GEICO makes Arizona taxpayers spend $8 million on vouchers

by David Safier

The Star has a story this morning that makes GEICO sound like the good guys for donating $8 million so poor kids can go to private school. The story is factually accurate and wildly misleading. Here's what the story should have said.

GEICO used the state law that allows corporations to get 100% tax credits for money they give to School Tuition Organizations (STO). That money will be distributed by the STO to pay for student tuitions to private schools. So GEICO paid $8 million up front and will have all of it deducted from whatever taxes it owes the state. Cost to GEICO: zero. Cost to Arizona taxpayers: $8 million.

The STO that got the money, Arizona Leadership Foundation, is making out very well on the deal because it gets to keep 10% of tuition tax credit donations to pay for overhead. That comes to $800,000 in overhead — $800,000 taxpayers will pay, since, as I said earlier, GEICO will get 100% of its money back. In the research I've done on STOs, I see no indication that it will cost the Foundation almost a million dollars to collect the money, then distribute it to the students. The money has already been given. That was easy. Now parents have to apply for the funds. The STO will assess the applications, then give the money to the private schools chosen by students whose applications it accepts. That's not an $800,000 operation.

I'm guessing there's some kind of connection between the people in the Arizona Leadership Foundation and the Tucson GEICO folks. The STO was founded in 2011, and its total revenue that year was close to a million dollars. On its 2011 tax return, it only lists one paid person, Executive Director Richard Kirsch. Some articles about the STO mention that Aaron Muth is president, but I don't know if he's compensated. It seems odd to me that GEICO would choose a young STO which has never handled much money when there are plenty of established STOs with a track record. For some reason — I suspect some kind of personal connection — GEICO put all $8 million of its tuition tax credit eggs in the Arizona Leadership Foundation basket, and $800,000 in the STO's coffers.

That's the story the Star should have told. And it's a story Mayor Jonathan Rothschild should know. I admire the job the mayor has done so far, but he screwed up when he called GEICO's tax credit "remarkable." Unless Rothschild is a voucher advocate who believes public dollars should flow to tuition to private schools, he got conned on this one.