Some people believe that tax credits and vouchers are the same thing when it comes to new ways of funding education.

They’re not.

While they both have an effect on the State’s budget, the source and processes regarding those funds are completely different.

With vouchers, state monies go directly to benefit families who would qualify for the voucher.  Then that voucher could be used as payment in full for educational services at schools which choose to accept them.

However, one must read the words that are used in deciding whether or not to accept vouchers.

Private and faith-based schools usually have other “soft costs” that go beyond tuition – such as uniforms, or the expectation that parents will participate in fundraisers to help the school further enhance its income needs.

Voucher families, however, are exempt from that expectation.  “Payment in full” means “payment in full.”

And if the tuition is more than the amount of the voucher, the difference must be accounted for in some other way.

A voucher is not financial aid nor is it a scholarship.

It’s a voucher.

Tax credits, on the other hand, reduce the tax liability of an individual or a corporation.  Monies are donated to a scholarship organization, and, if approved, the individual or corporation receives a tax credit.   Monies don’t flow into the State’s coffers, and then out to the schools or their parents.  Those who have donated receive a tax credit, and the determination of eligibility rests on the scholarship/educational improvement entity, as does the amount of funds to be awarded.

Pennsylvania’s tax credit program was the first in the nation to be signed into law in 2001.  A number of other states have their own programs in place, and very soon, our nation will move forward with the Education Freedom Tax Credit.

The reasons why the program works are pretty straightforward.

Of course, parents of children in faith-based and private schools receive relief from the ever-escalating costs associated with tuition and fees at these schools, but allowing families to have help with these funds can reduce the number of students in the public school without having a significant effect on the funding the school receives.

If public school classrooms currently overcrowded, the closure of a faith-based or private school with no other choice in educational environment only adds to the population of and already strained public school.

Further, a faith-based or private school education doesn’t take the entire cost of education away from the public school, which is what happens when a child is enrolled in a cyber and/or charter school as approved by the state.

Before the pandemic, our local public school district found itself with a $3 million+ deficit for the coming school year.  The shortfall was blamed on early retirement packages that needed to be funded, as well as other line items in the budget.

However, what was glazed over was the fact that a couple hundred students in the district were enrolled in cyber-charter schools.  If the cost of education in the district is $15,000 per student, multiplied by a couple hundred, well, do the math.

Amazing how math works, isn’t it

While individuals usually have a tax burden, there are program where businesses can participate.  The problem with a business, however, is that a business only pays tax if it shows a profit.  If it shows a loss, then no tax is paid.  When no tax is paid, there is no tax credit, and if there is no tax credit, then there are no scholarships.

School choice initiatives are always seen as supporting the primary role of parents, since they’re the first teachers of their children.  However, as school choice efforts gather momentum, there could be more parents to enroll their students in home schooling or charter schools.  The more students transfer from the public school to educational environments where the cost is education is directed from the school district to that entity, the more funding the public school district may lose.

If new streams of revenue are not implemented, such as those utilized by higher education institutions, private and faith-based schools and other non-profit organizations, public schools could find themselves in an ever worsening financial condition.  If all school district revenue comes from the local tax base, they may have no choice but to cut programs AND raise taxes.

Be careful what you wish for…because it’s a system, and each element of the system has an impact on every other element in the system.