at least $500,000.

This, all the while corporate taxes have been shrinking in Arizona.  At 9.3% in 1990, corporate income tax is currently at 6.968% and will phase down to 4.9% by 2017.  When fully phased in, these cuts will cost the state about $270 million each year, that’s enough to restore full-day kindergarten across the state and much, much more.  This doesn’t even include the commercial property tax rate, which has also been cut from 25% in 2005 down to 18% this year.

In addition to the issue of sustainability, is the issue of which private schools are getting the corporate tax credit money.  At least one-fourth of the 64 schools on the states approved list of School Tuition Organizations certified to receive donations for the corporate income tax credits are religious institutions.  Yes, the Arizona Supreme Court has deemed this constitutional via what many believe are convoluted reasoning, but it still should give pause to the majority of taxpayers – those that support the separation of church and state.   Additionally, I was unable to determine of the $11 million donated by corporations in 2011 and in subsequent years, how much was actually paid out?  There are numerous questions about these school tuition organizations and the corporate tax credits that fund them.  Unfortunately, laws designed to preclude transparency and accountability prevent these questions being answered.  It is obvious to me that Representative Coleman’s bill makes total sense, which unfortunately means it will probably be a tough sell in the Arizona Legislature.  Let’s hope against hope that reason prevails.