Opinion: The Georgia Senate’s 3 percent poison pill for school choice

You have to hand it to Georgia’s Democratic legislators: They’re willing to say they just don’t like the state’s tax-credit scholarships. Republicans, on the other hand, keep coming up with ever-more creative ways to act as if they like the popular program, while working to stunt its growth.

The latest ploy, coming from (where else?) the state Senate, is to harp on the supposedly exorbitant “fees” student scholarship organizations, or SSOs, charge to run the program. People are allegedly “making money” off the scholarships, and our cost-conscious senators are on the case! So they amended House Bill 217 to ensure at least 97 percent of the money SSOs raise goes toward scholarships.

That sounds great, in theory. Who wouldn’t want as much money as possible to go toward scholarships?

Certainly, I do. That’s why I favor raising the cap from its $58 million limit. But it’s worth explaining why a 3 percent limit on “fees” would be crippling.

First, understand why SSOs get to keep any of the money they raise. Start with the fact that, before the tax-credit scholarship program was created, there were no such organizations. Unlike the vast majority of charities, which would exist apart from any particular credit or law, the law specifically mandates the existence of SSOs to collect the donations and award the scholarships. What our senators call “fees” are the overhead costs of operating these outfits, which the Legislature mandated in the first place.

And the program requires significant operation. SSOs not only raise money but solicit scholarship applications, vet the applicants and decide who receives help, and how much. Someone has to do that work. With over 13,000 scholarship recipients in Georgia, it’s a fair amount of work.

Based on the evidence, they do it quite efficiently. Although senators wax concerned about SSOs keeping 10 percent of the funds, the law allows that percentage only on the first $1.5 million an SSO raises each year. It can keep between 5 percent and 7 percent of what it raises above $1.5 million.

Based on figures from the Revenue Department, SSOs collectively could keep as much as 7.8 percent of what they raise. (The actual amount might be lower, but the department does not report it; HB 217 would change that.) Is that high? Low?

Compared to other charities, it’s very low. I reviewed Charity Navigator’s data for the 68 Georgia charities that received its highest rating. The vast majority, 57 out of 68, spent more than 7.8 percent of their revenue on overhead. Just one of the 68 kept its overhead to 3 percent or less. The average for all of them was about 14 percent.

Remember, these charities are rightly considered the most responsible in the state, groups like Habitat for Humanity and United Way. And they spend almost twice as much on overhead as SSOs are already allowed to keep.

Just for kicks, I also looked at what Georgia’s public schools spend on overhead — i.e., everything but instruction. It’s about 33 percent.

But here’s the real question: If senators are truly worried too little money is going to kids on scholarships, why are they insisting on this provision, which would return about $2.5 million a year to the pool, while simultaneously removing a provision to raise the cap by another $35 million over the next several years?

One could be forgiven for thinking their goal is not to improve the program, but to neuter it.

Reader Comments 0

14 comments
gapeach101
gapeach101

"SSOs not only raise money "   Exactly how do they raise money ?  They gather government designed  forms completed by individuals, submit them on January 1 and have their funds assigned to them by Jan 6th.   We are not  talking large amounts of fundraising efforts here.

And of course, lets not forget, for every $1,000 these concerned citizens "donate" they receive tax savings anywhere from $1,250 to $1,390.    If these individuals are so concerned about helping public school kids, there is nothing stopping them from giving more...oh... except  that it doesn't create income for them.

jhgm63
jhgm63

Maybe if the parents didn't buy that new iPhone, they could send their kids to the school of their choice. 

DeepStateDawg
DeepStateDawg

Hey Kyle. Profit is what you're talking about. Typically profit is a function of revenue minus expenses and all that accounting stuff - ebidta I think. Businesses with good products and customers can make quite a bit of profit. 


Problem here is that education, like medical services, aren't great fits for free market. If one SSO is to make more profit than another SSO, why would that be? Would one have a better product? 


