Skip Navigation

Research & Commentary: Low-Income Tax-Credit Scholarship Program Would Be a Great First Step for Minnesota

March 20, 2020

Tax-Credit Scholarship Programs Are The Most Popular Form Of Private School Choice In The Country

Companion legislation introduced in the Minnesota Legislature would establish the Equity and Opportunity in Education Tax Credit Program, a tax-credit scholarship program (TCS) for low-income students in the Land of 10,000 Lakes. Tax-credit scholarship programs allow qualifying families to pay for tuition and fees at private and parochial schools, as well as at both a traditional public school or a public charter school located outside of the student’s school district, using scholarships provided by donors, who, in return, receive tax credits.

Under the proposed program, nonprofit organizations, after receiving approval from the state, would be eligible to grant scholarships to children from families whose income was below 200 percent of the free and reduced-price lunch threshold. Individuals or corporate taxpayers would be able to receive a credit for their donations to those organizations for up to 10 percent of their adjusted gross income for that taxable year. The total budget cap for the program would be $35 million.

Currently, with 23 different programs in 18 states and more than 1.2 million scholarships granted, TCS programs are the most popular form of private school choice in the country. Even better, they provide several education benefits to participating students while doing so at a lower cost than public schools. A study released in October 2016 by EdChoice “estimates the fiscal effects” of 10 of the nation’s 23 TCS programs (comprising 93 percent of all awarded TCS scholarships). The study found TCS programs have saved “state governments, state and local taxpayers, and school districts” $1.7 billion to $3.4 billion through 2014. In other words, TCS programs saved anywhere from $1,750 to $3,000 per student. The savings in the 2013–14 school year alone (the last year available for study) ranged from $320 million to $580 million.

2019 study from the Urban Institute, expanding on previous research, found TCS students participating in Florida’s Tax Credit Scholarship Program, the nation’s largest education choice program with more than 108,000 students enrolled, for at least four years are 99 percent more likely to enroll in a four-year college and 56 percent more likely to graduate than their public school peers.

Further, a 2020 working paper from the National Bureau of Economic Research found Florida’s program also provides serious benefits for the state’s public school students. These students attending public schools who faced more competition from private schools utilizing the program saw their test scores and suspension rates improve and their absenteeism decrease, with students from “comparatively lower socioeconomic background(s)” being “most positively affected.”

Copious other empirical research on tax-credit scholarships like TCS, voucher programs like FES, and other school choice programs has shown these programs offer families improved access to high-quality schools that meet their children’s unique needs and circumstances.

Moreover, these programs improve access to schools that deliver quality education inexpensively. Additionally, these programs benefit public school students and taxpayers by increasing competition, decreasing segregation, and improving civic values and practices. 

Students at private schools are also less likely than their public school peers to experience problems such as alcohol abuse, bullying, drug use, fighting, gang activity, racial tension, theft, vandalism, and weapon-based threats. There is also a strong causal link suggesting private school choice programs improve the mental health of participating students.

No wonder these programs are so broadly popular. The results of EdChoice’s seventh annual Schooling in America survey, released in October 2019, found 68 percent of respondents in favor of TCS programs, up 2 percentage points from 2018. Support for TCS programs also in the American Federation for Children’s sixth-annual National School Choice Poll, released in January 2020, reached a similar 65 percent.

Currently, private education choice in Minnesota is literally nonexistent. Therefore, enacting a TCS program would be a great first step for the North Star State and would give low-income Minnesota families a greater opportunity to meet the unique education needs of their children. 

The following documents provide more information on tax-credit scholarship programs and school choice.

School Choice Fallacies: Disproving Detractors’ Allegations Against Tax-Credit Scholarship Programs
https://www.edchoice.org/wp-content/uploads/2017/08/2017-7-Tax-Credit-Brief.pdf
This report from Martin Lueken and Michael Shaw at EdChoice examine tax codes to address claims alleged by school choice detractors, such as: Tax-credit scholarship programs lead to “profit,” “double-dipping,” “get-rich schemes,” and “tax shelters” for donors.

The Tax Credit Scholarship Audit: Do Publicly Funded Private School Choice Programs Save Money?
https://www.edchoice.org/wp-content/uploads/2017/03/Tax-Credit-Scholarship-Audit-by-Martin-F.-Lueken-UPDATED.pdf
In this audit, EdChoice Director of Fiscal Policy and Analysis Martin Lueken updates previous work examining the fiscal effects of private school choice programs on state governments, state and local taxpayers, and school districts. Lueken’s report analyzes savings from tax credit scholarship programs, which allow individuals and businesses to reduce their state tax liability by making a private donation to a nonprofit organization that provides scholarships for children to attend private schools of their choice. This audit looks at 10 tax credit scholarship programs operating in seven states between 1997 and 2014. These 10 programs serve 93 percent of all students participating in tax credit scholarship programs nationwide.

