Voucher FAIL in Arizona

Where public funds are expended, people normally desire public accountability. This has always been the hidden flaw in the scheme to dismantle the public education system via vouchers. Voucher systems in the United States have always been implemented only on a very small scale. And it’s impossible for me to imagine them being really scaled-up without coming to look a lot more like charter school schemes or the kinds of school choice that you see in some European countries. In either case the point would be that schools that are mostly funded by taxpayers are going to wind up being pretty heavily regulated.

The cutting edge loophole around this is the idea of education tax credits which, as Kevin Carey explains, are “a shell game whereby Taxpayer (A) donates $X to Non-Profit Foundation (B), which then turns around and gives $X to Private School (C). Taxpayer (A) then gets a tax credit from the government equal to $X.” The hope is that by hiding the expenditure in the tax code the funds can flow without any public oversight or accountability. And that’s how you get the kind of massive scandal unearthed by the East Valley Tribune about the operation of Arizona’s tax credit scheme.


The way the system works is that “taxpayers give money to nonprofit charities called school tuition organizations, or STOs for short. STOs give scholarships to children for private school tuition, and the state provides donors a dollar-for-dollar tax credit in exchange for their contribution.” Some key bullet points:

— An untold number of STOs, schools and parents are using the tax credits in ways that violate federal tax laws governing charitable donations.

— Nearly two-thirds of all STOs failed to spend 90 percent of their donations on scholarships – as required by state law – since 2003, the year the STOs began filing annual reports with the state Department of Revenue.

— Executives at two of the largest STOs have used tax credit donations to enrich themselves, buying luxury cars, real estate and funding their own outside for-profit businesses.

— A majority of tax credit donations are earmarked to give scholarships to students already enrolled in private schools, no matter how much money their parents earn. Just seven of the state’s 55 STOs use financial need as the primary factor in deciding who gets tuition money.

— Even as they took in millions of dollars in scholarships, the state’s private schools hiked tuition dramatically, pushing the cost of private education further from the grasp of middle- and low-income families.

— Tax credits have failed to increase minority students’ access to Arizona’s private schools. Students at the schools receiving the most scholarship money remained overwhelmingly white at a time when the state’s Hispanic population boomed.

Read the whole thing. This is the kind of serious investigatory work that, unfortunately, we’re seeing less-and-less of.