How would we know? Smarter kids? Better curriculum? Cooler teachers? Less homework? Who's to say? 


Education isn't like a consumer product. You can't keep purchasing an elementary school education for your kid. 

Kyle_Wingfield
Kyle_Wingfield moderator

@DeepStateDawg "Profit is what you're talking about."

Nonsense. This is everything but the money that goes into a kid's scholarship. So it includes expenses -- office, staff, promotional materials, etc. That's why I called it overhead.

Cobbian
Cobbian

What is the oversight on the SSO's decision making process?  Is this effort really increasing the number of parents who can make a choice about the schools their kids attend?  Or, is this just giving a tax break to people who were already sending their kids to private schools?  


Unless the legislature comes up with local oversight of private schools that receive tax payer funds, including these tax credits, and oversight on how decisions are made about who gets the "scholarships", then I don't think tax money should be involved.

AndyManUSA#45
AndyManUSA#45

Just the fact that the government takes 33% of the top of your child's education, while every one else gets by on less than half of that, tells you everything you need to know. Unless, of course, you were publicly educated, then you may need flashcards or coloring books to help you with such obvious things.

jfb3
jfb3

The whole program is a scam. The SSO's actions are completely confidential. No accountability of scholarship recipients. Every dollar of the current $58 million cap is  taken directly from the treasury. Each dollar raised by an SSO has to be replaced by taxes from other sources.

Hedley_Lammar
Hedley_Lammar

@jfb3 Right you are jfb3. Most of the kids receiving the "scholarships" were already attending private school.


Now they are asking for even more.


This at a time when we have a reverse Robin Hood in the WH. Robbing from the poor ( Healthcare ) to give to the rich ( 200,000 bucks ) 


Only in America.



Kyle_Wingfield
Kyle_Wingfield moderator

@jfb3 "Every dollar of the current $58 million cap is  taken directly from the treasury. Each dollar raised by an SSO has to be replaced by taxes from other sources."
These are two of the more wrong-headed sentences uttered about this or any other topic.

Let's begin with the first one. First, from a technical standpoint, a dollar that does not enter the treasury cannot, by definition, be taken from the treasury. Every court that has heard a case about this issue has recognized as much, including the U.S. Supreme Court. Second, and more broadly, a tax credit (like every other means by which the state excludes income or sales from taxes) simply represents a dollar the state does not tax. The logical conclusion of your thinking is that the state has a right to every dollar we earn or spend, and each of those dollars it chooses -- in its infinite mercy -- not to tax was "taken directly from the treasury." This is obviously nonsense.

Now to the second one. The same point about the logical conclusion of your thinking applies here. But there is a far better way to phrase this: A dollar raised by an SSO is a dollar the state cannot spend (because it does not tax it). Now, you might believe the state would be better off removing this tax credit, taxing this income, and spending it on something else. But there is no evidence whatsoever that the state is raising taxes elsewhere to offset this tax credit. 

Hedley_Lammar
Hedley_Lammar

@Kyle_Wingfield @jfb3  First, from a technical standpoint, a dollar that does not enter the treasury cannot, by definition, be taken from the treasury.


Its fungible.

Kyle_Wingfield
Kyle_Wingfield moderator

@Hedley_Lammar It's not fungible if it doesn't exist in the first place. And as far as the treasury goes, it's never in there.

gapeach101
gapeach101

@Kyle_Wingfield @jfb3 What are you talking about?  "A tax credit ....is a dollar the state does not tax"  If you are talking about a dollar the state does not tax, that represents 6 CENTS the state doesn't get, not the ONE DOLLAR the state doesn't get via a tax credit.

As for "a dollar that does not enter the treasury cannot, by definition, be taken from the treasury",  those $$ have been directed somewhere else, by the state payer.  How about I get to select where my taxes are assigned?  Why only parents of kids in private school.  There' s a question I'd like answered.  What percentage of people give to this program who do not have children/grandchildren in the private school to which the contribution is directed?