comments

Scholarships could be biggest impact of school choice law: Almost $25 million given

Brendan Kirby | bkirby@al.com By Brendan Kirby | bkirby@al.com AL.com
Email the author | Follow on Twitter
on January 12, 2014 at 8:00 AM, updated January 12, 2014 at 8:01 AM
Student raised hand in classroom.jpeg.JPGView full sizeThousands of Alabama school children could get scholarships under a state tax-incentive law that prompted almost $25 million in donations to nonprofit organizations.

An afterthought in a controversial school choice law is likely to have a far greater impact than the legislation’s original design, according to a review of state tax data.

When the Alabama Legislature originally passed the Alabama Accountability Act last year, the law offered parents the ability to claim a tax break of up to $3,500 to help their children escape “failing” schools. It also allowed residents and business to claim a dollar-for-dollar tax credit for contributing to scholarship organizations to help low-income students from those schools.

The Legislature amended the law a few weeks later to loosen restrictions on scholarships granted during a window between Sept. 15 and Dec. 31 of each year. By the end of 2013, scholarship granting organizations had received nearly $25 million – the maximum amount that the statute will refund to taxpayers.

Scholarship program – here’s how it works

The scholarship component of Alabama’s school choice law allows businesses to reduce their tax burden by half and residents to write off up to $7,500 on income tax – provided it does not exceed half the tax burden.

Residents can spread the credit over an additional three years, however.

The credit is a dollar-for-dollar reduction, meaning that people and corporations essentially can contribute to scholarships for free. A person, for example, could make a $2,000 contribution and then get the entire amount back when he or she files incomes taxes.

Scholarships awarded before Sept. 15 in any year must be given to a student from a public school deemed “failing” by the state. After that, they can give more broadly but recipients’ income cannot exceed 150 percent of the state’s household median income; using the most recent government data, the cutoff is about $60,734.

In addition, a portion of the scholarship money must to high-poverty families. That figure depends on the percentage of public school students qualifying for free or reduced-prices lunches.

No more than 25 percent of the awards can go to students who were continuously enrolled in private school the previous year, although that rule does not apply to students after the first year they receive a scholarship.

The Legislature placed a $25 million cap on tax credits under the program, a figure that was reached by the end of 2013. State officials said the scholarship organizations have verified that they received all but about $500,000 of the promised donations.

The money will come out of the Alabama Education Trust Fund when people and businesses file their tax returns.

Here is a look at the nine nonprofits that qualified to receive scholarship contributions:

  • Alabama Opportunity Scholarship Fund in Birmingham Amount raised: $17,826,344.30

  • Beacons of Hope in Birmingham Amount raised: About $350,000

  • AAA Scholarship Foundation in Prattville Amount raised: Less than $100,000

  • Global Community Development Ministries, of Lafayette Amount raised: $40,000 to $50,0000

  • Circle of Love Outreach in Selma Amount raised: About $30,000

  • Chambers County Educational Foundation Amount raised: Appears inactive.

  • Inspire & Achieve Corp. in Huntsville Amount raised: None

  • Scholarships for Kids Inc. of Birmingham Amount raised: Could not be reached

  • BlackBelt Human Resource Development Center in Selma Amount raised: Could not be reached
Kimberly Hobbs, a mother from Theodore outside of Mobile, is among hundreds of parents who have applied for scholarships under the program. She said her family has sacrificed to send her three children to Most Pure Heart of Mary Catholic School. A scholarship would make it easier, said Hobbs, who added that she believes private school will help open doors for her kids.

“I want my kids to have a private school education,” she said. “I think they have more to offer.”

The law has drawn fierce criticism from opponents who fear that it robs already-cash strapped public schools of funding.

But Gary Crum, of Circle of Love Outreach in Selma, said the law offers a vital safety valve for poor folks.

“One thing that it does is low-income families finally get to sit down and make a decision about their children’s education that they ever could do before,” said Crum, whose organization has raised about $30,000 in scholarships for students at Ellwood Christian Academy. “Choice in education is something that has been needed in Alabama for a long time.

Impact not yet clear

The number of scholarships that have been given is unknown, and several organizations said they still are reviewing applications. But the sheer amount of money donated suggests that the impact will be far greater than the direct tax credit given to parents who send their own children to private schools.

