Education savings accounts bill advances in House committee

Rep. Jim Dotson
Rep. Jim Dotson

A bill that would establish education savings accounts to be used at parents' discretion to fund private school and other education costs passed in the House Education Committee Thursday.

House Bill 1222 would be funded through a tax-credit scholarship in which individuals and corporations could donate to a nonprofit organization that would provide money to parents seeking a private or home school education for their children. Contributors to the nonprofits that administer the savings accounts would receive an income tax credit from the state of Arkansas equal to 65 percent of their donation. The donation would also qualify for a federal income tax deduction.

Rep. Jim Dotson (R-Bentonville), lead sponsor of the bill, told the committee, "The purpose of this bill is to create an opportunity for students to have access to education services that specifically meet that individual student's unique needs."

Critics of the bill say the education savings accounts are a voucher program. School vouchers use state money to fund scholarships that pay for students to attend private school.

Rep. John Walker (D-Little Rock) asked Dotson, "What’s the difference between a voucher bill and an education savings account bill?"

Dotson answered, "A voucher bill is tuition and fees to a particular school as that particular school accepts that voucher. This is funding that goes into an education savings account for a parent to be able to direct the funds for the educational needs of their student, which is not limited to simply tuition and fees."

Parents could use the money in the education savings account to fund tuition at a private school as well as for other education expenses, including uniforms, books, tutoring services, transportation, examination fees and even college, since a portion of the unused money in a savings account would carry over to the next year.

Rep. Jana Della Rosa (R-Rogers) asked Dotson, "Why do it this way? This seems like we’re putting in a whole middleman that's going to have administrative costs, that is convoluting the system. We're going to have more reporting, [the Department of Finance and Administration] is going to have more to mess with, you've got tax credits. Why don’t we just expand the Succeed Scholarship?"

The Succeed Scholarship is a voucher program enacted in 2015 that uses public tax dollars to pay for students with special needs to attend private schools. The program is capped at 100 vouchers.

Dotson said, "I studied various models all across the country. This is the plan I came up with. I would support that as well.  I would love to see that happen."

Questions and testimony lasted for two hours. Several private citizens, including two mothers, spoke for the bill along with Patrick Wolf, professor in the Department of Education Reform at the University of Arkansas Fayetteville.

"Private school choice has spread all across our country," Wolf said. "You could land in the eastern shore of Maryland and travel all the way across the United States using a northern or a southern route, and you would never step foot in a state that doesn't have a private school choice program until you hit the extreme Pacific coast, and those states are crazy of course."

Richard Abernathy, executive director of the Arkansas Association of Educational Administrators, which represents school superintendents, spoke against the bill, calling the program a "universal voucher program."

"We talk about eligibility of kids. Not only are traditional kids that are attending public schools eligible, but all kids in the state of Arkansas will be eligible, when you look at this bill, even those kids who have never attended public schools."

The bill first would prioritize students who received the scholarship the year before, then those students' siblings, followed by students from a waitlist who qualify for free and reduced school lunch, then new applicants that qualify for free and reduced school lunch, followed by students who come from military families, then finally all students on the waitlist and all other new applicants.

Abernathy also said the bill was discriminatory. "This bill discriminates against public school parents. ... They are not eligible to participate in educational savings accounts to send their kids to college. Whereas, if you are attending homeschool or a private school, you in fact can divert some of those dollars that you receive from education savings accounts to pay for your kid to attend college," he said.

Several superintendents from rural districts also spoke against the bill, saying it could lead to the consolidation of schools. A school district is consolidated according to state law if its student population drops below 350 students for two consecutive years. For some small districts, the loss of students to private schools could push them below the 350 student threshold, triggering consolidation.

In Arkansas, the largest portion of the cost of a public school student’s education is covered by what’s called “foundation funding” — a mixture of state general revenue and local property taxes that the state collects and then remits to local school districts. The legislature has established foundation funding at $6,646 per student for the current school year. When a student leaves a public school for a private school, the foundation funding does not follow the student. The student’s former public school district does not receive foundation funding for that student the next year.

HB 1222 would not directly divert public education funding to private schools as some voucher programs in other states have done. Instead, dollars that would have otherwise entered state general revenue in the form of income tax would be diverted to the nonprofits administering the education savings accounts. Those nonprofits would then be able to transfer an amount of money equivalent to foundation funding for each academic year into an eligible student’s account.

A legislative impact statement released by the Department of Finance and Administration found the bill would lead to a $6.5 million reduction in state general revenue from July 2018 to June 2019. Growth would be capped at 10 percent per subsequent year.

"It is anticipated that full amount of the credit would be utilized every year," according to the impact statement. Consequently, the amount of revenue reduction would grow significantly each year.

During testimony, Dotson said that Governor Hutchinson is "neutral" on the bill and not taking a stance for or against it.

In a statement, Hutchinson wrote that he applauds Dotson on his school choice leadership, but has concerns about the fiscal impact of the bill.

“I’ve always been a strong advocate for choice of parents in the educational environment, but I do have to watch over the state budget, and this would have a negative impact of approximately $7 million. For that reason, I’ve expressed my reservations on the bill."

The governor added that his preference "would be that if we used limited state resources for choice, it should first go to those children who are caught in an academically-failed school and are looking for a way out and low-income students.”

The bill now goes to the full House.

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