Research & Commentary: New Jersey Education Tax Credits

Published May 14, 2012

New Jersey Gov. Chris Christie has been trying for nearly two years to persuade state legislators to pass a bill creating a pilot tax credit scholarship using donations from businesses to fund school tuition for poor children stuck in some of the state’s chronically failing public schools.

Some legislators and interest groups claim the proposal—Assembly Bill 2810 and Senate Bill 1872—would cost the state upwards of $1 billion, divert public funds to private institutions, weaken public schools, pull high achievers out of public schools and leave more special-needs students behind, and fail to serve student needs as well as public schools do. They argue the state’s worst schools need more funding and better programs.

Reform advocates respond the bill’s fiscal statement finds no negative impact on state coffers and the program actually benefits the public schools affected by returning $354 million to them in the first five years. Broader school choice has been documented as benefiting local public schools by creating examples of efficient, effective education to emulate and spurring them to follow suit, by creating competition for pupils. School choice also has been documented as serving the special needs of all students better than public schools do, because one school or school system cannot serve every student as well as a more diverse set of schools.

Reformers cite the persistent failure of the bill’s designated school districts despite decades of spending increases and non-market reform attempts as evidence more of the same will not improve them. The children in these districts, they say, need more and better options—now.

The following documents offer more information about New Jersey’s tax credit scholarship proposal.


Christie Says Vouchers Are Needed to Repair Poor Schools
New Jersey Gov. Chris Christie says students in long-failing school districts should be allowed to pursue better options through a pilot tax credit scholarship program, reports Bloomberg News. The state spends more than any other to educate children, yet 100,000 students attend schools that consistently fail to meet state standards. Christie proposes to reorient the system through teacher tenure changes, privately funded scholarships for poor students in poor schools, and increasing education spending.

Opportunity Scholarship Act (OSA) Pilot Q&A
New Jersey’s Opportunity Scholarship Act would create a pilot tax credit scholarship modeled on Pennsylvania’s extremely popular business tax credits for education. It would allow businesses to deduct from their taxes donations to nonprofits that grant private school scholarships to students in seven chronically failing school districts. The students’ families must be at or below 185 percent of the federal poverty line. Private schools that accept the scholarships must comply with state health, safety, and financial reporting requirements and annually administer the state achievement test.

Low-Income Students Gaining With Tax Credit Scholarships, Study Finds
Participation in Florida’s tax credit scholarship has grown, and participants are gaining academically, according to a new study reported by Sunshine State News. Scholarship recipients reported “modest” math and reading gains. They tended to be among the lowest-performing students at the public schools they left, and were more likely to be black and from lower-income families.

More Benefits from Credits than Vouchers
Education tax credits offer a popular, less-controversial way to give needy children better school options, writes Adam Schaeffer in the Philadelphia Inquirer. Tax credits have been historically unlikely to receive legal challenges and, when challenged, have always prevailed because they let individuals decide what to do with their own money rather than steering funds through the government to specific schools or programs.

What Research Says About School Choice
Nine scholars and analysts teamed up to sign an editorial in Education Week calling for journalists, politicians, and the public to recognize that the best research shows consistently positive results from school choice policies such as vouchers, tax credit scholarships, education savings accounts, and charter schools.

Report: Tax Credit Scholarships (“Vouchers”) Will Save Florida Taxpayers $57.9 Million Next Year
Though critics of tax credit scholarships charge they will “drain” public school coffers, in Florida as elsewhere the programs save millions, writes Jon East in RedefinEd. This has been true since the program began and has been found by many other independent estimates. The students taking an education tax credit scholarship save the state money it can spend on improving public schools, he writes.

Testimony before the Assembly Budget Committee on A-2810, the Opportunity Scholarship Act (OSA)
Derrell Bradford, executive director of Excellent Education for Everyone in New Jersey, testifies before the state assembly about legislation to create an education tax credit benefiting children attending chronically failing New Jersey schools. He addresses what he calls common myths about the legislation, including that it will cost the state upwards of $1 billion, divert public funds to private institutions, weaken public schools, and pull high achievers out of public schools and leave more special-needs students behind, and that school choice programs do not serve student needs as well as public schools.

The Education Investment Tax Credit
This model legislation for education tax credits from the Cato Institute aims to provide maximum freedom for parents, children, schools, and taxpayers to support and attend the schools they choose. It allows businesses and individuals to claim a tax credit for donations made to a private school scholarship-granting organization or for personally paid private school tuition. In the first year of the program, the credit claimed may not exceed 70 percent of state per-pupil spending for public education. The program is capped in the first year to $150 million of state spending, increasing 25 percent each year the program spends 90 percent or more of its cap.


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If you have any questions about this issue or The Heartland Institute, contact Heartland education policy research fellow Joy Pullmann, at 312/377-4000 or [email protected].