Indiana Joins Growing List of School Choice States

Published September 1, 2009

An eleventh-hour budget crunch put Indiana’s new tax credit program over the finish line, but school choice supporters say successful team-building efforts ensured the result.

On June 30, Indiana Gov. Mitch Daniels (R) signed into law the Fiscal Year 2009-10 budget, which includes a $2.5 million tax credit fund for scholarships for eligible students to attend private schools. Indiana is the 11th state to offer school vouchers or tax credits.

The Republican-led state Senate has adopted versions of a scholarship tax credit proposal in years past, and the majority Democrat lower house ultimately approved the negotiated budget deal hours before deadline by a 61-36 vote.

Indiana’s private school choice backers credit the program’s adoption to the cooperative strategy of supportive organizations—including the Catholic Conference, Non-Public Education Association, School Choice Indiana, and Chamber of Commerce. Chamber Vice President Derek Redelman said his group has helped spearhead the push for tax credits since 1997.

“In the past couple years we’ve had more of a true coalition approach,” Redelman said.

Measuring Cost Savings

Public backing from the governor and from newly elected State Superintendent Tony Bennett contributed greatly to the program’s passage. Daniels and Republicans initially pushed for a $5 million cap on the tax credit, but they gave ground to ensure a deal acceptable to both parties.

“When [Daniels] proposed the tax credit as part of the special session budget, he recognized it not only as good for families but also as a way to save a little bit of money,” said Lori Drummer, state projects director of the national Alliance for School Choice and a board member of the state-based advocacy group School Choice Indiana.

Redelman estimates reaching the cap will save the state $10 million, based on the program’s mandate to serve students leaving the current system to enroll in private school at significantly lower costs.

But critics dispute the claims of financial benefit to the state’s taxpayers.

“The fundamental problem is that public schools are scrambling for every dollar we can get to maintain programs, and it’s not so easy to find those dollars,” said Frank Bush, executive director of the Indiana School Boards Association. “When dollars are being given to a brand-new initiative, that doesn’t help.”

Granting Scholarships

While there are no limits on where in the Hoosier State tax credit scholarships may be used, both Drummer and Redelman noted the areas likely to draw the greatest participation in the new program are those with concentrations of poorer families, especially Gary and Indianapolis.

Redelman said Gary is “one of the hardest-hit areas in terms of academic performance and one of the neediest areas in the state.” The local Catholic diocese no longer operates a school within the city.

Indianapolis, the state’s capital, is home to the CHOICE Charitable Trust, the nation’s oldest privately funded K-12 scholarship-granting organization. Supporters hope the trust will lead the way for new groups by registering to participate in Indiana’s tax credit program. To qualify, a scholarship-granting organization (SGO) must undergo an annual audit to ensure at least 90 percent of contributions are distributed in scholarships.

“One thing I like about this program, unlike many others, is that SGOs cannot serve specific schools,” Drummer said. “They have to open up and provide real choice.”

Defining Need

Opponents allege the program’s expansive eligibility might shortchange students in greatest need. Students from families earning up to twice the federal poverty line are eligible to receive a tax credit-funded scholarship.

“It just seems like an insidious approach to try and dismantle some of the existing urban school programs, but it’s not directed only at those children because of the [family income] benchmarks,” said Bush.

Redelman said it’s not only the poorest students who can benefit from greater choice.

“We advocated for a broad window of eligibility that might also help some middle-income families who are too ‘wealthy’ to qualify for financial aid but who cannot fully afford private school tuition,” Redelman said. “There are a lot of such families who get caught in the middle.”

After a dozen years of legislative advocacy, Redelman said his organization is ready to help put the program into action and assist at least 2,000 families. “We’re thrilled by the chance to get started,” he said.

Ben DeGrow ([email protected]) is a policy analyst for the Independence Institute, a free-market think tank in Golden, Colorado.