The right reforms for the wrong program

by David Safier
It should be clear by now that I'm no fan of tuition tax credits, and it should be equally clear I think it's possible Steve Yabrough has been misusing his School Tuition Organization as a money making machine. Those are two separate issues. Even if the tuition tax credits were improved and STOs were using their money wisely, I'd still want to get rid of them. I don't like vouchers, and tuition tax credits are vouchers by another name. It's as simple as that.

But given that tuition tax credits are the darling of the Republican legislative majority, they'll be hanging around for awhile. And if we're going to have them, I would love to see them improved — more accountability for STOs, more money going to low income families, and more students who are actually transfers from public schools getting the tuition money rather than students who would be there anyway, tax credit scholarships or no.

The Goldwater Institute pushed for reforms in these areas in a 2003 report. These were the very reasonable suggestions:

1. "School tuition organizations could also be required to undergo financial audits by independent auditing firms."
2. More of the tuition tax credit funds should be "directed to students below a given income threshold. This reform is typically referred to as 'means testing.'"
3. Policymakers should consider "elimination of the option for donors to recommend scholarship recipients."
4. The Arizona Department of Revenue should "honor requests from school tuition organizations to post their financial information so donors could review salary, overhead, and other related administrative expenditures." This would be optional, and it would allow donors to decide if the STO was spending its expense money wisely before donating to that particular STO.

It's a pretty good list. If an audit were thorough enough to reveal whether, say, the $400,000 sent from Yarbrough's ACSTO to Yarbrough's HY Processing was justified, that would go a long way toward clearing the air. Greater means testing and getting rid of donor recommendations would remove some of the potential misuse of scholarship money that goes to people who have the means to send their children to private school. And while a voluntary posting of STO expenses where the public could see them puts too much faith in people making rational economic decisions, it would certainly be a step in the right direction.

Matthew Ladner has been saying in comments that he wants liberals to join with him and the Goldwater Institute in reforming tuition tax credits instead of fighting for their elimination.

That's an idea that will go nowhere. Democratic legislators and their liberal supporters aren't about to spend time and political capital to tweak something they want to eliminate. And if they did, the answer from the Republican legislators would be, "If it ain't broke, don't fix it." The whole thing would be an exercise in futility.

I have a different suggestion.

The Goldwater Institute should push hard to have thorough government audits of STOs. If the audits find everything is legal, the air is cleared and there will probably be no reforms. But if problems are found, as I suspect they would be, that would very likely lead to reforms of the system along the lines G.I. has recommended.

That's what happened in Florida in 2003-2004 when one of the companies that was the equivalent of our STOs was caught pulling a few fast ones, and it was also discovered that some scholarships were going to students who didn't exist or had left the school. The result was of the scandal was, Florida passed reforms that made their tuition tax credit system more transparent and equitable.

If problems are found in the Arizona system, of course Democrats will push to get rid of the tax credits, and I'll be right there fighting along with everyone else. But let's be honest. We won't get very far. Democrats can't muster enough votes to call for a bathroom break in the middle of a long legislative session, let alone end one of the Republicans' cherished programs.

But the scandal and the fuss that ensued could create legislation that would improve Arizona's tuition tax credit program. That wouldn't make me very happy, but I'd have a whole lot less to complain about.