AZ Legislators Hard at Work on Education Reform

It’s a new year and the Arizona legislature is in session and again applying itself assiduously to the business of reforming the state’s public school system—a system that increasingly is coming to resemble a private business. Several bills, perhaps written by lobbyists during the holiday recess, are starting their journey through committees.

• A voucher bill proposes to give parents a voucher equal to $5,500 that could be redeemed at any private school, religious or not, if their child is in a class of 35 or more pupils.
• A bill is proposed that would allow parents to fire the principal of an existing public school and replace the school with a charter school.
• A bill that just passed the Senate Finance Committee would essentially double the amount of state income tax money that individuals or couples can contribute to a Student Tuition Organization (STO).

This later bill is particularly interesting. Currently, a couple can direct approximately $1,000 of their state income tax obligation to a STO. The STO can then allocate that money to students to pay their tuition at a private or religious school. The donation is a dollar-for-dollar tax credit, not a deduction.

Theoretically a wall is constructed around the STO—somewhat like a “superpac” wall—which prohibits the STO from taking into consideration who contributed the money when allocating the “scholarship.” This arrangement would seem to violate the state’s constitutional restriction on spending state funds to support religious education, but the Arizona Supreme Court declared otherwise (see Kevin Welner’s analysis of this revolutionary decision), and their decision was upheld by the US Supreme Court in 2009 on a 5-4 vote. In 2010, the state recognized more than 50 STOs that received more than $55 Million in donations. More than 31,000 “scholarships” were distributed at an average of $1,650 per student.

Encouraged, perhaps, by the Supreme Court decision—the defense argued that the income tax money never was the state’s money since the state never collected it—proponents of the tuition tax credit program have come back in 2012 with plans to expand the program. The bill just passed would allow a doubling of the contribution provided that the STO uses the money to award a scholarship to a) a Kindergartener entering a private school, b) a student switching from a public to a private school, or c) a child of a parent on active military duty. (A rider on the bill would exempt schools receiving the scholarships from reporting test scores or requiring fingerprinting of their teachers.)

A key sponsor of this bill is State Sen. Steve Yarbrough (R-Phoenix), Executive Director of the Arizona Christian School Tuition Organization. STOs are allowed to keep 10% of all contributions for administrative expenses. Ten percent amounted to $5.5 Million in 2010.

These STOs that collect the income tax money and take a 10% "administrative fee" are the source of real concern. A recent article in the East Valley Tribune detailed astounding instances of misuse of the money supposedly aimed at supporting scholarships for poor children.

Two executives of the largest STOs have been caught using their administrative fee monies to buy cars (2 Infiniti Luxury sedans for one director), hire relatives and purchase real estate. Two of the 55 STOs account for almost a third of all the $55 Million collected last year: Arizona Christian School Tuition Organization and the Arizona Scholarship Fund. The STOs are essentially unregulated since the enabling and subsequent legislation vested no agency with any responsibility or authority to monitor their dealings.

This is simply the way things are done in Arizona. Why? For reasons we can eventually get into in more detail, but briefly, because the demographics of the state virtually demand it: an old, Anglo power structure wishes to reduce its contribution to all those public institutions—such as K-12 education—that increasingly serve a young Hispanic population.

(Thanks to Jeanne Powers for help in compiling this entry.)

Gene V Glass
University of Colorado Boulder
Arizona State University