Increasing the scholarship tax credit hurts public schools and benefits affluent Oklahomans
In 2011, the Legislature passed the Oklahoma Equal Opportunity Education Scholarship Act, which grants tax credits to individuals or corporations who make a donation to a scholarship granting organization (SGO) or an educational improvement grant organization (EIGO). SGOs award scholarships for students to attend participating K-12 private schools, and while much less utilized, an EIGO awards grants to qualified public schools.
Currently, the total amount of tax credits that donors can claim per fiscal year is $5 million; however, SB 407 (Sen. Rader) and HB 2621 (Rep. Echols) would increase this amount to $20 million and $60 million respectively. Passing SB 407 or HB 2621 would mean backtracking on progress made last session, which increased tax dollars for public education.
Today, public schools have 54,000 more students than they did in 2008, but due to tax cuts and budget shortfalls, they have $180 million fewer dollars to serve those students. Last year’s teacher pay raise was a great step forward, but Oklahoma schools still have far to go to be properly funded. This is not the time to take tax money away from public schools—and increasing the cap on scholarship tax credits would do just that.
Advocates for opportunity scholarship funds are not sheepish about advertising how donors can profit from scholarship donations, and some private schools explicitly market these generous tax incentives. As a Christian school in Oklahoma City told prospective donors: “by redirecting your tax dollars, you can directly support scholarships … at little, and sometimes NO, net cost to you.” This is true.
Individuals and businesses receive a 50 percent tax credit for a one-time donation and a 75 percent tax credit for a two-year donation on top of the standard state and federal charitable tax deduction. Individuals can claim up to $1,000, married couples can claim up to $2,000, and businesses can claim up to $100,000. As such, the law benefits affluent Oklahomans who have the means to donate thousands of dollars and take full advantage of the tax credit. Currently, a perk in federal tax law allows families earning over $200,000 a year to actually make a profit on their donation by getting more in tax credits and deductions than they donate. In short, the tax incentive favors Oklahoma’s wealthiest families and businesses under the guise of helping those most in need.
Because opportunity scholarship funds lack basic oversight, there is a lot we don’t know about the program. There is no provision that requires SGOs to report who receives the scholarships or how much they are awarded. In 2017-2018, the state’s three main SGOs granted scholarships averaging $1,800. With private school tuition and fees that can exceed $10,000, it is unclear how much low-income families must contribute to make up the difference.
Proponents of SB 407 and HB 2621 claim that the Opportunity Scholarship Fund provides a lifeline for students forced to attend a struggling public school. However, the solution to this problem is not to siphon off tax dollars that could be invested in Oklahoma’s woefully underfunded public school system. Ensuring that all Oklahoma children have the opportunity to receive a high-quality education begins with adequate and equitable funding, and increasing the Opportunity Scholarship Fund tax credit would chip away at this promise.
Rebecca Fine is an education policy analyst with Oklahoma Policy Institute.