That portion of the law remains limited to students coming from the 78 schools declared failing. Only 52 students from those schools transferred to a private school before the start of the current school year, according to the state Department of Education.

By contrast, about 5,000 students could receive private school scholarships if the organizations awarded grants averaging $5,000 each. The number of benefiting students will be greater if the grants are for less money.

Nine nonprofit organizations have qualified to participate in the program, and they range from a national organization promoting school choice across the country to a group involving former Gov. Bob Riley that has raised by far the most money to small, existing organizations that have brought in little or no money so far.

One of the qualifying organizations is Beacons of Hope, a nonprofit set up by the Catholic Diocese of Birmingham to support parochial schools in northern Alabama. Sister Brenda Monahan, director of the organization, said about 250 students out of an average of 400 applicants have received annual grants since 2010.

Since passage of the Accountability Act, Beacons of Hope has expanded its reach to help Catholic school students statewide. She said the organization is reviewing some 100 applications for scholarships but has not given out any of the $350,000 it has received under the program. She said she expects to award scholarships to at least half of the applicants in amounts up to half the cost of tuition.

The requires scholarship organizations to give at least 75 percent of their awards to students who were not continuously enrolled in a private school the year before.

“That’s going to knock some of those applications out” from current Catholic students who otherwise would qualify, Monahan said.

The law allows organizations to keep 5 percent of the money raised for administrative costs but mandates that they give away the rest of the money by the year after it was collected. That could put organizations in a bind if they raise a large amount of money, said Curtis Stewart, deputy commissioner of the Alabama Department of Revenue.

“I would think it would be a thing they would have to be careful about,” he said.

Leaders of several organizations said they did not anticipate having trouble complying with the restrictions.

“I don’t think so, because the level of need is great,” Monahan said. “It is the first initiative in our state that gives parents the right to choose the educational environment for their kids. For some students in our state, their education is determined by their ZIP code.”

Riley’s group raises most

Bob RileyView full size Former Gov. Bob Riley is serving as board chairman for the Alabama Opportunity Scholarship Fund.

By far, the most successful of the nine groups qualified to accept tax-shielded donations is the Alabama Opportunity Scholarship Fund, which has Riley its board chairman. Officials from the organization said they had received more than $17.8 million and had received applications from 1,221 students for the current school year. The organization said it has another 120 parents on hold for next school year.

“We are very pleased with what we were able to raise,” said Lesley Searcy, executive director of the group.

She said the organization limits its scholarships to children who would qualify for free or reduced-prices lunches in the public school system.

“The whole premise of the program is that low-income parents have the choice of the best educational option for their children. … Parents need all the options they can get,” she said. “We’re going to serve as many students as we can with the funds that are available.”

AAA Scholarships, started by former officials of a similar organization based in Florida, said it has raised less than $100,000 in Alabama. The organization participates in school-choice programs in a number of states.

“We’re set up for this type of program. We look at the states. What the law requires determines what we do,” said Kim Dyson, CEO of the organization. “What we like to do is empower the parent.”

Grady Harmon, Global Community Redevelopment Ministries, said his organization performed missionary work in South America for years and recently decided to devote its efforts to raising money for scholarships.

“In my old age here … I’ve kind of slowed down on that,” the 74-year-old Harmon said. “We thought we could use our nonprofit as” a scholarship-granting organization.

Thus far, all of the money has gone to students at Chambers Academy, a school in Lafayette where Harmon’s son serves on the board of directors. But he said he would accept applications from students wanting to attend any qualifying school. He estimated the total raised at $40,000 to $50,000.

“We’re very small. We’re probably the smallest ones,” he said.

John Mehaffey, headmaster of Chambers Academy, said the Global Community Redevelopment Ministries had helped the families of three students cover additional costs beyond to tax break their parents received through the direct tax credit available to parents of children at failing schools.

Mehaffey said he expects interest in the program to grow.

“It was passed so late that schools didn’t understand it much less getting the information out to parents,” he said.

Miranda Bouldin, director of Inspire & Achieve Corp. in northern Alabama, said her group qualified in December to receive donations but has not yet taken in any money. She said she is not certain about how much the group might raise this year.

“That all depends upon the taxpayer,” she said. “I think the biggest issue is not a lot of people knew about it.”