Update, June 12: Gov. Tom Wolf told the Capital-Star he plans to veto the legislation. Read more here.
Legislation that would nearly double the size of an educational tax credit program that funds private and religious school scholarships was approved Tuesday by Senate Republicans, whose unanimous support for the proposal overpowered the negative consensus among Democrats.
The bill to expand the Educational Improvement Tax Credit (EITC) Program now goes to Gov. Tom Wolf’s desk for final approval.
House lawmakers approved the legislation 111-85 in May.
Wolf, a Democrat, has not said whether or not he will veto the expansion, which was sponsored by House Speaker Mike Turzai, R-Allegheny. He told reporters Tuesday he doesn’t understand how the expansion will be paid for.
“I’m trying to fund public education,” Wolf told reporters. “I’m trying to make sure that we have an accountable system in place that I think is underfunded. I have done everything in my power, and I’ve worked across the aisle to get more money for public education. This seems to me — again, I’ll take a look at it — this seems to me to be at odds with that need of a government and a democracy like ours to support broad-based, accessible public education.”
The proposal is expected to be a key point in negotiations this month as Wolf and the General Assembly prepare to approve the commonwealth’s 2019-20 budget.
As it stands, Turzai’s bill would increase the EITC budget from $110 million to $210 million immediately after passage — the largest single-year increase since the program was created in 2001.
The proposal also calls for the program’s budget to increase by 10 percent annually if businesses and individuals claim more than 90 percent of the available tax credits.
Pennsylvania’s EITC program allows businesses and individuals to receive tax credits if they donate to private schools and scholarship funds approved by Pennsylvania’s Department of Community and Economic Development.
Those funds are distributed as scholarships to children whose families make under $85,000 a year.
Turzai’s proposal would increase the household income threshold to $95,000 for families with one child, which he says would help more middle-class families secure scholarships.
Proponents of the tax credit program say it provides crucial assistance to children who otherwise would not be able to afford private school tuition or after-school enrichment activities. Republican Senators who voted to expand the program called it a win-win for Pennsylvania’s business community and families seeking alternatives to public schools.
“The vast majority of people enrolled in this program are motivated to try to help educate kids — they’re not avoiding taxes or saving money,” Sen. John DiSanto, R-Dauphin, said during a Senate Education Committee meeting last week.
DiSanto said the construction company he formerly owned with his brother eagerly claimed EITC tax credits.
“Instead of paying taxes to the state, you’re giving cash to school,” DiSanto said. “The people involved in this are committed to helping the community.”
But public school advocates who oppose the program say the scholarships amount to little more than a subsidies for rich families.
The average scholarship amount was $1,160 in the 2016-17 school year, according to a federal analysis of tax credit programs across the country.
The program does not carry any cost to the commonwealth, but it does deprive the state of potential tax revenue. Turzai’s bill is expected to reduce revenue in the General Fund by $100 million in the 2019-20 fiscal year, according to the House Appropriations Committee.
The 10 percent annual increases would carry commensurate revenue reductions in each subsequent year they’re enacted.
The Senate Appropriations Committee anticipated a slightly lower immediate impact: just a $71 million reduction to the General Fund balance in 2019-20. But that analysis, based on data from the Department of Revenue, also anticipates General Fund reductions will grow because of the expansion over the next five years, reaching $188 million in 2023-24.
Senate Minority Leader Jay Costa, D-Allegheny, said in a Senate Appropriations Committee meeting Monday that the bill would eliminate tax dollars Pennsylvania could use to improve transportation, pre-kindergarten, and public education.
“This is money that is not coming into the commonwealth that this General Assembly would have the chance to distribute,” Costa said. “These could be resources… but we lose the ability to address those problems and further invest in education.”
Other Senate Democrats who said they support the program in theory thought the increases Turzai proposed were unsustainable. Sen. Sharif Street, D-Philadelphia, said in a committee meeting Monday that the 10 percent annual increase represented a “unique commitment” that doesn’t exist for other expenditures, such as basic education funding.
Senate Majority Leader Jake Corman, R-Centre, admitted on Tuesday that the program does represent a loss for the commonwealth. But he also said that the state could afford the expansion this year thanks to stronger-than-expected revenue projections.
“There’s no question — this is revenue we are forgoing,” Corman said. “Years ago we couldn’t do this, [but] the economy has turned, and we have the ability to balance our budget and to expand this program. I can’t think of a better reason to look at revenue we have now than to expand options for children to pick the school of their choice.”