Effects of Scaling Up Private School Choice Programs on Public School Students
http://papers.nber.org/tmp/97079-w26758.pdf
This working paper from the National Bureau of economic Research finds the continued expansion of Florida’s Tax Credit Scholarship Program produced modestly larger benefits for students attending public schools that had a larger initial degree of private school options, measured prior to the introduction of the program. These benefits include higher standardized test scores and lower absenteeism and suspension rates. Effects are particularly pronounced for lower-income students.

The Effects of the Florida Tax Credit Scholarship Program on College Enrollment and Graduation: An Update
https://www.urban.org/sites/default/files/publication/99728/the_effects_of_the_florida_tax_credit_scholarship_program_on_college_enrollment_and_graduation_0.pdf
In this update to a 2017 Urban Institute study, authors Matthew Chingos, Tomas Monarrez, and Daniel Kuehn find students participating in the Florida Tax Credit Scholarship Program are 99 percent more likely to enroll in a four-year college, and 56 percent more likely to graduate, than their public school peers.

The Effects of Statewide Private School Choice on College Enrollment and Graduation: Evidence from the Florida Tax Credit Scholarship Program
https://www.heartland.org/publications-resources/publications/the-effects-of-statewide-private-school-choice-on-college-enrollment-and-graduation-evidence-from-the-florida-tax-credit-scholarship-program
This study from Urban Institute scholars Matthew Chingos and Daniel Kuehn shows Florida’s Tax Credit Scholarship Program boosted college enrollment for participating students by 15 percent, with students enrolled in the program for four or more years seeing a 46 percent hike.

Protecting Students with Child Safety Accounts
https://www.heartland.org/publications-resources/publications/protecting-students-with-child-safety-accounts
In this Heartland Policy Brief, Vicki Alger, senior fellow at the Independent Women’s Forum and research fellow at the Independent Institute and Heartland Policy Analyst Tim Benson detail the prevalence of bullying, harassment, and assault taking place in America’s public schools and the difficulties for parents in moving their child from an unsafe school. Alger and Benson propose a Child Safety Account program, which would allow parents to immediately move their child to a safe school— private, parochial, or pub­lic— as soon as parents feel the school their child is currently attending is too dangerous for their child’s physical or emotion­al health.

The 123s of School Choice
https://www.edchoice.org/wp-content/uploads/2019/04/123s-of-School-Choice.pdf
This report from EdChoice is an in-depth review of the available research on private school choice programs in America. Areas of study include: private school choice program participant test scores, program participant attainment, parent satisfaction, public school students’ test scores, civic values and practices, racial/ethnic integration and fiscal effects.

A Win-Win Solution: The Empirical Evidence on School Choice (Fourth Edition)
http://www.edchoice.org/wp-content/uploads/2016/05/A-Win-Win-Solution-The-Empirical-Evidence-on-School-Choice.pdf
This paper by EdChoice details how a vast body of research shows educational choice programs improve academic outcomes for students and schools, saves taxpayers money, reduces segregation in schools, and improves students’ civic values. This edition brings together a total of 100 empirical studies examining these essential questions in one comprehensive report.

The Public Benefit of Private Schooling: Test Scores Rise When There Is More of It
https://object.cato.org/sites/cato.org/files/pubs/pdf/pa830.pdf
This Policy Analysis from the Cato Institute examines the effect increased access to private schooling has had on international student test scores in 52 countries. The Cato researchers found that a 1 percentage point increase in the share of private school enrollment would lead to moderate increases in students’ math, reading, and science achievement.

2018 Schooling in America Survey: Public Opinion on K–12 Education, Parent and Teacher Experiences, Accountability, and School Choice
https://www.edchoice.org/wp-content/uploads/2018/12/2018-12-Schooling-In-America-by-Paul-DiPerna-and-Michael-Shaw.pdf
This annual survey from EdChoice, conducted in partnership with Braun Research, Inc., measures public opinion and awareness on a range of K–12 education topics, including parents’ schooling preferences, educational choice policies, and the federal government’s role in education. The survey also records response levels, differences, and intensities for citizens located across the country and in a variety of demographic groups.

The Effects of School Choice on Mental Health
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3272550
This study from Corey DeAngelis at the Cato Institute and Angela K. Dills of Western Carolina University empirically examines the relationship between school choice and mental health. It finds that states adopting broad-based voucher programs and charter schools witness declines in adolescent suicides and suggests that private schooling reduces the number of times individuals are seen for mental health issues.

Competition: For the Children
https://www.heartland.org/publications-resources/publications/competition-for-the-children
This study from the Texas Public Policy Foundation claims universal school choice results in higher test scores for students remaining in traditional public schools and improved high school graduation rates.

The Public Benefit of Private Schooling: Test Scores Rise When There Is More of It
https://object.cato.org/sites/cato.org/files/pubs/pdf/pa830.pdf
This Policy Analysis from the Cato Institute examines the effect increased access to private schooling has had on international student test scores in 52 countries. The Cato researchers found that a 1 percentage point increase in the share of private school enrollment would lead to moderate increases in students’ math, reading, and science achievement.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit School Reform News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Heartland’s Government Relations department, at governmentrelations@heartland.org or 312/377-4000.

Author
Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.
TBenson@heartland.org @BenceAthwart